299 thoughts to “Open Thread Petroleum, Jan 8, 2017”
1,590,525,938
Cumulative total of Bakken Formation oil production.
One billion of those barrels produced in the past five years, four billion barrels to go with the projected 5.7 billion recoverable, another 20 years of production in the pipeline to go.
By 2035, the Bakken oil will be about done, can’t get anymore.
75 new wells per month, 12×20, 240×75=18,000 more wells over twenty years time.
The price of oil at 50, 4.5 billion barrels of oil, 225 billion dollars.
5,000,000 dollars of cost per well, 90,000,000,000 dollars invested in drilling those 18,000 new wells, 400,000,000 barrels for the extraction taxes, money for the state, 20% for royalties, 80,000,000 barrels for mineral owners, 480,000,000 barrels to keep everyone happy all of those years.
The oil companies can keep 3.52 billion barrels to sell to get them some money.
Times 50 USD per barrel to assess a value, 160,000,000,000 dollars in future income to pay the 90,000,000,000 dollars owed for oil wells drilled. After twenty years of production you will have 70,000,000,000 dollars left over for the buzzards to pick clean.
A measly 3,500,000,000 dollars per year for the oil companies to share. 350 oil companies working, ten million dollars to share amongst stockholders and employees.
The price of oil has to be more or the Bakken will slow to a crawl, then an end.
Made a mistake by a factor of ten. The 20% for royalties, it is 800,000,000 barrels for royalties, not 80,000,000.
2.8 billion barrels for the oil companies, not 3.52 billion.
Friend of mine attempted to make a “predator-prey” dynamic model of the oil price cycles, curve fitting from 2014. Fun. Trying to model the swings. Not a great fit, though.
The more fascinating part of the exercise is the realization that pressure on demand from alternatives (making demand more elastic) and pressure on supply from the decline of conventional fields in favor of unconventional fields which require more yearly capital input (making supply more elastic), combined with a continuing significant lag time between price and supply, will make the oil price *more and more volatile*. Higher highs and lower lows.
Anyway, he’s thinking maybe two more cycle tops — maybe ’18 and ’23 — before demand destruction causes the permanent price decline. I’m thinking probably that’s about right, but it might be only one more cycle top.
No evidence of consumption decline.
I hope Natural gas is petroleum related enough for this thread.
Weld County is interesting in that it is right next to major population areas in CO. It’s involving land that is used for housing developments and agriculture. So there is an on-going debate as to the extent to which the state should facilitate drilling at the potential expense of housing and farming.
With gas and oil prices staying low and with rapid decline rates, the potential disruptions may not be worth it in the long run. Colorado has had its share of boom and busts linked to natural resources, and, as a consequence, operators who go bankrupt and then aren’t around to clean up messes.
Boomer II.
Anyone buying a home in a region which has or had mineral production should always have a title search of the oil, gas and other minerals performed before purchasing the home. If the mineral ownership has been severed from the surface, the mineral owners typically will have the right to develop them. In most states, the mineral estate is dominant and the surface estate is servient. This is why local efforts to stop mineral development through zoning have been challenged successfully in the courts.
Undeveloped minerals are real estate, and prohibiting the owners thereof from developing them many times results in an unconstitutional taking.
The problem, of course, is that buyers of homes and other surface real estate in these areas are not advised as to the law, and therefore do not find out about the potential problems that may arise until it is too late and they have already purchased the real estate. Unfortunately, ignorance of the law is not an excuse in these matters any more than it is in any other matter.
Most in the business of developing oil and gas do not want to be anywhere near residential development. Unfortunately, many times, instead the development comes to them after the fact. In our area, many now want to “live in the country”. Most wells we operate have been there from 30 to over 100 years. Almost all of the minerals were long ago severed from the surface. Unfortunately, many have built homes very close to existing wells and other facilities. I feel that one who “comes to the nuisance” has very little room to complain. We recently had someone build a new home and a detached garage/shop on one of our leases, the minerals are severed. One well is less than 50 feet from the shop. They cut our electric lines and flow lines more than once during construction. The lease has been in continuous operation since 1977.
There are different facts in every situation, and at least two sides to every story when it comes to mineral development v. housing development. One thing is certain, if something is of record concerning real estate title, there is notice to anyone considering purchasing the real estate.
In Colorado most homeowners do not own mineral rights, Only recently have they become aware of that fact.
There have been ways to limit drilling. Zoning laws are what the local governments are turning to. And voters are asking for tighter controls from the state government in regards to set-backs from buildings and schools. Drillers have never had unlimited control over where they drill even if they do own the mineral rights.
Water is another issue. Water needs to be divided up among homes and communities, agriculture use, and drillers. So there are conflicts there.
I’m with Shallow Sand when it comes to people moving to the country, and then raising hell about industries and businesses that were there before they arrived.
It’s getting to be quite a hassle to run a farm these days, in some places. I haven’t had any problems, personally, but I know folks who have, and more who WILL.
Now about mineral rights, and surface rights and solutions:
As Shallow Sand and others have pointed out, the LAW as it exists, and existed in the past, is mostly very much on the side of the owners of mineral rights in most places in the USA, with surface rights playing second fiddle.
But in the END, the law is basically what PEOPLE want it to be, although the wanting and the getting are often separated by a good many years.
The people of a political subdivision, such as a city or county, might have a HARD time stopping mineral rights development via local ordinances, but at the state level, once they have state level support, there are some things that WORK.
States can tighten up environmental regulations to the point that development is either impossible, or delayed for decades, and states can mostly put a tax on pretty much anything they please and mostly at just about any RATE that pleases the state legislature. Fighting a tax that is deliberately set high enough to simply prevent mineral right development deliberately is possible, but that may well take decades as well, and then the state only has to LOWER the rate…………
There is zero doubt in my mind that even though the owners of the California agricultural industry, taken collectively , are as “rich as an Argentine”, they DON’T have enough money to keep the PEOPLE of LA from eventually taking their irrigation water away from them, if the people of LA really NEED it.
And it looks like they WILL really need it, within the next few decades, if the current trend toward drier weather on the shaky side holds.
“I’m with Shallow Sand when it comes to people moving to the country, and then raising hell about industries and businesses that were there before they arrived.”
That’s not what happened. For the most part, the housing developments and the schools and the parks were there first, and then oil companies came in and wanted to drill next to the developments. They got pushbacks as a result.
If the drilling was confined to unpopulated areas of Colorado, there would have been little said about it. But when it started to happen within established communities, then it didn’t go over well.
But economics will likely keep drilling much more restrained than what was expected a few years ago.
If you have a housing development, and there is so little space between houses for a drilling rig to set up, then there isn’t going to be drilling.
That’s one of the realities which will constrain drilling in populated areas.
If there is an empty field or a farm or even a park, maybe a drilling rig can be set up. But if there are nothing but houses and modest backyards, there won’t be enough space to allow a rig to be established and be far enough from a house to meet state guidelines.
Here are Colorado state rules for setbacks.
“The new regulations increased the minimum setback distance to 500 feet, adding a 350-foot setback from outdoor recreational areas such as playgrounds or sports fields, and a 1,000-foot setback from high occupancy building such as schools or hospitals. It also included 1,000-foot buffer distances from these outdoor areas and buildings within which facilities are permitted but require increased on-site mitigation to prevent air, noise, and water pollution. These rules took effect on August 1, 2013.”
As you can see, it there isn’t a lot of room to put drilling rigs in established neighborhoods.
Parts of Weld county are open areas, and parts of it are not.
in Texas (and most states)mineral rights are superior to surface rights. The principle is owners of the surface do not have the right to deprive owners of the minerals the right to develop their property. Much in the same way one surface owner can not deprive the surface owner of a land- lock tract access to his land. I know it is a difficult position for many here to grasp but these private property rights are fundamental in the USA?? Minerals are largely owned by private citizens/companies. One citizens or group of citizens does not have the right to deprive another the use or enjoyment or the income from their private property. Mineral owners don’t tell surface owners what they can or can not do with the surface and surface owners by law and common sense should not try to to tell mineral owners how or when or if they can developed their minerals.
As an aside, one of the poorest counties in the country, Mora County in Central New Mexico. These goobers passed a “frac ban” while at the same time started a multi million dollar new court house that they do not have the money to finish. Government goobers defined. http://nmindepth.com/2015/03/21/capital-outlay-projects-often-controversial/
“That’s not what happened”.
True enough, but the mineral rights and the surface rights were pretty much mostly separated a LONG time before the houses arrived.
The homeowners troubles are still the result of their failing to act like adults, and hire ADULT lawyers, when searching title, lol.
Anybody who trusts anybody else just because they have created fancy trade organizations to help them make more money, as the real estate industry has done, is a few bricks shy of a full load. The real estate industry is one of the worst. I have been indignantly called ignorast by a real estate agent/ broker for referring to her by that legally recognized proper term. She INSISTS on being called a REALTOR, lol. She has customers who believe she’s actually somehow BETTER, and not to be confused with MERE agents and MERE brokers, lol.
And we all know all the lawyer stories. They usually rank either slightly above or slightly below car and truck salesmen, depending on one’s personal opinion. 😉
I’m not sure you guys are getting what I am saying. There are setback requirements spelled out by the state.
In housing developments, there isn’t room to put in drilling rigs in those neighborhoods.
It’s a done deal. There’s no space for the rigs.
So when drillers want to drill in pre-existing neighborhoods and don’t have places to drill, they can’t do it.
So the collision between developments and drilling happens, and it has nothing to do with homeowners being difficult or unreasonable.
I was thinking more along the lines of drillers, and coal miners, coming onto a farm or rural property used as a home, and making a mess of the place, which is within their rights, as owners of the mineral rights.
A guy like Shallow Sand would do what he could to create as little disturbance as possible.
But other oil guys and coal miners are not necessarily much interested in playing nice.
I have a home in Denton, on top of a gas field. The wells in that neighborhood were set in pads on open land near I35 about five-six blocks away, and thus far there’s no problem. The town has a large college student population which tends to bat left, so they tried to forbid fracking, but it didn’t get far.
I like the results thus far, the town gets a wad of tax income, house prices are up. I tried to get the antifrackers to focus on things they could change, like the emissions from condensate tanks and silencing compressors, but they turned out to be a bunch of idiots.
as an aside to your point. Several years back I had a prospect that sat under a housing development. Mostly small manufactured homes or mobile homes. There were not a lot of open surface areas to drill so we bought a couple of mobile home lots (2 acres) and moved our rig in and to keep the peace we put up closest neighbors in a hotel for a couple of week. It was a dry hole so we cleaned up the lots and sold them. No big deal. If there is a will there is a way.??
Home buyers rely on title insurance to protect their interest. And of course a mortgagee (lender) requires the buyer or seller to obtain a title insurance policy to protect the lender in the event of title failure. The title company attorney prepares the deed of trust and the warranty deed approves the issuance of a title policy which is issued by the insurance company.
Now that I think about it, I’m not really sure who is the client of the title attorney because he probably owns the title company/abstract office.
Generally that is the extent of a home owners interest in the chain of title to a particular property.
Title insurance DOES NOT cover the mineral estate. And that is why home owners generally don’t know anything about mineral ownership.
John S,
Every title insurance policy I’ve seen did mention mineral rights, and they are often mentioned on deeds, at least in Florida. May vary by state, I suppose.
People who don’t use financing might forgo title insurance thinking it isn’t worth the cost, in which case they may not know about mineral rights, because they are sticking their heads in the proverbial sand. They will howl loudly because they didn’t know.
Jim
Jim,
In your situation, could the mineral rights have been listed as an exclusion from coverage in the event of title failure?
Title insurance protects a buyer/lender from a financial loss due to title failure but it is limited, I believe, to the purchase price/mortgage.
What is the value of a non developed mineral estate? If you don’t know the value of the mineral estate how do you price title insurance? For that matter what is the value of a developed mineral estate?
The oil & gas industry does not use title insurance when selling or purchasing oil and gas properties. The industry relies on title opinions prepared by oil and gas attorneys, due diligence title reports prepared by Landmen. Mid-stream facilities are probably different but that’s not my field.
Many of these people obtain error and omission insurance policies to protect themselves from liability, but I can assure the value of the policy will never be adequate in the event of a title failure.
Anyway, that’s from my experience for what it’s worth.
.
My experience is that title insurers never will insure minerals.
The title insurance simply notes that the mineral ownership has been severed from the surface rights and is not part of ownership. The title insurance guarantees the title to what you do own. Mineral rights do not come into play since they are clearly indicated as not being owned.
Why? To fund the pumps and stuff that have rusted away.
Even if the money is needed for repairs and infrastructure, why sell when prices are low? Why didn’t they sell when the prices were high?
More SPR things:
720 million barrels in the US SPR when full. It’s usually not 100% full and when it is (last happened Dec 2009) it’s not really full because you can’t recover 100% of what you store. Oil gets into pores in the rock and won’t come out. Just like less than 100% recovery of oil from an oil field.
The usual calculation is 720 / 20 mbpd US burn = 36 days of consumption storage. With US production at about 8.5 mbpd that number seems to rise to a little less than double — call it 70 days.
But not true. Maximum extraction rate is only 4.4 mbpd (takes 13 days from the word go for the first barrels to enter the system). Not 11.5. So the total embargo of imports scenario because Canada wants to save it for their grandkids means the country goes from 20 mbpd consumption to 12.9 mbpd — for 160ish days (720/4.4) and then just the 8.5 is all we have to function.
Gonna have to compute oil consumption required to haul/deliver food to stores and for people to drive to stores to get it. Tricky for the haulage from central america (fruits).
Salt dome storage caverns don’t have pores. They’re caverns.
The papers are about incomplete recovery. Some stays behind in the rock, however low the porosity / permeability. Some escapes during fill/extraction cycles, which means loss during the process itself, I guess.
Total loss is specified at what looks like under 1%. The papers by enviro ppl opposed to storage in their neighborhoods said 1%, so that’s probably top end. They added spillage to the loss mechanisms other papers talked of.
The rock is salt, which has zero permeability. I suppose some oil will stick to the salt cavern walls.
Where’s the Money go if the Feds sell SPR Crude? Gov Black hole?
Latest from Art: http://www.artberman.com/the-opec-oil-production-cut-another-year-of-lower-oil-prices/
“In fact, tight oil production is a plus for OPEC. The U.S. must import i n c r e a s i n g amounts of OPEC heavier oil for blending in order to refine the ultra-light oil produced from tight oil plays.”
Useable North American Tight Oil just 16 x the US SPR ? Seems like a whole heap of Fracking trouble and crude imports to make all that LTO useable.
These are only proved reserves of LTO. Recoverable resources are much bigger.
Berman compares proved LTO reserves classified under strict SEC rules with unaudited “official” reserve numbers for OPEC countries shown in BP Statistical Review. Most experts do not trust these numbers, particularly for Saudi Arabia.
Look, for example, at Rystad Energy’s resource estimates, which are much bigger for the U.S. than KSA, Canada or Venezuela.
If we consider only economically recoverable resources, I’m not sure that Canadian oil sands or Venezuela’s ultra heavy oil is a lower cost resource than LTO.
These are only proved reserves of LTO. Recoverable resources are much bigger.
With all the LTO drilling done in US, thousands of wells, how could there be anything but proved LTO reserves in the US?
The Venezuela figure is BS. The reserves outlook gets grimmer by the year, because the current development strategy is incompatible with enhanced recovery. The areas under development are mostly the “sirloin steak” in the Orinoco heavy oil belt, and these high graded areas are now being gutted by pdvsa and partners. They are going after quick kill primary recovery, ruining the reservoirs. This means that not only is the 300 billion barrel figure a poor number, the “real number” is gradually degrading as they continue to lower reservoir pressures and allow water to penetrate the developed reservoirs.
Hi Fernando,
Based on what you know I think your estimate for URR for Orinoco is about 100 Gb, if I remember correctly, due to the poor development you outline above.
Please correct me if I am remembering incorrectly. Thanks.
