Open Thread Petroleum, Feb 8, 2017

Comments on oil and natural gas production and closely related subjects only in this thread.  Thanks.

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153 Responses to Open Thread Petroleum, Feb 8, 2017

  1. Fred Magyar
    Ignored
    says:

    New Study Finds Cutting Oil Subsidies Will Not Stop Climate Change
    The effect of removing fossil fuel subsidies would fall far short of the reductions promised in the Paris Agreement

    https://www.scientificamerican.com/article/new-study-finds-cutting-oil-subsidies-will-not-stop-climate-change/

    • twocats
      Ignored
      says:

      article doesn’t seem very good. is it really a good idea to group in subsidies to consumers for cheap fuel vs. subsidies (and tax incentives) to corporations? If you cut the corporate welfare then oil prices would go up, and if you give strong wages (instead of just cheap fuel), and subsidize renewables, then you would see a huge swing to renewables and EV use. This article/study really misses the mark.

      The “study” doesn’t mention the word “military” one single time, so is ignoring the single largest oil “subsidy” in the history of humanity – protecting oil assets around the world for the US.

      also doesn’t mention per capita fuel use.

      seems like the onus is never on the United States in these studies.

      • Fred Magyar
        Ignored
        says:

        article doesn’t seem very good.

        Quite often I post things merely as food for thought. Feel free to kill the messenger if that’s what makes you happy! 😉

        Here’s some more food for thought from a libertarian climate change denying Republican congressman who salvaged a Tesla battery pack to run his off grid home. He is using technology developed by climate change denier and vocal Trump supporter Jack Rickard from EVTV.

        https://thinkprogress.org/gop-congressman-tesla-car-battery-to-power-off-grid-solar-home-8a8e6338ca86/
        GOP congressman powers his off-grid solar home with a Tesla battery
        But libertarian, MIT grad Rep. Massie (R-KY) is still a climate science denier

        I guess it’s just another typical case of tribalism and a little bit of “Don’t do as I say, do as I do”. At the end of the day, we still at least theoretically, live in a free country where everyone is entitled to their own opinions, fantasies, superstitions, delusion etc… Frankly I don’t really give a rat’s ass what people say they believe to appease their tribes as long as everyone get’s off fossil fuels asap!

        As far as I’m concerned, people can Praise The Lord Jesus if that’s what floats their boats! It doesn’t float mine, but I’m entitled to the same rights as everyone else.
        Cheers!

      • Twocats
        Ignored
        says:

        Fred – I didn’t assume your posting was an endorsement. It’s very rare to find articles that get all aspects of the PO dynamic correct. Being critical is what we do 🙂

        Nature is a respected publication and this study may influence the conversation from IMF to UN who knows. That’s what is so scary to me. So no, I’m glad you posted it.

        • Fred Magyar
          Ignored
          says:

          To be fair, the actual study itself doesn’t suggest that cutting subsidies to oil companies would have no mitigating effect on climate change, only that by itself it is a measure that falls short in stopping climate change cold! (pun intended) 😉

          In any case, you are right, in that the title as written, could be misconstrued. It seems alimbiquated already said something to that effect.
          Cheers!

    • Fernando Leanme
      Ignored
      says:

      In general, subsidies for oil and gas consumption are seen in oil and gas producing and exporting nations. The communists who pose as “anti capitalists” and “anti oil corporations” fudge this by mixing up real subsidies such as we see in Venezuela (where communists rule a mad max society where genocide seems imminent) with the tax rules in nations such as the USA or Canada (tax rules intended to account for the depreciation of a depleting commodity).

      The approach is to hammer a lie over and over until it somehow becomes the truth. Communists do that.

      • Dennis Coyne
        Ignored
        says:

        Hi Fernando,

        The special rules for depreciation that apply to mining and not to other forms of capital are a subsidy. If one capitalist (operating an oil well or any other type of extraction of minerals) pays a lower tax rate than a capitalist who manufactures airplanes, then the lower tax bill is a form of subsidy (aka a tax break).

    • alimbiquated
      Ignored
      says:

      The headline is deceptive because the study only purports to show that cutting subsidies isn’t enough by itself to meet the limits set by the the Paris agreement. The headline seems to suggest it would have no effect, but that is not true.

  2. Lightsout
    Ignored
    says:

    A question for shallow and Mike.

    Guys I know you have access to much better data than I do. I am looking for information about a new well just put on production. It is called the “Twin well” and was completed in the lower Clear Fork formation of the Permian. I would like to find out if it was fractured as part of the completion.

    Thanks in advance for any info.

  3. Mike
    Ignored
    says:

    LO: it has not been completed yet. Nostra is a small company trying to milk as much publicity (and raise money) as it can from a Lower Clear Fork/Glorietta vertical well in the Midland Basin. These are shallow targets overlying the Spraberry. Remember that now days any company, or individual needing to talk up a well and bragging about how money he or she makes, or might make, in the oil business is either a.) trying to raise money or b.) has serious self-esteem issues.

    This week WTI has corrected 10% due primarily to the stupid US shale oil industry’s plans for outspending revenue, again, and raising production. I would not be surprised if we saw another 10% down correction. These guys have the market savvy of a bunch of 3rd graders.* Russia and OPEC announced continued cooperation in trying to prop up worldwide oil markets by cutting its production. Why, one might ask, particularly when both producing powerhouses just three years ago were set on regaining market share and driving the US shale oil industry into the dirt with low prices?

    Because they have computers, and geologists, and engineers and people that crunch the numbers too and they see that the shale oil phenomena in America is heavily in debt, unprofitable, low interest stimulus credit dependent, saturating the snot out of sweet spots and Russia and OPEC are giving the shale oil industry just enough rope to drill itself into oblivion. Which is going to happen a lot sooner than people think. Then Russia and OPEC will have America right where they want us again.

    Who is running America’s energy policies and preparing America for its long term hydrocarbon needs?

    *Same bunch.

    • Lightsout
      Ignored
      says:

      Thanks Mike.

      That does explain why the company has failed to announce any flow rate from the well.

    • Eulenspiegel
      Ignored
      says:

      When I read the US oil history:
      https://en.wikipedia.org/wiki/Texas_oil_boom
      Drilling itself into oblivion is a good old tradition for an oil company. The record was 3 cent / barrel oil.

      • Mike
        Ignored
        says:

        Yes, being market stupid and fiscally irresponsible (mostly with other people’s money) is a time honored tradition in the American oil industry. The only period of stable oil prices in our long history, almost 35 years of stable oil prices, was due entirely as a result of conservation minded regulations (Statewide spacing rules and allowables) enacted by the Texas Railroad Commission.

        • shallow sand
          Ignored
          says:

          Mike. I am hoping higher interest rates also matter. Just as long as those higher interest rates do not drive demand so low we collapse again.

          • TechGuy
            Ignored
            says:

            Shallow Sand Wrote:
            “Mike. I am hoping higher interest rates also matter. Just as long as those higher interest rates do not drive demand so low we collapse again.’

            Thats exactly what will happen as interest rates rises. Since the Fed drop rates, Borrows doubled down on Debt, and once again will run to issue servicing their debt.

            I doubt interest rates will go up substantially since it will trigger another recession/crisis. Or when the next recession begins CBs will start lowering rates and printing more money to avoid a worldwide depression.

    • HuntingtonBeach
      Ignored
      says:

      Mike, in economics no one ever said capitalism and free markets didn’t produce losers. In the long run, more often than not only the strong survive.

      “A cartel is a group of apparently independent producers whose goal is to increase their collective profits by means of price fixing, limiting supply, or other restrictive practices. Cartels typically control selling prices, but some are organized to control the prices of purchased inputs. Antitrust laws attempt to deter or forbid cartels. A single entity that holds a monopoly by this definition cannot be a cartel, though it may be guilty of abusing said monopoly in other ways. Cartels usually occur in oligopolies, where there are a small number of sellers and usually involve homogeneous products.

      Prior to World War II (except in the United States), members of cartels could sign contracts that were enforceable in courts of law. However, today price fixing by private entities is illegal under the antitrust laws of more than 140 countries.”

      https://en.wikipedia.org/wiki/Cartel

      “The invisible hand is a term used by Adam Smith to describe the unintended social benefits of individual self-interested actions. The phrase was employed by Smith with respect to income distribution (1759) and production (1776). The exact phrase is used just three times in Smith’s writings, but has come to capture his notion that individuals’ efforts to pursue their own interest may frequently benefit society more than if their actions were directly intending to benefit society.

      https://en.wikipedia.org/wiki/Invisible_hand

      • Mike
        Ignored
        says:

        America is not a oligopoly and the US shale oil industry is not a cartel. Producers act independently of each other, hide technology advancements from each other, vie for acreage blocks by bidding against each other, categorize wells as confidential, etc. and otherwise act in their own self interests and NOT for the collective good of society. They want you to believe that, but it is dung heap. Harold Hamm constantly warns the Permian Basin not to overproduce, so his company can overproduce in North Dakota. Otherwise Adam Smith didn’t know squat about the oil business and when the last barrel of LTO is produced, and exported, and we’re all out, we’ll be back to begging OPEC for help. How is that good for society?

        “Mike, in economics no one ever said capitalism and free markets didn’t produce losers. In the long run, more often than not only the strong survive. ” Thanks. That’s insightful.

        Most shale oil companies in America have a credit score of something like 400 yet they are able to borrow low interest capital to service old, long term debt and/or defer debt maturities at higher interest rates and otherwise meet growth loan covenants. They have essentially lied about their collateral to do so. Sorry, I don’t see that has capitalism, or free trade, or fair trade. That’s a scheme. Its fake capitalism. “Growth Based on Debt Is Unsustainable, Artificial” Jose Manuel Barroso, former Prime Minister of Portugal, now with Goldman Sachs International.

        The oil industry likes to coin the phrase, “prices have always been cyclic.” That’s its excuse for doing the same ‘ol stupid things over and over again. This is different, however, because in America we no longer have an endless supply of oil to jack around with and this shale phenomena is all happening on credit. With borrowed money.

        Not that it matters, but I was exploring for, and finding, oil when these shale dickheads did not exist and I will be here when they are long gone and you, and the rest of America, is dealing with their debt. I am not looking to make a buck day trading E&P stocks, I am concerned about the long term hydrocarbon health of my country.

        The oil business is a business; to be sustainable, and beneficial to society, it must be profitable. The shale oil industry now has to be profitable enough to get out of over $280B of debt.

        • HuntingtonBeach
          Ignored
          says:

          “I am concerned about the long term hydrocarbon health of my country” like a drug dealer is to his addicted customer. You mostly only seem interest in making a buck for yourself. Your complaint above is that oil drilling “Dickheads” are squeezing your profit margins and cutting your profits. When in fact, those “Dickheads” have cut the imports and price of oil in half for America for the last 3 years. Saving the American consumer many times more than $280 billion.

          If you really cared about America, you would realize that shale oil should be the methadone wake up call to transforming to a carbon free life style. But your not really interested in that are you ? You seem to have your head in a hole in the ground and can’t see the big picture.

          • shallow sand
            Ignored
            says:

            Yes, Mike wanting to continue earning a living running a small business as he has for the last 40 years is pure evil.

            It’s seems that for some reason both US shale and “a carbon free lifestyle” do not involve small business, as each requires massive capital infusions and being cash flow negative for at least a decade, something that a small business cannot handle.

