Open Thread Petroleum, April 4, 2019

133 thoughts to “Open Thread Petroleum, April 4, 2019”

1. Per shaleprofile.com my math (rounded) shows for 12/18 Bakken, Permian and Eagle Ford shale wells produced 5.7 million barrels per day (oil).

   Likewise, of that amount, 4.1 million barrels per day (72%) came from 2017-18 wells.

   1.6 million barrels per day came from 2016 and prior wells.

   1. Shallow sand,

      Note that when output is expanding quickly as in 2017 and 2018 this effect is accentuated. If output were growing more slowly or was on plateau the effect would be reduced.

      As an example (using the most recent US summary at shaleprofile.com) in Dec 2016 total output was 3820 kb/d, but only 63% of output was from 2015 and 2016 wells, it is still a lot though.

      1. Dennis.

         I agree. However, I do think this shows how much heavy lifting there is to keep growing by 1-2 million BOPD per annum as predicted by some.

         1. Shallow sand,

            Yes it takes high completion rates and an assumption that the new well EUR does not start to decrease in the Permian until 2023. It is doable if oil prices roughly follow the AEO 2018 reference oil price scenario.

            

            1. It is doable if oil prices roughly follow the AEO 2018 reference oil price scenario.

               Dennis, you appear to live in a world which is far more rational than the one that exists.

               1. Niko,

                  Some assumptions need to be made for future scenarios to be created. Clearly the future is unknowable only guesses can be made.

               2. Classic Discussion- this says volumes, upon volumes.

                  NM- Dennis, you appear to live in a world which is far more rational than the one that exists.

                  DC- Some assumptions need to be made for future scenarios to be created. Clearly the future is unknowable only guesses can be made.

                  I couldn’t agree more with both of you.

         2. Shallow Sand,

            The scenario below uses the AEO 2018 reference oil price scenario and my standard economic assumptions, (where I have assumed average Permian well cost of $10 million in 2017$, royalties and taxes of 33% of wellhead revenue, transport cost of $5/b0, LOE of $2.3/bo plus $15000 per month, no revenue from NG or NGL, a 10% annual discount rate at 2.5% annual inflation rate, and an interest rate of 7.4%, all $ values in constant 2017$). From 2019 to 2022 output rises at an average annual rate of 750 kb/d each year, the completion rate rises from 398 oil wells completed per month in Oct 2018 to 602 oil well completions per month in Oct 2022 and note that the completion rate increased from 184 completions per month in 2016(annual average) to 392 completions per month in 2018 (annual average). This seems like a reasonable oil well completion scenario in a rising oil price scenario. Note that I have assumed new well EUR remains constant from 2017 to 2023 and thereafter decreases and I have also assumed the USGS mean TRR estimate for the Permian basin is correct. Average new well EUR is 398 kb or 2017 to 2023 wells if we assume the well is shut in at 10 b/d (387 kb if we assume 15 b/d), I also assume 15% terminal decline rate after hyperbolic reaches that annual decline rate. The scenario has 172,600 total wells completed in the Permian basin with the last well completed in March 2049 and URR is 58 Gb for the Permian basin (note that TRR is about 75 Gb for mean USGS estimate, but 17 Gb is not economically recoverable under the economic assumptions I have used here.)

            

         3. Shallow sand,

            For US LTO, using the Permian scenario from above and my most recent updates for other tight oil plays (same oil price assumption used in all cases), the annual increase in US tight oil output averages 750 kb/d from Jan 2019 to Dec 22 (3000 kb/d over 4 years). Output peaks in 2025 at about 11 Mb/d and URR is 86 Gb with USGS mean TRR estimate assumed for Permian, Eagle Ford, and ND Bakken/Three Forks (for the previous 3 plays combined URR is 78 Gb).

            

            1. If LTO is producing 11 M/d in 2025 and 70% of that production will be gone within two years, that means roughly 8M/d of NEW production will need to be drilled the following two years just to stay on plateau (wash, rinse, repeat ad infinitum). There are many reasons that could not happen: rock quality deteriorates; financial pullback; lack of key materials such as labor, water, sand etc; change in political will to suck Texas dry/deal with climate disruption etc.

               As always I will view Dennis’s predictions as a best case scenario assuming everything goes exactly right for the oil industry. Seems unlikely imho.

               1. Stephen,

                  Yes the scenarios assume a gradual ramp up in completion rate at what I believe are reasonable rates (slower than in the past), I also assume for other plays besides the Permian that new well EUR starts to decrease starting in Jan 2019 (though we will not know if this has occurred until 2021 at the earliest) for Bakken and Eagle Ford, for the Niobrara I assume Jan 2023 is when new well EUR starts to decrease (same assumption as Permian basin), and for US “other LTO” I assume new well EUR starts to decrease in Jan 2022.

                  Any of these assumptions could prove incorrect and reality might be higher or lower than the scenarios I have created. In addition completion rates could be higher or lower than I have assumed, prices could be different, well costs could change, there are an infinite number of possible future scenarios, this is one of an infinite number and odds are very close to zero that it will be correct.

               2. Also keep in mind that the 72% decline only happens if all well completion stps abruptly. Perhaps that occurs if oil prices go to $20/b, odds less than 1% that will occur before 2045.

2. Y’all may want to go back and read the links in the Argentina stuff of a post or two ago because within those links was reference to quotes from Schlumberger about the somewhat newly discovered reality of a hard limit on spacing.

   What this seems to mean is that a great many wells that have been drilled will not be completed. We’ve known for several years now that the bulk of output from the entire field was from very recently completed wells and that effect has grown over time. Anyway, the parent-child well communication issue was quite prominent in the Schlumberger discussion and it would seem inescapable that the heavy lifting work Shallow just referred to becomes less heavy if no effort is made to do the work at all — by not completing wells.

   BTW, those quotes out of Argentina about how they are seeing far more gradual declines from their shale wells compared to Bakken and Permian, I guess we oughta hunt down or I will hunt down the official permeability numbers for that rock in the Vaca Muerta because it’s hard to see how there’s any other way for that decline rate to be less steep unless the rock is less tight for that LTO. Might have been screwball hype. If not screwball, then this same sort of reliance on recent wells will not manifest itself there. Output will not concentrate as narrowly on the recent wells. blah blah

3. Maybe I missed something and you guys have already talked about this… but have you guys listened to Art Berman’s Macrovoices podcast?

   https://www.macrovoices.com/podcasts/MacroVoices-2019-03-14-Art-Berman.mp3

   He is basically showing that the Permian is flattening/rolling over. See slide 11:

   https://www.macrovoices.com/guest-content/list-guest-publications/2598-art-berman-slide-deck-march14-2019/file

   If you listen to the interview he has lined up the 7 month lag time with Rig Count and Lagged Production. If this ends up sticking then the production flattening should show up in July. Just wanted to hear what you guys have to say about it.
   Thanks! Karen

   1. Hi Karen, thanks for shearing this news. The last I read was in some part of US they want to issue more strict laws related to fracking near houses, Schools i.e and this will have negative impact on shale buisiness in that Area. Than this further strenghtening the fact that investors turn away from shale Buisiness as they not get back what was promised. I strongly believe the situation now have dramatical changed like the CEO of EOG Mark Papa told, they cant exspand with borrowed money, and they need to set of for dividend after loan ballons and interest is payed. I also believe as much ad 50% of the exsisting DUC’s might be profittable and will never be compleated. Beside this there might be a slow growth in world economy when trade war continues if talks end same way as with North Korea . There is already talks between Saudi King and US where cartell law soon will be issued. It might be oil price will be 50 – 70.usd wti 2019 -2025. Than I believes Permian and US oil production will peak before 01.07.2019 , and start a gradualy decline with 5-10 % anualy.

   2. Karen,

      Often these correlations don’t continue beyond the end of the chart, through Feb 2019 Permian output has continued to increase, and there can be a lack of correlation with rig counts as there are DUCs that can be completed, if completion rate goes down, then output will flatten, but I have modelled how far completion rate would need to fall in order for this to occur. We would need to see the Permian horizontal oil well completion rate fall from about 410 completed wells per month in Dec 2018 to 295 wells per month in Dec 2019 and the rate would need to continue to fall to 240 completed wells per month by Dec 2022 for the scenario below which has barely decreasing tight oil output.

      We do not know future completion rates, but I doubt they will fall enough to reduce Permian tight oil output unless oil prices fall back to under $40/b, which I think is highly unlikely.

      It is possible that the rate of increase will slow down from the 2017-2018 average, my guess is 600 to 900 kb/d annual increase on average over the next 4 years, with a best guess of 750 kb/d average annual increase.