Production is slightly below 2 mmbopd, so my forecast seems to be holding. Right now the regime is chaotic, the National Assembly is powerless, but they met and declared Maduro had abandoned his job. The constitution actually allows them to do it, it’s not very well written. Things are terrible, and there’s an increasing refugee flow, which of course is ignored by the media
Meanwhile in Cuba repression is up, the new interior minister wants to show he’s a tough dude. This is also ignored by the media, which is focused on Trump being Putins lover and planning to send al gore to Guantanamo.
Maduro named a new Vice President, Tareck el Aissami. The guy is known as “El Califa de Aragua”, was named in a confession made by Walid Makled, a large cocaine drug lord captured in Colombia, to be the facilitator for large cocaine shipments the Makled cartel shipped via Venezuela (the Makleds shipped FARC cocaine). El Aissami speaks Spanish with a mixed Cuban-Venezuelan accent, his family is from Lebanon, but he spent time in Cuba. El Aissami has so much power he convinced Chavez to demand Makled be turned over to Venezuela and not to the USA, which had an indictment issued by a federal court. Santos, Colombia’s president, seems to be a mole, or is an idiot, he shipped Makled to Venezuela, and the guy disappeared in Chavez’s jail system. This means Makled didn’t get to testify in USA court against el Aissami, Cabello, and the other high level druglords in the Venezuelan narco regime.
Some wags claim el Aissami has terrorist links, but that’s probably baloney. I asked my Russian contacts, and they say el Aissami is very tight with the Assad regime, but that’s just because he wants protection for his family left behind in Lebanon and Syria. They also mentioned he has a remote cousin (not Jewish) serving in the Israeli army, so you go figure how tangled all of this gets.
Thanks Fernando,
So with the 120/b scenario about 100 Gb of Orinoco URR. My estimate is about 250 Gb from Orinoco and 250 Gb from Canadian oil sands.
Probably a more realistic extra heavy oil (XH) estimate would be your 100 Gb estimate from Orinoco and maybe 200 Gb from Canada for a total of 300 Gb of XH URR. That would reduce my World URR “medium” scenario to 3100 Gb of C+C (with about 1300 Gb produced through Dec 2016), leaving 1800 Gb to produce.
Note that this scenario assumes high oil prices. If high oil prices leads to lower demand for oil as other energy sources are substituted for oil, then a lower scenario with URR=2800 Gb may be more realistic and depending on how low oil prices go, even that scenario may be too high as the XH URR will fall to 200 Gb or less, which would put C+C URR at 2700 Gb.
Using those assumptions, we might be at 50% of C+C URR by 2017 and a plateau in output from 2015 to 2019 may be pretty reasonable. How fast output declines will depend in part on oil demand (through the effect of oil prices on supply and demand for oil.)
Dennis,
The recent USGS estimate of world URR is much bigger than yours.
The chart below shows resources of conventional oil fields outside of the U.S. (excluding tight oil and tar sands).
Total number is 3,300 BBO
Excluding cumulative production: 2,500 BBO.
Probably, you underestimate future reserve growth in discovcered fields and potential resources of yet undiscovered fields.
That chart is so absurd it is funny. Of course it includes those OPEC fictional reserve numbers.
And 565 billion barrels of undiscovered oil. At the 2015 rate of discovery, 2.7 billion barrels, that would take about 210 years to find it all. And at the 2016 discovery rate, less than 1 billion barrels, it would take over half a millennia.
But the biggest joke of all is that 665 billion barrels of reserve growth. Hell, they don’t even need to look for any new oil. Just sit back and let what we have already found grow and grow and grow.
The updated number for oil discoveries in 2016 is 3.7 billion barrels, according to Wood Mackenzie.
In 2015, it was slightly higher.
The estimate for 2016 is preliminary and can be revised upward.
Still, this is indeed a multi-year low. But global exploration activity last year was also at multi-year lows, both in terms of spending (about a third of 2014 levels) and the number of wells drilled (also a third of 2014 levels)
Before 2015, the average discovery rate was around 10 billion barrels.
Exploration activity is expected to rebound in 2018.
In my view, a more important issue than the absolute level of discoveries (which may rebound) is that these new discoveries are mostly high-cost resources. Their development may be postponed if oil prices are not sufficiently high, and that may result in serious supply deficit in the next decade
Hi AlexS,
I believe the USGS overestimates both undiscovered resources and reserve growth. They also include all OPEC “reserves” which are not audited, these are likely to be 300 Gb lower than reported for conventional OPEC reserves (Jean Laherrere’s estimate).
So let’s assume extra heavy oil plus LTO has a URR of 500 Gb and we will call everything else conventional oil. My estimate is 2800 Gb for my “medium scenario” and 3100 Gb for my “high scenario” for C+C less extra heavy oil. LTO is likely to be a rounding error so we could put it in either category and not much would change.
I expect discoveries will be about 300 Gb and reserve growth another 300 Gb and that current 2P reserves plus cumulative production (excluding extra heavy oil) is about 2200 Gb.
Perhaps I am too conservative, but Ron, Doug, George Kaplan, and many others think my “medium scenario” is too optimistic.
Fernando thinks I am in the right ballpark, I think.
If oil prices remain under $100/b long term, even my “low estimate” of 2800 Gb (2500 Gb conventional and 300 Gb extra heavy) might be too optimistic.
If oil prices can be sustained at $120/b, we might see C+C URR of 3100 to 3300 Gb.
I just don’t think the USGS estimate is realistic because by 2040 we may see lower demand and lower oil prices which will leave a lot of oil in the ground because it will not be profitable to produce.
Hi Fernando,
You already know I think you are have told it like it WAS, in the past, and that you are telling it like it IS in Venezuela and Cuba today. You may be off some as to the matter of degree, but my take is that things are as bad or WORSE than you have described them.
Anybody in this forum who doubts you is probably a well educated and basically political liberal individual, because there aren’t more than maybe half a dozen or so of all other kinds put together, at least not among the ones who post comments indicating their political leanings. Figuring out a man’s politics is easy, if he talks much.
Now there is this magazine , with a web site of course, called THE NEW YORKER, which is one of the highest quality most reputable publications around, and you are hearing this from a guy who is occasionally called a Trumpster, or nazi, or pervert or even worse, by more than just one liberal, in more than one place.
Every big D Democrat I ever met who reads the news has a HIGH opinion of the New Yorker.
So- Anybody who doubts you, because you are of a different political tribe, is WELCOME to google Venezuela plus failed state plus The New Yorker, and they can read a long, detailed, high nuanced article about the situation in Venezuela on their web site, free, without even registering.
This article touches on the relationship between Venezuela and Cuba, but not to any great extent. But it verifies that Cuba HAS HAD secret police types , etc, in Venezuela, who are so far as I can see, are very likely still there, helping Maduro run his own little police state.
Because make no mistake, Venezuela is now close enough to a police state that using that term is hardly an exaggeration at all.
The situation there is nothing less than desperate, it’s bad enough to make a grown man cry, if he allows himself to think about it.
Given that you are in my estimation proven correct by an unimpeachable source, about the political and economic picture in Venezuela, and that are an oil guy with first hand and second hand but recent knowledge of the Venezuealan oil industry, I believe you should be taken as seriously as the proverbial heart attack when you talk about Venezuelan oil.
Other people’s mileage may vary.
Mac: thanks for your kind words. I’d like to point out I’m in daily contact with people in Venezuela and people who go in and out of Cuba, and I also monitor events in Venezuela and Cuba by simply looking at videos people manage to upload. I also get the US State Department communications for USA expats living in Venezuela. These warn (and give the location) of ongoing riots, lootings, marches, and other events which threaten safety.
By the way, I just wrote a post, it’s about a time traveler from 1967.
I am probably one of the very few forum members who takes Fernando seriously, in respect to the history of Cuban and Venezuelan politics, etc.
But I ‘m assuming just about all of us take what he has to say as an oil guy seriously, as I do. Does anybody have any reasons to offer as to why I should change my mind?
Hi Old Farmer Mac,
Mike, Shallow sand, Fernando, George Kaplan, SouthLaGeo, and AlexS are some of the best people here for inside knowledge of the oil industry in my opinion. Rune Likvern is great as well, but he doesn’t offer his opinion much these days here at POB.
What goes on in Cuba and Venezuela gets almost zero coverage in the USA media, and what you see about Cuba is mostly distorted, I guess because the USA elites are following the Obama line, and/or tend to be left wingers who admire the Caribbean’s Stalin, just like USA fascists loved Adolf Hitler in the 1930’s.
One thing is for sure, I don’t expect fair coverage from the media, I’m going to continue to be insulted and trashed for telling the truth, and life will go on. Eventually the Castro dictatorship will fall, and we may, or may not, find out about the regime’s crimes. This world isn’t known for accurate information, and people tend to avoid recognizing their mistakes.
I don’t think I ever doubted that the Castro regime was a cruel dictatorship, and obviously the USSR was run, usually, by a bunch of bad actors as was communist China.
However I do think there has been great hypocracy in the way the US has dealt with nasty regimes. China is still avowedly communist yet they are now one of our major trading partners. We trade with Viet Nam, also communist. Both countries probably rival Cuba and Russia today as nasty regimes. Why the difference?
Cynical me thinks it is because the US establishment was/is convinced that there was money to be made by dealing with these particular nasty critters. It was clear for a long time that there would be no benefits to business dealing with Soviet Russia so no serious effort was made to understand what made them tick. I believe that when Stalin died there was a real opportunity to come to some reasonable arrangement with the USSR instead we, the US, chose to up the ante.
I don’t know if Venezuela or Cuba or the USSR would have taken other paths with less US belligerency but I certainly see an ugly assymetry in our behavior.
Nothing ugly about bashing a commie dictator on the nose if it’s a low cost issue. As it turns out, obama’s friendly attitude towards Raúl Castro has encouraged Maduro, Ortega, and Morales to become dictators in their respective countries. And all of them keep spouting the vilest comments about the USA. Just a few days ago Raúl Castro held a military parade in which his troops chanted they wanted to fill Obama’s head full of lead.
When I watch obama’s foreign policy “experts” I cringe. They are the biggest bunch of retards I’ve seen on the job ever since Rumsfeld, Cheney, and the neocon kiddie corps took over the White House.
The point is that Cuba doesn’t really matter one way or the other to the US, and it is politically expensive to keep the nonsensical embargo in place, as it obviously doesn’t have the power to remove the regime.
Politically expensive with whom? Chilean communists?
Focus on the point I’m making: by legitimizing the Castro dictatorship that utter imbecile known as Barack Obama has encouraged the transformation of the Venezuelan autocracy into a dystopian dictatorship, which is now allied with the Castro Mafia, and aiding the emergence of more dictatorships in Nicaragua and Bolivia.
I thought Bush was incredibly stupid when he invaded Iraq. And now I assert Obama isn’t far behind. The USA has endured 16 years of crappy leadership. But wait, there’s more…
Fernando,
From your standpoint, what would be a good course for the USA to pursue in regard to policy with Cuba or Venezuela going forward?
I think most Americans really don’t know what would be good/ constructive policy.
I have been making the points as outlined in that piece for sometime…i repeat long carbon based energy. dumb money indeed?
Hi TT,
We DO have our differences of opinion, but I am with you, when it comes to the prospects of making a lot of money in the oil biz.
It’s quite possible the industry as a whole will stay in the pits, over the long haul, and that we might leave oil, before oil leaves us.
There’s an old story about some Saudi prince saying that the Stone Age didn’t end because of a lack of stone, and that the Iron Age didn’t pass into history due to a lack of iron, and that the Oil Age will not end due to a lack of oil. He may well have been right, there might be one hell of a lot of stranded oil, EVENTUALLY.
But in the short to medium term, somebody who KNOWS the industry has in my opinion an EXCELLENT shot at making very handsome profits. It’s going to be ten to twenty years, at least, before electric vehicles cut very deeply into the demand for oil.
Depletion and the increasing cost of extracting,shipping and processing smaller fields and lesser quality crude will force the price up, and low cost producers will be probably be sitting pretty for some years to come. MOST years. And if you KNOW what’s going on, you will have a pretty good idea when it’s time to get OUT, for the last time.
These are my personal opinions, based on observing commodity markets as a commodity producer, over the years. The only real difference is that so far at least, lol, nobody is marketing a product that will render food obsolete. 😉
If I could I would buy Mad Dog or the Atlantis fields. But those won’t be producing that much in 20 years.
There might be money to be made by buying and selling oil-related stocks, but there is also money to be made buying and selling stocks in other industries.
What I have been pointing out is that anyone who is encouraging you to buy a specific company or a specific industry may already be holding stock in those and looking for buyers.
Owning stock without being able to sell it doesn’t make you any money unless you are collecting dividends.
I collect dividends. I bought my shell shares at such a low price they pay 9 % on the investment. And I really don’t think any of you should buy any. I want them all for me.
I continue to predict 63 average for the year. I think I put my price forecast in my blog a while back, and I don’t see a need to change it.
Which year? 2017?
Obviously he means 2017. The Brent price averaged about $44/b in 2016 (nominal) and is about $54/b at the end of the year. My guess would be about $75/b by the end of 2017 in 2016$. If Fernando’s estimate is in 2016 $ and is the average Brent price for 2017, I agree with his estimate.
That means he may be wrong, because I am rarely correct on my oil price estimate.
Sure, 2017. Take $63 and multiply by 1.015 to account for the inflation factor. That’s my forecast. I can also predict the retail price of cat food tuna.
I mentioned that zoning laws can prevent drillers from drilling in certain areas.
Here is an older article explaining how it is done.
‘It doesn’t make economic sense,’ said Perry, standing in the back of KD’s Bar-B-Q, a local favorite. ‘It adds a few hundred thousand dollars for each well. That’s 10 or 20 percent more.’
But that doesn’t mean he dislikes the rules. He wrote them, or at least helped write them, as part of his other job — mayor of Midland.”
“And in Oklahoma, where the fervor for drilling is no less intense, some cities flat-out ban drilling within their city limits. Among them is Tulsa, which once billed itself as the Oil Capital of the World.”
Keep in mind many new wells onshore US are horizontal. So, location may be 1-2 miles away, yet well can go under subdivision, lake, park, etc.
The 18,500’+/- lateral from Eclipse’s Purple Hayes well was just the first of several ‘super lateral’ designs with 22,000′ the present goal. Vertical depth there was over 8,000′ with TMD about 28,000′. This well is producing primarily condensate.
In the Bakken, an operator (QEP?) is currently drilling several 15,000′ laterals under Lake Sakawea at a vertical depth of over 10,000′.
What % of US oil consumption is food transport? This got tricky quickly.
Average US person eats about 5.4 pounds of food a day. That’s just the food. Average meal travels 1500 miles to reach your mouth.
First tricky item — packaging. It has to transport, too. Amazing variance on this. Glass jar of pickles vs paper around candy bars. The only estimate out there is numbers for municipal solid waste and estimates of % of that is food packaging. Year 2000 US waste generation 4.5 pounds/day/person, and growing. Probably over 6 by now based on the curve, but will use 5 lbs/day cuz round number.
31% of that is packaging and half of that number is food packaging. Some 2006 study. So 15% of 5 lbs a day is 0.75 pounds added to the 5.4 pounds of food is 6.15 pounds shipped a day per person.
For 1500 miles.
Eyeballing some charts looks like typical/average truck hauling weight for stuff hauled is 60,000 lbs. Typical diesel mileage 6 miles/gallon.
6.15 pounds X 320 million mouths = about 2 billion pounds of food moved each day
1500 miles / 6 = 250 gallons truck burned
2 billion lbs / 60,000 lbs = 33,333 truck trips X 250 gallons/truck trip = 198.4K bpd to move food.
Ain’t much. Maybe there’s an error in there. Top of my head . . . things not included, hauling spare parts for the food moving trucks, spare parts for the packaging gizmos, plastic packaging, agricultural consumption itself.
[Edit] Blurb says 17% of total US oil use is agricultural, up and downstream (fertilizer plus fuel). This would be far more than food transport.
I am suspicious of that fifteen hundred mile figure, but it may be accurate. Or it may have assumed a life of it’s own, after being tossed out by one or two people who really just guessed at it.
Most of the food that is produced in truly huge amounts, staple food, is shipped by water, and or by rail, if it travels a LONG way. A VERY limited amount of food, in relation to the total amount, is air freighted.