            I have repeatedly stated my hope for a $55-$65 WTI price band, which I think is a fair price to consumers and producers. Hope that is not being too greedy. I am sitting in a parking lot looking at an unleaded sign at $2.259. That doesn’t seem too bad?

            Actually, as I sit here and think about it, I recall discussing with Mike the difficulty of dealing with 2015-16 prices, that the $90s of 2011-14 were too high and Mike said $60 is a price that is good for both producers and consumers. I added traders have to trade, so maybe happiness would be a $55-65 price band.

            I have bantered a lot with Nony on SA (I think the person is Nony, goes by a numerical handle there) and Nony would love for oil to be $10 and for every small producer to go broke. Is that what you are advocating?

            As for a methadone wake up call, I think if anything Shale has given the General US populace the idea that there is no need to worry about oil scarcity anymore. Technology has delivered us decades, if not a century, of cheap, plentiful oil supply.

            • HuntingtonBeach
              Ignored
              says:

              I have to wonder what part of capitalism, free markets and economics you don’t understand. Maybe all of it. The owner of a small town market for 40 years, just wanted to continue his small little business. When the Walmart opened up in town. I’m sure the burger flipper at McDonalds believes a $20 Big Mac is fair to support an annual income of 50K for himself. The buggy whip manufacturer just wanted to continue business as usual in 1910. Maybe you would be happier if you moved to China with government controlled pricing. Who are you to decide what’s a fair price for 320 million Americans to pay for a gallon of gasoline ? In a free market, price will find a equilibrium over time. Big boys don’t whine, they become more efficient. The cry babies go out of business.

              Maybe if you look in the rear view mirror as you sit on your ass. You will see the point I see reading in your comment.

              • Dennis Coyne
                Ignored
                says:

                Hi Huntington beach,

                Has it occurred to you that a big company like Walmart can drive all competitors out of business and then raise prices as they see fit. About 20 years ago Walmart proudly displayed “made in the USA” stickers on many of their goods. I admit that I don’t shop at Walmart much these days, but when I do I rarely see any such stickers or products produced in the USA.

                The bottom line is that low prices for a limited resource do not make much sense.

                Mike is correct that the US may well regret the low prices of the 2015-2017 period as it lead people to purchase large SUVs and pickup trucks which they may not be able to afford from 2019- 2030.

                • HuntingtonBeach
                  Ignored
                  says:

                  “Has it occurred to you that a big company like Walmart can drive all competitors out of business and then raise prices as they see fit”?

                  Hi Dennis, do you mean like when the Saudi’s flooded the market in late 2014 and 2015 to chase shale out of business. An also to try to kill or slow down EV’s ? Yes, but notice it doesn’t always work.

                  Maybe there were some that bought larger vehicles because of lower cost fuel. But in the long run that’s not going to make a difference. What needs to continue is the advancement in technology and production of EV’s for the next 5 to 10 years. The only answer in the long run is to transform our energy needs away from fossil fuel and except some life style changes. Driving EV’s is the easy part. The sooner the better.

                  • Dennis Coyne
                    Ignored
                    says:

                    Hi Huntington Beach,

                    Mike’s point is that low oil prices due to overproduction does little to help in the long run.

                    My point ( and his) is that it is better to produce the oil in a more rational manner where oil prices gradually rise over time as the resource is gradually depleted and then we are more likely to see a smooth transition to a society where less fossil fuel is utilized.

                    Pot shots at Mike and Shallow Sand (who provide us with much information about the real oil industry) does little to help us here.

                    I would prefer not to fly blind.

                  • HuntingtonBeach
                    Ignored
                    says:

                    Hi Dennis,

                    I entered this conversion not because of Mike’s technical knowledge on how to dig, line or squeeze oil out of a hole in the ground. I entered it because Mike was advocating price fixing, which would benefit himself. Mike and Shallow are small business men who are price takes in the economy, not price makers. The price makers which Mike calls “Dickheads” have economies to scale Mike and Shallow don’t enjoy. This is all risk they need to understand as stripper well businessmen. They claim the “Dickheads” are losing money, but in the same conversation ask others in the shale business what their cost is.

                    My point is in a free market place. Price will fined it’s equilibrium over time. When your dealing in an industry that takes huge amounts of capital investment over long periods of time to move the needle. Your going to see long periods of time for the commodity to find it’s equilibrium.

                    If Mike and Shallow can’t handle the ups and downs of their industry, they can always flip burgers for a risk less income stream.

                  • shallow sand
                    Ignored
                    says:

                    Shale drillers are price takers, just like us.

                    I ask “shale drillers” who post here about profitability after they make the claims that we cannot “compete”. They typically do not respond, at least not with numbers.

                    I can read 10K and 10Q. I also understand how overstating EUR understates DD&A, which inflates earnings.

                    Shale doesn’t do to well at sub $50 WTI. Neither do we.

                  • HuntingtonBeach
                    Ignored
                    says:

                    “Shale drillers are price takers, just like us.”

                    Wrong, a price taker is someone who can’t influence the market price. Like you and Mike. The shale drillers are price makers or as Mike likes to call them “Dickheads”. One individual shale driller most likely isn’t going to be a price maker, but as a group they have totally effected the price of oil over the last 3 1/2 years. You should know that as much as anyone here on this site.

                  • Mike
                    Ignored
                    says:

                    Shallow, you can keep arguing with this fella if you feel the need to, it isn’t going to do any good. On one hand he wants to live a carbon free life, void of fossil fuels; on the other hand he likes cheap gasoline and is remarkably offended at the term ‘dickheads’ to describe the shale oil industry’s fiscal irresponsibility. I suspect he has made some money day trading PDX stock. In any case, he is all over the map.

                    Always conveniently overlooked when debating the merits of the shale “revolution” is the fact that the shale oil industry would not exist but for low interest stimulus money. It is quite possibly pushing $300 billion in long term debt and if its loans were called tomorrow, it could not cover them. In its short history it has never been profitable enough to stand on its own financial feet without credit. Wall Street owns it, and controls every aspect of it. Its an OPM taker, not a price maker.

                    By the way, price “fixing” is not the same as conserving hydrocarbons to ensure we have enough.

                    But I do enjoy the advice, don’t you? Let’s discuss that burger flipping thing next chance you get.

                  • Boomer II
                    Ignored
                    says:

                    I’m with Mike on this. Even if we ignore environmental issues, there are strategic reasons not to encourage plundering our oil supplies.

                    Oil is a critical resource and as a nation we should be giving some thought as to what we are doing with it.

                  • HuntingtonBeach
                    Ignored
                    says:

                    Mike, you truly are a piece of work. You inform Shallow it’s a waste of time to argue with me and than you processed to argue with me twice the amount of Shallow. Your view seems to be to slow dance oil reserves until last call. Which ends up at the same destination, but lines your pocket with increased profits by redistricting supply. How convenient for you. The real answer to a finite oil resources is to transform to renewable energy and adapt.

                    Boomer, if we have learned anything in the last 10 years. It’s in our first year economics classes 101 and 102 in college works in real life. All those peak oiler’s with their hair on fire posting on The Oil Drum got extinguished. Prices rose, entrepreneurs applied capital and labor in quest of profits and boom. We have been swimming in oil for the last 3 year. Of course Mike would like to go back to the days insufficient supply. He made a lot of excess profit until oil found a new equilibrium. Today about 80% of today’s oil production is used in transportation by burning it. But we know there is technology available today that could replace half of that 80%, which wasn’t only 10 years ago. It’s just a matter of transforming over time. But Mike doesn’t talk about transforming to renewable’s. He likes to talk about restricting supply and lining his wallet.

                    Don’t be conned, there is enough oil in the ground to make earth uninhabitable. Do you really think Texas is the only place in the world that can be fracked ?

                  • Dennis Coyne
                    Ignored
                    says:

                    Hi Huntingtonbeach,

                    Not exactly price fixing, it is control of supply, just as oligopolies such as the car industry or wind turbine manufacturers control output so there is not a price crash.

                    In a capital intensive industry this is the only way to create stability.

                    You do realize that the RRC (and a few other state agencies in Oklahoma and Louisiana) essentially controlled the level of US oil output from 1935 to 1970).

                    The World depended on OPEC to control the level of World oil output to maintain price stability from 1985-2014, but this broke down in the 1998 and again in 2015.

                    In addition, we need higher oil prices in any case so the World moves on to non-fossil fuel energy.

                    So Mike’s policy for rational development of oil resources would be a good thing from an environmental policy perspective, though a carbon tax (such as the Cantwell-Collins proposed legislation from 2010) would be would be better.

                    The supply of oil is indeed limited and in the long run the oil price is likely to rise, as a nation it would make more sense to produce oil when the price is high rather than low. Then the US gets the income rather than sending our money elsewhere.

                    The shale producers are acting like price takers and producing all they can.

                    A price maker controls their output to maximize profit, this has not been the case for the shale industry, their behavior is that of a price taker.

                  • d00dles
                    Ignored
                    says:

                    HB,

                    lol shale companies aren’t price makers just because they have kept prices low. They are simply responding to the market. Shale companies would have to operate as a collective to be a price maker.

                    Saudi or Russia would be a price maker as they each control ~10M barrels of production.

          • Mike
            Ignored
            says:

            I am a marginal stripper well operator whose total daily production does not come close to one Bakken well, asshole. How am I a drug dealer? Am I the enemy simply because I am IN the oil business? Of course I am. Which makes me very confused. You like the shale oil business, are offended I call them fiscally irresponsible, greedy dickheads, because, I assume, shale oil has saved you gasoline money for jaunts up and down the 101, but want to use shale oil as a means of living a carbon free lifestyle? You sound a lot like an addicted customer.

            I see the big picture very well, thank you. It is going to take a long time to transition completely away from hydrocarbons in the world; longer than we have shale oil resources available to us. That is a potential problem and in spite what you think (have we ever met?), I do care about that.

            Call me back when you do.

            • HuntingtonBeach
              Ignored
              says:

              Law makers make it illegal to produce and sell dangerous drugs. Legal drugs are highly regulated to protect the consumer from harming themselves. It is now realized burning fossil fuels is dangers to humanity over time and doing so is shorting our existence. Yes we are all addicted. The difference between you and I is I want the world to go to rehab.

              “I am concerned about the long term hydrocarbon health of my country” is just a cover story for your own self interest. There is enough fossil fuel in the ground to make earth uninhabitable for humans. Hydrocarbon are killing mother earth as we know it. Drug dealers don’t get off in court under the defense of “I just want to continue to make a living like I have for the past 40 years”.

              • Mike
                Ignored
                says:

                I have no “cover stories,” pardnor. I am a proud oil and natural gas producer who at the end of a long career is down to marginal stripper well production. I also have interest in numerous shale oil wells in S. Texas. My family and I, my employees and their families, like higher oil prices. When stupid people get deeply in debt they can’t pay back, to drive the price of oil down, some of us stand up. Debt is not good for America and people who borrow money then walk the check are…the worse kind of dickheads.

                It is possible, however, to be IN the oil business, protective of it, and also be concerned for our long term energy future. I advocate for an increase in gasoline tax in the name of conservation. I am also very outspoken as to slowing the rate of shale oil development in America thru increased regulations of drilling permits. I am opposed to exporting our hydrocarbon resources and adamantly opposed to the amount of water being used to frac shale wells, to then export that oil away. I actually DO lots of things to promote my beliefs. My motives are different than yours, and certainly more realistic; we need to conserve our hydrocarbons to ensure a smooth transition away from them. I don’t much give a rats ass if you think that is “self serving” or not.