      

4. Venezuela production 740,000 BOPD in March. The rate is so low we anticipate serious gas shortages, and lack of LPG for cooking. The electricity crisis led to the replacement of the General in charge by a relative of Cilia Flores, Maduro’s wife, known to be incompetent and a crook. But he also named Delci Rodriguez, the psychopath who was running foreign relations and became his Vice President, to supervise the electricity problem. Oil production dropped mostly because the blackouts caused full field and plant shutdowns, and some key pipelines got plugged. This will take months to fix.

   The electricity problem is causing water shortages, it’s the dry season, and there’s signs several epidemics are about to take off. Meanwhile the surge of people fleeing to Colombia is held back by blockaded bridges, and high water level in the river between Cucuta and Ureña (it looks like there was some rain in the Colombian hills south of Cucuta).

   1. Oil pipeline blows up https://twitter.com/joseapariciof/status/1113880314949066752?s=21

5. Canada produced 4,524 kb/day of crude oil & equivalent products in January down -278 m/m
   Exports of crude oil & equivalent products totalled a record 3,860 kb/day in January, up 9.1% from January 2018
   Chart for production: https://pbs.twimg.com/media/D3ZukJvX4AASI8p.png
   Chart for crude oil inventory https://pbs.twimg.com/media/D3ZuEauWsAIsGcD.png

   2019-04-05 Statistics Canada, press release https://www150.statcan.gc.ca/n1/daily-quotidien/190405/dq190405b-eng.htm

6. Baker Hughes weekly US Rig Count
   Oil: +15 at 831
   Natural Gas: +4 at 194
   Permian: +8 to 462
   Marcellus: +3 to 68
   Table https://pbs.twimg.com/media/D3aD3aIWAAAoNZH.png

   Canada has less rigs than last year
   Oil: -13 to 22, which is less than half of 2018: 48
   Seasonal chart: https://pbs.twimg.com/media/D3aEEbRWAAA-nFA.png

   Baker Hughes (GE) International Rig Count
   Total up +12 to 1039 in March
   Oil +7 to 824 … Natural gas +2 to 187 … Misc +3 to 28
   Split: Land +15 to 792 … Offshore +3 to 247
   Algeria +8 (7 oil)
   Libya +6 (6 oil)
   Mexico +6 (6 oil)
   Indonesia +3 (3 oil)
   Venezuela -5 (-6 oil +1 gas)
   Australia -4 (-3 gas)
   Kuwait -3
   http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsintl

7. All quiet on the saudian front…

   https://www.arabianbusiness.com/energy/416992-saudi-aramco-reveals-sharp-output-drop-at-worlds-largest-oil-field

8. Schlumberger reports Vaca Muerta permeability varying from “nano darcies to microdarcies” (note average Bakken perm is 0.04 millidarcies).

   This doesn’t matter all that much for outright production since you’re fracking your way to new permeability numbers, but the claim of more moderate decline rates per well vs Bakken would not seem to have natural permeability difference as its cause and let’s just say “allegedly more moderate decline rate”.

   If the rock were more brittle because of lower perm and fracks more extensively, that would seem to generate more outright production, but no change to the slope of decline.

   Oh well.

   1. Watcher

      Picture a refrigerator-sized rock containing 10% – by weight – oil and gas.
      Smash it with a magic hammer to create a gazillion cracks out of which the hydrocarbons will flow.
      Now, imagine a super, duper magic hammer that creates WAY more cracks that are FAR tinier.

      The second example would not only produce more hydrocarbons, the lengthier, narrower pathways to the wellbore would ensure longer lasting, slower-to-be-captured oil/gas molecules as they make their way out of the formation over time.
      The former CEO of Core Labs described this a few years ago.

      If you wish to get a sense of the recent innovations regarding fracturing, the March issue of American Oil and Gas Reporter has an outstanding article describing Oasis’ work in the Elkhorn field in the Bakken.

      Although it is an eye glazing piece of technical stuff, it provides a view of cutting edge operations in the world of completions.

      Likewise, reading up on Extreme Limited Entry (XLE) perforations – especially the work by the ever innovative Liberty Resources – may offer a glimpse of future potentialities of Tier 2 and Tier 3 rock, solutions to parent/child well issues, and – hold onto your hat- plausible justification for the recent claims of over 30 billion barrels recoverable from the Bakken.

      Early, early innings yet in this unconventional field.

      Focusing on historical trends while remaining oblivious to current happenings is a sure fire path to gross mis prognosticstion.

      1. There is no doubt the tight rock structures are much more difficult to substract oil from than sandstone reservoir that can be stimulated in diferent ways with good result. As I read fracking by use off very high hydraulic pressure open up the tight rock layers and unthil a few yeats ago the decline rate droped at a very early stage because the overlaying wight and flow carries with particles that block the fraction. Later it followed a propant research that was done before but again this gave improvement and could hold the fraction open some longer. Than thete was research on chemical incerted that should reduce friction between oil flow and rock. There is also lors of otjer gazes , metal that in certain pressures, temperatures might react and create polutant as happened lately when oil cargo was sent back from Asia. Better propant , longer latherals , some improvement of fluid , improved riggs and padds enable to drill several latherals simutaniusly have made the improvement they call shale revolution. Still very few are able to earn mony to pay dividend , loan , interest and exspansion with WTI 60 USD. Now number of riggs increasing again , why when there are so many DUCS and investors tells the buisiness shall be cash nutral. Could it be the DUCS are to closed spaced and not profittable because frack hits , drainaged matrix…

         1. Freddy

            There is such a wide range of physical factors regarding both the drilling and fracturing in this realm of unconventional hydrocarbon development that sweeping, generalized statements can be difficult to make if one is seeking accuracy.

            It was only 10 years ago that serious efforts were made to develop the Bakken and since that time, the advances across several US basins – indeed around the world – have been nothing short of breath taking.

            Regarding the financial state of upstream operators, reports of economic distress may be highly misleading.
            That hundreds of billions of dollars have been invested with paltry rewarding returns thus far is widely recognized.
            However, $60+ WTI will unleash a surge of profitability that, in fact, is already underway.

            The DUCs in the Permian are directly related to the in line service of massive takeaway pipeline capacity in the coming months.
            Likewise, Gulf refinery modifications and export driven port buildout all play a role for those uncompleted wells to be sitting there.

            Mark this well, Freddy …
            Absent some dramatic upheavals on a global scale (always but a match strike away) starting next spring – say, 14 months out – expect to see American shale producers to embark upon a long running plateau of profitable operations potentially lasting decades.

            This relates to the oil boys.
            Their gas focused cousins will continue to struggle.

            1. Coffeeguyzz,

               Note that the 30 Gb estimate for the Bakken has been around for quite a while, it is nonsense. The average Bakken well in North Dakota in 2017 is likely to produce about 400 kb. About 2.8 Gb has been produced so far with about 13750 tight oil wells completed in the North Dakota Bakken/Three Forks. If we assume that all wells produce the average of 400 kb this would require 75,000 wells. Typically the NDIC suggests 55,000 s a best guess wells which would be 22 Gb if all wells are drilled in sweet spots (where most of the 13750 wells to date have been completed). A more likely scenario is the new well EUR starts to decrease as sweet spots run out of room with the average EUR of the final 41,250 wells being something like 250 kb so we have 13750*0.4+41250*0.25=15.8 Gb, but when we take into account the economics of these wells and likely future oil prices, fewer wells are completed (about 27,300 wells) so about 9 Gb is a much more reasonable estimate with the information gained from production over the 2005 to 2019 period (about 14 years of production history) in the North Dakota Bakken/Three Forks.

               Note that I look at the output data for ND Bakken/Thee Forks, Eagle Ford, Permian basin, Niobrara, and “other US tight oil plays” (besides the first four plays already analyzed) to arrive at an overall US tight oil estimate. The USGS mean TRR estimates are used as a starting point, then average well productivity data and completion rates to date as well as average economic input data are used to model potential future output. Peak in 2025 at about 11 Mb/d and URR of about 86 Gb for US tight oil output is consistent with the EIA’s AEO 2018 reference oil price scenario, higher or lower oil prices would increase or decrease overall URR.

      2. You missed the point. There is no technique they can use there that can’t be used in Bakken. Their quote is comparative. They say they don’t decline as fast as Bakken. If that were due to technique, then the technique would be in North Dakota too.

         1. Watcher

            Your comments sparked me to spend several hours catching up on the Dead Cow.

            My above statements regarding the lengthier, tinier pathways by which the molecules travel to the wellbore does, indeed, play a role in VM having low decline rates, along with several geologic factors.

            Following data is from 2016 pdf from Schlumberger ‘Vaca Muerta Shale – Taming A Giant’ …

            Thickness ranges from 200 to 1,700 feet
            Porosity ranges from 4 to 14% with average being 9%
            Total Organic Carbon runs 1 to 8% with spikes as high as 12%
            Depth 10 1/2 thousand feet
            Pressure gradient is .6 to .9 psi/foot

            The thickness (read height of fractures) combined with the especially high pressure gradient ‘pushing’ the molecules into the induced fractures are reasons for shallow declines in this play.