Here in the USA, it’s not too likely that very much in the way of unprocessed or processed staple food is shipped more than a thousand miles by truck. Exceptions will be mostly fresh high retail value produce, shipped as directly and quickly as possible from grower to retailer.
The REAL food miles come at the very tail end of the distribution chain. I never owned an eighteen wheeler, but I did once own a C70 Chevy which would legally haul about sixteen thousand pounds of apples to market. The farthest local growers usually go with their own truck of this sort is about a hundred miles, one way. Thirty gallons of diesel would take me that far, and home again.
The people who actually bought my apples at retail, after they were picked up at the wholesale market and delivered around town in smaller trucks, usually bought no more than five pounds at a time.
I’m guessing, pulling numbers out of my hat, but I suppose a typical shoppers average grocery purchase weighs from about twenty five to thirty pounds, up to a hundred pounds,depending on family size, and is made on roughly a weekly basis, on average.
And I’m guessing that the average trip to the super market is at least six to ten miles, round trip. THAT’s where the food miles really pile up. A liter of gasoline burnt to get fifty pounds home, the last five miles, times around a hundred million households, times fifty weeks, adds up. FAST.
Maybe. The pickle jar weighs a LOT and there’s not much food weight part of that. The whole packaging thing is a significant thing, and that’s another food item I didn’t include, disposal of it.
I’m going to guess the 1500 mile thing came from the coasts’ pop centers and their daily bread from Iowa and Nebraska. The various websites talking about this like to talk about a head of Imperial Valley California lettuce going to England. X calories burned for 1 or two calories delivered to the mouth. But that sort of thing definitely would drag the average up. 1500 miles maybe is legit.
I am surprised the total transport is south of 1 mbpd, if it truly is. As for shipping, I can’t see Iowa bread going to NYC any way but by truck. Not going to fly it there. And the canals don’t reach.
Everybody driving the last 5 miles to the store . . . maybe that really doesn’t show in the diesel calc. Oh! Of course. The issue is not diesel. It’s the 60,000 pounds per trip. A car is carrying the much lower weight per your estimate. Will redo.
14 billion pounds of food move the last 5 miles by car per week, probably at 150 lbs per weekly load (family of 4 at 6 lbs/day/mouth incl packaging)
14 billion / 150 lbs = 93 million car trips per week.
5 miles in a 25 mpg car is 0.2 gallons. X 93 million /7 and /42 = an additional 63,000 bpd from the car trips added to the trucks above. About 260K bpd for food transport.
Hmmm of course if it’s 5 miles each way that’s a X 2 on the 63K. And SUVs for that trip, not a Datsun. Might be up nudging 400K.
It occurs to me that Pepsi and Coke may not be food, and they are heavy.
I’m having problems with this 400ish K number because the famous 2004 pie chart of US oil consumption said 65% transportation, and of that 65% it was only 37% passenger cars, 18% heavy trucks and 27% light trucks (sums to 45%), and that was before SUVs (called light trucks) had swept up sales. Though F-150s may have arrived.
0.37 X 0.65 is only 24% of consumption. Trucks light and heavy rather more. So what are they hauling. Food as a daily consumable would seem to be the dominant hauled stuff, but apparently not.
Most of the grain or flour that goes from the midwest to the northeast probably gets there by rail, where it will then be baked into bread, packaged, and shipped by truck to food distribution centers, or directly to supermarkets. But the distribution center food warehouse seems to rule these days, because it’s better to load a truck up to the doors with a variety of stuff all destined for one address or maybe two or three, than it is to have a truck stop to deliver bread and nothing but bread to a bunch of different stores. That means a lot more total time and miles invested in stop and go driving, compared to the one stop load. That still happens, but not as often as in the past.
Grain is milled into flour near where it’s grown, when possible, because this reduces total shipping costs, being that the weight and volume of flour is less than the weight of whole unprocessed grain, plus the tailings are used mostly in livestock rations, and customer for that product is most definitely NOT in NYC, lol.
Most of the cows,hogs and chickens we eat are raised in confinement, and are raised in the mid west and southeast, closer to the feed supply, and where land and water are cheaper, and neighbors less fussy, and mostly in localities where neighbors are relatively few in number.
Nobody’s ever going to operate a modern supersize hog farm anywhere close to the BIG APPLE, 😉
Watcher’s conclusion is probably right – not much fuel used to transport food compared to the total available. On the other hand, some random thoughts. 5.4 pounds/day/person is too high. Babies, young children, seniors, etc. Second, the 1500 miles is too high. Some of the basics make up a significant amount of the weight – like liquid milk, along with other dairy products, cheese and eggs. These products generally will never go 1500 miles. Vegetables, seafood, fruit, etc yes. But, chicken, pork and beef – I think that 1500 miles is too high.
OOPS! Of the 5.4 lbs, 30% – 40% is wasted.
Pre oil, railroad cars had no refrigeration to speak of in summer months. That’s where the term cattle car came from. Had to ship beef alive to the cities.
40-50% of a steer by weight is not edible.
I am not at all sure just HOW much of a cow winds up as nekkid ape chow these days, but YOU most definitely don’t WANT to know much about what goes into processed meat products, if you plan on eating them.
Fifty years ago when I had the “insider tour” of a huge and extremely famous hog slaugher plant that you get only by personal invitation from management,even back then, they bragged about selling everything but the squeal.
I’m pretty sure that well over fifty percent of the live weight of a cow winds up as nekkid ape chow these days, but how much over I can’t say. Fifty to fifty five percent would be a reasonable guess. Farmers have been breeding cows for more milk and meat, and less waste, since the beginning. For the last seventy five years or so, this breeding has been based on high tech such as artificial insemination, a solid understanding of genetics, and very sharp pencils. So a typical cow TODAY is going to yield significantly more more than she did a decade or two back.
Boomer – If you lived in my neighborhood, you would be right: No place to put a drilling rig. But, I see all of these articles talking about 5000 foot to 10,000 foot laterals. If that means what I think it does, there are hundreds of places to put a drilling rig and drill under my property.
I have a sketch for a plastic and fiberglass church mock up to put over a stealth drilling rig. 6000 ft laterals aren’t a big deal. This means the fake church site can be used to drill at least 8 wells and nobody will notice.
Yes, there are companies putting down long laterals in Weld County, but some of them are shifting attention to Texas.
google translate is so bad it’s almost incomprehensible, but there are a few sentences that seem to know something about shale. Doug, time on your hands?
eg
Slate companies can prevent a sharp drop in production, because then they do not have anything to write off the money already invested. At the slightest opportunity, they will step up drilling. The forthcoming increase in oil prices will cause a second shale boom, but it will be weak like the first, because in a year or two good sites for drilling have already left.
Don’t waste your time on translation. Nothing interesting.
The author is a petroleum geologist, but he knows geology of conventional fields.
His understanding of U.S. tight oil reservoirs is very limited.
Alex, forgive me, sir, but you are all over the map on a number of issues, seem to have first hand knowledge of the Russian language and certainly of Russian production and reserve estimates and I cannot make up my mind what you think of the shale oil miracle in the US. One day you quote the EIA has having downgraded its US LTO estimates because of (direct quote), ‘poor well quality off of sweet spots,’ the next day you seem to criticize Art Berman for comparing unaudited ME reserves to reserves reported by the shale oil industry under “strict” SEC rules…an oxymoron if I ever heard one. Strict SEC reserve rules went out the window in 2010. You will agree with me (and Shallow) occasionally about ( the lack of) LTO profitability but then are always quick to imply there is abundant P2, P3 LTO reserves to consider. Its confusing.
I would ask you as I have a hundred people, including LTO CEO’s and CFO’s the past 3 years; how are all those magical reserves going to paid for? If y’all don’t know (Dennis included), why talk about them? They are not probable reserves and are only possible reserves if the price of oil is sky high. Or as Watcher says, the shale oil industry starts getting crop subsidies from the government.
“The forthcoming increase in oil prices will cause a second shale boom, but it will be weak like the first, because in a year or two good sites for drilling have already left.” I actually think this statement, if correct, is pretty spot on. The first “boom” hasn’t even been paid for yet, the second one, with higher costs, and lower well productivity, is going to be even harder to pay for. So, to the Russian geologist I say, nostrovia, comrade.
Mike,
The number in Art Berman’s chart is for proved reserves of U.S. tight oil (11.6 billion barrels), as recently reported by the EIA [ “U.S. Crude Oil and Natural Gas Proved Reserves, Year-end 2015”, December 2016 http://www.eia.gov/naturalgas/crudeoilreserves/ ].
It’s not an estimate of technically recoverable resources, which, according to the EIA Annual Energy Outlook 2015, exceeded 72 billion barrels.
I agree that estimates of the LTO TRR are highly speculative, but I have no reason to question the reliability of proved reserves estimates, which are made in accordance with SEC rules.
Proved reserves according to SEC definition are more conservative than all other proved reserve estimates (SPE; Russian A+B+C1, etc.).
On the other hand, Art Berman shows proved reserve numbers for Saudi Arabia and other OPEC countries, which were never audited and which are considered by a large number of experts as significantly inflated.
My point is that comparing these two sets of numbers is not correct.
Thanks, Alex; as to Berman, I agree that is not a good comparison but only because I no longer have any faith in SEC “rules.” A number of very smart people analyzing the shale oil industry have determined, categorically, that LTO EUR’s might be inflated by a factor of 50%. Everybody lies about reserves and for all the rhetoric directed at the ME for its lack of reserve transparency, ours are now worse in American, IMO.
I suppose all this reserve discussion and predicting and modeling is important, though I am not sure why. I live in a practical world where only PDP reserves count and with regard to LTO, I have my doubts even about those PDP reserves and PUD reserves is a stretch. It is not sufficient to simply say “when” oil prices rise, or “if” oil prices rise when making predictions about the nature and recovery of hydrocarbon reserves. I want to know how this miracle of shale oil abundance, P1 to P4, is going to get paid for.
Thanks again. Your comments I know are very much appreciated here.
Thanks, Mike
I highly appreciate your comments, as well as Shallow Sand’s and other people with practical experience in the oil industry. You give us a much needed dose of reality.
As regards LTO EUR estimates, it depends on which estimates we are talking about.
I totally agree with you, Shallow Sand and others that EUR numbers in shale companies’ presentations are not realistic (to put it mildly). When a company says that their average shale well EUR is 500-600 or even 700-900 kbbls, these are pure lies. As indicates a recent article in BTUAnalytics, well production profiles shown in a shale company’s presentation as “average” is actually better than the best wells operated by this company. It seems that showing fake data in investor presentations is a widespread practice among shale producers.
However average EUR numbers used by the EIA for calculation of technically recoverable resources look much more realistic. For example, the EIA’s average EUR estimates for various subplays of the Bakken vary between 77 and 263 thousand barrels per well.
The range for the Eagle Ford subplays is between 90 and 199 thousand barrels.
For the main subplays of the Permian:
Avalon/Bone Spring – 128 kbbls
Spraberry – 167 kbbls
Wolfcamp – 99 kbbls.
These numbers do not look too high compared with what Enno Peters shows in his excellent website.
The LTO TRR estimates in EIA’s reports are calculated very simply:
total area with resource potential (in square miles) x average well spacing (wells per one square mile) x average EUR per well.
If we think that EIA’s TRR estimates are too high, in my view, that may be due not to inflated EUR estimates, but to exaggerated area or too dense assumed well spacing.
Alex, thanks. I agree that the EIA’s EUR estimates per type well per shale basin are far more realistic than P4 presentations made by shale oil companies themselves. Having said that, simply calculating PUD’s per square mile is absurd. And that is why I put no stock whatsoever in the EIA’s TRR assessments and TRR estimates in general in unconventional shale resource plays. Forget the extenuating circumstances of the price required to extract the stuff, no shale play I have looked at is one big homogenous rock pile ripe for the pickings.
Using decline curve analysis in resource plays, in the Eagle Ford trend that is 350 miles long, for instance, is easy. And lazy. And grossly inadequate. I have seen cross sections across sweet spots where TOC, GOR, oil and water sats, thickness, carbonate brittleness, etc. etc., all of the wonderful “attributes” the shale oil industry adores, vary drastically over hundreds of linear feet. Move off those sweet spots and extend those cross sections out 3000 feet and it is like going from the moon to Pluto. Trying doing volumetric calculations of OOIP in shale beds, the way it should be done, then using historical recovery factors. Its ugly. But is more accurate than decline curve analysis. We’re not talking about, in the Eagle Ford, 350 miles of 500 millidarcy Frio sand. The shale industry, and apparently the EIA, thinks so. Not me.
Take for instance being able to book PUD reserves based on “proximity” to a type well. And being able to call those reserves assets, to be able to borrow money against. Its nuts !! I have never heard of such a thing in my entire life until the stinking shale industry came along.
Anyway, that’s my story. I give no credibility to any reserve classification other than PDP in resource plays. It is deceptive, funky math and no way to make guesses about our energy future. The EIA owes America more.
Hi Mike,
Thanks. I don’t have access to the information needed to do such an analysis.
I do assume that EUR will decrease as poorer areas are drilled and assume that the USGS and David Hughes estimates are roughly correct.
As I have mentioned before my estimates are far lower than EIA estimates for TRR (which seem to assume the plays are uniform) and more in line with the estimates of David Hughes and the USGS.
This URR estimate is roughly 25 to 30 Gb for the Bakken, Permian, and Eagle Ford combined and maybe another 5 Gb at most for other US LTO areas.
As I have mentioned this is a drop in the bucket at the World level where my estimate of total C+C URR is about 3300 Gb (including a 500 Gb extra heavy (XH) oil URR from Canadian oil sands and Orinoco belt). If the XH URR is 300 Gb as suggested by Fernando’s comments), then World C+C URR falls to 3100 Gb. Roughly 1300 Gb of cumulative C+C has been produced to the end of 2016, leaving 1800 to 2000 Gb left to produce. Based on my WAG of future output from 2017-2024 (plateau at 2015 level), 50% of the 3100 Gb URR is reached in 2024.
I expect gradual decline after 2018.
Mike, Dennis, thanks
I agree that TRR estimates for LTO are much less reliable than for conventional fields.
I just want to point out that EIA estimates do not assume the shale plays are uniform.
Each play is divided by subplays, with different average EURs and well spacing.
Furthermore, it seems that there is a more detailed division by smaller units within each subplay, where well profiles are more or less uniform.
For example, in the recently released Assumptions to the AEO-2016, the EIA shows separate estimates for 42 units in the Bakken.
In my view, where the EIA may be wrong is the assumed number of potential wells, not the average EUR per well.
Another important question: which part of these TRR is economically viable at different price levels.
There is no doubt that economically recoverable resources of LTO at oil prices below $100 are much lower than TRR.
Alex, you are correct, I recall, that there is actually some form of Tier system for the quality of shale resources and I stand corrected on that.
I simply wish to say, for the last time, I promise, we need to be careful about predicting the role that shale oil is going to have in our energy future. America has been lied to about shale resources and it must stop, now. It is up to smart people like you, Alex, and Dennis (sans the what if’s <;)) to keep everyone on planet earth.
I assume the EIA directorship will change along with everything else in DC; it will be fascinating to me to watch if, and how, its reporting changes in general accordance with the balls to the wall, wide open on everything scheme the new fella seems to have. If America can now be re-conned into a push for energy independence (which will cause the price of oil to go back to 28 dollars, in spite of OPEC cuts), the EIA will need to support that push with higher reserve estimates, IMO. It has become very clear to me that no "reporting" entity in the government system is exempt from political influence. To keep your job, one does, and says what the boss wants.
01/11/2017 at 8:26 pm
AlexS said:
However average EUR numbers used by the EIA for calculation of technically recoverable resources look much more realistic. For example, the EIA’s average EUR estimates for various subplays of the Bakken vary between 77 and 263 thousand barrels per well.
The range for the Eagle Ford subplays is between 90 and 199 thousand barrels.
For the main subplays of the Permian:
Avalon/Bone Spring – 128 kbbls
Spraberry – 167 kbbls
Wolfcamp – 99 kbbls.
Thank you for this data, I supposed something like this, but the exact numbers are always better.