                If you do not like fossil fuels you must be terribly conflicted, constantly, when you use them. If you want the world to go on fossil fuel “rehab” why don’t you set the example for the world to follow. Get off them, now. Don’t do it half assed, go cold turkey. Start by not pecking on a keyboard. Be careful out on there on the 405 on your bicycle. Because folks like me, and Shallow, whom you have just trashed in a rather lame, insulting manner, by the way… we didn’t make the stuff. We just get it out of the ground. The real enemy is the user, the hypocrite, the people who talk a big line about the evil fossil fuel empire, but just can’t quite ever seem to get it completely done and out of their lives forever. You folks keep us in business. The real enemy is…you!

                • Dennis Coyne
                  Ignored
                  says:

                  Hi Mike,

                  I agree we should conserve resources and as soon as possible will purchase a Tesla Model 3 (already drive Toyota hybrids since 2004), my electricity is supplied by renewables (by buying “Green tags”) and at some point will buy solar panels with battery backup for most of my electricity use, probably 95%.

                  Eventually rising fossil fuel prices willaccelerate the move to non-fossil fuel energy.

                  I agree it will take several decades to accomplish this (probably about 25 years or more).

                  I will likely be dead before fossil fuel use falls to 10% of today’s level (I expect I will be gone by 2060 or sooner).

                  In the mean time we should conserve our resources, on that point we likely agree.

                • HuntingtonBeach
                  Ignored
                  says:

                  “If you do not like fossil fuels you must be terribly conflicted”

                  Wrong, I enjoy fossil fuels. Just as much as anyone else or like an addict who needs his fix. You miss the point. We need to stop burning them. Anything less is only a delay of the inevitable demise of climate change. We have to transform our fossil fuel energy use.

                  If you really are the family man you proclaim to be. Think about it this way. It’s about the children.

                  Country is just about empowering the powerful and that’s not you.

                  • Seán McMahon
                    Ignored
                    says:

                    Eh? I think you need to take a deep breath.

                    Higher poo means less usage of oil and a potential quicker transition to EVs. Restricting production now would save some supplies for the future, raise the poo, reduce the debt bubble and escalate the transition to EVs.

                  • HuntingtonBeach
                    Ignored
                    says:

                    Correct ! Double the price of fossil fuel the way Europe does by taxing it. That would offset the miss guided tax cut give-a-way Trump gave the oil industry and help reduce the federal Trump debt.

                    Don’t bail out the banks. That’s a moral hazard.

                    Yes, “take a deep breath” while you still can before the air turns into “poo”. Now your thinking like a Survivalist. Eh ?

                • Timthetiny
                  Ignored
                  says:

                  Mike you seem really out if touch with the industry, speaking as someone else who works it.

                  Your stripper wells wouldn’t exist without subsidies, we can’t use all of our light oil anyway so we should trade it, and the total of all fracd wells in the state of Texas was less than 1% of state water usage last year.

                  You may know one niche end of the business, but you come into all these threads and beat your chest and proclaim anyone who disagrees with you an idiot.

                  Most of the shale wells I drill pay in 6-12 months at about $50. In fact, that’s the current standard for investment with all private equity I speak to. You sound like someone whose upset he can’t compete.

                  • Mike
                    Ignored
                    says:

                    I have interest in shale oil wells, hand; I know what they cost to drill and complete, how much they decline, what they cost to operate. I understand fully the difference in EUR and actual UR and have spent 50 years worrying over well economics. I don’t see much published, realized production data that even remotely suggests wells, even in the Permian, are paying out in less than 12 months. At $60 and current net back prices that means a well has to make over 325 KBO and produce 900 BOPD for a year, with no decline. I am sure there are some of those out there, no doubt; my concern is the over all heath of the entire shale industry.

                    In order for me to “compete” with the shale oil industry I would have to get deeply in debt and spend upwards of a quarter of my production revenue just to pay interest on that debt. That’s no way to run any business, sorry. I would have to become reliant on “private equity,” and OPEC production cuts for success. I don’t have to do that, nor do I need IDC or depletion allowances to make money in my line of work. I do not wish to compete with the shale oil industry. I am quite fine doing what I do, thank you.

                    I don’t recall calling anyone an idiot. You work in the shale oil industry; I understand fully why you don’t like what I, and many others, have to say about how sustainable your faction of our industry is. Some of us feel the need to advocate for the truth. That’s how we can better prepare for the future.

                  • shallow sand
                    Ignored
                    says:

                    Timthetiny. If you don’t mind, maybe give us some detail about the wells you drill.

                    You are financing the wells via private equity? I’d be interested to know what kind of terms they provide.

                    I don’t want identification specifics, don’t need to know company name, Basin, wells names or any other identifying stuff.

                    As for the subsidies for stripper wells, I think the blanket statement they wouldn’t exist without them is innaccurate. The subsidy is percentage depletion I suppose? Some states also tax stripper wells less regarding severance. I am kind of surprised you do not operate some stripper wells, seems almost every company that operates shale wells operates stripper wells, and there are many early shale wells that are near or at stripper well status. Check out companies like Pioneer, Diamondback, Parsley, etc and see how many low volume verticals they operate.

                    My concern clearly is prices dive back below $55, maybe way back down into the $40s or even $30s as shale apparently will be the direct reason US is forecast to top 11 million BOPD in 2018 and 12 million BOPD in 2019. I assume you agree that is not good for shale or stripper producers?

                    The compete stuff makes little sense to me as an owner of working interests. No one makes much money during times of commodity overproduction. The compete reference is something I hear consumers wanting $1.75 gasoline saying, not producers.

                    How do you guys compare to us, if we are talking competition? Out of our checkbook we spent $33.07 per barrel in 2017, and declined 1.18% from 2016 with zero new wells, zero planned workovers. Thankfully zero debt. Will admit 2016-2017 was warm winter where we didn’t have to shut down much, and we left some stuff off, about 10%, for about 3-5 months when WTI got into $20s – low $30s in winter of 2015-2016.

                    How much per barrel of oil, or BOE, do you have to spend to keep production flat?

                  • Dennis Coyne
                    Ignored
                    says:

                    Shallow sand,

                    I hear crickets.

                    Note the absence of a reply from Timthetiny,

                    I wonder if he really is in the industry.

      • Nick G
        Ignored
        says:

        I like free markets. They’re efficient and effective. But…they’re not perfect. When they’re not perfect, government should intervene.

        In this case, they don’t price in external costs of pollution and supply insecurity. Really, we want to leave much of our hydrocarbon inheritance in the ground, including oil, rather than burning it. We might find it useful later for petrochemicals and plastics, which in theory don’t have to create pollution.

        Ideally the US would impose stiff carbon and fuel taxes. These would price in those external costs, encourage efficiency and substitution, and capture surplus value for the US rather than for oil exporters and producers.

        But…we’re not smart enough to do that. An alternative would be restriction of supply. That would be less efficient, and give much of the surplus value to oil exporters, but it would be rather better than nothing.

        • shallow sand
          Ignored
          says:

          Why should we only tax air pollution that results from burning ICE engines?

          Also, if we are going to tax oil due to air pollution, shouldn’t it be partial, given the many uses of oil besides producing ICE engine fuel?

          • Dennis Coyne
            Ignored
            says:

            Hi Shallow sand,

            The idea is to put a tax on all sources of CO2 pollution (coal, oil, and natural gas). Coal produces the most CO2 per unit of energy, then oil, and then natural gas.

            A carbon tax would be based on the output of CO2 emissions per unit of fuel. In addition there are other pollutants such as SO2 and N2O, mercury, etc and the fuels could see additional taxes based on the levels of these other pollutants, in addition to their CO2 pollution.

            Climate change is not discussed on the Petroleum side very much, but it is a real concern for the future of our children and grandchildren, based on mainstream science.

            • shallow sand
              Ignored
              says:

              Dennis.

              Are fossil fuels the only contributors to climate change?

              Methane seems to be a big issue. Aren’t there non-fossil fuel sources?

              How about other factors contributing to climate change? How should those be tackled?

              • Nick G
                Ignored
                says:

                Are fossil fuels the only contributors to climate change?

                No. The other ones should be tackled as well. Anyone who’s concerned about climate change would agree, I think. On the other hand, FF is the single biggest.

                How about other factors contributing to climate change? How should those be tackled?

                By a combination of many strategies: taxation to internalize costs; education to help individual consumers; regulation to give competitive industries a common standard.

                Also, government should stop incentivizing the wrong things. For instance, Brazil encourages deforestation in the misguided belief that farming in areas with poor soil will actually help farmers make a living.

                ——————————-

                It helps to remember that fossil fuels have other external costs as well: security of supply is a big one. The US has fought several very, very expensive oil wars. And, climate change isn’t the only form of pollution: particulates, mercury, nox, sox, etc actually are more important for coal than CO2.

                Finally, I don’t think anyone here has any objection to you and Mike making a living producing oil. We’re not arguing about that: we’re arguing about policy issues like whether and how to restrict oil production.

                • shallow sand
                  Ignored
                  says:

                  So, are you saying that the “leave it in the ground” movement does not want to shut down US stripper wells?

                  The way is see it, our wells and facilities are already here, they have a very small footprint, and are very stable as there is almost no decline. We do not use much water for new wells.

                  Clearly oil is necessary for many products besides fossil fuels. The problem is people like to lump US oil producers into one big homogenous group.

                  I think we would just like to have the same regulatory framework which we have operated under for many years, which does involve unannounced checks of our facilities by inspectors, as well as annual reports made by us to our state regulatory agency, and not be scared that by one stroke of the pen, we will be put out of business, at great financial loss.

                  • Nick G
                    Ignored
                    says:

                    I think most environmentalists are more sensible than you might think – they mostly want to reduce costly and high risk E&P (at least at first), like arctic and shale.

                    And, I think everyone thinks regulatory certainty is a good idea. I’d guess that a majority of US business is unhappy with the Current Occupant’s chaotic and unrealistic approach to regulation.

                    Finally…I’d guess that most people understand that it’s consumption that needs to be reduced first, rather than production. Trying to reduce production is difficult and backwards, as OPEC is finding out.

                • Mike
                  Ignored
                  says:

                  I am actually debating for the same things you are, Nick, only for different reasons than you. After 50 years as a producer I am keenly aware of the role decline, depletion and debt, plays in my industry’s ability to provide a vital resource to our society. You want fossil fuels to end tomorrow. I want to ensure we have enough fossil fuels to get us through tomorrow. You know, better to be safe, than sorry.

                  Its interesting to me that “advocating” for the end of hydrocarbon use is thought to be noble, in the best interest of our society. If someone actually in the oil business advocates for fiscal responsibility, and conservation of our remaining hydrocarbon resources, it is always in his own “self-interest.” The shale oil phenomena “rained on my parade,” or I can’t “compete,” therefore my entire motive is to eliminate my competition. As if I could actually do that. Or need to.

                  It is a weak argument made by folks with no other argument to make…by the same folks who apparently believe that money grows on trees, that debt maturities to 2040 to drill wells that decline 80% the first three years of their existence is a sound business model, and that “technology” will magically ensure we never run out of hydrocarbons. Ever.

                  • Nick G
                    Ignored
                    says:

                    I think we agree – it would be good to conserve fossil fuels. We’d be much safer, in many ways.