            Sections of the SCOOP/STACK along with core Bakken fields have similar characteristics, but a .9 gradient is VERY high.

            In fact, doing a bunch of reading on this play, many similarities to the Tuscaloosa Marine Shale appear to exist, namely, high oil cuts, extreme difficulty in drilling, high over pressure.

            When this ‘code’ is cracked, the Argentinian’s are looking at a massive, massive resource that should produce great wealth for their country for generations to come.

            1. One of my favorite places—
               I hope so.

9. If markets were truly free and there was real capitalism then airlines would be looking at the new and excellent Russian MC-21 which does what Boeing was trying to do with the 737 Max. The MC-21 will safely handle passengers in the 140 to 160 passengers and is a mid range plane that can go as far as 4,000 miles.

   Instead – Boeing lobbies the corrupt U.S. AIPAC Congress to keep a Boeing monopoly of death traps like the 737 Max allowing some Airbus sales. They also blocked a nice Bombardier mid range jet from Canada.

   I’ve flown in the Bombardier in South America– it is a fine aircraft.

   1. Unions restrict airlines from buying aircraft with certain passenger totals because number of crew can be lower if they do. It reduces employment.

      It’s not an aero engineering issue.

10. Jay Hanson RIP http://theoildrum.com/node/4719?fbclid=IwAR2L0Top3yivcvSYEiPigUR4BkMAKoTGFhQlB3hbiW0AQeA2fy6NPqGOiZ8

    1. Robert, why the RIP? Did something happen to Jay Hanson?

       1. https://candobetter.net/node/5739?fbclid=IwAR34N0kXKnikaZT4I1QE-wITbOdJhWjGldUCjPYEL8ddE9rWycFMCpNUvTg

          1. Thanks Robert, I was a great fan of Jay Hanson. We corresponded occasionally. I knew he was an avid diver. I had no idea how old he was and still don’t. But from his picture, it looks like he was an old man, like me. Probably too old to be diving. But we never want to give up our search for adventure.

             1. Probably too old to be diving.

                The time to take risks is when one is old and has a lot less to lose. I am planning on becoming a recreational drug user, smoker, long haired heavy metal fan when I am old. The last part might not work as planned due to my head’s hair long-term trend, but being partially deaf must help with the loud music.

                It is a tragedy when young promising people die from taking easily avoidable risks. If old people take all the risks pension systems will be more sustainable too.

    2. Die-off website was THE first time I heard the term “Peak Oil” mentioned, even though I had learned about Hubbert as an undergrad in the 80s . The Notes at the end of one of his articles cited a professor of geology of mine whom I admired immensely. I was hooked. I owe it to Jay, in part, for rattling my cage.

11. Remember Peak Oil? It’s back!

    It seems that the biggest Saudi field is losing its punch.
    Years ago we used to talk a lot about peak oil, the prediction made by M. King Hubbert that the easy oil was going to run out, that it was going to get harder and harder to find the stuff, and it was going to get more and more expensive to get out of the ground. Hubbert wrote in 1948: “How soon the decline may set in is not possible to say, Nevertheless the higher the peak to which the production curve rises, the sooner and sharper will be the decline.”

    According to the predictions made back in 2005, right about now the Saudis are running out and we are smack in the middle of confusion, heading for chaos. Of course we are not, we are flooded with fossil fuels, thanks to the fracking boom.

    But according to Eric Reguly, writing in the Globe and Mail, there is trouble ahead, because that prediction about Saudi oil may not be that far off. He writes that the giant Ghawar field used to produce ten percent of the world’s oil, five million barrels a day.

    The US Permian shale basin now supplies 4.1 million barrels a day, but fracked wells run out pretty quickly, and the fracking companies are all losing money. Better sell that pickup truck; it may well cost a lot more to fill it. As Reguly concludes, the Ghawar field is indeed in trouble,”and if it does collapse, peak oil will come a bit sooner.”
    In fact, Ghawar is not as resilient as we were led to believe. We just found out that its output has fallen substantially since Aramco previously came clean on its reserves and production. If Ghawar is losing momentum fast, peak oil – remember that theory? – might be closer than we had thought. And Ghawar is just one of dozens of enormous conventional-oil reservoirs scattered around the planet that are in various stages of decline.

    Those include the North Sea, Alaska’s Prudhoe Bay, and Reguly reminds us that Mexico’s Cantarell reservoir used to supply 2.1 million barrels a day and is now down to 135,000.

12. Trump Declares War on OPEC, Saudis Laugh as Oil Price Surges

    Donald Trump is ramping up his attack on oil prices as US crude hit a 5-month high today. While up to now the US president has been focused on denouncing high energy costs via Twitter, it appears he now is looking to do more than merely bash OPEC online. As CNBC reported, the US wants to ensure “dominance” in this sector through a blockbuster executive order designed to boost pipeline infrastructure. In reality, Trump walks a dangerous tightrope when it comes to crude.

    Of course the Saudis are laughing at Trump. The world is laughing at Trump. He is an ignorant baffoon.

    1. “The world is laughing at us,” Donald Trump often said during his campaign. The claim was not obviously true then, but Trump has made it so. I seem to recall one of his election promises was to make the world stop laughing at America.

       https://youtu.be/PrTs8bdVT78

    2. Of course the Saudis are laughing at Trump. The world is laughing at Trump. He is an ignorant baffoon.

       May be ignorant bully, not only (or so much) baffoon ? He practices what is called “gangster capitalism” on international arena for some time. Totally ignores international law. Does not even use a fig leaf as previous administrations. Trump is “Full Spectrum Dominance” in action 😉

       In view of the Saudi role of the guarantor of the “dollar as the reserve currency” system his behavior might well be a reckless move, which totally contradicts Trump’s behavior in Khashoggi case. Kind of direct pressure is Soprano style: “Do what I want, or…”

       If Saudi stop selling oil for dollars that will be a very bad news for the USA. Hopefully they can’t do this being a Washington vassal, but to insult a vassal is not the best diplomacy, anyway.

       Why Trump can’t understand that oil is limited and higher prices might well be the best strategy as they helps to find alternatives, develop infrastructure (for example for EV passenger cars) and prepare to inevitable shortages, or even the Seneca Cliff in oil supply.

       Why he wants to propel/sustain the US stock market at any cost?

       Low oil prices can help to kick the neoliberal can down the road, but they can’t save the USA from the “secular stagnation” and might not be able to save the USA from the recession too because consumption is low: credit card debt reached 0.87 trillion in the fourth quarter of 2018 On other words the bottom 80% of the USA population might well be debt slaves of the US banks.

       On March 25, 2019 yields curve inverted the first time since mid 2007: The yield on the U.S. 10-year Treasury note dipped below the yield on the 3-month paper.

       In other words secular stagnation is the result of the crisis of neoliberalism both as the ideology and as the social system dominant in the world. Neoliberalism entered “zombie” stage in 2008 and it continues to exist (and even counterattack, as in Argentina and Brazil) only due to the fact that there is no acceptable alternative and the return to the New Deal capitalism (which many wish) is difficult or impossible because management now is allied with the capital owners, not with workers (as was temporary the case after the Great Depression; that alliance ended in 70th).

       I just do not understand if Trump is on drags such as amphetamine, see rumors at https://heavy.com/news/2016/10/donald-trump-drugs-drug-use-sniffing-sniffles-cocaine-clinton-debate-test ;

       BTW captagon was/is a favorite drag of ISIS headchoppers which allowed them to demonstrate the level of toughness in fight and self-sacrifice they did, as it switches off the instinct of self-preservation enhancing the person’s ability to do dangerous things. ( https://www.vox.com/world/2015/11/20/9769264/captagon-isis-drug ).

       Or he is a “naturally stupid” bully, who does not care to learn diplomatic etiquette and some elements of diplomacy, while on the job.

       In both cases he is a real embarrassment for the nation, is not he?

       While I do not support Russiagate witch hunt, his behavior really raises questions about his fitness for the office.

       Also Bush II style (as in Iraq WDM fiasco ) bunch of crazy warmongers, neocons that control Trump administration foreign policy (Haley in the past, Pompeo, Bolton now ) is not what his voters expected based on his election promises.

       In a sense, he proved to be Republican Obama, another master of “bait and switch” maneuver.

       Looks like we are living during what Chinese call “interesting times”, aren’t we ?

       1. “Why Trump can’t understand that oil is limited and higher prices might well be the best strategy as they helps to find alternatives, develop infrastructure (for example for EV passenger cars) and prepare to inevitable shortages, or even the Seneca Cliff in oil supply.”

          Perhaps because T. is captured by and ensnared in the apocalyptic cult called Christianity. They really think Jesus is coming to smite the earth. All the bad signs around us mean we’re smitten. Why bother think about the future when there’s no future on the planet?