But now they are not reserves at all. Nobody will drill a well with EURof 100 kbbls even with the oil price $100/bbl. So it’s no use talking about TRR, let me go to the proved reserves calculation.
I’m sure, the method is the same, but we have to take into consideration the wells (areas or blocks) with profitable EUR only. Now it is more than 250 kbbls. However, there are several circumstances to be impediment to the pay-off, such as:
1. Geometric problems of wells’ allocation (habitations, lakes and wetlands, too long plot, etс.)
2. The wells’ interference (http://info.drillinginfo.com/well-spacing-bakken-shale-oil/)
3. Low natural fracturing.This is the main enemy; it can reduce all your EUR estimations to zero. This topic is described in more detail here http://en.angi.ru/news/453-Alexander%20Khurshudov%3A%20Oil%20exporters%20don%92t%20need%20to%20worry%20about%20shales%20renaissance/
In my opinion those factors may decrease reservoir recovery by 30-40%. This being so, Bakken proved reserves have to be reduced from 4.6 to 3.0 bln bbls and this is close to reality.
That sounds reasonable to me – we’ll know better when this year’s results with new reserves numbers come out. At the moment we are at about 10% y-o-y decline, or about 100,000 bpd per year absolute. At pure exponential decay this would give 3.6 Gb. However decay in a basin is often more linear as frequency and quality of new production gradually declines. For the Bakken that would give 1.8Gb. Somewhere between the two then. I think we’ll likely see a plateau this year and then a faster decline as drilling drops off quickly. The problem with all the LTO is there is no history. Expecting responsible (third) parties to come up with numbers of the same accuracy as for well understood conventional fields isn’t practical. It’s almost guaranteed that the E&Ps can and will overestimate initially (and they are the ones providing the data for USGS and EIA in a lot of cases – so those are not really independent analyses).
To George Kaplan, 01/16/2017 at 4:14 am
The problem with all the LTO is there is no history.
Absolutely right for the whole shale play, not for a single well or any small block. That’s why I think fluid-dynamic modeling will be useful for better understanding of formation processes. Of course, it should be done with dual porosity. As a first step we can make the single well model, try to calculate it with different fracture porosity and compare them with well geophysical data. Maybe such works had been already done, but I don’t know any results.
Thank you for this opinion. I hope English translation of the article will be published tomorrow, so it is better to continuer later.
Hi Mike,
I think if oil prices rise and LTO companies learn from past mistakes, that LTO output can pay down the debt owed. Oil prices will need to be at least $95/b for this to occur.
I think oil prices could remain at that level for about 10 years and possibly the F95 TRR estimates of the USGS (EIA TRR estimates are not reliable in my view) might be economically recoverable.
Note that the EUR for the average well that I use in my models is quite a bit lower than the typical LTO investor presentation and is in barrels of oil rather than boe.
Generally you are correct that I don’t think the wells can be paid for if oil prices remain under $85/b and I rarely predict future oil prices correctly.
If IEA estimates for supply and demand are correct, oil supply will be short of demand and oil prices will increase by the end of this year.
I don’t know how much they will rise or the rate of increase.
It will be interesting to see what happens to the permits over the next few months. Last month there were only 31 net (new minus cancelled), the lowest since 2007 I think, and this year they are so far negative (more cancelled than approved). The number of open permits has been gradually falling since August as there have been more spuds than net new permits, but now the drop might be picking up. The EIA resource estimates gave (I think) by far the largest proportion remaining in Three Forks, but I don’t see anything much happening there, it’s still all in the Bakken. Maybe there is a new, and much higher, price threshold needed for that, or maybe there just aren’t many attractive sites left in any of the formations.
The EIA Short-Term Energy Outlook for January was released today.
From the report:
“EIA estimates that total U.S. crude oil production averaged 8.9 million b/d in 2016, a decline of 0.5 million b/d from 2015 levels, with all of the production decline in the Lower 48 onshore. However, based on the latest available monthly data from October and production estimates from November and December, EIA estimates that production began increasing in the fourth quarter of 2016, averaging 8.9 million b/d for the quarter, up from an average of 8.7 million b/d in the third quarter. If confirmed in final data, this would be the first quarterly production increase since the first quarter of 2015. Although most of the fourth-quarter increase came from the federal Gulf of Mexico, EIA estimates that Lower 48 onshore production also increased by almost 60,000 b/d.”
According to the EIA, U.S. C+C production bottomed in September at 8.58 mb/d and increased to 8.90 mb/d in December. Further growth to 9.22 mb/d is projected by December 2017 and to 9.44 mb/d by December 2018.
All monthly projection for 4Q2016 and 2017 were revised upwards. The new number for December 2017 is 220 kb/d above projections in the December 2016 STEO and 940 kb/d higher than in March 2016 STEO.
EIA forecasts U.S. crude oil production will increase from 8.89 mb/d in 2016 to an average of 9.00 mb/d in 2017 and to 9.30 million b/d in 2018. “Production levels in 2017 are 0.2 million b/d higher than in the previous forecast. The upward revision largely reflects assumptions of higher drilling activity, drilling efficiency, and well-level productivity than assumed in previous forecasts.”
The new EIA annual estimates for 2016 and 2017 are higher but projections for 2018 slightly lower than in the recently released Annual Energy Outlook (8.74 mb/d; 8.70 mb/d and 9.32 mb/d, respectively).
U.S. C+C production forecasts
“EIA expects Lower 48 onshore crude oil production to average 6.8 million b/d in 2017, up slightly from the 2016 level. In 2018, EIA expects Lower 48 production to increase by almost 0.2 million b/d. EIA expects that declines in Lower 48 onshore crude oil production have largely ended, and production will be relatively flat in the first quarter of 2017 compared with the previous quarter, averaging 6.7 million b/d. Lower 48 crude oil production is then expected to increase at an average month-over-month rate of 20,000 b/d from April 2017 through March 2018 before leveling at just under 7.0 million b/d from April 2018 through December 2018. The growth in Lower 48 onshore crude oil production primarily reflects increased oil production in the Permian Basin in Texas and New Mexico.”
U.S. Lower 48 states (excl. GoM) C+C production forecasts
Projections for C+C production in the Gulf of Mexico were revised downward (by 150 kb/d in December 2017).
Thanks for the update Alex. I didn’t realize the EIA made monthly revisions to their GOM projections. Still think they are too high for 2017. I don’t think monthly averages will consistently be over 1.7 mmbopd in 2017 like they show. The highest actual production we’ve seen in recent years is about 1.66 mmbopd in September 2015 – every month since then has been between about 1.5 and 1.61 mmbopd.
And with 2017 being too high, I think their 2018 estimates are also too high, but, maybe with new projects coming on line, 2018 could be higher than 2017.
The report has:
“Gulf of Mexico production is forecast to average 1.7 million b/d in 2017, an increase of 0.1 million b/d from 2016, and then increase to 1.9 million b/d in 2018. The anticipated expansion of the Tahiti field (in the Gulf of Mexico) and start of production from the Horn Mountain Deep field in 2017 and the Big Foot and Stampede projects in 2018, along with other projects that will begin operations in 2017 and 2018, are expected to contribute to the increase in the Gulf’s production.”
For 2016 Chevron has Tahiti Vertical Expansion and Tahiti Upper Sands Development as future options. They had previously (2015?) discussed possible FID in 2016 for these, but I don’t think it happened. Even if it did, I doubt that the project would come on line in 2017, and I don’t think the added flow would be that big (10 to 20 kbpd). Freeport McMoran had earmarked Horn Mountain Deep for 2017 but I haven’t seen any mention of it proceeding since their sale of all GoM assets to Anadarko started to be discussed; If it is proceeding it would only be 25 to 30 kbpd, probably split over 2017 and 2018. Big Foot isn’t due for installation until the end of 2018 and wouldn’t contribute flow until 2019 ramp-up (75 kbpd nameplate). Stampede should ramp up through 2018 – it’s nameplate is 80 kbpd but most recent project have been slow and haven’t achieved full design rate (if at all) until longer than one year.
The only definite new projects next year are Phase II of Jack (maybe 20 kbpd) and Thunder Horse South (up to 40000, but probably not all in 2017), plus some small gas tie backs. There is nothing else approved for 2018 or anything in 2019, and it’s getting to the point now that nothing larger than a single well tie back could be achieved by then. There are still projects ramping up – Stones, Heidelberg, Coelacanth, Gunflint – but equally some recent additions are already in decline. I think it will be a struggle even to maintain a plateau after mid this year given the 10 to 12% decline rates we see in mature fields.
As an example of the decline issues this is what is predicted for Lucius, one of the larger recent additions (and is probably in the optimistic side).
I was wanting for an ‘open’ petroleum thread. So here is a question for those geology folks. Considering all the oil that has been taken from below our feet throughout the world. What will eventually happen to all these vast empty caverns left behind below the ground as the oil leaves? There have been several worldwide reports about sink holes developing in places geologists never would have predicted. Something has to give after the oil is removed from the ground?
Would appreciate some ‘sound’ comments about the subject. Thank you.
There are no vast empty caverns. Geologists routinely will take a rock core sample from a prolific oil field and put it on their desk as a paper weight. The oil is in microscopic pores in the the rock (porosity). The pores are connected by microscopic veins (permeability). So, after the oil is gone, it is just solid rock down there.
Even if there were caverns [and there are not], similar to empty swimming pools, they would be tiny. 1 trillion barrels of oil can be contained in about 38 cubic miles. Spread that around this vast planet and it is not that much. Over 26 billion barrels in one cubic mile. A huge oil reservoir is 1 billion barrels – 1/26th of a cubic mile. So, do not worry about those grandkids of yours.
Surface subsidence due to hydrocarbon extraction is, as far as I know, either very rare, or very minimal.
One notable exception is Ekofisk field in the Norwegian North Sea where a fairly shallow, very porous and permeable chalk is the reservoir. After years of production, feet of subsidence were observed and it became a big deal for the operator to deal with it.
I’m most familiar with the Gulf of Mexico. One might think that all of the hydrocarbon extraction from the many bay and marsh fields in south Louisiana could be a contributing factor to coastal subsidence and wetlands loss. As far as I know, though, hydrocarbon extraction either does not contribute at all, or, has resulted in a very small component of the subsidence.
Good information SouthLaGeo. But as far as Grandma is concerned, hopefully none of her grandchildren live in a house in the middle of the Norwegian North Sea.
Hopefully not, though I did come across another field that has experienced subsidence that is in a populated area, Wilmington field in the LA basin. That’s a 3 billion barrel field. Also came across examples from the Houston area, and the Netherlands. I suspect one of the contributing factors is how well lithified the reservoir is, and how prolific the field is. The core sample that clueless referenced is a case of a well lithified reservoir, and after the hydrocarbons are produced, the rock fabric remains unchanged. If, on the other hand, the reservoir is not well lithified, as can often be the case with young, shallow reservoirs, production can result in some degree of reservoir compaction, and this could manifest itself in subsidence.
To get back to the original question of granmaofsix – what happens to the space left behind by the produced oil (assuming only primary production)? That depends on the drive mechanism that provides the energy for the oil to be produced.
If it is pure water drive, then, the oil is displaced by water. It is often the case that aquifer volumes are much larger than reservoir volumes, so the relatively small amount of produced oil has little impact on the overall system. Pure water drive systems can have some of the best recovery factors. I’ve seen recovery factors over 50%.
If the drive mechanism is pure depletion drive, then, the reservoir pressures depletes until the well is no longer able to flow. The oil in the reservoir isn’t replaced by anything, it just becomes a lower pressure system. Pure depletion drive oil reservoirs have very low recovery factors – maybe 10-15%.
If it is pure compaction drive, where compaction of the reservoir provides energy to produce the oil, then, again, nothing “replaces” the produced oil, it just becomes a more compacted system.
If it is gas cap expansion, then the produced oil is replaced by the expansion of the gas cap.
I don’t have enough experience with either compaction drive or gas cap expansion to know what there recovery factors can be. Most that I have dealt with in the Gulf Coast have been some hybrid water drive/depletion drive system.
The old Maracaibo basin fields have caused subsidence at Lagunillas, Bachaquero, etc. it’s similar to the Long Beach case.
I think the voids we leave behind, which have low pressure fluids, eventually fill up with water, and the rock expansion and compression from above rebuilds the pressure, but this probably takes thousands of years, or in some cases millions of years.
Grandma – I do not know if you have been reading this thread, but you did ask a good question.
WoodMac sounds optimistic about seeing an increase oil and gas industry activity but I guess it depends on prices.
Bloomberg 2017-01-11
The oil industry will shake off the effects of the biggest downturn in a generation this year as they more than double project approvals and increase exploration spending for the first time in three years, according to Wood Mackenzie Ltd.
The article says barrels but the first project listed is natural gas…
Bloomberg 2017-01-11
Majors set for biggest production gains since start of decade
Rystad estimates that the seven companies will boost output by about 670,000 barrels a day next year. Still, years of under-investment during the time when oil prices were low mean the production gains may be short lived.
“Output should start declining eventually for the majors that slowed project-sanctioning,” said Rob West, an analyst at Redburn (Europe) Ltd, a London-based equity broker. “Field-by-field models suggest that’s a problem for 2020.”
Much of the expected increase is coming from offshore oil and gas projects approved at the start of the decade, said Espen Erlingsen, vice-president for analysis at Rystad. They’re the kind of mammoth projects that are difficult to shut down once they get going.
Included is Chevron Corp.’s Gorgon liquefied natural gas project in Australia, which partly resumed operations last week, and Kazakhstan’s Kashagan field, in which Eni SpA, Exxon, Shell, and Total SA all have stakes, which began producing last year. Eni expects oil and gas production to climb to a record in 2017 even as spending continues to fall. https://www.bloomberg.com/news/articles/2017-01-11/big-oil-hits-sweet-spot-as-new-projects-reap-rewards-of-recovery
A few more listed on Reuters…
Projects most likely to get the nod include Exxon Mobil’s Liza discovery offshore Guyana, deepwater projects in Brazil and in the Gulf of Mexico. BP late last year approved the development of the second phase of the Mad Dog field in the Gulf of Mexico and its partners will decide on it this year. http://uk.reuters.com/article/oil-production-spending-idUKL5N1F03US
I’ve a new post on LTO production from all the 8 states I cover, available here.
Enno: Thanks very much for all of your updates!
I will look over your most recent post more closely later today, but are there any trends in any of the states that you are noticing (better wells, worse wells, etc)?
I encourage all to review Enno’s posts. Incredible amounts of data, very organized. He is a pro at this.
For those who do not have the time, I note, per my review of Enno’s data, the following:
For wells completed in the following years, barrels of oil per day per well for 9/16 was:
2015 – 90.89 barrels per day per well.
2014 – 47.67 barrels per day per well.
2013 – 29.01 barrels per day per well.
It appears most wells will not hit 200,000 barrels of oil before they have fallen below 50 barrels per day. Once wells fall below 50 barrels per day, it becomes difficult for the wells to generate much net income in comparison to well cost.
For example: a well producing 50 barrels per day, likely is generating 40 barrels per day or less for the working interest owners. Once taxes, LOE, G & A, interest, etc. is paid, there is likely under $300,000 net income annually at $50 WTI. For a $7 million + well, this means the annual return is less than 5%.
It appears from Enno’s data the typical US LTO well will stabilize around 15-25 BOPD. If we take the midpoint, 20 BOPD, assuming 20% royalty, that is just 5,840 barrels of oil to the working interest owners. After payment of all expenses, there is likely little to no income, possibly we are now in the red when things like G & A and interest payments are included.
I have been very interested in decline rates as a predictor as to whether it makes sense to expand in Colorado. As I said in an earlier comment, Weld County, where most of Colorado’s oil activity is currently happening, is also near population areas. If there isn’t a long-term opportunity for these wells, and if they conflict with other land and water uses, to what extent are they worth doing, both for the companies that own the rights and for the communities where drilling might happen and for the state?
In rural areas, where the land might otherwise sit idle, then expanding operations (as long as they are profitable) makes sense. In other areas, where other forms of economic development will likely happen, they may not make sense if they are going to be relatively short-lived projects.
The projects will likely not be short lived. Private companies will eventually buy the wells and likely operate them for many years. The private companies will not have large office buildings, private jets, and seven and eight figure annual compensation to pay to top management out of the oil and gas sales.