                    Why are many people ready to believe that advocates for the oil industry are insincere? Because large parts of the oil industry (and the car industry) have been deeply dishonest. In particular, Exxon/Mobil and the Koch brothers have been disseminating false and harmful information for more than half a century. They’re responsible in particular for the US’ critical dependency on foreign oil. That’s been enormously unpatriotic.

                  • Mike
                    Ignored
                    says:

                    Nick, I think it is actually enormously unpatriotic and actually kinda cowardly, not to take full responsibility for one’s owns actions in life. For instance, to blame Exxon, or the Koch brothers, for dependency on foreign crude (you are kidding, right?) or to blame Total, or the NCAA, whomever, for climate change, and to sue them for it, while consumption of hydrocarbons in America, and the world, keeps going up, up, up, is really stupid. It is the height of hypocrisy, really. You are blaming the wrong folks. You should be blaming yourself, and all those around you that are just as guilty as you are. As I am. But I am capable of accepting responsibility for my actions.

                    Because you use less fossil fuels riding a diesel electric train to work than I do driving a 1 ton pickup to work, and need to get my work done, does that make you superior than me, or more noble? Hardly. You are still using hydrocarbons, hand. Hydrocarbons you need, from dishonest insincere, lying folks just like me, that provide them for you. So you can be a…hypocrite.

                    This argument is so lame. You represent a miniscule faction of our society with the financial wherewithal to make choices in life. You fly over rural America and look down on us with disdain, because we are not as “aware” as you are. As your buddy HB suggests, we are not looking out after the best interest of our children…because we have to haul wheat, and cattle, and run tractors, and drilling rigs, and truck things to all you wussies on the right and left coasts. So you can eat. Its laughable, and I can assure you that most of America would laugh at your hypocrisy.

                  • Dennis Coyne
                    Ignored
                    says:

                    Hi Mike,

                    I think you misunderstand profoundly where the average liberal is on these issues.

                    Certainly there are extremists that think we should shut down all fossil fuel production tomorrow.

                    Many people have complained that bad forecasts by the EIA or IEA have negative effects, and I agree that those poor forecasts have a negative influence on government policy and consumer choices.

                    Likewise, lobbying by the Koch brothers and major oil companies against carbon taxes and other policies that might help us to conserve oil resources so a transition to alternative energy might occur more smoothly also is negative.

                    The average consumer in the US thinks that climate change is a hoax and that fossil fuel supply is virtually unlimited.

                    Nothing could be further from the truth.

                    Decisions and policy would be far better if they were based on reality rather than fiction, in my humble opinion.

                  • Nick G
                    Ignored
                    says:

                    Mike,

                    I never said you were a bad person, or that oil producers are morally bad. I said the exact opposite, in fact: consumption is what we have to change, not production. Most environmentalists would agree. I also agree that we’re all in this together, and we all share responsibility. Don’t worry so much about a minority of people who make personal remarks, or seem to be moralistic – just stick to giving out good information.

                    But…when large companies (especially Exxon/Mobil, and car makers), and people like the Koch brothers shape national and local public policy in bad ways, that makes an enormous difference. They buy politicians and get bad laws, they buy media outlets and produce bad information. They harm our country, and….they give the oil (and car industry) a bad name. Don’t be surprised to see people be angry about that. If you’re being honest, you have nothing to worry about – just ignore their anger (or explain where it should be directed…).

                    The US could have raised CAFE efficiency standards much faster, and reduced our dependency on oil imports. We could have developed hybrids and EVs much sooner. As it is we have reduced our passenger fuel consumption by about 10M bopd vs 1960 fuel efficiency – imagine what things would like if cars still got an average of 11 MPG??? Imagine how much better off we’d be if cars got an average of 45MPG, instead of the current level of 23?

              • Dennis Coyne
                Ignored
                says:

                Hi Shallow sand,

                Most of the increase in radiative forcing is due to the burning of fossil fuel (coal, oil, and natural gas).

                It is the easiest thing to tackle (methane emissions come from many sources and those could also be taxed where possible).

                There are many possible ways that a carbon tax could be instituted. One option is a “feebate”, where all carbon taxes that are collected are returned as a rebate each month to all citizens equally. Or the taxes could be used to pay off the national debt and when accomplished could be returned to citizens or used for infrastructure.

                For the Cantwell-Collins plan see

                https://www.brookings.edu/on-the-record/fiscal-reform-and-climate-protection-considering-a-u-s-carbon-tax/

        • HuntingtonBeach
          Ignored
          says:

          “But…we’re not smart enough to do that”

          Hi Nick, I agree with all of your comment except the above. We are smart enough. It’s just those with self interest and powerful are fighting common sense. I know you know that.

      • TechGuy
        Ignored
        says:

        HuntingtonBeach wrote:
        “in economics no one ever said capitalism and free markets didn’t produce losers. In the long run, more often than not only the strong survive.”

        The US does not have true capitalism. Its mired in a sea of subsidies, unrealistically low interest rates, and nearly unfettered credit. This is causing severe capital misallocation in the economy, including shale oil. When an entire industry (shale Oil) is handed blank checks that provides no returns, there is a serious problem.

        Normally Market control interest rates and credit, but the world’s Central banks changed that by manipulating interest rates to try to avoid normal business cycles. The more they try to manipulate the worse the imbalances become.

        Normally recessions clean out the losers and give investors & banks pause on who they loan money to. CB’s & gov’t try to avoid this keeping interest rates very low and also to subsidize large businesses that fail (ie US auto manufacturer bailouts).

        Adam smith’s invisible hand has been handcuffed by Central bank and gov’t policies and thus cannot function.

        If interest rates were not at extreme lows, there would be no shale industry (at least at $50 bbl oil). Investors would could achieve returns using far less risky investments. The higher interest rates & tighter credit standards would force business to make more realistic investments and would have to provide business models that provided a real return.

  4. alimbiquated
    Ignored
    says:

    Any opinions or predictions on the price of oil?

    • George Kaplan
      Ignored
      says:

      Between $15 and $215 dollars, with 95% probability.

      • Dennis Coyne
        Ignored
        says:

        Hi George,

        I roughly agree, but would make it 99% probability from now to 2022.

        For the next 12 months, I expect the 12 month average Brent Oil price will be 60 to 80 dollars per barrel in 2017$ with about a 70% probability, my 95% probability range would be 50 to 90 dollars per barrel in 2017$ for the 12 month average price from Jan 2018 to Dec 2018.

        In the last 52 weeks the average 52 week Brent price (nominal) has increased by about $10/b from $46/b to 56/b and the current weekly price for the week ending Feb 2 was $68/b.

        My expectation is that the oil demand increase will outrun oil supply increase over the next 12 months and put upward pressure on the price of oil.

        Since June 2017 the Brent oil price has been increasing at about a $37/b annual rate of increase. with the price rising from $45/b to $70/b (linear trend through weekly average price).

        • GoneFishing
          Ignored
          says:

          Dennis, in your estimations have you considered that we might be entering a recession over the next couple of years or sooner? Demand might fall for a while. Hard to tell being in the information filtered US, but everything I see points to overinvestment in the markets, increasing world tension, increasing debt and decreasing pay (relative to goods and services provided). Even China is slowing in growth.
          What are your views on this?

          • Eulenspiegel
            Ignored
            says:

            It can be utter chaos then – because in a recession oil price goes down and shale financing will dry out to Zero. Wall street free money is not a gift from heaven that comes as certain as the sun goes up. Every shale companie not able to finance drilling out of cash flow will have to stop then and only pump oil from existing wells.

            Then, with a yearly decline rate ot 35% we will quickly come into serious oil scarity, even if world wide demand falls 1 or 2 million bpd.

            Other oil investment will also be seriously curbed in a world wide recession and oil price dump – so with world wide decline rates of 5% this can mean additional trouble. Plus an complete outage of Venezuela to Zero due to unrest.

            Restarting this engine can lead to temporary oil scarity of 5 mbd or more.

            So my try:
            Between $15 and $215 dollars, with 95% probability ;).

            • GoneFishing
              Ignored
              says:

              Every time the price of gasoline or diesel goes up, the EV’s get a big push and efficiency gets a push. It’s self defeating to make a lot of money in the oil business.
              If the price of oil goes over one hundred per barrel, the investors will flock to these now very profitable ventures. They never learn.
              Then later the price crashes again.

              It’s a silly and frustrating way to run a business and a world but all this up and down is just the sign that something is fundamentally wrong in the system. Maybe oil needs to have more storage and price controls. Producing commodities is always tough to deal with, lots of up and downs in pricing.
              Unlike mines, difficult to shut down the oil business when prices get low.

              I dealt in specialty chemicals, lots of high profit margins as well as fast ability to meet and create new markets. Parts of the oil business is there also, but only after the refinery end.

              If people got serious they could put the oil business out of the energy business in a decade. As it is it might be out of the energy business in two decades. Nobody is that serious, oil is far too convenient and inexpensive for the user. I expect the chemical business will use it for a long time. I am surrounded by plastic, even my car is made of plastic. My house is made of wood, so why not plastic 3D printed houses. Unbreakable plastic windows would make sense too.

              • alimbiquated
                Ignored
                says:

                >Nobody is that serious, oil is far too convenient and inexpensive for the user.

                Except maybe the Chinese government, which doesn’t enjoy being the world’s largest importer of oil.

                Also EVs are China’s ticket to take over the global car industry. If EVs take hold, most of the current industry will simply disappear. It would be handy for any country to dominate the sector that survives.

                Put those two facts together, and you see why the Chinese government is pushing EVs hard.

                Bloomberg predicts that in 2025, half the public buses in the world will be electric, and 99% of the world’s electric buses will be in China. I guess that means at least half the world’s public buses will be in China…

                https://oilprice.com/Alternative-Energy/Renewable-Energy/Nearly-Half-Of-All-Public-Buses-Will-Be-Electric-By-2025.html

                I have my doubts, but what it suggests is that China wants to get out of the habit of importing oil.

                • OFM
                  Ignored
                  says:

                  I have hopes that the western countries aren’t STUPID enough to allow the Chinese to dominate the manufacture of motor vehicles industry they way they already dominate the solar power equipment industry.

                  If we’re that stupid, well, we deserve to be THEIR economic colonies later on, because once they dominate a couple more heavy industries, they’re going to have the momentum to dominate them all. They’re going to have the tech to do things as cheaply as we do, but they’re not going to pay Western wages to anybody, not even engineers or doctors, for another generation or two at the soonest. So they’re going to have a long term cost advantage, which means……… well, you free traders figure it out for yourself.

                  If you rent, you will eventually find yourself with a Chinese landlord owning the building you live in, if they manage to take over a few more major industries.

                  The local guys, some of whom I have met and know socially and professionally, giving them some advice about certain problems, who owned pieces of the domestic furniture industry thought they could import actual boxed pieces of furniture, and make a killing, by doing away with domestic production, and they did, FOR A WHILE.

                  But it didn’t take the Chinese very long to establish their own marketing crews and brands here in this country, and now people people who used to own some good top brand money minting names are forced to compete with bottomless pocket Chinese manufacturers who bought out some well respected brands. The one major local manufacturer left here is using one hundred percent imported hardware, every nut, bolt screw, handle and knob, if not made of wood, is imported. GUESS from where, lol. Most of the finishing chemicals are imported. Most of the newer machinery is also imported, but THAT at least almost all came from Germany. I worked for this company locally as a maintenance tech on the weekend skeleton crew sometime back, my last ever job with a W2, and the plant manager then and now is an old buddy from back when we were kids, so I can and do stop by there and make myself at home in the boiler room, and when management comes thru, I’m on a first name how ya doing basis with them. The conversation is always about the state of the industry, once we talk over mutual acquaintances. They know me I’m a success in my own lines of work, self employed, so they don’t look at me as a lowly peon employee.