       2. re: Petrodollar – The petrodollar is one of those things.
          https://www.zerohedge.com/news/2019-04-06/ultimate-pivot-saudi-betrayal-petrodollar

    3. Price of WTI closed last week right up underneath a former major trendline that originates of 2016 lows. There is also the falling trendline that originates off of the 2008 highs which is only about $10 higher than current price. That trendline has slammed oil down twice so far. Back in 2014 and again in 2018. Trump will have the last laugh on oil price. But his stock market is set up to take a fall. (Not really his but you know what i’m say) NASDAQ-100 also closed just underneath former major trendline from 2016.

       There is a reason oil was bid right back into that trendline. And it’s just technical. Ditto for the NASDAQ-100. There was no technical resistance in the way preventing price from going there. There is a confluence of major trendlines above where WTI price is currently. Just from experience market needs to travel a lot further sideways to ultimately take on the trendline off the 2008 highs. At a price much lower than current price. So don’t be shocked when price gets rejected here and goes lower.

       1. Technical analysis is pure bullshit. End of story.

          1. In the short and medium terms the games of hedgefonds and big banks make the price.

             But in the long term reality takes over – when there are fuel lanes, no technical sign, no tripple top and no shooting star will keep prices from skyrocketing.

             And when cushing overflows, no hedge fond will keep prices from going negative (as with gas in permian).

             Only if nothing happens on the real sides, technical play will make prices. I know this from stock market very good.

             Oil is somewhat more complicated – for example shale companies and states like Mexico hedging prices directly influences the future markets and therefore the “technic”. Especially since they are not trading and holding positions only for minutes to catch a dime, but for months. Therefore they are creating market blocks that can’t be ignored.

             One interesting thing – the current rally since January doesn’t get mirrored in the longer futures. They are simply flat. They have mirrored the last year rally / decline but don’t react now. WTI in 3 years is at flat 54$ – so 3 years without earnings for all the shale companies is expected.

             1. Eulenspiegel, I agree. Fundamentals drive the market. Technical analysis is bullshit. I have known many technical nerds in my time. They all lost money. Three things drive the market: Fundamentals, fundamentals, and fundamentals. (Supply and demand are fundamental.)

                1. HHH,

                   Can you give us the date you expect oil to reach $20/b? On is this a daily, weekly, monthly, or annual average price? Is it for Brent or WTI? Once we know what your claim is, we can check it’s accuracy in the future.

                   I tend to agree with Ron in this case, it doesn’t seem to pass the smell test.

                2. I can imagine 20$ (WTI) oil in the current fundamental enviroment, for a short time.

                   When Mr. Trump decides to stop US oil exports. Then the light oil will spill over at Cushing, while the rest of the world heads towards 100$ Brent oil.

                   But this would be not technical analyzis, but stupidity analyzis. It’s not complete out of the world he decides that.

                3. I can imagine 20$ (WTI) oil in the current fundamental enviroment, for a short time.

                   I can’t. 20$ oil is beyond the pale.

                   When Mr. Trump decides to stop US oil exports. Then the light oil will spill over at Cushing, while the rest of the world heads towards 100$ Brent oil.

                   Trump is an idiot. He might suggest such a thing but everyone in his administration is not as stupid as he is. Well, NO one in his administration except Don Jr. is as stupid as he is. And Congress would oppose such a move. Bottom line, such a move would create such a shit storm he would cancel it.

                   It’s not complete out of the world he decides that.

                   No, of course not. His pea brain mind could decide to do almost anything. But carrying out such a plan would be out of this world.

                   Two things to remember. The US is still a net importer of oil. And second, the government does not export oil, oil companies do. Trying to control exports is beyond the President’s authority. If the president tried to control exports it would create a court challenge that could take years. And Trump has less than two years left.

                4. Eulenspiegel,

                   How short a time are you thinking for $20/b WTI, one week, one month, three months, or 30 seconds? Why would Trump stop oil exports, it would not affect gasoline prices, because most US refineries can’t handle tight oil, it would make little sense?

                   Now I get it, not much the man does makes sense, so maybe oil exports will be banned 🙂

                   He does do some crazy stuff, but that was not one of his campaign promises.

                5. It’s a hypothetic scenario, but possible with this president before an election to present falling gas prices.

                   Prices in WTI will ramp down as tanks are filling, and yelling of oil companies will get louder with every $ less.

                   Round about 20$ is a kind of limit – under this value many companies will just choke their wells when current production costs are below selling price.

                   It will be at longest a few months before turbulences get too big (100$ oil in rest of world because USA is still importing heavy oil, but alle the LTO export missing).

                   In any other scenario I can’t imagine 20$ oil – LTO producers now will reduce fracking long before this benchmark, and even a 1mb/day decline, happening in half a year, will turn around prices fast.

                6. Eulenspiegel,

                   We are roughly on the same page, with the possible exception that I don’t think an export ban would have as big a price effect as you do, it might get WTI to $30/b, but I agree with Ron that $20/b wont happen.
                   Consider that transport cost is at least $5/b so we are talking well head at $15/b, taxes and royalties are typically 33%, leaving $10/b before any LOE and LOE tends to be at least $13/b, so perhaps $23/b might allow “breakeven”, where profits less than enough to pay for interest on debt or to pay back the principal on all the debt accrued to drill and complete existing wells, the “true” breakeven price in the Permian basin is at least $50/b and is only that low if we assume a discount rate of 0, for the more typical 10% annual discount rate breakeven oil price is $57/bo (both cases assume a well cost of $9 million in 2017$ and a 2017 average Permian basin horizontal tight oil well profile.)

                   This is why $20/bo will not happen in the near term, though it might be possible after 2040 if demand falls enough due to rapid ramp up in BEVs.

             2. With 3 years flat 54 usd WTI it will be decline in US shale oil and lots of mergers , bancurupsy. Lately I read Equinor break even price offshore Brazil is 40 usd/barrel and a oil majour told to develop same oil volume as they do ofshotre Guyana would cost 3 times more in Permian. The world bank also reduced their estimate on world growth in todays report and that is also related to oil demand wich means lower oil prices. Brent passed 70 usd each barrel and I think now this starting to get to exspensive for US President…. Donald….

          2. Pure BS? Both WTI and Brent just printed a Bearish Dark cloud covering at close today on the daily chart. Just so happens WTI is right at trendline resistance. Pure BS right? Dow Jones printed a Bearish abandoned baby at close today. Just so happens to be right at trendline resistance. Multiple stock indices are at trendline resistance. Pure BS right. End of story. Both of these are Bearish reversal candlestick patterns.

             There is only one trendline on WTI chart. Below current price which originates off 2016 lows and touches the most recent 2018 lows that could prevent prices from going to $20. If price goes below it there is nothing in the way of oil going to $20. End of story.

             Guess what, price just got rejected at trendline resistance. That means price is going to go test that trendline below. Thats where support is.

             Technical analysis is the only way to get price right. Everything else is a BS guess at what may or may not happen.

             I spotted a market turn 3 weeks before it happened. By doing great technical analysis. Just because you don’t understand it doesn’t make it BS.

             1. Yes, pure bullshit. Technical analysis looks at such things as head and shoulders, double peaks, double valleys, flags, pennants, trendlines and other bullshit. What matters is fundamentals. Fundamentals are all that matters. Head and shoulders, give me a fucking break. I know, I know, I sold equities for a living for a short time in my career. I met a lot of technicians. To a man, they all lost money. Technical analysis is bullshit.

                I know, the trend is your friend…. until it isn’t. Technical analysis will never tell you when the trend is about ro reverse itself. And everybody jumps on the trend just before it reverses itself. And the trendline jumpers lose their ass.

                The fundamentals, that is supply and demand, the political environment, the economy, and other fundamental issues, these control the price of oil and all other commodities.

                Technical analysis is bullshit. Ene of story.

                1. HHH,

                   So when will the WTI Oil Price be at $20/b and how long will it remain at $20/b or less?

                   To prove that technical analysis is not bullshit, you need to make a prediction that we can verify.

                   Claims that you predicted that something in the past was going to happen tells us very little, especially because there may have been 9,999 other times where your predictions were inaccurate.

                   You have made the public claim that Oil Price (I believe you meant WTI) will go to $20/b.

                   1. Give us daily close, 5 day and 23 day average closing price lows.

                   2. tell us when this occurs (any 12 month period will do).

                   With this information we can see if you are blowing smoke.

                   So far ….

                   (crickets chirping).

                2. holeinhead,

                   Ron and I do not always agree, but in this case I agree with him 100%. Fundamentals drive oil prices especially over annual periods, traders can affect daily movements in price in the oil market, but eventually the balance of supply and demand will drive prices.