There could be a problem, however, in that these wells are very deep wells, even concerning the vertical portion. If there are a lot of failures, LOE will be high, maybe too high to justify buying them as strippers. Further, I am concerned about how long these wells will last given the “records” being set on time to drill them. Give me a slow drilled cable tool hole any day. The faster drilled, the more likely there will be a crooked hole, which will mean more rod and tubing wear, and more expense.
I think in the US over the course of many years, many wells were losers financially for those who invested in drilling and completing them, especially those that were drilled in the 1982-1985 time period. At that time, costs had skyrocketed as rig counts were at all time US highs. In 1986, prices crashed and many of those who invested in those wells went bankrupt, or saw the equity they had invested go to zero, or pennies on the dollar. We operate many wells from that era, drilled and completed by companies that long ago went out of business. They are in the black at current prices. It does not make sense to drill new ones at current prices, as it did 2010-2014 and 2005-2007.
It is very difficult to make money drilling wells in my opinion. Smaller companies, like Mike’s, can if prices are high enough and they are able to keep costs down.
However, if you are a good promoter, you can make lots of money drilling and completing wells from those who invest. LTO companies are very large versions of good promoters. They have the best promoters in the world, Wall Street, promoting them too.
What specific problems are arising in CO regarding mineral development? It is my understanding that CO is a highly regulated state in that regard.
I believe Colorado has the strictest regulations in the country.
Many cities wanted to impose their own restrictions and the governor shot that down. He didn’t want a different set of regulations in each city and county. So he sought some compromises — better regulations at the state level and none more restrictive at the local level.
With oil prices being down, there has been a lot less focus in Colorado on fracking in the last couple of years. There would have been relatively little fuss if the oil areas were located in low density parts of the state. But when the drilling activity is in areas near, or even in, major Colorado cities, residents make their concerns known.
At the very least, these areas would need to put more money into roads and other infrastructure and county services if there were an explosion of gas and oil drilling. Economic development plans need to be weighed.
I’ve considered the Bakken as an example of what could happen in Colorado. But Colorado has had a boom-and-bust history tied to natural resources. The state has worked hard in recent decades to lessen its economic dependence on them. With that economic diversity comes more questions about what regulations to establish to provide the greatest good for the population of the state as a whole.
Shallow
The sale of marginally producing wells from bigger operators to small outfits has been taking place for sometime now in the Bakken.
Just Continental and Whiting alone have sold over a hundred, maybe a lot over, I’ve not kept close track.
On a completely unrelated topic, a federal grand jury in Bismarck is investigating the violence relating to the DAPL protest.
An individual named Martinez is refusing a subpoena to testify in the incident where the homemade explosive devices, fashioned from propane cylinders, severely injured a woman handling one of them.
coffee. I have noticed that, and have been very surprised at the prices paid. For example, I wonder how the new buyer is doing with all of the stuff they bought from OXY.
Edit: Decided to look up stuff on Lime Rock, real quick. Does not take long. They paid OXY $1/2 billion in 2015 and have also had three other smaller Bakken acquisitions.
Some of the stuff they have bought I assume is non-operated, but Enno shows 326 active Bakken wells in ND for Lime Rock.
Here is how they performed in 10/16, by date of first production:
In 10/16 the 326 operated wells produced 13,462 gross bopd, I assume there are many non-operated interest owners in these wells, however, if we assume Lime Rock has 100% gross working interest, and 80% net revenue interest, this comes to 10,770 bopd net to Lime Rock.
So, assume Lime Rock sold 333,870 net barrels of oil in October, 2016. Also assume they had no hedges in place, and received $40 per barrel for that oil, which would be a good price.
Gross Revenue $13,354,800
Less severance: 1,335,480
Net check $12,019,320
Less LOE 4,006,440
Net operating 8,012,880
I assumed LOE of $12, which I do not think is unreasonable given they type of production they bought.
Lime Rock is a Private Equity Firm. Says on their website they have invested $7.2 billion in US onshore since 1998. Looks like all of their non-operations guys (non-oil guys) previously worked for Goldman Sachs.
I think what we will find is that most of the sales of “stripper” shale wells are not going to private operators so much as they are going to private equity funds that employ in house engineers, geologists, and other operational personnel. I assume the private equity funding is largely coming from areas like state and municipal pensions, etc?
You know, I haven’t modeled it, but I think these wells really ought to be drilled straight as much as possible, to make a steep turn but gentle enough to allow a 1500 meter lateral, and have the pump set in the straight hole section above the kick off. That should stretch the well life, although it doesn’t allow treating or cleaning out the lateral without getting into a huge workover expense.
Thank you, Shallow. The actual realized production from America’s shale oil wells is stunning when compared to the lies we have been told over and over and over again about EUR’s. I am embarrassed for the US LTO industry; I am unclear how those reservoir engineers that make those EUR claims can brush their teeth in the morning.
You are welcome Mike. However, I think Enno really deserves much more credit than I do. He has put out a ton of data for free, in a very easy to follow format.
I am waiting for someone on a conference call with an LTO firm to mention Enno’s site and ask the CEO about the disconnect. Seems it would be easy to ask, “How do you come up with an oil EUR of 875,000 barrels, when your average LTO well, per shaleprofile.com shows 147,xxx barrels at 60 months, with current production of 21.xx barrels per day?”
Oh yeah, I forgot, all those guys asking cream puff questions on conference calls are on the same side of the promotion as the LTO CEO’s. LOL.
Yeah, well, I have asked two of the biggest the exact same question. All they can do is give you the ‘ol Washington (political) thousand yard stare and bring up the weather.
Of course it is Enno doing the work; the 2013, < 30 BOPD figure saved me some work, however. By the by, there are numerous, unpublicized EF production sales on the market in S. Texas and not too many of them are getting done for reasons we both can speculate, mostly having to do with increasing GOR, increasing OPEX (remember about horrendous operational problems rod lifting low fluid entry wells at 8,000 ft.), no upside or behind pipe potential and ever increasing PA&D costs. No major integrated company has bought any "used" shale oil production I am aware of; nobody wants the stuff.
Mike: While looking around about Lime Rock’s purchase of OXY, I found where Resources Can Am purchased Samson’s Bakken assets out of BK for $75 million. I bet that amount is many times below what Samson originally had booked for those assets. Can probably look at some SEC stuff and find out some time.
Resources Can Am is sponsored by Apollo Group, which is a huge private equity fund. They manage over $200 Billion.
For whatever reason the private equity companies are the ones going after the “used” shale assets. I suppose they have the money and can pay higher prices than anyone else that might be interested.
It just amazes me how much money is out there in these private equity firms.
Mike. Is private equity the buyer of used shale in EFS, as it appears to be in the Bakken?
Yes, in the form of small start-up companies funded entirely by private equity, with a principle stake in the assets. It seems, so I have read, that much tighter banking regulations and asset to debt ratios (that you correctly pointed out over a year ago) have finally caught up to banks and that form of lending to the shale industry is over, as is junk bonds. Older shale companies laden with debt are struggling raising more capital and are relying on credit swaps and more shareholder dilution, that sort of thing. New companies are finding private equity funding; new companies and the skunks that filed bankruptcy to lower debt. They appear to be getting more money also. For instance Halcon, PV, etc.
So from my perspective the shale oil industry is down to private equity funding. A couple of years of big losses, realized production to EEUR (exaggerated), and rising interest rates, will put the brakes on that too, IMO.
Not to beat a dead horse but extenuating circumstances like where the CAPEX comes from has a direct baring on PDNP and TRR “reserves.” I just cannot see how the shale oil industry is going to survive short of a price miracle. Its a house of wet cards.
Thanks a lot Shallow, that’s great to hear!
“I will look over your most recent post more closely later today, but are there any trends in any of the states that you are noticing (better wells, worse wells, etc)?”
Looking at the oil basins, the basin that is showing the most noticeable improvements is the Permian. But also here drilling in the first 9 months of 2016 was quite a bit less than the year before, so part of it can be explained by reduced drilling in the fringes. Now that we see drilling picking up again here, I’m curious whether the average results will be negatively impacted.
We’ve heard stories about longer laterals, and bigger fracks, so I’m also wondering how much of the improvements can be explained by this as well. Looking at the extra $ spent per well, have the improvements been worth it? I hope that more people will publish their findings on this topic.
In the other oil basins I find the improvements rather small, given the low completion numbers.
What I find so surprising with each update is how predictable these production curves seem to be, on the aggregate. See the below picture. Only the oil basins are selected. Where 2012 wells peaked at around 300 bo/d in the 2nd calendar month, 2015 wells did so about 50% higher. It’s clear from these curves that they are unlikely to increase ultimate recovery by 50% (the improvement seems more like a one-time gain, early on), but that is how most improvements in initial productivity are (quite successfully) marketed. Given the clear data, I would have expected more controversy about this, as it has major consequences on well economics and reserves booking.
A straight line on this semi-log plot indicates a decline function with b = 1. I think this provides strong evidence that b in most cases is clearly not (much) bigger than 1. Wells that have been refracked are not even filtered out.
“For wells completed in the following years, barrels of oil per day per well for 9/16 was:
2015 – 90.89 barrels per day per well.”
Note that these overall statistics also include gas wells, so the gas portion is not insignificant, and better be considered as well. (Just don’t mix them up to “BOE” please 🙂
““How do you come up with an oil EUR of 875,000 barrels, when your average LTO well, per shaleprofile.com shows 147,xxx barrels at 60 months, with current production of 21.xx barrels per day?””
Indeed, “please give me some color on that”! 🙂
I’m already pleased to see that several people are comparing company claims with actual results. Jim Brooker is active with this, and I’ve seen now a few more on SA also doing so. The results are remarkable. There are still many stories left untold in my opinion; it’s going to be an interesting year again.
Shale EURs in the news today. The number Rystad gives is in BOE, I would be interested to hear if anyone has any views on this, it says oil well but then gives BOE units…
FT newspaper, US shale oil output remains resilient despite rig count fall
One measure of productivity is known as estimated ultimate recovery (EUR), or the total amount of hydrocarbon extracted from a single well. In 2016, the EUR of the average US horizontal shale oil well was 736,000 barrels of oil equivalent, more than double the volumes of four years ago, according to Rystad.
(paywall but gives one free) https://www.ft.com/content/73c5297e-d813-11e6-944b-e7eb37a6aa8e
I am not seeing more than double the volume from 2012 to 2015 from Enno’s post above Energy News, at least with regard to OIL.
2016 wells must be really be something, or more than likely the GOR continues to go up.
I do think that many of the OK resource play wells from 2015 and 2016 will produce a large amount of BOE, but I still think most of that will be gas, and not oil.
Per IHS Energy most recent month, 12,141 active hz wells in OK. Only 98 have hit 200,000 cumulative oil, but 2,325 have hit cumulative gas of 1.2 million, or 200,000 BOE.
I really wonder about the marketing of the “oil window” in the OK resource plays, given the data as of now indicates these wells do give up a lot of liquids early, but pretty much go to gas within two years or less. I would think until there is more history of the “oil window” actually producing oil with some duration, the term “oil window” should not be used.
At 20:1 (dollar value), not 6:1 gas to oil, 1.2 MMCF is 60,000 BOE and that puts those better wells at only 15-20% to payout. WOW. I thought that STACK stuff was going to make America great again?
My oldest “oil” wood ford well has produced 126,000BO and 1.25BCF in 18 months. Currently producing 140BODP and 2000mcfd. I am not complaining? I expect this well will make 300,000-350,000 BO and 7-10BCF if it follows the production of my older “wet gas” wells.
I can only imagine that the Rystad figure of 736,000 barrels EUR for 2016 wells, is just their own assumptions and theory, they must be modelling a less steep decline curve or longer life span. Although that’s not explained in the news article.
Just out of theoretical curiosity if you convert the whole of Rystads shale well EUR of 736kb BOE (oil+naturalgas) to just natural gas
736000 barrels of oil equivalent = (1BOE to 6Mcf) 4.416 Bcf
And then if you look at just Appalachia PA for just natural gas it does look realistic? Not that I’d know 🙂
Marcellus Shale in Pennsylvania: A 3,800 Well Study of Estimated Ultimate Recovery (EUR) – March 2016 Update
For 3,846 horizontal wells with enough history to forecast a decline profile, the estimated ultimate recovery averages 4.7 billion cubic feet equivalent (Bcfe) per well with a median of 3.9 Bcfe. The results vary considerably by region – in six counties in the Northeast part of Pennsylvania, the average is 5.5 Bcfe per well and in Wyoming County the mean EUR is 8.8 Bcfe. In that Northeast region, there are a number of wells exceeding 15 Bcfe EUR. (Lease condensate was converted to an equivalent gas volume using a price ratio of 20 thousand cubic feet (Mcf) per barrel). http://gswindell.com/marcell.pdf
I guess that natural gas can pass through sand grain wide fractures more easily than oil, perhaps over 6 times more easily?
Energy News
If you go over the comment thread on Enno’s site on the most recent Marcellus post, and/or count the ‘Cumulative Production’ wells posted there, one will find over 600 Pennsylvania wells have already produced over 5.8 Billion cubic feet … the energy contained in one million barrels of oil.
To be clear, not Ohio, not West Virginia, only Pennsylvania wells, with the vast majority being online four years or less.
coffee, recent well in Grady County Woodford, 2.5BCF in 9 months from a 5500′ lateral. This was a deep test and took 4 months to drill, but they will get that time down in 1/2 before long if past is prelude. Smells like money to me?
February 0 0
March 0 325275
April 0 361951
May 0 325275
June 0 283721.9201
July 0 265929
August 0 247929
September 0 224401.7468
October 0 219422
November 0 194723.5618
December 0 0
These past several months, Cabot, Chesapeake and Range have been bringing online 3 to 5 wells at a time on the same pad with the output nothing short of astonishing.
Ongoing flows run from 15 to 25 MMcfd each for several months. Vertical depth slightly deeper than 8,000 feet with laterals generally 6/7,000′.
EQT plans on 119 Marcellus, 81 Upper Devonian and 7 Deep Utica wells in 2017.
When they finally nail down the effective Proppant protocol for the Deep Utica wells, that formation may well surpass the Marcellus.
EQT”s Scotts Run, arguably the most productive unconventional well ever drilled (11 Bcf in 15 months online) has a lateral 3,200 feet long.
Hi Dennis or somelse
How many P2 or P1 barrels of oil and gas are in Vaca Muerta (Dead Cow) Argentina, ?
Thanks
EIA says 16.2 billion barrels. 308 trillion cubic feet gas. May be resources, not p1 or p2 reserves.
Resources. The Vaca Muerta hasn’t been developed enough to understand what’s commercial. I used to look at properties in that area, and there’s a very nice sand in that package, which has oil trapped in relatively small fields. So I expect you’ll get confusing news when a well taps the sand rather than the tight rock.
“In the United States, 400 gallons of oil equivalents are expended annually to feed each American (as of data provided in 1994).” This from a website about “energy inputs to US agriculture — re the stuff above about food and packaging transport. And it’s 23 yrs later, that site is filled with talk of corn yields up 350% since 1950 with oil inputs to the process of corn growing up 843% (to achieve it). Steep graph. Gotta be much more now.
400/365 X 320 million = 351 million gallons / 42 = 8.2 mbpd. It ain’t all oil. “oil equivalents”, but THIS is where the food risk is for insufficient oil. Ya 400K bpd to move it, but . . . call it 6 mbpd to get a crop out to the people. GDP is not the key item hit by scarcity.
Went chasing the source of those numbers. It’s from a 1994 study out of Cornell. This was not the focus. It was mostly about how crop yield improvements had been achieved via fertilizer and insecticide.
Population 1994 263 million. 22% increase to now. That 8 mbpd number included transport of insecticide and stuff to farms, not just what’s in the insecticide itself. They also seemed to have quantified transport of fuel to farm stuff. Not just the fuel itself.
I’ll tell ya what’s curious . . . there don’t seem to be follow up since 1994. These are pretty serious numbers. Surprising.
Damn near 1/2 of US consumption associated with food production. Credible?