                  Fortunately the car companies here , and the remains of the United Auto Workers, are well connected politically, and can probably at least force Chinese companies to manufacture cars here, rather than in China.

                  And there really isn’t anything special about an electric car, other than the battery. There’s no reason Detroit can’t build good electric cars. Detroit builds some cars, actually quite a LOT of cars, that are no doubt in my mind the best in the world, when you take into account the price of them.

                  There is absolutely no way in hell a luxury German car is worth twice the price, or more, of a top of the line Ford. Put the passenger in a blindfold, turn on the music loud enough he can’t identify the engine note, and I guarantee you he can’t tell one time out of a hundred if he’s in a new top of the line Chevy or Buick, or a new BMW that costs twice as much.

                  Imported luxury cars are all about status, rather than value, and the domestic industry, which now includes a hell of a lot of import makes built HERE, has pretty well caught up in terms of quality all around.

                  You have to either be a fool, or have money to burn, to waste, to spend it on luxury imports, and cheap imports really aren’t any better than comparably priced domestic cars anymore, although a lot of people BELIEVE they are, and are thus willing to pay more for them used.

                  I know, because I still know a lot of people in car biz. My career job title is ROLLING STONE. I still hang around with them in their garages from time to time just to visit and to keep up with what’s what, automobile wise. I can now find a middle aged Civic or Camry in need of a new engine or transmission just as fast and almost as cheap, or as cheap, as I can a similar Ford or Chevy. Plus parts are cheaper for Fords and Chevys as well.

                  PS I am NOT opposed to free trade, except when my relatives and neighbors come out on the losing end. That pisses me off, lol.

                  I’m not a loser, personally, because I’m a capitalist piglet.

                  It’s been a long damned time since I worked more than a month or two for wages, out of any given six month period. And when I did, I did so to learn new stuff, or to get some money to invest, and I invested it.

          • Dennis Coyne
            Ignored
            says:

            Hi Gonefishing,

            I expect when peak oil is reached in 2025+/-5 that the economy will gradually slow due to high oil prices, eventually this might lead to a financial collapse like 1929, my expectation is around 2029+/-5.

            Until this occurs I think oil prices will tend to rise, but the effect of increasing wind, solar, plugin hybrids, and EVs is difficult to predict.

            Eventually (2040+/-5) I expect there may be falling demand for oil as EVs replace ICEV with high oil prices.

            I could of course be very wrong and EVs may grow much faster or slower than I foresee.

        • Dennis Coyne
          Ignored
          says:

          An add on to my comment above (2/9/18 11:32 am).

          Plot of weekly brent oil price from June 3, 2017 to Feb 2, 2018 with linear trend.

          Note that the Brent trend was at about $60/b on Jan 1, 2018, so if the trend of the last 8 months continues, Brent would be at $97/b on Jan 1, 2019.

      • shallow sand
        Ignored
        says:

        Lol. Great post George!

      • GuyM
        Ignored
        says:

        That’s funny, George. But, too true.

    • TechGuy
      Ignored
      says:

      alimbiquated wrote:
      “Any opinions or predictions on the price of oil?”

      1. Geopolitics, The ME is a complete basket case and gets worse by the day. All it would take is a Proxy war switching to a Hot war to send Oil prices to the moon. There appears to be escalation between Iran and Israel this week.
      2. Economic weakness, No nation has a strong economy that isn’t mired in excessive debt with no realistic means to payoff that debt. The world economy is floating on cheap and easy credit. If there is a liquidity crisis, its going to trigger another recession/crisis, which will send oil prices lower. Will last weeks stock market correction trigger another recession? We are also overdue for another recession.
      3. Central bank & gov’t manipulation of economies. More QE would increase liquidity and let business and consumers borrow more. QE and ZIRP tends to make investors flee liquid assets and invest in commodities. Well see more QE and ZIRP once the economy falls back into a recession. I think they will be quicker to react this time around, thus limiting the how low oil prices will fall.

  5. George Kaplan
    Ignored
    says:

    Forties pipeline closure sends [UK] industrial output tumbling

    Industrial output fell by 1.3 per cent between November and December, according to the Office for National Statistics. This was the biggest monthly drop since September 2012 and came after a 0.3 per cent rise in November. The fall was large enough to cause quarterly industrial production to be revised down from 0.6 per cent to 0.5 per cent.

    https://www.thetimes.co.uk/edition/business/forties-pipeline-closure-sends-industrial-output-tumbling-5h35nn38b (Paywall)

    Sometime in 2018 UK oil and gas production will peak, probably for the last time, and then begin terminal decline. UK productivity is heavily influenced by oil and gas production as shown by the impact of the Forties unplanned outage, and will likely decline accordingly. Economists and management consultants like to talk of manufacturing efficiency, improved skill levels, reducing regulations, technology innovations etc. but oil and gas production has been the biggest single influence on recent UK productivity (or maybe equal with changes in the financial services industry), as discussed here:

    http://speri.dept.shef.ac.uk/wp-content/uploads/2016/04/SPERI-Paper-28-Innovation-research-and-the-UK-productivity-crisis.pdf

    SPERI Paper No. 28 – Innovation, research and the UK’s productivity crisis

    The UK is in the midst of an unprecedented peacetime slowdown in productivity growth, which comes on top of the nation’s long-standing productivity weak- ness compared to the USA, France and Germany. If this trend continues, UK living standards will continue to stagnate and the government’s ambition to eliminate the deficit will fail. Productivity growth is connected with innovation, in its broadest sense, so it is natural to explore the connection between the UK’s poor productivity performance and the low R&D intensity of its economy. More careful analyses of productivity look at the performance of individual sectors and allow some more detailed explanations of the productivity slowdown to be tested. The decline of North Sea oil and gas and the end of the financial services bubble have a special role in the UK’s poor recent performance; these do not explain all the problem, but they will provide a headwind that the economy will have to overcome over the coming years.

    • GoneFishing
      Ignored
      says:

      This is a fantastic opportunity to push forward in more sustainable ways and research efficiency, better food production and preservation, new energy methods and production, along with streamlining the systems. Any CEO worth his salt knows that the best time to do R&D is during the downside of a recession. That way the new products and systems are ready to roll out the door when the turnaround starts and if the products/systems save money then they can even sell during the downturn.

      • George Kaplan
        Ignored
        says:

        I’m not sure what you mean by “this” is a fantastic opportunity or to which CEOs you are referring. These days E&P CEOs look 3 months ahead at the next financial statement and not much further if they can help it. Share buy backs and dividend levels dominate over any longer term thinking and I think projects are approved more to be able to book reserves this year than for the production they’ll get 5 or 10 years in the future.

        There are UK companies that do a lot of R&D, e.g. Dyson I think spends more on robotics than any other country, but a lot of longer term university research has been cut back.

  6. GuyM
    Ignored
    says:

    Ok, new theory on using pending lease data file. Noted most was added to the second month of pending data, with very small increment in third month. Goes along with RRC laws regarding when royalty owners are paid on new wells. Pulling current Oct production from the production file and adding it to the second month of pending lease data, I come up with 3,745, and EIA’s for Oct is 3,767. Oct current is when it was last reported when Nov production was reported, or two months of reporting. To be continued….Just a theory, only time will tell how close it is. Problem is nobody has used either source of data, yet. Pending data file, or the second month of reporting Texas production on the regular query. Which is not retrievable. Oct reported in Nov is 83,465,095 oil and 9,766,327 condensate. We will never see these numbers again, unless written down. It appears that the best I have been able to achieve is to confirm EIA monthly numbers. Lot of work, just to do that. Even EIA’s September numbers look close this way.

    • Dennis Coyne
      Ignored
      says:

      Hi Guym,

      We can try to work on this by e-mail.

      I have 2nd month data (from Dean Fantazzini) going back to April 2014.

      I think by “second month” you mean the month prior to the most recently reported data.

      Clarify this by email and I can get you the data you need.

  7. Energy News
    Ignored
    says:

    Baker Hughes U.S. oil rig count: +26 rigs to 791
    Permian +10, Eagle Ford +3, Williston +4
    Natural gas: +3 to 184
    http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother

  8. shallow sand
    Ignored
    says:

    Shale discipline = oxymoron.

    Would be fitting if we tank back below $40 WTI, but man I am sure tired of this.

    Car parts store or Dairy Queen cashier might be a better gig, with a nod to Mike and Mr. Brown. Or was that flipping burgers at DQ?

  9. Guym
    Ignored
    says:

    Based on what I have heard from upstream, so far, I can’t fathom how EIA expects a million barrel increase 2018. Has anyone heard of one of the big players say: we are going to go crazy on production and increase it by 100%??? That’s what it would take to get to a million increase, probably more. They would have complete about 50% more wells just to reach the current increase of about 600k to 700k more. A don’t think they could even borrow enough to get at 100% in the current environment. Yeah, their gonna zipper frac some of those DUC Christmas trees they have in the Permian, early on this year to maximize income for the year. That will make production spike early, like last year. Then what?

    • Dennis Coyne
      Ignored
      says:

      Hi Guym,

      Clearly we do not know what future oil prices will be. Let’s assume that demand growth outpaces supply growth and oil prices gradually rise from $60/b (Brent price) to $97/b over the Jan 1, 2018 to Dec 31, 2018 period. Wouldn’t you expect under those circumstances we might see an increased rate of completion in 2018 compared to 2017 in the US LTO plays?

      • Guym
        Ignored
        says:

        Well, I am far from knowing it all. But, based upon what I have been reading, we don’t have the capacity, nor is the infrastructure comfortable with that kind of an increase. If prices rose over 80, there would be a more rapid, and costlier effort to get to that capability quicker, but I believe any effort would fall short to produce one million barrels a day more for this year. We are almost halfway through the first quarter, and the screws are being tightened to get WTI back to $55. Morons. It’s going to be close to the end of the second quarter, before they realize it’s circling the drain. Yeah, the price will be up, but too late for 2018.
        I had a sneaking suspicion that the morons would look at the first half and wring their hands that we are “swimming in oil”, again. Delaying the inevitable oil price rise. So, I sold my Jan 2019 leaps at close to the high, and invested in Jan 2020 leaps, just with the profit that was close to 100%. I am pretty sure it won’t drag out two years. Sitting on a loss right now. But Jan 2020 is a long time away.

        • Dennis Coyne
          Ignored
          says:

          Guym,

          I agree the 1 to 1.5 million barrel per day increase in US C+C output predicted by some agencies, consultants, and companies, is not very likely. If it should occur, it is likely to keep oil prices toward the low end of my expected range ($60/b) and those low oil prices would reduce profits, investment, and the rate of well completion.

          It is for this reason that I expect a 500 to 700 kb/d increase in US output in 2018 (average output compared to 2017 average output), roughly half the level forecast by many others.

          • Guym
            Ignored
            says:

            I agree with 500k to 700k estimate. At that level, we would probably still be dropping in world production, and price would still go up. At $60 a barrel, there is no impetus for production increases over that 500k to 700k level. At $55, we get stagnant production, and companies eventually dropping like flies. There’s NO real profit at $55, or barely profit at $60 for only SOME companies.
            There is still companies that are claiming profit at $55. So, I say line them up with their 10k reports and demand they prove it. It’s the end of the year, they had a full year to do it in. Where’s the BEEF!!! Maybey 10% will not show red. That’s not a profit, is is living on borrowed money and borrowed time. You can’t count sales of “non-performing assets”, that’s not from operations, that’s from desperation.