                3. Sorry chief , have to disagree that fundamentals matter . If so can you explain the pricing of Tesla, Uber,Lyft etc . The stock and commodity exchanges are no more places of ^price discovery^ they are centres for ^racketeering^ . Of course in the end fundamentals will prevail (just as peak oil will prevail) but in the meanwhile guys like you and me (and others on this forum) long watchers of the shenanigans know that this BS could last for a while to come , but after reading Energy’s last post on shale well decline of 57% per year I think we are close to a tipping point . Guys like us are suffering from ^collapse fatigue ^ . Despair not , this is a race between a tortoise and a hare . Be well and with respects .

13. Meanwhile, for all:

    The Middle East is still there. Syria is leasing the economic part of Latakia (Russia controls the military part) to Iran. Latakia is a port on the Mediterranean. Syria owes Iran a lot, in money and other ways, and is giving the country preference in rebuilding Syria and is granting other goodies too. In the case of Latakia Iran has announced it will unload fuel products there and that is likely to be the case in view of what else they’re doing for Syria.

    We should keep in mind, though, that Iran shares the South Pars NG field in the Persian Gulf with Qatar and Qatar has long wanted a route to export its NG (they are historically the largest exporter) that doesn’t go through the Strait of Hormuz. With Iran at Latakia the lapsed idea of a pipeline from Qatar through Iran, Iraq, and Syria to the Mediterranean is back, with the export terminal to the Med at or near Latakia. Iran would like that too. Turkey might not, I don’t know, and Russia doesn’t like having Iran at or near its own establishment on Syria’s coast, but I expect that Qatar and Iran are at one on this and their economic relations have been quite warm particularly as Iran has been very helpful to Qatar since the Saudis and their merry men put a blockade on them.

    This is a situation that I expect to become well worth keeping an eye on.

    1. It will be much easier to supply Hezbollah with this port access. They are getting closer and closer to the Israeli doorstep. Inches in fact.
       Its hard not to see Iranian de facto expansion as a failure of Republican policy- Cheneys project.
       btw- consider seeing the movie Fair Game as a facet story of this whole mudslide.

       1. I’ve been brainstorming Iranian response to USA- Israel air strikes. The Iranian response will likely be a strategy which aims to break Israel’s strategic Lines of Control on oil imports – the tanker lines to Ashkelon, from Ceyhan Turkey and from Yanbu/Jeddah in KSA. Won’t be long until Israel has their ‘Suez Moment’, so to speak. Tough neighborhood for sure. Buckle your chinstrap.

    2. Pretty sure I did not follow that. The supposed motivation behind American interest in Syria was to secure such a pipeline for Qatar natural gas to the Med and then to Europe. The idea was to crack the GAZPROM monopoly in Europe. There is no reason Syria, previously thought an obstacle to such a thing, would now want to make it happen and inflict pain on their Russian allies. So nah.

       The more significant talk about natural gas in that area is that expected to flow from offshore Israel north to . . . Europe. That is certainly a challenge to gazprom, but it’s likely that will not be reliable supply nor will it last very long.

       1. Watcher,

          Russia is Syria’s (especially) military ally, yes. Iran is Syria’s economic and military ally, putting troops on the ground in Syria and now being favored for helping in reconstruction of the country and now given use of a Mediterranean port. There’s also a religious connection but I don’t know if that’s particularly influential.

          Russia and Iran are economic allies.

          Syria isn’t in a strong position with regard to either of its allies and needs both. The pipeline would be a source of transit fees for Syria and Assad’s former position on its being built isn’t the only thing that has changed during the wars; he has strong reason to agree to Iran’s wish to see the thing built, as he owes Iran. At any rate pipelines aren’t built over a long weekend and fluidity is the dominant characteristic of relations between the three countries, so a lot will happen yet. I wouldn’t be surprised if Gazprom were invited to participate in the pipeline. Stranger things have happened in the Middle East.

14. They can’t give it away: Texas natural gas at all-time negative lows
    Scott DiSavino

    https://www.reuters.com/article/us-natgas-waha-pipelines/they-cant-give-it-away-texas-natural-gas-at-all-time-negative-lows-idUSKCN1RF1L0

    Next-day natural gas prices for Wednesday at the Waha hub in West Texas plunged to record negative levels – meaning some drillers are paying those with spare pipeline capacity to take the unwanted gas and are getting nothing for it.

    The drop in prices has been caused by weak demand and recent equipment problems on a key pipeline in New Mexico, analysts said. But pipeline constraints in the Permian basin in West Texas have squeezed gas prices there for some time.

    The Permian is the nation’s largest oil field, but it also produces large volumes of gas, and the region lacks pipelines to move it.

    Spot prices at the Waha hub fell to minus $3.38 per million British thermal units for Wednesday from minus 2 cents for Tuesday, according to Intercontinental Exchange (ICE) data. That beat the prior all-time next-day low of minus $1.99 for March 29.

    Prices have been negative in the real-time or next-day market since March 22.

    1. How does this work, are producers not allowed to Flare unlimited amounts of gas in Permian?

       Think i saw some figure for EF that it was a requirement to capture 85% or such are there similar restrictions in Permian in place?

       1. They’re not supposed to be flaring unlimited, legally, but enforcement is poor.

          https://www.houstonchronicle.com/business/energy/amp/Natural-gas-flaring-in-West-Texas-severely-13562825.php

15. January crude oil production (kb/day)
    OPEC-14 -822
    Canada -278
    USA -90
    Mexico -87
    Russian Federation -78
    Brazil -60
    Norway -48
    Total (for the countries listed on the chart) -1,496 kb/day
    Chart https://pbs.twimg.com/media/D3kCyzYXsAEZvmb.png

    The countries that have already reported their February crude oil production (kb/day)
    OPEC-14 (Secondary Sources) -220
    Brazil (ANP) -142
    Norway (NPD) -70
    Russian Federation (Energy Ministry) -40
    Mexico (Pemex) +80
    Alberta (AER) +28
    Total -337 kb/day
    Chart https://pbs.twimg.com/media/D3kDP0fWAAE6qUV.png

16. The increase in US crude oil inventories nearly match the decrease in those of KSA
    From the average in 2014 to January 2019
    USA +100 million barrels
    KSA -89 million barrels
    OECD without the USA +14
    Chart https://pbs.twimg.com/media/D3kjir7XsAAPPvZ.png
    Total (OECD + Saudi Arabia) https://pbs.twimg.com/media/D3kjqM3WAAAXitx.png

    1. Interesting observation but Saudi oil inventories are not as transparent as those of USA, it´s based on what the Saudi government reveals. If we are back to “normal inventory by volume” then days forward are below. I still don´t see the point why KSA would invest in 100+ mb additional storage capacity, increase inventory once and then draw down. What´s the logic?

       I´m surprised that oil stocks in USA no not decline more this spring but I guess it´s partly because of low refinery runs (outage, IMO2020 upgrade and maintenance). This should change in the coming month or so.

    2. Obviously I don’t know but it seems that Saudi Arabia changed its strategy sometime during 2015 to 2016. They replaced their oil minister and started talking about OPEC cuts. I guess due to low oil prices but also the USA lifted its ban on crude oil exports in December 2015.

       The JODI Data that can be verified such as import/export figures has always been shown to be accurate.

       (In May 2016, Al-Falih was appointed Minister of Energy, Industry and Mineral Resources, replacing outgoing Ali al-Naim)

17. Been reading about Indian oil production. Though the wiki spends quite a bit of time on consumption and policy planning, and some of it is surprising.

    I suppose we should start in the list of surprises with their SPR. Like most places they have a couple of weeks of consumption stored away, and plans for much more. That is a common theme in the world of SPR. You have oil stored for a couple of weeks, and plans for more. It’s always plans. It never seems to be actual additional storage.

    Until now, perhaps.

    There is some text that suggest essentially choking back production from certain domestic fields and declaring them to be SPR. The idea seems to be that if you choke back flow, then you can declare that to be normal flow, and then in the future if you open the choke and get additional flow you can call that additional flow an extraction from SPR. No don’t react with a declaration that it doesn’t make sense. It doesn’t have to make sense. And its original.

    In keeping with the theme of announcing plans as if they are things accomplished, we have the Indian addendum to the phrase India Imports 86% of its oil requirements. The addendum is that the government has announced plans to reduce that to 65% in the next few years, and this will be achieved by the usual list of renewable this, wind that, a sprinkling of solar, but they’ve added a new and original item. Domestic exploration. That would suggest they’re going to find new oil at a magnitude that would permit production of about 20% of imports.

    That would be about 1 mbpd. They’re going to find new oil and they’re going to produce it to the tune of 1 mbpd additional onto their current production and in just a few years. And when you declare that that’s not possible they will agree and say the list of renewables will take care of whatever is not possible.

    They do deserve some credit in that other places don’t play the exploration card, they just stop with the renewable silliness. The concept is . . . a solution planned is a solution achieved.