“Costa Rica produced 98% of its electricity last year without fossil fuels but the sustainable success story unravels with the rising demand for gasoline and cars.”
The usual green crapola doesn’t withstand scrutiny.
Actually it presents a great opportunity. Start replacing those vehicles with EVs and continue to run the country on renewables. Hawaii may accomplish it first (renewables and EVs), but if you have already made the switch to getting rid of fossil fuel electricity generation, you’ve made an important step.
It’s like natural gas was a necessary step to phase out coal in the US.
A very interesting article based on the HSBC report that I commented on in the last petroleum thread. I think all you Pollyannas out there are just way off base here and are in for a rude awakening very soon.
A report by HSBC shows that contrary to industry mythology, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline, while European government scientists show that the value of energy produced by oil has declined by half within the first 15 years of the 21st century.
The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil—unless we choose a fundamentally different path.
Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.
New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.
The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply in coming years will be insufficient to sustain rising demand.
Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain of the industry’s hype about “peak demand”: it vindicated what is routinely lambasted by the industry as a myth: peak oil , the concurrent peak and decline of global oil production.
The HSBC report you need to read
Insurge Intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest. Read and/or download the full HSBC report.
10 things you need to know
1. The oil market may be oversupplied at present, but we see it returning to balance in 2017e.
2. By that stage, effective spare capacity could shrink to just 1% of global supply/demand of
96mbd, leaving the market far more susceptible to disruptions than has been the case in
recent years.
3. Oil demand is still growing by ~1mbd every year, and no central scenarios that we recently
assessed see oil demand peaking before 2040.
4. 81% of world liquids production is already in decline (excluding future redevelopments).
5. In our view a sensible range for average decline rate on post-peak production is 5-7%,
equivalent to around 3-4.5mbd of lost production every year.
6. By 2040, this means the world could need to replace over 4 times the current crude oil
output of Saudi Arabia (>40mbd), just to keep output flat.
7. Small oilfields typically decline twice as fast as large fields, and the global supply mix relies
increasingly on small fields: the typical new oilfield size has fallen from 500-1,000mb 40
years ago to only 75mb this decade.
8. New discoveries are limited: last year the exploration success rate hit a record low of 5%,
and the average discovery size was 24mbbls.
9. US tight oil has been a growth area and we expect to see a strong recovery, but at 4.6mbd
currently it represents only 5% of global supply.
10. Step-change improvements in production and drilling efficiency in response to the downturn
have masked underlying decline rates at many companies, but the degree to which they
can continue to do so is becoming much more limited.
Thanks for the info, Ron. As an old fart, I would like to remind everyone that there a few other intersecting trend lines that are also important.
First, since the oil shock of the early 1970’s, the amount of energy wasted has declined sharply. Cars get better mileage; all appliances use a fraction of what they used at that time; LED light bulbs; OLED TV’s will probably be standard by 2040, etc. Will energy efficiency continue to get better?
Second, since the energy shock of the 1970’s, world wide population has exploded. But, in Japan, China and most of Europe [excluding immigrants] declining population trends have already started. Will this declining trend expand to most of the world by 2040?
Substitution has made a significant impact, and is expected to continue its growth – solar, wind, batteries, etc.
I will not be around to know, but I can envision a world in which oil is $150 per barrel or more [in today’s $’s] in 2040 and it is no big deal economically.
First, since the oil shock of the early 1970’s, the amount of energy wasted has declined sharply. Cars get better mileage; all appliances use a fraction of what they used at that time; LED light bulbs; OLED TV’s will probably be standard by 2040, etc. Will energy efficiency continue to get better?
World population has just about doubled since that oil shock, far more than wiping out any gains in efficiency. World Population Growth
At 3 billion we were already in deep overshoot. We are on track to reach 9.2 billion by 2040. That will be a critical mass. The earth simply cannot support that many people, wind and solar power notwithstanding.
China and most of Europe [excluding immigrants] declining population trends have already started.
Sorry but China’s population is not declining. they are still increasing by .5% per year. China Population Growth
Will this declining trend expand to most of the world by 2040?
You must be joking. No, world population will be 9.2 billion in 2040, give or take a couple of hundred million.
Wake up and smell the coffee, we are destroying the world with our massive population. Our population continues to increase at greater than 1% per year.
19 births/1,000 population
8 deaths/1,000 population
• 131.4 million births per year
• 55.3 million people die each year
• 360,000 births per day
• 151,600 people die each day
• 15,000 births each hour
• 6,316 people die each hour
• 250 births each minute
• 105 people die each minute
• Four births each second of every day
• Nearly two people die each second Average life expectancy at birth is approximately 67 years.
Hi Ron From 1965 to 2005 the World total fertility ratio decreased from 5 to 2.5, when it decreases to 2.1, population stabilizes and when if falls to less than this population declines. World population is likely to peak around 2070 at 9 to 10 billion and will then start to decline. This is what many demographers expect to occur. If total fertility ratios fall to 1.75 by 2050, and continue to fall thereafter to 1.5,population decline will be fairly rapid reaching 4 billion or less by 2200.
Dennis, you are placing all your bets on a declining fertility rate and convincing yourself that this is the answer to the population problem. It is not. From the same link that I posted with the first chart above: World Population Growth
II.1 Fertility
Perhaps the most direct and obvious determinant of population growth is fertility. In the following visualization we show the rate of fertility, defined as the average number of children that would be born to a woman over her lifetime if the woman were to experience the exact current age-specific fertility rates, and the woman were to survive from birth through the end of her reproductive life. This data comes from the UN Population Division. As we can see, fertility rates were stable across the world until the 1960s, with some differences in levels between ‘developed’ and ‘developing’ countries. After this point, fertility rates started dropping and levels began converging. This coincides with the decline in growth rates that has already been discussed. In the next section we explore the combined effects of changing fertility and mortality. You can read more about these factors in our fertility and life expectancy entries.
Even with the declining fertility rates, we still get 9.2 billion people by 2040.
If total fertility ratios fall to 1.75 by 2050, and continue to fall thereafter to 1.5,population decline will be fairly rapid reaching 4 billion or less by 2200.
Hell, while you are “iffing,” why don’t you “if” the fertility rate down to .5 in the next 10 years. That would help a lot. Unfortunately reality will set in and the fertility rate will settle at about 2 until the mortality rate begins to rise. I expect that to happen by 2040… or sooner.
I did not see Dennis placing any bets, let alone “all” his bets. Neither did I. Just “sayin” that population doubled since the 70’s oil shock, but it is not going to double again. So, maybe it might, maybe, possibly be manageable.
If you do not think so, place your bet and take action now within your family to start eliminating the excess. My wife and I did – had our 50th anniversary and no kids.
If I recall, since it stopped snowing in the US 10 years ago, that you believe in a few years that the continent of Antarctica will be ice free so billions can move there or else to Greenland or Northern Canada.
If I recall, since it stopped snowing in the US 10 years ago, that you believe in a few years that the continent of Antarctica will be ice free so billions can move there or else to Greenland or Northern Canada.
And just where did “recall” that I believe that from? Nothing that I ever wrote, that’s for sure.
Clueless, don’t make up shit if you expect to get a reply from me.
why don’t you “if” the fertility rate down to .5% in the next 10 years. That would help a lot. Unfortunately reality will set in and the fertility rate will settle at about 2%
Ron,
I don’t think you’ve really gotten an intuitive feeling for what “fertility rate” means. It’s not a percentage, either .5% or 2%. That’s a growth rate. A fertility rate is the ratio of children to women: if it’s less than about 2.1, then women are not replacing themselves, and fairly soon the growth rate absolutely has to go below zero.
In China, the fertility rate is far less than replacement – around 1.3, IIRC. That means they’re pretty close to where Japan is now: an absolute decline in population.
Nick, you are right but this was just a slip on my part. Of course I did not mean 2%, or .5%. I meant 2 or .5 children per woman.
But thinks for correcting my error. I will now correct my mistake.
” A fertility rate is the ratio of children to women: if it’s less than about 2.1, then women are not replacing themselves, and fairly soon the growth rate absolutely has to go below zero.”
“Fairly soon” is a matter of opinion. Nowhere near soon enough, in the opinion of the vast majority of scientists who consider such questions as part of their day to day work.
I understand the math.
I’m with Ron, mostly, because I also understand that while the population will continue to grow for quite some time, barring a miraculous lucky accident, we are depleting our one time gift of nature reserves of resources at an ever accelerating rate.
But over the last few years, I have grown cautiously optimistic that things might not get as bad as Ron thinks they will.
Once the energy and resource shit storms hit hard enough to force most governments to really take them seriously, it will probably be too late for substantial part of the human race. Many hundreds of millions of people, maybe billions, are at very high risk of dying hard, before this century is out.
But with good luck, meaning good management, mostly, there’s not too big a risk of people starving or dying of exposure or contagious diseases, etc, in countries such as the USA, those in Western Europe, Brazil…. many others.
The amount of energy and resources we waste in such countries is such that only a rather minor fraction of it is more than enough to maintain food production, maintain essential infrastructure, and maintain public order.
But most of the people used to eating ribeye are going to have to get used to eating chicken. Ribeye will be for old farmers and the one percent. 😉
Highly processed and expensively packaged convenience foods may be taxed to such an extent that most people will as a matter of choice or necessity will go back to cooking and eating the way their great grand parents ate.
That tax revenue could easily be justified by earmarking it as food stamp money.
This would actually be a VERY good thing, in terms of public health.
Hi Ron,
There are different estimates of what will happen to the total fertility ratio (TFR) in the future.
The UN Medium fertility scenario simply assumes that TFR will tend towards 2.1.
The experience of many advanced nations does not support this assumption.
The fact is that over a 40 year period the World TFR fell from 5 to 2.5 (from 1965 to 2005), we do not know what will happen in the next 40 years.
There are some demographers that expect the TFR to fall to about 1.75 by 2060 with population peaking at about 9 billion in 2070 and then falling as TFR continues to fall to perhaps 1.5 by 2150.
In the chart below mortality rates gradually decrease so that average life expectancy approaches 90 and then remains at that level.
Dennis, this is all well and good. But the sad fact of the matter is the world is being destroyed while just trying to support 7.4 billion people.
This “Living Planet Index” declined by 52 percent between 1970 and 2010, “a much bigger decrease than has been reported previously,” according to the report.
The 52 percent figure refers to a general trend of vertebrate species populations shrinking, on average, to about half the size that they were 40 years ago, according to WWF spokesperson Molly Edmonds.
And the sad part is Dennis, though this carnage began well over a century ago, half of what remained has gone in the last 40 years, since the mid 70s when the earth’s population was half of what it is today.
You guys really amaze me. You seem to be saying “all we have to do is wait about a hundred years and the population will be back down to about where it is today.
Are you kidding me? Even at our current level of population, all the earth’s wildlife will be gone in 100 years. All that will be left will be man and his domestic animals. And the earth will swiftly be turning into a desert.
Hi Ron,
The fall in wild animal populations was in response to very rapid population growth since 1970, the rate of population growth is now falling this may reduce the rate of wild animal population decrease (along with conservation efforts.)
Better access to birth control and better educational opportunities for women will increase the rate of decline in TFR.
Perhaps it will be too little too late, but try we must IMO. I don’t believe the future is known, or not by me.
Interesting.
What is the animal population doing in the areas where human population is not growing?
Even at our current level of population, all the earth’s wildlife will be gone in 100 years.
The rate of devastation of wildlife has little to do with population.
The US managed to extinguish the buffalo, wolves, and the Carrier Pigeon (and many, many other creatures),in a very few decades, with a much smaller population. On the other hand, countries like the US are now choosing to support improved biodiversity, despite high population density:
“Latin America, home to many low-income countries, has borne the brunt of animal loss, with “a dramatic decline” of 83 percent cited in the report. The opposite was found in countries where income is high—those nations show a 10 percent increase in biodiversity.”
Humanity will choose whether to greatly reduce biodiversity, or not, and that can and will happen whatever the population level.
“Will energy efficiency get better?”
EVs are four times as efficient as ICEs. A quarter the energy, same number of miles driven, using current technology. The efficiency effect has not even begun.
you forget the efficiency of producing electricity from either photons or another fuel…. electricity does n’t freely fall from the sky
DrTskoul,
Of course electricity is not magically produced.
The point would be that 100 EJ of electricity can replace 300 EJ of fossil fuel because there is much less energy wasted as heat, much more energy can be converted to work.
If the recession is severe enough, demand will go down. Non-essence oil use will be eliminated if people don’t have the money for it. Even if the population continues to rise, people without money aren’t going to be buying cars and putting gasoline in them.
Boomer – how long did the longest recession since 1940 last?
Or, do you have a Phd in Economics and are making a prediction with a peer reviewed paper that there will be a new recession that never ends?
PS: People with a job will buy gasoline before they buy food – they have to get to work, you know, in order to have money for anything .
I am making a prediction that the global economy will contract unless there are significant changes. The high cost of oil is what we are discussing here. So unless there are adequate substitutes, it probably reasonable to talk about a permanent economic decline.
What I think we are in for is another recession comparable to 2008, because I don’t feel there have been any fundamental changes in the world economic situation to prevent one. I don’t know what might trigger it, but I think a lot of current economic growth is mostly financial fluff and can disappear pretty quickly.
As for people getting to work, if they don’t have jobs they don’t need to drive. I think global labor competition, automation, and recessionary forces will limit job growth.
Look, this forum is mostly populated by people who expect hard times ahead because of declining oil supplies and/or environmental damage. The fact that I, too, expect hard times ahead shouldn’t be all that much of a surprise here.
No, but that is because there are more pessimists in the world than optimists.
Like Warren Buffett, who states that he will always bet on a better future, is in the minority.
None of us here is going to influence the future. It’s going to unfold as it does and we can prepare or react to it as we can.
I’ve always been fiscally conservative. I don’t believe into going deep in debt. Don’t buy a house based on the best possible future ever. I’ve seen people having to sell houses as a loss or even have them foreclosed.
This whole forum is about the future of energy, and most here assume that oil supplies will get scarcer and more expensive. Now people are free to make investments based on those predictions.
But you can also make investments in other industries which look to take advantage of changes in fossil fuels.
Having followed the market since the 1970s, I personally believe the best option for most individuals is to stick with the S&P 500. And it is probably best to buy a little each month, through good times and bad, rather than trying to time the market.
I used to read the tech discussons boards around 2000. I learned to recognize the hype. So “pump and dump” pitches are pretty easy to recognize, and often there will be other investors (often those who are taking a short position) who will poke holes in the hype.
Let’s turn the tables a bit. I know the reasons why a coming global recession is likely. What would be the reasons to tell me that one of the longest recovery periods in history will keep going? What’s happening in Europe and China and the US to suggest we headed for an extended boom?
Here’s a quote from that article posted. This is what I believe, too.
Is an Economic Oil Crash Around the Corner? | Alternet: “Today, we are all supposed to quietly believe that the economy is in recovery, when in fact it is merely transitioning through a fundamental global systemic phase-shift in which the unsustainability of prevailing industrial structures are being increasingly laid bare. The truth is that the cycles of protracted economic crisis are symptomatic of a deeper global systemic process.”
Sorry for off topic.
Boomer, You gave some good advice – “And it is probably best to buy a little each month, through good times and bad, rather than trying to time the market.” And, I do not try to time booms or busts either.
But, I think that your question is a little off. No one has to forecast an “extended boom” in order to say things might be better in 25 years.
I am 75. Today, I sit in a climate controlled room in my house, turn to Amazon, and I can find hundreds of items that I use, cheaper and delivered to my front door [many without a shipping charge.] You can imagine the thousands of hours that I wasted in my lifetime driving to different locations, trying to find something that I needed, only to find out that the size or color, etc. was wrong or they did not carry it, or that it was sold out – check back in a week etc. Of course, because of those problems, we just did not have as much in the 1950’s. No POS inventory systems back then. Now, for example, there are so many different lightbulbs that one has to be either insane or a huge optimist to drive to a store to find some of them.
In the 40’s and 50’s you had a screw driver. And, if you could afford it, a hole starter punch. Then you put soap on the screw and used muscle to screw it into hardwood. Everything is hand-held power tools now – zero back then.