            • HuntingtonBeach
              Ignored
              says:

              The current increase in US production 4 week average of a million BPD over last year is needed to meet demand. Current YTD demand of product supplied is up 5.7% or 1.125 million BPD. Current total inventory excluding SPR is down 140 million barrels from this time last year and the three year surplus is pretty much gone. Refineries have been running balls out up until a couple of weeks ago and processed inventories have dropped verse last year by 40 million barrels. This is the time of year oil inventory builds because refineries are down for maintenance getting ready to switching over to summer blend. Second and third quarter margins are going to be good trying to keep up with demand.

              I’m with Goldman Sachs projecting $70 Brent in 3 months and maybe as high as $80 in 6 months. When the refineries turn it back up to 96% throughput with current demand and inventory. Prices are going up. I’m betting on it.

  10. Kolbeinh
    Ignored
    says:

    I must say I am a bit worried about where the oil marked is headed. This constantly push down in prices (by strong forces) has been going on for too long. I mean Angola had 1 ONE active offshore rig according to Baker Hughes last rig count, and Brazil had only 8. And supply is supposed to stay up in Angola and even grow significantly in Brazil. This is going to backlash hard at some point, most probably begining second half 2018 and further into 2019. And then we got the problem with the global economy not being able to cope with high oil prices. Everything is not very well planned and this high volatility in oil prices serves noone, except short term ease for countries importing oil and short term speculators that are on top of things or have superior information. It is a disaster for long term planning of risky and expensive offshore projects for example and after a while the consequence will most likely be a tanking economy globally. This is not well planned, it is uncontrolled capitalism. And those nations who can influence the oil market are too busy fighting each other to take a collective approach.

    I do think oil prices will skyrocket when scaricity is present, unlike a few others posting here. But then what…financial crises with lower oil prices again because of sudden demand panic. And then oil price will rise again….too high because of a too long period with underinvestment, and then economies in average would tank again? My point is, this volatility makes it hard to plan for 5-10 year long projects and it not very beneficial for most people in the industrial world in lets say the next 10 year period.

    • Dennis Coyne
      Ignored
      says:

      Kolbeinth,

      That is the nature of capitalism, it is not controlled by governments, or control is minimized.

      See Walras.

      https://en.wikipedia.org/wiki/Léon_Walras

      • Guym
        Ignored
        says:

        Except, EIA is controlling a downward price with their insane predictions. They are the government, but Mike has a picture of EIA and IEA, hand in hand, on his blog. It doesn’t appear they are doing it intentionally, as it depicts governments at their best.

        • Dennis Coyne
          Ignored
          says:

          Hi Guym,

          It is the output that will affect the oil price. The government in many nations (US, Canada, and UK for example) do not control output, individual businesses make these decisions with little interference from government (since 1970).

          The output decisions of individual businesses are affected very little by the output forecasts of the EIA and IEA, most of these company CEOs realize the forecasts are not very good.

          • Mike
            Ignored
            says:

            Uh? The US shale oil industry just in the past week drove the price of oil down 12% by mouthin’ off about increased spending. An OPEC minister farts the wrong way and the price of oil can move $4. Of course the EIA and the IEA influences the price of oil, same as the USGS, with absurd estimates about technically recoverable reserves, can influence where, when and how a corporation depending on secure hydrocarbon resources decides to build a plant. Or shale oil abundance BS might give cause for some dumb ass in Florida to buy a bigger SUV. Speculation in crude oil markets is driven by an array of different factors other than “output.” Short term speculation creates volatility that affects long term supply. Look what has happened to worldwide output in the past 3 years. Besides, in the US, Wall Street and long term LTO debt dictates output now, not the price of oil.

            • Dennis Coyne
              Ignored
              says:

              Hi Mike,

              Do you base your economic decisions on the forecasts of the EIA and IEA, or more on the geology of the play, the costs of drilling and production, and your own expectations of the future price of oil?

              The drop in oil price since late 2014 was due to excess oil output relative to demand.

              I will have to respectfully disagree, the output of oil relative to the demand for oil is the critical factor.

              I agree the forecasts of the EIA, IEA, and USGS estimates will have some influence on oil prices, as to the flatulence of OPEC oil ministers, I think that effect is relatively small. 🙂

              • Mike
                Ignored
                says:

                What I do regarding business decisions is totally irrelevant, Dennis. You are ignoring how the EIA and the IEA influences markets and such vital things as energy policies in America and what Rick and Donald talk about over diet cokes. The EIA is unfortunately a powerful government entity with powerful influences over world oil markets. Ask Harold. I am sorry you refuse to accept that. Set me right, do predictions and models about the future matter, or not matter?

                But I am glad you are back from a long lunch. The anti-oil, anti-God, anti-everything except the world is going to spontaneously combust tomorrow gang has cross-dressed over into the petroleum only thread, it seems, and is attacking the only two oily men you have left. Unless you want to include TT, then you have three. In any case, its cause for panic. Or was it intentional?

                • Dennis Coyne
                  Ignored
                  says:

                  Hi Mike,

                  Unfortunately Islandboy published his post “privately” and messed up the usual order.

                  When the Open Thread is “Petroleum”, rather than non-Petroleum, people who usually only look at the non-Petroleum Thread post in the Petroleum thread.

                  Maybe just ignore things until next week.

                  I have been on vacation so have not been looking at the blog much.

                  Not intentional, sorry.

                  You did not answer the question.

                  There are a lot of oil producers like you and Shallow sand in the US. Do you or shallow sand let the ridiculous forecasts of the EIA or IEA affect your business decisions?

                  Every oil producer has their own internal model (whether it is implicit or explicit), those are the only models that matter, in my opinion.

                  Also note that my inadequate models for LTO have been heavily influenced by the comments that you and shallow sand make.

                  I thank you both for making my simple models somewhat more realistic.

                  The EIA forecasts of the past have not been very good, one only need to look at the old forecasts to realize this.

                  Smart people realize these forecasts are not very good,

                  See for example.

                  http://www.postcarbon.org/publications/shale-reality-check/

                  That report makes sense in my opinion.

                  • Mike
                    Ignored
                    says:

                    Thank you, Dennis. You are correct, the latest PCI report is incredibly important and for the most part, will therefore go totally unnoticed. If the opinions from that of David Hughes, and the MSM (absorbed totally from the shale oil industry itself) are something like… in the middle, America is still in deep shit. Unless you are as old as I am, you will deal with it. Big time. More importantly, your children will.

                    I actually think your models make more sense than the EIA does. The EIA is dangerous. Intentionally? I do not know. What I do know is that “smart people” do not make business decisions based on the EIA, you are correct; but the US government does. It is basically very unsmart, always has been, regardless of who is steering the boat, but has gotten even unsmarter in the past 14 months.

                    Actually, pissing the rest of the world’s producing oil countries off with the making America first, energy dominance stuff, is about as stupid as you can get. Its for ego maniacs, not forward thinking people who love the children they leave behind.

                    “The shale oil industry was a prime beneficiary of this new hyper-debt regime.” http://kunstler.com/clusterfuck-nation/party-on-dudes/

                    Thanks, Dennis.

                  • Dennis Coyne
                    Ignored
                    says:

                    Mike,

                    Thank you.

                    I agree 100%. Government is far from perfect, but we get the government we elect.

                    Representative Democracy is a terrible form of government, just better than anything else I can think of.

  11. Guym
    Ignored
    says:

    Did I get on the wrong board?

  12. Caelan MacIntyre
    Ignored
    says:

    Hi Dennis,

    Perhaps it’s normal for POB but, FWIW, I just noticed that the petroleum thread’s address is http://peakoilbarrel.com/open-thread-non-petroleum-feb-8-2017/

    • George Kaplan
      Ignored
      says:

      WordPress creates the link when you first create a new post, you can then edit the title but it doesn’t change the link address (to do that you’d need to delete the previous post and create a new one).

    • Dennis Coyne
      Ignored
      says:

      Hi Caelan,

      Yes I made a mistake on the intitial title, since corrected, but the address documents my initial error.

      No way to correct it now.

      I probably should have done what George suggested above, too late now though.

    • Caelan MacIntyre
      Ignored
      says:

      Understood, guys, thanks.

  13. Watcher
    Ignored
    says:

    https://www.platts.com/latest-news/oil/washington/as-imports-dip-us-weighs-options-to-dull-venezuela-21281041

    Details suggest someone is getting hurt in the US by not getting Ven oil.

  14. CDM devil
    Ignored
    says:

    What are the opinions on the state of the oil markets. Rig counts are up, exploration expenditures appear to be going back up, and demand is forecasted to increase. Which is going to win out and are oil prices going up or down over the next year.

    • Dennis Coyne
      Ignored
      says:

      CDM devil,

      I would say up. With at least a 50% probability 🙂

      • Guym
        Ignored
        says:

        Or, is it either up or down with a 95% probability? (Could go sideways at 5%).

        • Dennis Coyne
          Ignored
          says:

          Guym,

          I would say there is a 99.999% probability that the price of oil will be more than zero for the next 50 years, perhaps more.

  15. George Kaplan
    Ignored
    says:

    Enchilada pipeline planned to partially restart in February: Baldpate is due to start production again at around 30 kbpd (plus a lot of gas), maybe more as there was a new well for Penn State that has been completed. I presume it is tapped directly to the pipeline and not via the Enchilada platform, which they say has been isolated. The other, mostly Shell, fields of Salsa, Llano, Auger (Cardamom) and Magnolia, go through the platform (I think) and there is no news of their start-up date. It sounds like there was quite a bit of damage on the platform so it might take a long time for these to come back now (e.g. a year if they need a new 30″ isolation valve, maybe three years if they need a new platform completely).That is about 50 kbpd oil off line. All the fields are in decline so the actual economics of a big repair job, especially a platform replacement, might be quite marginal and they may be looking at alternative tie ins if these are available.

  16. Energy News
    Ignored
    says:

    Weekly Change in U.S. Ending Stocks of Crude Oil + Products – EIA
    Another version, just trying different things: https://pbs.twimg.com/media/DVspW85W0AAw5ml.jpg

    • FreddyW
      Ignored
      says:

      Thanks, this is a really good graph. Please continue to post this version. Maybe also a monthly version?

      • Energy News
        Ignored
        says:

        Yes there is a monthly one, although it shows individual years rather than an average for a range of years.
        Chart on Twitter: https://pbs.twimg.com/media/DVxC3CiX4AECpi-.jpg

        • Energy News
          Ignored
          says:

          US Net Imports of Crude & Petroleum Products (4 week average)
          As US production is increasing, obviously need to see net imports falling to balance supply/demand
          Chart on Twitter: https://pbs.twimg.com/media/DVx8ICWW4AA2Pn0.jpg

        • FreddyW
          Ignored
          says:

          It´s ok it doesn´t show the average. But it only shows until November.

        • Energy News
          Ignored
          says:

          As you know it’s only an approximation to convert the weekly numbers to a monthly chart and so I don’t usually bother.

          (Note on accuracy for new people. The weekly dates don’t align perfectly with the months. Weekly numbers only work in a monthly chart if the weeks at the start and end of the month have zero change. And so to do this chart I have had to assume that during the weeks at the start and end of the month the inventory change for that week is spread equally to each day, so it’s wrong but gives an approximation).