18. 2019-04-08 (ShaleProfile) US – update through December 2018
    https://shaleprofile.com/blog/

    (2018) Oil production from wells started in 2018 is at: 3,541,921 bo/day, this is 54.4% of the total 6,512,307 bo/day.

    (2017) Oil production from wells started in 2017 peaked in December 2017 at 2,889,460 bo/day, they are now producing, December 2018: 1,178,108 bo/day. Giving a drop from the peak of -59.2% in the last 12 months.

    (2016) Production from wells started in 2016 peaked in December 2016 at 1,561,476 bo/day, they are now producing, December 2018: 416,032 bo/day. Giving a drop from the peak of -73.4% in the last 24 months.
    After one year they were at, December 2017: 662,907 bo/day. Giving a drop from the peak of -57.5% over 12 months

    1. An annual decline rate of 57.5 percent is insane. Yet 3,541,921 bo/day from 2018 wells is even more insane. Shale oil is a phenomenon no one would have believed just a few years ago.

       But now it is obvious that this juggernaut called shale oil is slowing down. And its crash will likely be more shocking than its rise.

       1. The decline is likely to be less steep than the increase, peak will probably be in 2025, though a lower completion rate than my scenario would result in a lower peak that occurs sooner and has a less steep decline and a higher completion rate than I have assumed would result in a higher and later peak with steeper decline peak could be 10 to 12 Mb/d and might occur from 2023 to 2027, my best guess is 11 Mb/d in 2025, doubtful it would be less than 9 Mb/d or more than 13 Mb/d or before 2022 or after 2028 (my guess would be a 10% probability or less for either that very high or very low scenario).

          1. peak will probably be in 2025

             Oh my God! And you are actually serious. Okay, I will say no more. I will leave you to your delusions.

             1. Ron,

                Model below with number of well completions per month shown on right axis. Well profiles determined by fitting hyperbolic well profile to average well data from shaleprofile. Perhaps delusional, but for 2010 to 2018 the model matches actual output quite well, perhaps this will continue in the future, past estimates have been pretty good when the well completion guesses for the future were not too far off and well profiles did not change markedly.

                Note that I assume for Bakken and Eagle Ford that average new well EUR decreases starting in Jan 2019 (we won’t know if this guess is correct until 2021), for Niobrara and “other US LTO” I assume Jan 2022 is when EUR starts to decrease for new wells, and Jan 2023 for Permian Basin decrease in new well EUR. Again guesses based on when these tight oil plays ramped up completion rate and a guess at when sweet spots will be saturated with wells, using ND Bakken as basis for guess. I have no delusions about being correct, that is why I give a range of 2023 to 2027 as the guesses could be too low or too high.

                In the past my estimates have usually been lower than actual output, except in the case where there has been an unexpected crash in oil prices as in 2015.

                

          2. The decline is likely to be less steep than the increase

             Have you heard about a Seneca cliff? It is called that way because Seneca in his letter number 91 to Lucillius (Epistulae Morales ad Lucilium), written towards the end of the year AD 64, a year before he died, refers to the fire that destroyed Lugdunum (Lyon) the summer of that year in the following terms:

             It would be some consolation for the feebleness of our selves and our works, if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid.

             It appears he knew almost two thousand years ago what you don’t.

             1. Carlos,

                Yes I suppose if oil installations everywhere in the World are consumed by fire simultaneously. My inclination is to believe the odds of that occurring are infinitesimally small. About a similar probability to my guesses of well completion rates in the future, future well profiles, and future oil prices all being precisely correct. 🙂

                This is a scenario based on a set of assumptions that I have laid out quite clearly, if the assumptions are correct, the scenario will also be correct, change the assumptions and the scenario also changes.

                The logic and mathematics are quite straightforward.

                1. Why you think such scenario is so improbable?
                   Venezuela is living a Seneca cliff in its oil production right now. Did anybody predicted it before it took place?

                   We have no idea of what will happen after Peak Oil. Some people assume nothing, while others think it will be the end of our civilization. Somewhere in between probably. But I fail to see how the economy can take it well if for most applications we can’t substitute oil. The globalization is run on oil and its derivatives.

                   Your assumptions can only be valid at this side of the peak. If you think otherwise you fool yourself.

                2. Well said Carlos. Well said.

                3. Carlos and Niko,

                   The World economy has experience with oil output declining (1979-1982 being the biggest percentage decline).

                   I would say it is improbable that all oil field development will abruptly stop in an environment where oil prices are rising and oil company profits are high (as was the case for example in 2011 to 2014).

                   Maybe each of you can give us your estimate of the probability that much of the drilling and completion of new wells world wide will cease simultaneously.

                   You are absolutely correct that nobody knows the future only guesses can be made and the probability that any guess will be correct is close to zero, this applies to any guess yours or mine. Scenario below mimics the 1979 to 1982 fall in conventional extraction rate from producing oil reserves Worldwide and then is similar to the fall in World conventional extraction rates from 1983 to 2018 (about a 1.25% fall each year on average, eg 9% in 1982 and 0.09*0.9875=8.89% in 1983).

                   The fall in extraction rates starts in 2026 (an arbitrary assumption). This might coincide with a major war between Saudi Arabia, Kuwait, and Iran and Iraq starting in 2025 and ending in 2029, then it is assumed World extraction rates continue to fall but at the more gradual rate experienced from 1983 to 2018 (again this is arbitrary).

                   

                4. An alternative where extraction rates fall at the 1983-2018 rate, no middle east major war assumed in this case.

                   

                5. Yet another alternative scenario with extraction rates remaining at the 2018 extraction rate for conventional resources until 2035, then extraction rate decreases to 98% of previous year level each year until 2085. Again these are arbitrary assumptions, the possibilities are endless. I have left the tight oil and extra heavy oil output scenarios the same in each of these scenarios, clearly this could be changed as well, but the oil shock model is very easy to work with.

                   I am happy to change any assumptions if anyone has suggestions.

                   

                6. Carlos,

                   I also assume as you do it will be somewhere in between collapse and BAU, yes there are problems in Venezuela and Libya, do you see that for the World as a whole that this has been catastrophic? It is a terrible situation for those in Venezuela and in Libya, as well as Syria, Palestine, Yemen, and many other places throughout the World. For many in the World there has been little negative effect so far.

                   My point was mainly that it seems improbable that oil will stop being produced everywhere in the World all at once. Seneca was writing about a fire in a single city, as far as I know every city in the World was not burning simultaneously, likewise it seems improbable that decline like Venezuela will happen everywhere at the same time, despite the fact that we didn’t know in advance precisely when Venezuelan output would collapse, I have been expecting this would eventually occur since Maduro became president in 2013, though especially since opposition forces gained strength in 2016.

                   I have a friend from Venezuela and he tells me things are very bad there, he still has family living in Venezuela.

    2. Wow . Tks Energy. Your post knocked the ball out of the park .Tks once again .

    3. Holy Cow!
       I/we all “knew” the decline rates were in that ballpark but it is something entirely different seeing this in print.

       And all the companies out there (and the Bankers?) are staring at this for years now.

       Makes you wonder when they just say “stuff it- I’m done” and go home…..

    4. Energy News,

       Keep in mind the way you are doing this has a range of wells from 0-12 months, 13-24 months and 25 to 36 months. If we look at well profiles, the average 2017 well fell in output by 65% from peak to minimum over first 12 months of production. In 2016 it was 64.5%, in 2015 it was 65.1%. In 2018 it is too early to tell as we don’t have many wells with 12 months of output to date (only 594 wells which started producing in Jan 2018, those wells have decreased by 62.3% in their first 12 months of production.

19. 2019 first quarter discoveries are 62% natural gas, 38% oil & gas condensate. Cyprus & South Africa are the largest finds.

    April 8, 2019 (Rystad Energy) Global discoveries of conventional resources in the first quarter reached a robust 3.2 billion barrels of oil equivalent (boe).
    With 2 charts -> https://www.rystadenergy.com/newsevents/news/press-releases/Global-discoveries-on-the-rise-as-majors-take-a-bigger-bite/

    1. energy news,

       Thanks, so if the 1st quarter rate continues for 4 quarters that would be 5 Gb of oil discovered in 2019. Production is likely to be at least 29 Gb of C+C, if we keep coming up short by 24 Gb each year, then the 1300 Gb of conventional oil resources are gone after 54 years, if we assume reserve growth is zero (not very likely).

       1. There are 2 significant northern GOM exploration wells drilling now – Black Tip is a Shell operated Wilcox test that, if successful, would extend the Perdido Fold Belt trend further north under the salt canopy. The 2nd is Yarrow, a Chevron operated Norphlet test close the Shell’s Appomattox.
          Another important GOM well that should drill this year is Chevron’s Kingsholm, a Wilcox prospect that is close to the North Platte project that may end up getting developed by Total. Rystad flagged this as one of the key exploration wells to watch in 2019.