In short, in literally hundreds of ways, living is easier and, in my opinion, better today than when I was born.
The future – it will get better even faster. Robots will take over many tasks. Like the first $30,000 plasma TV’s, only the rich will be able to afford the first useful robots, but they will become mass market products. This is not an “all in bet” that robots will save us. Just one of hundreds of new things that are coming. And, I would rather not get into genetics.
I’m a few years younger than you and, in contrast, I have never been less optimistic about the future.
If we would phase out fossil fuels and find ways to use energy more efficiently, I would be optimistic about the economic growth those actions could provide.
But I see too much capital going into businesses that contribute relatively little to the quality of life, too much focus on wealth through financial juggling, and too many “smart” people using their skills to extract money rather than to invent things.
I also anticipate that with the wealthy getting wealthier and everyone else either staying at the same level they are now or even falling behind, whatever cool things come along will be out of reach for many people. But increasing income inequality doesn’t distress me as much as others because I think it results in less consumption, which is better for the environment.
I think we are leaving at the end of the industrial and fossil fuel ages. Could something better come along? Maybe. But it will be disruptive, some will fight it (as they are doing now), and there will be anti-science and anti-progress movements (as we see now).
The big question is if society has enough time to make a transition to something better, or if the combination of a decline of oil and global warming are going to limit the future.
I remember in the 1950s being told that nuclear power would provide electricity for next to nothing. It didn’t happen.
I remember in the 1960s we learned in school that the end of colonization in Africa would usher in a new era of progress and democracy for that continent. It didn’t happen.
I remember in the 1980s yuppies believed that if they dressed the right way and bought the right stuff, success would be theirs. For many it didn’t happen that way. Just the same old problems.
I remember in the 2000s that the Internet would enable more participatory democracy and everyone who have more information available to them. Yes, the Internet has changed some things for the better, but it has made some things worse.
The only thing I can be hopeful for is more renewable energy.
Warning somewhat off topic comment. Skip unless interested in the ways poor people deal with the cost of driving.
” People with a job will buy gasoline before they buy food – they have to get to work, you know, in order to have money for anything .”
True enough, but except for people who are already cutting it fine down to the last five dollar bill paycheck to paycheck and HAVE to commute a long way, most of us can cut WAY back on gasoline.
And even then, you can do something about buying a lot of gasoline.
It doesn’t happen often these days, with gasoline done to about 2.25 in my area, but I know a guy who just recently landed a good job about one hundred eighty miles round trip, and drove his four by four full size pickup there for a couple of weeks while he shopped for a commuter car. He bought a little Toyota econobox with some cosmetic damage for peanuts, and he will save enough on gasoline alone to pay for the car and all the expenses associated with it within about eighteen to twenty four months, considering how much he is saving on depreciating his truck due to putting close to a thousand miles a week on it.
He’s afraid to move,at least until he has been on the new job for a year or two, and very reluctant to do so, because he has roots here, and living costs in Charlotte are thru the roof compared to this community. So his eight an a half including lunch works out to about eleven and a half hours daily, but you gotta do what you gotta do these days.
Something that is not often taken into account when holier than thou types criticize working class guys for driving large pickups is that a lot of them really don’t put many miles on their trucks, because they live close to work. And while such trucks cost a lot up front, and use a lot of gas, and a lot to repair, if you take care of them, they can outlast the original owner, while enabling him to save or make some significant bucks once in a while, even if he mostly uses it to commute.
A number of my neighbors sell firewood, and use their full size pickups to deliver it. They can net from fifty to a hundred and fifty bucks on a Saturday,above and beyond their out of pocket expenses for the day, while putting delivering a couple of loads, typically within ten to fifteen miles of home.
Another fifty or sixty miles on the odometer of a pickup truck a couple of times a month is such a trivial expense that it hardly even matters, except for the gasoline. Five years down the road, another five thousand miles on the odometer means a five hundred dollar lesser trade in value. And a lot of deliveries are combined with the work commute, or going for groceries, etc.
I routinely abuse the hell out of my twenty six year old Chevy four by four by putting three times the load on it that it’s SUPPOSED to haul, but I did add helper springs, and top quality light truck tires, and I take it EASY when loaded that way. Never yet had a problem with it as the result of using this way, no broken springs, or axles, or wheel bearings, or transmission or clutch troubles, EVER. Alternators, starters, water pumps, batteries, brakes, etc, all go bad no matter how you use a truck , as the years and miles accumulate.
Redneck whites laugh at old black working class guys for driving huge old luxury cars,the stereotype being a Cadillac out front and an outhouse out back, but old black guys know about cars.
You can buy such a car for peanuts, once it has some age on it, with not so many miles on the odometer, and it is actually less apt to break down that anything else you can get for twice or even three times the money. People who buy really nice cars can and do usually maintain them properly, whereas you can never really know for sure how an old Civic or Corolla has been treated unless you know the past owners personally. You spend up to three times as much for gasoline, per mile, but your total cost of driving amounts to peanuts, if you are retired, or work very close to home.
There are a ton of ways to adapt to higher energy prices, and higher gasoline prices in particular.
My elderly Escort died recently, and the elderly full sized family Buick that used to be handy for family affairs is more or less retired to a spare barn, because I wasn’t using it enough in recent years to justify the insurance and tags. I won’t be replacing the Escort, because I no longer drive far enough often enough to save any money by getting another econo car. The Buick is ready, except for an inspection sticker, and a call to DMV for tags, so if the truck quits, I won’t be without wheels for any longer than three days.
The thing to do now is squeeze the last few good miles out of the truck , and the first time it needs major repairs, get a newer one, with better brakes, air bags, better fuel economy, etc. .
Y’all remember not too long ago we were estimating portion of GDP derived from oil output, mostly shale? That was when the price first started its decline and we projected diminished activity.
but
Y’all also remember the old “$10 decline in the price of oil is like $XXXXbillion tax cut to stimulate consumer spending?”
Factoids–
Gasoline is part of retail sales. Raise gasoline sales total (not volume), you raise retail sales. The algorithms will trade on that number. Not why that number. That’s all you have to have happen to raise NYC tax revenue (from wall street bonuses).
We didn’t get any huge economic boost from the crash in oil prices. Consumer spending didn’t explode.
Mostly, it’s all crapola since we learned money is created from nothingness via QE.
You want disaster, look at barrel total, not dollars. You aren’t going to get megadeaths from dollar numbers on a screen. Those numbers will just be changed.
We need better terminology than just “everything else equal” or “everything esle held equal” to describe what happens when you change just one variable in an economics discussion.
Watcher sez that when the price of gasoline crashed, the money that consumers saved on gasoline did not have a positive impact on the rest of the economy.
I say bullshit. It’s true that there was no sudden burst of prosperity. But suppose that the price of gasoline had stayed at four bucks instead of declining to two bucks. I have a lot of neighbors who buy from ten to fifteen gallons a week to get to work.
And you can take it to the bank that instead of banking the twenty or thirty bucks they saved on gas every week, they spent just about every dime of it. Some went to pay off old bills, and the rest went to buy things they were doing without previously.
So – there was no noticeable uptick in the economy , maybe, but if the price of gasoline had stayed up, then my neighbors who commute would have been spending twenty or thirty bucks a week LESS on groceries, clothing, medical care, entertainment, or whatever.
So – while cheap gasoline didn’t lead to things getting noticeably better, it’s perfectly reasonable to say that the crash in the price of gasoline KEPT THINGS FROM GETTING WORSE.
There ought to be a readily recognized short hand phrase that covers this situation, using less words.
There are countless situations where it could be usefully used.
My health has been declining as I get older. My doc has designed a treatment regimen to SLOW my decline, and I follow it . But I ‘m not getting younger, OR healthier. What I AM doing is going downhill at a SLOWER rate.
Watcher would say that since I am not getting healthier and younger, my meds and recommended diet and exercise program are useless, since there is has been no noticeable positive improvement in my health.
NO, consumer spending didn’t explode, but most of us benefited from declining gasoline prices.
The article says this.
“A new scientific research paper authored by a team of European government scientists, published on Cornell University’s Arxiv website in October 2016, warns that the global economy has entered a new era of slow and declining growth. This is because the value of energy that can be produced from the world’s fossil fuel resource base is declining inexorably.”
I agree that the world has entered an era of slow and declining growth, but I don’t think it is caused by the value of energy at this time.
Businesses aren’t expanding right now because of lack of energy. Rather they aren’t expanding because they don’t see a growing need for their products. So they put their money into financial investments rather than production increases. Giving the world’s businesses more cheap energy would not increase their markets unless their customers have the money and the inclination to buy. In the developed world, most people have more stuff than they need already. They are spending more on services and health care, and I suppose you can call that economic growth, but most of those expenses don’t require lots of cheap energy.
I agree that a lack of cheap energy will cause problem when even life’s basics become unaffordable, but I don’t think that’s the current cause of global economic growth decline.
“Pemex expects to produce around 1.9 million barrels of crude per day (bpd) in 2017, down from around 2.1 million bpd in 2016 and well below a peak of 3.4 million in 2004.”
That looks like 200,000 barrels a day is coming off of 2017 exports unless domestic consumption drops to offset. That’s a big drop in proportion to current exports.
The HSBC article/analysis appears to be spot on to me.
If we do achieve a declining demand/population by 2040 (and I believe we definitely will), it will very likely be due severe economic hardship related to insufficient energy supply in the interim.
Fossil fuel decline will far outpace renewable ramp up, for most countries.
The interconnected economies of the world will suffer big time, including the big exporters like Germany, S. Korea, China and Japan.
Thats how I see it.
“Fossil fuel decline will far outpace renewable ramp up, for most countries.
The interconnected economies of the world will suffer big time, including the big exporters like Germany, S. Korea, China and Japan.
Thats how I see it.”
I believe Hickory is right.
Poor people pay ten times much to do their laundry at laundromants as better off people spend to do their laundry at home, because they can’t get enough money or credit together for a washing machine………..
Moderately well off people often rent for years past the time they COULD buy a house of their own, even though they know that owning is a superb long term investment….. because they want nice cars, and nice clothes , and vacations, NOW.
The only class of people who customarily and habitually make long term investments are the rich. Ditto countries, and even countries as rich as the USA and Germany have a hard time investing in long term infrastructure because so many people have their hands out .. for a hand out. I get one myself, every month, as regular as regular can be and have been getting it ever since I hit that magic sixty fifth birthday.
But I believe Germany will be in better shape than any other large , well developed, highly industrialized country, in terms of using lots of domestically produced renewable energy , thus avoiding paying blood for imported fossil fuels. A couple of very small countries with lots of wind and or water power might use a higher percentage of domestically produced energy than Germany, but they’re special cases.
They’ve been pedal to the metal for a long time, compared to any body else, in terms of effort in relation to the size of the country, and I read about some grumbling because of the cost, but the German people seem to be solidly in favor of continued investment in renewable energy.
Hardly anybody except somebody like me ever mentions it publicly, but the Germans haven’t forgotten their country’s history, and they aren’t anxious to have to deal with ANYBODY, to any greater extent than absolutely necessary, to ensure their energy supply. They won’t have to, if they succeed in going totally renewable.
OFM, I’m not so sure about Germans ability to deal with a shortfall in energy available for import- they are heavily dependent on importing energy-over 60% of net energy use (compared to 14% for USA- year 2013 data). They do have coal to use.
But I was referring to the risk of the economies of countries like Germany, S. Korea, China and Japan due to their heavy reliance on exportation of goods to countries who, during hardship times, will stop buying as much. I believe that Germany will suffer a big drop in GDP within 5 years, due to loss of customer buying power.
Back atcha , Hickory
I agree with your conclusion about Germany not being able to function now and near term without importing huge amounts of energy. But long term, I believe Germany will be able to produce enough energy domestically , and use it so efficiently, that Germany will be one of the last countries, probably THE last one, making a go of the importing raw materials and exporting finished goods economic model.
And I believe you are right that Germany is up against it long term because you can’t sell to customers who can’t pay.
On the other hand, they can tighten up their belts and give up some of their living standard, and by doing so, they can probably do OK even after losing most of their export markets by putting most of the people in the export industries to work on producing goods and services for domestic consumption.
We ain’t seen nothing yet, in terms of what can be done in terms of efficiency and recycling, and Germany is likely to be the country that leads the way on both fronts.
They may have to import the raw materials needed to upgrade their existing housing stock to near zero or better than zero net energy but they can and will do it, imo, when the time comes that enough industrial workers are in need of the work by putting such industrial workers on the housing upgrade job. ETC
German workers are a hell of a lot smarter and better trained, on average, than Americans, or just about any others in any country. They won’t have any trouble at all transitioning to new jobs at the individual level.
( It’s not that we Yankees are less intelligent, but rather that we don’t make equal use of our intelligence, on average. )
Fossil fuel decline will far outpace renewable ramp up, for most countries.
The interconnected economies of the world will suffer big time, including the big exporters like Germany, S. Korea, China and Japan.
When you say “exporters” you should qualify exactly what kind of exports you are talking about. Germany, South Korea, China or Japan, then you are talking about exports of manufactured goods. But they have massive imports of fossil fuels. In fact they import almost all of their fossil fuels.
So when crunch comes to comes to crunch, these nations will get nothing, and they will export nothing.
But nevertheless all will still be right with the world… according to the Pollyannias.
Yeah right!
I’d like to point out that perhaps grain exports are primarily the processed products of water and energy inputs. Countries that export grain and import fuel may indeed see their grain production decline and/or become costly. Perhaps in the future oil exporters will only want food in return for their fuel.
Imagine that. Someone decides he doesn’t want any more pieces of paper for something valuable.
““Pemex expects to produce around 1.9 million barrels of crude per day (bpd) in 2017, down from around 2.1 million bpd in 2016 and well below a peak of 3.4 million in 2004.”
That looks like 200,000 barrels a day is coming off of 2017 exports unless domestic consumption drops to offset. That’s a big drop in proportion to current exports.”
That’s not a big drop in proportion of total Mexico’s exports.
Oil and product exports now account for only 5% of Mexico’s total exports, down from 16% in 2011. A further decline of 200 kb/d is not significant for Mexico’s economy.
I don’t know the exact numbers but I’m guessing Mexico exports about 1.2 million barrels a day. Knock that down to a million. 16% decrease seems significant to me. They’re overall export values are declining as per your chart from 400 to 300 between 2014 and 2016. I’m not sure what they have planned but if they keep doing what they’re doing they’re gonna keep getting what they’re getting, which is a greased pole to failed state. Perhaps going from barely functioning state to failed state is not a big move on the scale of things but I’d suggest its ramifications are highly significant. I can’t imagine how they’re gonna get by as an oil importer.
200 kb/d at $50 per barrel is around $3.65 billion per year.
Mexico’s total exports in 2015 was $380 billions, and $306 billions in January-October 2016.
So this represents only 1% of total exports.
Declining oil production is a problem forMexico; but not the main problem.
Does anyone here know how Pemex actually functions. They make a loss every year but nevertheless pay a load of taxes. They then get some of that money back to cover the loss. They seemed to be asking not to pay taxes on KMZ so they could retain some money and maybe look like a proper company – but no go. It makes no sense.
Note KMZ has been on a long plateau, when it comes off it will almost certainly decline like Canterell did at 20% or more per year. 10% average production decline might look like the good old days.
Survivalist (and George Kaplan)- thanks for bringing up that comment/chart by G. Kaplan from the prior post. Quality work/analysis as always.
I would be very interested to see a similar charted projection of global oil export capacity. This will have major implications for global economic trade / growth / relations. Thanks.
“I would be very interested to see a similar charted projection of global oil export capacity”
I second that. So much great thought and analysis is presented here.
Zero net exports within 25 years or so is gonna be a damn mess. Indeed it’ll be a damn mess well before that. To put it mildly, I’m not an optimist.
Modern industrial agriculture turns oil into food. And a few years ago when prices of oil got high enough folks said ‘hey let’s turn food into oil’. We’re just not equipped to deal with what’s coming. And there’s no stopping what’s coming. EVs might get your ass to Walmart, but why bother? It’ll be empty.
” To put it mildly, I’m not an optimist.”