          This method gives December at near zero change, +0.2 and January at +18.7 million barrels.

  17. Hightrekker
    Ignored
    says:

    Justice department’s No 3 official to take Walmart’s top legal job
    It would be funny, but it is our political reality.

  18. OFM dumb redneck aka trumpster aka KGB agent aka Nazi sympathizer,aka child molester, etc, ask HB.
    Ignored
    says:

    Hey Mike and Shallow Sand,

    This part of the blog would hardly be worth reading, from my pov, unless you guys stick around. I’m REALLY interested in the hands on aspects of the industry you talk about.

    I can get statistics lots of other places, it’s the insights I gain from reading guys like you and Dennis and Fred and Doug and GF that keeps me coming back. All of you have helped me come to a better understanding of REALITY. Thanks to all!

    Now I suppose you two don’t read the non petroleum thread very often, if at all, or you would know something about what my little helper, HB, Huntington Beach, is really like. He’s a LOT worse, morally, and intellectually, than you think. Go over to the non petroleum threads to read some of his recent stuff.

    And incidentally he has bragged several times about making a lot of money in the oil biz because working class people are stupid, or worse. He has nothing but contempt for you, or me, or anybody who disagrees with his insufferably elitist and arrogant opinions.

    I have been running my mouth quite a bit here, over the last year or two , about what is wrong the D party, and why the R’s have mopped the floor with them, nationally, state, local and federal, for the last few decades, and what they need to do to regain power, namely in my opinion quit running Republican Lite banksters like HRC, and get back to supporting the working classes of this country, rather than IGNORING them.

    Mosey on over to the non petroleum thread, and see what he brags about, and how he looks at people who actually WORK for living, how he talks about them. Anywhere about two thirds of the way down, or thereabouts.

    And incidentally, if you might be wondering about agriculture and food and so forth, you will see if you read my non political comments in that thread that I know my stuff, in my own line of work, just as you know your stuff in your line of work.

    HB has never posted a comment that leads me to believe he knows shit from apple butter about anything, excepting only commercial trucks. He says he used to be a truck salesman, lol. That fits, sales people in the motor industry are generally considered by the more cynical members of the public to be about as untrustworthy as anybody in any industry, bar none.
    I wouldn’t be surprised if he lives in his mom’s basement.

    I would copy and paste some of his nastier remarks, and utterly stupid remarks, but for some reason this new computer is refusing to copy just what I highlight over there. It wants to copy the entire thread. It copies only what I highlight almost every where else, or else it won’t copy at all.

    I have extended an open invitation to any regular here who happens to be passing thru my neck of the woods to drop in for a visit, for a couple of hours, or a couple of days, or even longer. This might just be interpreted as indicating I am not PERSONALLY full of shit, lol, that I do have a nice little farm, etc etc.

    I’ll pick either of you guys up and put you up for free, excepting conversation, at either Charlotte or Roanoke, if you ever have business in this area,flying, and if you’re driving, I’ll meet you on I 77 or I 81 and treat you to the best dinner you can get near the interstate……… for conversation with a real working man. I have been a commercial trucker, heavy equipment operator, certified welder, professional farmer, you name it, I’m a world class jackass of all trades. I can build a wood framed house without asking anybody anything about how it’s done, turnkey from grading the ground to the last drop of paint. Nothing pleases me better than a conversation with a man who works in an industry I know little or nothing about, especially one that I COULD work in, if I were younger, and free to travel. Except for the fact I had a hot young wife at the time, I would have gone to work on the Alaskan pipeline as a welder.

    Now old HB, he probably can sell trucks. I doubt he can do anything else, except maybe wipe his backside. And maybe he has lucked out in the stock market, a lot of people do, when the market is rising.

    Well, one other thing……. he’s REALLY good at making a fool of himself when he engages with me.

    Check out his exchanges with me, you will find them amusing and enlightening. Look at and above and below his two o seven two twenty eighteen two twenty pm , you will see what I mean.

    • Stephen Hren
      Ignored
      says:

      Please leave your personal BS off this blog, you are wasting everyone’s time and space.

    • Guym
      Ignored
      says:

      The thing about this oil in Texas, it pretty much is not discriminate whether it lies under a Democrat, Republican, Independent, or Wiccan’s property. I’m sure each has their own opinion on how it should be developed, not developed, or ignored. As is their right.

    • shallow sand
      Ignored
      says:

      I guess I really don’t care too much if anyone wants to argue with my posts. Not a big deal, really.

      Guys that own trucking companies or sell trucks hate high fuel prices more than everything else, naturally. I used to accuse a coupe posters of owning trucking companies because they sounded like my friend who does own one, and who was whining about fuel prices to me in 2013 the same way I have been whining about low oil prices since Thanksgiving, 2014.

  19. stupid old farmer trumpster kgb agent, ask HB.
    Ignored
    says:

    Fernando has been right all along, although hardly anybody here, myself excepted, has given him credit.

    http://foreignpolicy.com/2018/02/07/cuba-is-making-the-crisis-in-venezuela-worse/

    FP says so in no uncertain terms. Cuba is keeping Maduro in power, and has thousands of agents in the country helping him run his police state.

    It’s hard to say what will happen in Venezuela, but the situation there is obviously unstable, and one way or another, things are going to change radically.

    Maybe Maduro and his Cuban masters will be able to crush the opposition, and set up a full fledged police state.

    Maybe the opposition will finally succeed in kicking him and his regime out. Even if the cards fall this way, the country may still be in a hell of a political mess, and in any case, getting the economy back on it’s feet again is going to take a while, years not months.

    The Venezuelan oil industry may collapse altogether, depending on how much fighting happens.

    I guess that would result in the price of oil going up ten dollars, maybe more.

    • Guym
      Ignored
      says:

      Naw, EIA will just up the estimate US will increase this year to 2 million bpd at $55 a barrel. Have to keep the price down. Or, free, even. We could have entire population of Texas out with shovels to donate free oil!!

    • Hightrekker
      Ignored
      says:

      Maybe, but we have been hearing this for two years.
      I don’t have any comrades in Venezuela currently, so haven’t got primary sources.
      Foreign Policy is a (publication of division of Graham Holdings Company-formerly The Washington Post Company). with a center right perspective, but pretty credible if one is a neoliberal.

  20. Energy News
    Ignored
    says:

    Lots of new capex projects were approved as oil prices recovered.
    Woodmac, FID: https://pbs.twimg.com/media/DV0YVoRXkAA_IAf.jpg

  21. Energy News
    Ignored
    says:

    OPEC January 32,302 kb/day, -8.1 kb/day month/month
    (Table 5 – 9: OPEC crude oil production based on secondary sources, tb/d)
    Twitter table https://pbs.twimg.com/media/DV1Qu7SXUAA3pJX.jpg

  22. Energy News
    Ignored
    says:

    Venezuela Crude Oil Production
    Direct Comms: Jan 1,769
    Secondary Sources: Jan 1600
    The Secondary Sources December number was revised down -98 kb/day. And so Decembers Direct Communications number seems to have been right, although probably just a coincidence looking at the historical gap between the 2 numbers.

  23. OFM
    Ignored
    says:

    Is anybody willing to venture his opinion as to how likely it is that oil will go thru the roof within the next couple of years, say ninety bucks and up, and stay there for a while?

    • Kolbeinh
      Ignored
      says:

      Notoriously difficult to predict oil prices. I am more of the opinion that we will see an oil price spike somtime in the not too distant future. I am scared of the prospect of 90+ oil price for a long period of time, because of the risk of too high inflation, defaults on debt and low, even negative economic growth. So I fear the last scenario is not possible without a “crash” landing.

      • Dennis Coyne
        Ignored
        says:

        Kolbeinh,

        What happened from 2011 to 2014 with average oil prices at $110/b?

        The only problem was an oversupply of oil which drove prices lower.

        Today, only a fall in demand as people start to by more plugin vehicles is likely to drive prices lower, unless we see $160/b or higher. At that price (in 2017$), we might see an economic slowdown and potentially a financial crisis, but probably not before 2025.

        • Kolbeinh
          Ignored
          says:

          If the dollar tanks hard compared to most other currencies for importing countries, like in 2011-2014, it is more likely that high prices can be endured. I don’t think there is the same opportunity to lower interest rates and releash QE to the same extent this time for either the US, European CB or China. Well, QE could be the last resort..but printing money should in theory lead to hyperinflation/currency crisis. And if the supply situation of oil gets worse over time, despite what the overly optimistic IEA and EIA tells you, a crisis will come.

          That is why I keep saying that too low and volatile prices for the oil industry serves very few in the long term, because it disrupts too much long term production. And my faith that OPEC will do anything about it is limited. They will just milk whatever high prices they get, and if a recession comes it’s out of their control…they will just wait until it’s over.

    • Dennis Coyne
      Ignored
      says:

      OFM,

      I would guess about an 80% probability that by 2020 oil will be $90/b or more and remain at that level or higher on average (for most 12 month periods) until 2025 at least.

    • Donn Hewes
      Ignored
      says:

      The funnest part of POB is waiting to see if Ron or Dennis is right. You are trying to give away the answer! I don’t believe it will go up that high and stay there for any great length of time, but really have no idea. Unlike Dennis I think our global economy is really messed up. Even if I was right; I have no idea how long it takes for these “cracks” to become obvious. Very good reasons for NOT wanting them to show.

  24. Guym
    Ignored
    says:

    We can’t be fiscally responsible, so we going to have a garage sale:
    https://oilprice.com/Energy/Crude-Oil/US-Mandates-Biggest-Non-Emergency-Strategic-Oil-Selloff.html

    Next on the agenda, Fort Knox. Nope, still won’t be enough. How many 6 billions make one trillion? Even if we robbed all those billionaires, we still wouldn’t have enough.

  25. Watcher
    Ignored
    says:

    India news. It appears the government’s cash ban of the first half of 2017 decreased oil consumption in India. Estimates are that 2017 oil consumption growth will come in at about 3% vs 7% 2016

    December’s oil consumption growth was up about 9% over the equivalent month of 2016. It appears the effect government intervention earlier in the year has faded away and consumption growth will resume and probably much faster than before in order to offset the slowdown of early last year.

    Apparently, gasoline in 2017 saw its consumption increase 7%. This may indicate I move away from LPG to gasoline, as is normal in other countries.

  26. Energy News
    Ignored
    says:

    This should increase US exports, by cutting the cost of transport.

    2018-02-13 – Bloomberg – Louisiana Offshore Oil Port in U.S. Gulf has made minor modifications to operate bi-directionally and enable both loading and offloading of VLCCs without multiple shuttle tanker movements.

    • Energy News
      Ignored
      says:

      Port of Corpus Christi’s Ship Channel Improvement Project (CIP) – Feb 13, 2018
      The President’s budget includes $13 million in funding for port of Corpus Christi’s CIP in the U.S. Army Corps of Engineers in its civil works budget. Completion of the CIP will allow the Port to increase export volumes of U.S. oil and natural gas, supporting the nation’s allies abroad and bolstering domestic energy production. According to Energy Analysts International, the Port of Corpus Christi exported more than $6 billion of crude oil to U.S. trading partners in 2017 contributing to offset the United States trade deficit.
      http://portofcc.com/press-release-port-of-corpus-christi-included-in-the-presidents-proposed-fy-19-budget/

  27. George Kaplan
    Ignored
    says:

    IEA out for February:

    https://www.iea.org/oilmarketreport/omrpublic/

    Global oil supply in January edged lower to 97.7 mb/d but was 1.5 mb/d above last year as rebounding US production underpinned non-OPEC output growth.