          1. SouthLa Geo,

             Thanks for the info, any WAG as to how much might be discovered?

             1. This is truly a WAG, but, 100-300 mmbo per discovery.
                Black Tip is the biggest wildcard to me. The nearest discovery is Whale which could be a fairly significant field.

                1. Thanks SouthLaGeo,

                   Your WAGs are without a doubt far superior to any I might make.

       2. Denise,
          These are discoveries . When will they come online ? or will they ever come online if oil prices remain low ? You have done simple arithmetic to arrive at the 54 year number but hell will break much before that . We do not have to go to zero for that to occur ,just as the human body is 80% water but if you loose 20% you will die because of dehydration. Ever heard of a disease called cholera ?Well that is what it is.

          1. hoelinhead,

             A very simple projection, some of the discoveries might come online and some may not, about 63% of discoveries would start producing about 39 years after discovery using Paul Pukite’s standard maximum entropy assumptions in an oil shock model. So basically you are correct that much of the oil discovered would not be online after 54 years. The 270 Gb discovered using the 5 Gb assumption for 54 years (which is likely to be too high by 135 Gb at least) would only add 9 years of output at 30 Gb per year. Note also that average consumption and output is unlikely to remain constant at 30 Gb for 40 years.
             If demand is enough to consume all available supply (relatively high oil prices and slow ramp up of EV sales), then the next 47 years would look like the model below. About 1181 Gb of oil are produced, an average of about 25 Gb per year. This is based on Paul Pukite’s Oil Shock Model see

             https://www.amazon.com/Mathematical-Geoenergy-Discovery-Depletion-Geophysical/dp/1119434297

             Note that this model assumes 125 Gb of oil are discovered from 2019 to 2065, but most if the oil that becomes new producing reserves is from oil discovered prior to 2019. The model has 2588 Gb of conventional oil discovered from 1870-2018 with 1334 Gb produced, leaving 1254 Gb to be produced, about 1014 Gb of conventional output is produced from 2019 to 2065 in the model so none of this needs to come from 2019 to 2065 discovery. Also note that the model includes backdated reserve growth that the model assumes will occur in the future based on the rates of reserve growth that have occurred from 1870 to 2017. Total conventional discoveries (including any past and future reserve growth) for this model are 2800 Gb from 1870 to 2300, with 2760 Gb (including backdated future reserve growth) cumulative conventional discovery through 2065. Also included in this model are separate extra heavy and tight oil models with 193 Gb of extra heavy oil and 87 Gb of tight oil produced from 1967 to 2300. Total C+C URR is 3090 Gb for the model.

             

             1. World oil production and consumption will start to fall, when average EROEI of energy sources drops too much, to sustain economic growth. Your graphs don’t show that, so they’re useless.

                1. Podpis. If you have a reasonable assumption for Dennis to work into a model, he is wizard at it. Propose an assumption- when does EROEI drop too low? How much is too low? Lets here it.
                   Is it the level of the Alberta oil sands? (They are still producing btw).

                2. We don’t have data to know when average eroei of World energy sources drops too low. We can only observe the state of the World economy.

                3. Podpis,

                   So far real GDP growth per capita has been fairly steady from 1970 to 2018, this could change of course and it would be better if the rate of increase slowed and wealth was redistributed from rich to poor. Population growth should also slow with the best case scenario being a peak in World population by 2060 and total fertility ratio average for the World falling to 1.5 or less until World population reaches 500 million or whatever level is sustainable, before fertility ratios gradually return to replacement level (2.1 births per woman).

                4. Podpis,

                   EROEI is often misused. It is not a coherent analysis if only one primary energy source is considered. All energy sources used by society must be considered as energy inputs to the oil production, refining and distribution process come from oil, natural gas, nuclear, wind, solar, hydro, and geothermal energy sources.

                   If you can point me to a publication that takes all these energy sources into account and accurately predicts the future development of EROEI for all energy sources used by society, I would be happy to include it in my analysis.

                   I am not aware of any such publication. Feel free to ignore my analysis, it is a simple scenario based on a set of assumptions any of which could be incorrect and the assumptions are easily changed.

                5. You are right in first paragraph. I meant that when World economy cannot increase energy consumption (because energy sources are too poor), everything will just fall apart in a couple of years. We have to watch the economy, not oil reserves, because reserves are function of the World economy. Today we have oil reserves for 50 years, next year we can have reserves for 8 years, if demand destruction price moves to 30 usd/barrel.

                6. name,

                   It is not clear that with higher prices (if energy supply becomes short), energy will not be used more efficiently and that substitutes will not be developed.

                   It will not be easy to accomplish and the World economy will likely slow down as the adjustment is made, I just think there are a number of changes in costs for EVs, solar, wind, etc that may make such a transition possible, but it will be difficult in my opinion. Better public policy would help, a crisis might lead to changes in that realm.

             2. I expect that a long slow declining tail of production will have some abrupt
                jolts downward along the way, and end up lower quicker as a result.
                The jolts downward will come as producing countries become failed states and the chaos disrupts operations.
                For examples of how this comes to be, just look at the past 5 yrs of Venez and Libya as examples. Sure they may pick back up at some point, but overall effect is diminished global production, well below a theoretically well managed industry.
                Secondly, (and likely a smaller effect) some deposits will likely be kept in the ground because of choices some cultures make. For example, I could see the USA deciding to keep its large remaining coal deposits largely in the ground after 2030. Canada could decide to put a big constraint on oil sand production, keeping just enough for domestic use, if they so desired.

                1. Hickory,

                   At the World level those disruptions don’t have a huge effect.
                   Average 12 month output in chart below, from 1982 to 2018 the average annual rate of increase in World C+C has been about 800 kb/d. There will be some fluctuations of course, but predicting those is beyond me, for any future projections I make just assume there are random wiggles in projected output, price or any other predicted quantity.

                   

             3. Correction:

                The model has 168 Gb discovered between 2019 and 2065, but this “discovered oil” includes backdated future discoveries. Earlier I mistakenly said 125 Gb of oil discovery between 2019 and 2065 for the oil shock model presented.

       3. Dennis,

          Your 54 year prediction also assume no growth in consumption rate (not very likely).

          1. Iron Mike,

             Output is likely to peak in 2025 and then decrease, in fact it might decrease by quite a bit as EVs ramp up production and demand for oil for land transport begins to fall after 2030.

             Do you expect consumption of oil will increase for the next 54 years? Pretty sure that would be a very bad assumption. If anything I have over estimated consumption for the next 54 years, to do a back of napkin projection.

             1. If you are right about effect of EV and renewables in general then one would expect it would decrease.
                I have no idea what the future holds to be honest. I would assume consumption rate would decrease but the trend has some strength, and i would guess it will continue to increase until about 2025-2030 maybe. I honestly don’t know.

                1. Iron Mike,

                   I don’t know either, I have assumed about 3100 Gb of World C+C URR, it might be more or less than this which could result in a later or earlier peak and higher or lower peak output.

                   If my best guess scenario is roughly correct then by 2025 EVs will be needed and luckily they are beginning to ramp up today. It is unlikely in my view that the rate of increase in plugin sales from 2014 to 2018 (annual increase of 58%) will continue for much longer. My best case scenario assumes that it does, and my worst case scenario assumes it is just fast enough so that demand is equal to the supply projected by my medium oil shock model. Clearly there are many other possibilities above below and in between the two scenarios I just outlined.

                   In short, nobody knows.

                2. EV’s are bullish for oil prices (oil demand). EV’s are expensive, so it means, that making them consumes a lot of oil. EVs, Play Station 4s, housing, clothes, PVs, windmills, hamburgers, furniture – no difference. You have to go deeper into The Rabbit Hole, to understand. Civlizations stand on the most dense, and easily accessible energy source, which in our case is crude oil, since 150 years and 1,5 billion people. Everything else is just a decoration. If you want to change it, you have to replace oil with even denser, and more accessible energy source. We do not have one such now.
                   That’s why this chart is as it is: http://www.nationalobserver.com/sites/nationalobserver.com/files/styles/body_img/public/img/2017/07/11/bp-global-fossil-burn-percent.jpg?itok=30FiKZox

                3. Oil isn’t Energy, not the last 20 years.

                   Oil is only transportation. Exactly, non-rail-transportation since most rail transport world wide is electric since 50 years.

                   Energy is coal, gas, uranium, hydro, wind, solar. Round about in this order at the moment. This drives electricity and factories.

                   With an oil shock, it would be easy to cut oil demand by about 20-30% without a big crash. Car pooling for work travel, less leisure driving. Perhaps even private bus services. And transforming cars into gas usage.

                   I (here in Europe) could give up my car totally and come around with public transportation and bikes. Less comfortable, but it would work.