    OPEC crude oil production in January was steady month-on-month (m-o-m) at 32.16 mb/d. Higher Nigerian output offset losses elsewhere. Compliance with supply cuts reached a new high of 137%.

    Non-OPEC output dropped by 175 kb/d in January, to 58.6 mb/d, but was 1.3 mb/d higher than a year ago US crude output, up 1.3 mb/d year-on-year (y-o-y), will soon overtake Saudi Arabia and could catch Russia by the end of the year. Compliance with output cuts by non-OPEC countries was 85%.

    Global oil demand growth for 2018 has been increased slightly to 1.4 mb/d, partly due to an optimistic GDP forecast from the IMF. This is down from last year’s gain of 1.6 mb/d, as higher oil prices, shifting Chinese demand patterns and fuel switching in non OECD countries slows growth.

    • George Kaplan
      Ignored
      says:

      To me they are showing a turn over from excess supply to a coming accelerating draw on stocks and then … something has to happen to demand, because the supply isn’t going to respond fast enough in my opinion, even with the putative Saudi excess capacity and however much core acreage in the US LTO is left, which would have to be initiated by a price signal but after that is likely to take on a life of its own.

      • Jeff
        Ignored
        says:

        IEA’s 5y oil market report will be published next month. Last year’s ed. indicated problems in 2020 and beyond (I know you think it’s more likely to be this year or next). Will be interesting to see what it says and their 5y take on US LTO. IMHO The WEO 2017 was a disappointment compared to 2016.

        • George Kaplan
          Ignored
          says:

          OIL PRICES: COLLAPSE NOW, SPIKE LATER

          “From next year onwards, we literally halve the number of projects and decline rates are picking up,” Amrita Sen, chief oil analyst at Energy Aspects, said on Bloomberg TV. “I do think there is a potential for spike … We’ve seen a huge amount of shale production growth, 1.5 million barrels per day, year-on-year in Q417, and still we are drawing stocks everywhere. That just shows you that we aren’t adding enough supplies elsewhere and demand growth is very high.”

          https://oilprice.com/Energy/Oil-Prices/Oil-Prices-Collapse-Now-Spike-Later.html

          I’d add: 1) we halve the number of projects and they are smaller, and tending to be slightly more gas than this year (so small condensate stream rather than oil); 2) the lack of recent discoveries has meant all the low cost fast cycle, but low production, near field developments have been used up in the last three years and any large, decent finds have been fast tracked – there just aren’t that many attractive conventional projects to fill any gap; and 3) recent FIDs for large oil projects will not hit plateau until 2021 and new ones now will be later still – i.e. conventional project start-up numbers and total new production will continue to fall for at least five years.

          Also, although I’ve been a bit disparaging of ideas that the balance of oil API means it can’t be refined, a sudden drop in heavier oil, replaced with a spike in light production might, at the least, mean the price of LTO doesn’t rise as fast as, say, Brent.

  28. George Kaplan
    Ignored
    says:

    There have been murmurings of restarting some developments in Nigeria, but none that I have seen from Angola. The chart below is from Sonangol, their NOC. They are predicting a plateau to 2019, with the addition of the two Kaomba FPSOs this year and next at 115 kbpd each (the pale blue columns at the top for Block 32). After that they start to decline which is likely to be pretty steep, maybe 20% y-o-y or more. The orange columns in the middle are for Kizomba (the biggest oil FPSOs) and have shown steep decline, with the blue wedge for Kizomba satellites, which will likely be declining soon. The red columns above are Block 17, the biggest producer, and come from FPSOs started from about 2008 to 2013 (Pazflor, Dalia, CLOV – Girassol is also there but in rundown as it was started in 2001). It is likely this block will start to decline noticeably in the next couple of years, and go down at least as fast as Kizomba.

    They have nothing else in the works that I know of. Recently their ministry was predicting over 30% drop by 2023. The regime there is not very attractive to the IOCs as there has been frequent changes in leadership and a general desire to increase taxes and local content. They have a few possible developments but they look pretty expensive (I think recovery per well is quite low in the remaining areas, maybe less than a quarter what can be achieved in Brazil) and some have been abandoned (e.g. pre-salt in Kwanza). There has been talk that their best bet might be EOR on some of the older fields.

  29. George Kaplan
    Ignored
    says:

    EIA US reserve figures out for 2016: oil, no change – revisions down equalled acquisitions up and production equalled discoveries/extensions; gas up 5.9%

    https://www.eia.gov/naturalgas/crudeoilreserves/

    • Dennis Coyne
      Ignored
      says:

      Thanks George.

      For tight oil proved reserves there was an increase of 5.3 Gb (including the produced oil in 2016) with 87% of this increase (4.6 Gb) in the Permian basin.

      At the end of 2016 US proved tight oil reserves were 15.5 Gb. Proved plus probable reserves are likely to be more, possibly as high as 23 Gb. Also higher prices in 2017 may increase reserves further.

      Note that this is a drop in the bucket compared to conventional oil reserves (1300 Gb) and extra heavy oil in Canadian Oil sands and Orinoco (390 Gb for the combined total extra heavy reserves).

      • Mike
        Ignored
        says:

        Probable reserves depends entirely on interest rates and the availability of OPM. Due to price volatility (WTI is down 12% in just two weeks) we cannot be assured that money will keep pouring in the shale industry unfettered. Even if it does the shale oil industry has already shot itself in both feet and is now zeroed in on its kneecaps with overproduction. Higher interest rates are coming and so are difficult economic times, and falling demand.

        15G BO of proven reserves is nothing and should cause everyone in America to pucker up, big time. But, what America is focused on is the 10 MM BOPD number, like its a “milestone.” A proud accomplishment. Quit drilling shale oil wells tomorrow and by this time next year we are down to 6 MM BOPD and on the express elevator down.

        People think this shale stuff is fun, interesting, fascinating; it gives them something to do with their time and an opportunity to make a day trade or two. But its messed up the world oil order and given people the wrong idea about our future. Depletion never sleeps. To fully understand the ramifications of 80% decline rates in 3 years, you more or less have to have your own money invested in it. Otherwise, you really don’t have a clue.

        I am saddened how dumb people are about this shale revolution and the false sense of security they have about our energy future. America is in big trouble in about 6 more years. https://www.oilystuffblog.com/single-post/2018/02/12/Reality-Check

        • HuntingtonBeach
          Ignored
          says:

          Dumb is thinking restricting the production of shale at a lower rate today is the answer to the problem. The real answer to the problem is to transfer the American transportation system to EV’s and expand renewable energy as quickly as possible.

          Slow dancing current production until the last call solves nothing, but does line the wallets of the stripper well producers today. How convenient for you Mike.

          • shallow sand
            Ignored
            says:

            HB, this most recent swipe at Mike about lining pockets of stripper well producers confirms in my mind that you own a trucking company. LOL.

            So, how many Tesla semi trucks have you ordered? LOL!!

            • HuntingtonBeach
              Ignored
              says:

              “The only thing we have to fear is fear itself” Franklin D. Roosevelt

              Actually I find Mike unpatriotic with no respect for American ingenuity and technology. After 150 years of oil production and increasing faster than anytime in history. Mike promotes fear of running out of oil and calling others dumb.

              I got a thousand dollars that says the confirmation in your mind is delusional regarding my profession. Your comment is all hat and no cattle.
              —————

              Clean Oil That Only Costs $20

              The United States is in the midst of an energy revolution.

              Oil production has risen by 5 million barrels per day (bpd) since 2010, an increase of nearly 100 percent. New technology, particularly techniques in shale oil drilling, has opened up vast new opportunities for oil and gas companies.

              Companies like Petroteq Energy Inc. are pioneering new approaches to energy extraction. While OPEC producers stick to the tried-and-true methods, American companies are exploring new horizons, watching production costs fall and profits shoot through the stratosphere.

              Petroteq Energy is pioneering safe and clean methods for unlocking oil sands assets. The company has two patents on technical methods for extracting oil sands in a way that avoids producing waste materials.

              The company produced 10,000 barrels from its production facility in Utah in 2015 using its brand-new technology, and now it’s upgrading a second facility in Utah to increase its production capacity.

              https://oilprice.com/Energy/Oil-Prices/Clean-Oil-That-Only-Costs-20.html

              • Lightsout
                Ignored
                says:

                Actually I find Mike to be extremely well informed and to have an exact understanding of all things oily.

                As for your linked article it’s a classic piece of fake news. The test facility produced intermittently at a rate of 1000bopd in 2015 using bought in feed stock. It has now been moved and reassembled on the Temple mine site. It is of a modular design and could eventually increase to 10000bopd. However unless somebody is hiding an extremely large hole in the ground a fully developed mine does not yet excist. And in any case permits are only in place for a mine to support 2500bopd of production and that involves the removal of 5 million tons of ore and overburden per year. So it remains to be seen what production costs actually are.

              • Mike
                Ignored
                says:

                Huntington, you are not as clever as you seem to think you are; your ‘agenda’ is actually quite transparent. It is to throw more billions of dollars of borrowed money at unconventional shale resources and to deplete them as fast as possible, so America is forced to move to renewals as fast as possible. In the mean time, like most people reliant on others to make money for them, you too can take financial advantage of the shale phenomena to your own personal gain.

                I was born in the oilfield 66 years ago; its all I have known. I would hope my perspective on well economics and depletion might cause people to rethink the miracle of shale and better prepared themselves for the future. Otherwise, for me to feel insulted by your insults I would have to value your opinion. I don’t.

                And I can have 50 600 pound steers shipped to you in Californy by Friday. Be advised, however, if you have never been around them they’ll shit all over your yard and bawl all day long if hungry. Let me know, its an excellent chance for you to be an oilman AND a cowman too!

                God Bless Texas.

                • TechGuy
                  Ignored
                  says:

                  Mike,
                  Don’t let HB get to you. You have real fans out there! I think you are 100% correct. Shale will die a painful death when it runs out of OPM.

    • Guym
      Ignored
      says:

      So, at 3.2 billion a year, we are bone dry in ten years. Most of that will not come out as cheaply as it did in 2016. Actually, less time than that. If, we only averaged 10.5 million a day over that time, it is 3.8 billion a year. Cuts it down to nine year. If we go up on production as fast as EIA has projected, then IEA projection of reserves will be gone in a little over 5 years. And that, folks, is the reality of US shale.
      That is supportable, somewhat, if you look at EOG’s dog and pony shows on their website. In the past, EOG has been the largest producer in Texas at almost 10% of production. In 2017, they will have completed slightly over 500 wells. They state their premium locations to be about 8k. If you can buy that, then, yes, Virginia, there is a Santa Clause. But that, still, does not calculate much differently than IEA’s estimation, according to drilling and years left.

      • Guym
        Ignored
        says:

        Uh, Mike, I think we just said the same thing, basically.

      • George Kaplan
        Ignored
        says:

        The Permian will keep growing reserves for a couple more years (these figures are for end of 2016, there could maybe be the same increase again for 2017, but then probably dropping off like EF and Bakken have done after 3 or 4 years of big growth); but equally I wouldn’t be surprised if there are some negative revisions to Bakken and EF after 2019 as they find they can’t get quite as much recovery as they thought (or at least wanted everybody else to think) from each well.

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