                4. name,

                   The specific energy (energy per unit mass) or energy density (energy per unit volume) is not everything.
                   EV prices will decrease as economies of scale in their production reduces production cost.

                   The $32,500 Model 3 standard range is already quite competitive, especially considering how nice a car it is.

                   https://www.tesla.com/model3/design#battery

20. Problem of less oil… first price per gallon makes/breaks planting… second makes/breaks local farms..third makes/breaks housing at the 2 hour commute fringe.. or banks.. which fund first two above

    1. My family has been using tractors and other ICE powered farm machinery since the roaring twenties.

       The price of oil is not a real problem for farmers, except in the very short term. It hurts if you need more money to plow in the spring, or harvest in the fall, sure enough.

       But farmers, excepting a very few of us, live in a world where we operate on the thinnest of margins, and in countries such as the USA, a lot of us willingly continue to work for nothing, not even earning a living, because we love the lifestyle. Our WIVES support our farming habit.

       Seriously, we are business men and women, and we pass along our costs to our customers, like all other businessmen. When diesel fuel and fertilizer go up in price, the price of our production goes up as well……. shortly afterwards, within the next year.

       When the prices of our input goods fall, we make a little extra…. for the next year or so. It takes that long for us to up production a little, thereby pushing the prices of our product down. It’s a never ending dance.

       In the event of a shortage of fuel, etc, we expect to be at or very near the head of the line when fuel is rationed …. right up there with the police, the water and power utility, the military……. none of THOSE people can eat unless WE work, lol.

21. So in the opinions of the regulars here who pay close attention to oil production…….

    Which half a dozen or so countries will be the next ones to go from net exporters to net importers?

    And how long will it take ?

    1. Good question, and a related one- which few countries with sizeable economies or populations will be the first to suffer economic disruption when the oil supply contracts in relation to demand over the coming years?

       I’ll through up an example for consideration-

       S. Korea- 50 million people, heavily industrialized. As of 2107 #5 importer of crude oil in the world. It may be the highest importer of crude/capita for a major economy, but I don’t have that data at hand. In a global economic recession, their earning power to pay for crude imports will be heavily challenged. They do not have a great resource base for renewables.

       1. I have it on hand. S Korea 0.051 barrels/person/day.

          Canada 0.066 b/p/d

          US 0.061 b/p/d

          Most Middle East oil exporters much higher than any of those
          (KSA is the 5th largest consumer in the world with 29M people)

          And Singapore 0.24 b/p/d, but that’s bogus because refinery processing is being counted as consumption and they ship product out

          1. Watcher- those numbers you gave are consumption/capita correct?
             I was indicating net importion of crude / capita.

             1. Don’t know how I missed that but yes that’s consumption. For South Korea pretty much the same thing.

                As mentioned, it’s hard to nail down something like per capita imports because it may have taken place in order to refine it and sell product. Hard enough to define net imports when you have API 32 liquids coming in and API 42 liquids going out, but if you then have crude coming in and diesel going out it’s pretty much impossible to compute net per capita import.

       2. My candidates are Pakistan,India,South Africa and Indonesia .I am including climate change also in my forecast . Of course I have not mentioned places like Mali,Chad ,CAR etc which have already collapsed .

22. April 9, 2019 (STEO) EIA estimates that U.S. crude oil production averaged 12.1 million barrels per day (b/d) in March, up 0.3 million b/d from the February average.
    (2020) EIA forecasts that U.S. crude oil production will average 12.4 million b/d in 2019 and 13.1 million b/d in 2020, with most of the growth coming from the Permian region of Texas and New Mexico.
    https://www.eia.gov/outlooks/steo/

    1. Energy News,

       Thanks. I focus on YOY increases, the STEO has L48 excluding GOM increasing by about 0.99 Mb/d from Dec 2018 to Dec 2020 or roughly 500 kb/d each year in 2019 and 2020. This is a pretty conservative estimate, though there may be decreases in L48 onshore conventional output so this seems a reasonable estimate. The GOM estimates may be a bit too high though, if SouthLaGeo’s estimates for GOM is correct (I believe he expects flat output at best over the next few years, EIA expects a 151 kb/d annual increase in GOM output from Dec 2018 to Dec 2020.)

       My tight oil estimate best guess sees about a 750 kb/d annual increase in tight oil output in 2019 and 2020.

       1. I’m favoring a slight upward revision of my GOM estimates. Since July-2018, the GOM has seen a step change in production from around 1.5-1.8 mmbopd to 1.7-1.95. My previous estimates for 2019-2020 were 1.7-1.8. I’m revising them upward to 1.75-1.85. The 2018 average was just under 1.75 (using BSEE data).
          I’m counting on existing production and a few recent or planned projects (such as, to name a few, projects at Thunderhorse and Atlantis) to support the current production through 2019, and then, banking on Appomattox, which is supposed to come on in Q3 2019 to keep things flat in 2020.

          

          1. I agree with your estimation of projects to expand existing fields.
             I know the company I work for did SGE on the 3 you mentioned – I don’t honestly remember if I worked on those.
             I remember, Jack St. Malo, Tubular Bells, jeez, probably 15 more in GOM but I sadly don’t remember.
             Just a bunch of data, job numbers and crates of piston cores in my mind…
             We are doing NO new GOM SGE work, just pipeline and cable surveys.
             Exploration in GOM pretty much dried up in 2014-15.
             Except for Mexico! We have non-stop jobs there thru 2020….
             Mostly EBS and GeoTek for rigs coming in.
             Freeport ( where we base out of generally) has gone absolutely nuts with export facilities being built.
             We have finished 3 pipeline surveys in the last year and have 5 more lined up for NOW NOW NOW!!
             After the collapse there are not many players doing SGE, EBS,Survey, etc…

          2. SouthLaGeo,

             Great stuff, thanks.

23. Seems there is a possebility that Mr. President Donald Trumph will also have a trade war with EU soon , if that happens and agreement with China falls that also might happen this will have significant impact of world growth and oil demand. Oil price in range 40-50 WTI will than be a reality because of over supply..
    https://www.bloomberg.com/news/articles/2019-04-09/trump-has-a-message-for-the-world-my-trade-wars-aren-t-over-yet

24. This is good but the Dallas Fed doesn’t explain why a complex refinery doesn’t just use the cheapest oil available, either light or heavy? – I guess it costs more to run a refinery at less than full capacity and they only run at full capacity when they run the heavier oil that they are designed for.
    And also they can make more diesel if they run heavier oils, they can adjust the cracking of the heavy residuals to produce more diesel and less gasoline. There is too much light distillates and not enough middles at the moment.

    2019-04-09 (Dallas Fed) The global refining sector‘s expanding ability to process low-quality crude oil (heavy & mostly sour crude) and a growing supply of high-quality shale oil have significantly reduced price differences between low and high quality crude oils.

    The discount placed on low-quality crude creates a potential arbitrage opportunity for anyone who has a way to transform (heavy) residual content into higher-value products. This is where complex refineries come into play. They possess specialized equipment crackers and cokers that enable them to produce more gasoline and diesel from a given barrel of low-quality feedstock. The most complex refiners processing a heavy crude can often produce as much gasoline and diesel as many simpler refineries can with more expensive, high-quality crude oil.

    …the global refining sector has added a significant amount of capacity to process low-quality crude oils over the last decade. In essence, complex refiners arbitraged away much of the quality-related price differential that previously existed.

    Dallas Fed -> https://www.dallasfed.org/research/economics/2019/0409.aspx

    

25. OPEC says that its March oil output fell by -534 kb/day to 30,022 kb/day
    Venezuela oil output in March fell by -289 kb/day to 732 kb/day from 1,021kb/day
    Table: https://pbs.twimg.com/media/D3zGC_RWwAAe1O5.jpg

    

26. Seems the EIA in thisestimate revice US oil production in 2019 to increase 100k bpd.
    https://www.ogj.com/articles/2019/04/eia-revises-up-oil-price-forecasts-for-2019.html
    Seems now EIA reduce average WTI price in 2019 , 2020. With oil price WTI in 50 usd world the pioneer and CEO Mark Papa told there will be no increase in US shale . It mean a forcast for US might be – 100k bpd in 2019 and – 250 k bpd in 2020. It might even be more decline. I doupt US shale will grow 200k bpd in a 50 range usd WTI world as EIA predict.

    1. When I read the article, they increase their forecast by 100k bpd, not total US production by 100k bpd.

       This will increase even more with this forecast, more than 1 mbpd this and next year.

       1. It is correct they upgrade 100k bpd , and they exspect shale production will grow a lot with WTI 57 usd average in 2019 and WTI 58 usd / bbl
          in 2020. Latest i read is they send home staff to save cost..

27. Looks like Venezuela is still in troubles

    From a German net news site:
    https://www.heise.de/tp/features/Venezuela-Der-naechste-Blackout-4371494.html

    Again a total black out. So less oil, and more unrest.

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