Neither am I, at least not much of an optimist. I have often remarked that I believe there is a good to excellent chance that a substantial portion of our species will die HARD within the foreseeable future as the result of overshoot. Five or ten years ago, I was a more or less committed doomer, and expected that MOST or nearly all of the human species would be going to hell in a hand basket.
But renewables have come on like gang busters, and birth rates have been dropping like stones, and there IS reason to hope that most of us will manage to turn the overshoot corner without perishing in the process.
We all know that taking almost any argument to it’s logical conclusion leads to absurdities as often or more often that to useful answers.
Net oil exports will never fall anywhere close to zero, so long as some countries are still producing substantial quantities of oil, for a fairly simple reason. OIL is so intrinsically valuable that producing countries will find it VERY much to their advantage to cut back on domestic consumption so as to have oil to trade for things they really want, or MUST HAVE.
Food is the ultimate must have good, but there are lots of others. A country such as Suadi Arabia will never have a big enough and diversified enough economy to manufacture all the stuff necessary to HAVING an oil industry, so if the Saudi’s are going to produce oil, they WILL be importing the equipment needed to produce it.
And while they may jerk us around , sometimes, they will not never jerk TOO HARD, except by miscalculation, because the House of Saud would be living in exile, and quite possibly impoverished exile, if it weren’t for UNCLE SAM maintaining a military establishment adequate to keeping the family no the throne, and USING IT to do so. They wouldn’t last two years if we were to turn our backs on them. One or another country would move right in on them, and they wouldn’t be able to do diddly about it.
Oil will always flow in international trade, so long as oil is needed, and any significant amount of oil is being produced.
OFM- indeed there will be oil flowing on the markets (exported) for along time, but the quantities available will likely come up way short of demand before too long- that is the point of this discussion.
The repercussions of that little trend are immense, of course. For example, if Putin or someone strategically savvy is in charge of Russia as this trend unfolds, you can bet some big dollars that they will wield the petro-Ruble sword on a grand scale, just as we would if we were in that position.
There are dozens of big implications to consider, most chaotic. You have mentioned that Egypt is in a precarious position- food and energy. I completely agree seeing as how they are the biggest grain importer in the world, having grown far into overshoot territory.
I would add to that list S. Korea. They import about 83% net energy consumption, and rely heavily on the health of the economy of their overseas customers to enable purchase of their exported manufactured goods. There is a big risk that when oil prices rise next time, their costs will escalate and their earnings will plummet- like 2009 but perhaps much more prolonged and deeply. Fragile position.
I’m sure this is no news to you, but it is the big deal.
Back atcha once more, Hickory
We’re in the same book, and mostly on the same page.
But we are different paragraphs, sometimes. 😉
I bet I’ve posted ” DON’T get caught in Egypt” here at least twenty five times. 😉
Here’s a link to the Italian study references in the story/link provided by Ron
Andrew Latham, head of exploration research at Wood Mackenzie, on conventional oil exploration:
“People do tend to look at the total volumes [of conventional oil] being added in recent years and conclude that we are running out of subsurface potential, I find that unlikely. It’s our view that conventional exploration is a perfectly viable growth and renewal option, particularly for those that are good at it. In reality, a lot of exploration’s recent decline is nothing more than the fact that it’s drilling fewer wells in the downturn.”
There is indeed a perfect correlation: oil discoveries in 2016 are down about 3 times from average 2000-2014 levels. Exploration spending and the number of exploratory wells drilled also dropped about 3 times.
In my view, the key risks for adequate oil supply in the future are mostly related to economic factors rather than poor resource potential.
1) If oil prices remain relatively low, that may discourage a significant rebound in exploration activity;
2) Even if oil exploration and the volume of oil discoveries are increased, development of newly found oil fields may be postponed/delayed, again due to relatively low oil prices;
3) These risk are exacerbated by the fact that most of potential discoveries are high-cost resources located in deep offshore; Arctic zones, etc.
4) Oil companies may be discouraged from increasing both exploration and development spending on costly upstream projects with long investment cycle due to false signals from the supply-side (expectations of a second boom in LTO production, with annual growth of 1 mb/d over the next several years) and the demand-side (expectations of an imminent and rapid oil demand destruction from EVs and renewables).
In that sense, perception that costly conventional oil and tar sands resources may remain stranded, created by shale cheerleaders, on the one hand, and EVs/renewables cheerleaders, on the other, may have a detrimental impact on the future global oil supply/demand balance.
Oh for God’s sake. What else is a WoodMac employee going to say?
“There’s really not much left and no point in hiring my firm to consult on anything.”
The concept that if you increase spending on exploration you get more discoveries is likely true, but the concept that the magnitude or total of new discoveries will align itself to the amount spent on exploration CANNOT be true, because the total remaining must decline.
There MUST be diminishing returns on those expenditures.
Of course, there is a long-term trend of diminishing returns.
But the sharp drop in new discoveries in 2015-16 was due to the sharp drop in exploration spending.
All the oil will eventually be found unless there is a complete collapse in civilization. The best prospects are explored first. The current slowdown is only delaying discoveries by a few years and it might be a good thing to smooth out the decline rate. The main point is that frontier territories are getting sparser and success rates in them is declining. I think the most money per year ever spent on exploration was in 2011 to 2014, and discoveries kept on declining. Every dry well means one less prospect. Eventually we run out no matter how much is spent.
And alternatives (both alternative energy sources and new ways to use energy) will allow us to better use what oil we have left.
Why burn away oil for purposes where it is not necessary? Save it for critical uses, and eliminate it for unnecessary uses.
I remember reading that there was a time when pioneers routinely used beautiful hardwoods for fuel. Eventually the hardwoods became more scarce and it was a shame so much went up in smoke.
I’m pretty sure almost all the oil is going to be burnt – it is just too good. What we need to ensure is that we don’t go back to coal.
As long as natural gas is plentiful, there isn’t much reason to go back to coal.
We are, of course, talking about two different things. Oil for transportaton and coal and natural gas and renewables for electricity generation.
Reminder about oil types.
New discoveries relentlessly are of higher and higher API number. Jeffrey’s chart, which I have found and lost about 10 times, makes clear middle distillates essentially disappear from “oil” with API > 40.
No kerosene. No diesel.
Success rates for exploration wells dropped from 23% in 2006 to below 5% today, Half of that period saw record oil prices. Have Andrew Latham explain that.
This shows how small and rare discoveries in the North Sea are (this was from August – things have been a bit better since):
“Of the six spuds in the UK, two of three completed were small discoveries. In Norway, with 11 of 13 well results known, 6 were dry and 7 discoveries, of which only Brasse looks likely to be commercial.”
These are the high impact wells for this year, with possible resources. Korpfjell, Mesurado, Eagle Deep, Dukchinskaya, Prospect B, Marina are oil, the others gas. Mesurado has been drilled and was dry. Th eothers would give about 1.5 Gb assuming 30% recovery if they all were successful. However recent success in frontier territories has been 5 to 8% depending how it’s measured. Deep and ultra deep drilling is being reduced and that is where the big finds might have been, maybe it’s mostly because of money but I think there is an aspect of running out of prospects. The big technological boosts from improved seismic and new generation rigs came in the early years of this century, and as is always the case in the oil industry every body does pretty much the same thing at the same time so there was big over investment, lots of good discoveries, and then another load of over investment in development of the off shore fields – which happened to coincide with USA LTO and recovery of Iran and Iraq. Hence a supply glut, but also maybe fewer good exploration prospects remaining than might be expected.
George, Do you know who the operators are of these wells?
Ironbark : BP
Korpfjell : Statoil
Halcon : Total
Mesurado : ExxonMobil
Antelope Deep 1 : Total
Eagle Deep : CGX Energy
Dukchinskaya : Statoil / Rosneft
Prospect B : Chariot / Serica (?)
Barque : NZOG Ltd
Marina : Karoon
(I think – may be out of date for some)
I’m not sure that estimates of global oil discoveries made by Rystad, Woodmac and others fully account small discoveries, of 50-100 million barrels and less.
2016 Review: Western Canada’s ultimate potential for natural gas jumps (Release date: 2017-01-12)
Since horizontal drilling and multi-stage hydraulic fracturing started being applied to Canadian tight and shale resources just over a decade ago, estimates of the ultimate gas potential of the Western Canada Sedimentary Basin (WCSB) has more than tripled to over 1 000 trillion cubic feet(Tcf).
It seems that low interest rates are helping to restart oil sands investments, +100kb/day…
MEG Energy Corp. is boosting production at its Christina Lake project in Alberta and tapped debt and equity markets for financing. The expansion at Christina Lake Phase 2B will increase output from the site by about 25 percent to 100,000 barrels a day by 2019.
Husky Energy to spend $1 billion on new heavy oil projects in Saskatchewan. The Calgary-based company said this week that it plans to build three $350 million thermal extraction plants in the region as part of its ongoing transition to “low sustaining capital” operations.
2016-12-14 http://www.vancouversun.com/Business/12527791/story.html
Suncor Energy announces $1.0 billion medium term note offering – Marketwired – Sept. 8, 2016
The sale to Houston oil producer Sanchez Energy Corp. and private equity firm Blackstone Group is expected to close in the first quarter. John Christiansen, a spokesman for Anadarko, said the acreage represents the entirety of its oil and gas-producing assets in the Eagle Ford, though it still operates midstream assets there through a subsidiary, Western Gas Partners.
Like you said, shallow, private equity.
I am sure Anadarko got tired of counting all the money they were making on these properties.
Well said, Mr. Hightower; their 5-6 year old wells are getting very wobbly (as in standing on one leg) at 165K, or less, of BOE. So not many of them even reached payout and/or for sure have not made any money. Sanchez, on the other hand, is quite certain it can turn one mans junk into another’s treasure and has promised its 50/50 partner, Blackstone, 400K EUR’s. They must have a secret. I know, bigger frac’s ! Sanchez’s 50% of the deal, by the way, was financed by guess who? Blackstone.
Anadarko, I guess, needs all the bucks it can get to develop its big “discovery” out near Balmorhea, which by the way has less billions of barrels of oil in it than its Eastern Montana, Bakken flop, that produced zilch. You almost have to have a TV guide to follow this shale stuff now days.
How exactly do you cheerlead for these shale guys when you essentially KNOW their lying thru their teeth? It says something about the cheerleader, I should think.
I guess you cheerlead if you’re trying to unload stock or wells that you own. Hype it until you can unload it.
Or its RI and ORRI (mail box money) and you can’t tell the difference in that and WI.
I assume those EUR’s are BOE, Mike.
From a quick review of these properties, it appears the produce more gas than oil. 2.4 million gross MCF gas isn’t going to generate enough $ for sure.
Yes, Shallow, BOE, and the ‘ol 6/1 BOE, of course. Anadarko’s block is in the gas to liquids rich gas leg and oil (condensate) production struggles to get to six figures. I don’t know what their WH prices have been for gas but I would assume a dollar and some change until recently, way south of HH.
With respect to my colleague, Mr. Hightower, I think Anadarko got tired of looking for where all their money (CAPEX) disappeared to.
Sanchez thought it was smarter than Shell and bought the Harrison Ranch block for slightly more than the GDP of Ecuador. Shell’s wells were awful and they could not wait to bail on that stuff. I have not checked to see if Sanchez is doing any better with it.
Sánchez bought this stuff to get a Wall Street pop in their stock. It was up 29% on the news.
Sánchez has lost money every quarter but one since the 4th quarter of 2014 per NASDAQ, and those losses have ranged from $1.18 to $9.91 per share quarterly. They posted a .36 profit q4 2015 somehow.
Investors love to invest in oil and gas. One only needs to look at Legend Oil & Gas Ltd to see how gullible investors can be. Ticker is LOGL.
As I recall, this company bought some insignificant Bakken undeveloped acreage, a few marginal wells in Canada and a few very low volume stripper leases in Eastern Kansas, and was able to raise around $100 million in an IPO. The value of their assets was maybe $2-3 million at the time.
I’m not saying the shale companies are like those involved with Legend. I am just pointing out how gullible investors can be.
I include myself in that. I bought some E trade stock during the internet bubble. Bought it at split adjusted $50, in a short time it went over $70, of course I didn’t sell until it hit $20, but that was better I guess than waiting till it hit $1. I think E trade did a 1/10 reverse split, so had I held on for 17+ years, I would just be at about $3.50.
To me, sales of LTO assets to private equity is bullish for oil. Private equity needs to make a return, I don’t think they generally drill in excess of cash flow.
Private equity has done well in the shale boom. They bought acreage, flipped it, let shareholders of public companies finance development, then are coming back in and buying the production once it has settled.
People look down on stripper wells, but those are the ones that actually make money, if they are bought right. However, I would much rather operate shallow ones than 20,000′ horizontals. I suspect the Bakken will have some decent strippers, as will low produced water areas in the Permian. I think EFS Hz strippers will be the least desirable of the three, but it is early.
Mike, what would a tubing hole at 8,000′ cost me, assuming nothing out of the ordinary? Dont worry, I’m not in the market to buy this stuff, just think it worth noting that a 1,000′ tubing hole costs $500-$800 right now here.
Edit: Per 2015 10K Sánchez PV10 all categories was $595 million. Long term debt $1.746 billion. Wow!! How does a company with debt to PV10 ratio get the $$ to buy out Anadarko EFS? Surely Blackrock has some onerous terms or is this really Blackrock buying the whole thing with Sánchez as operator and taking on some risk?
In the Haynesville, don’t look at their P4 reserves (I love that phrase and wish I knew who to give credit to) but at what they do. The four biggest players were Encana, Swepi, Chesapeake and BHP. Encana and Swepi sold out to PE backed companies. Chesapeake has sold off parts of their position trying to raise cash to retire debt and BHP has done nothing in the last 2 years. Gas production is a small part of this companies assets, so they can afford to be honest with their investors and do what most companies should do, which is quit drilling. It is WAY too early for the big boys to be getting out now while there are wells to be drilled, if these shale plays are as profitable (on average) as they say.
I first heard of P4 reserve classifications from a smart, oily fella named Jim Brooker, on Enno’s site.
Still waiting for the analysts to find Enno’s site
Mike, there’s a new Sheriff in town. If SEC regs are about to force shale operators to fire a bunch of non college degreed workers, then those regs are not going to happen. Harold Hamm will have his private phone number for this kind of thing.
If there are lenders willing to ante up, then Trump will say ante up and keep those people employed. Can’t make a profit? Don’t matter. Keep the wheels turning.
Greenbub.
A similar thing happened in the 1990s, as majors and large independents sold out of most of their US onshore conventional production.
However, they were not selling out less than ten years of producing the assets.
Hess stock was down yesterday because they are not planning to add many rigs in the Bakken this year.
If the Bakken and EFS aren’t going to add much more oil production, the US will possibly just see significant onshore growth in the Permian.
North dakota numbers are out again. Roughly 10000bpd drop
“There was one significant precipitation event in the Minot area, eight days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F. December 2016 and January 2017 will be a different story.”
Probably means a big drop is coming. I still haven’t seen an explanation for the sudden increase in October that makes complete sense. According to Enno Peter’s charts the rise was only in McKenzie and it affected all the formations (Middle Bakken, Three Forks and, especially in percentage terms, “others” which went from 3 to 36000 bpd in Mckenzie). Also it looks like only CRL and Whiting were impacted.
The directors cut didn’t say much to explain the big drop in permits (over 70 to 35 – but actually only 31 net): “Drilling permit activity fell slightly from October to November then decreased sharply November to December. Operators are maintaining a permit inventory that will accommodate a return to the drilling price point within the next 12 months.” and “North Dakota leasing activity is limited to renewals and top leases in the Bakken – Three Forks area.” How many Bakken “Top leases” are left?
Interesting to note that SM Energy just announced it is marketing all of its Bakken acreage and production. We have been discussing that private equity firms have been the buyers of most of the Bakken production. These firms typically do not drill in excess of cash flow.
I noted, as did others, that the large increase from September to October was due partly to Whiting shutting in some highly prolific wells in order to complete some new ones in one field. Those impacted both August and September negatively, and then October positively, as the total BOPD was in excess of 20,000 once all wells were reactivated.
I see there are several EFS properties being marketed too. Anadarko just sold some, as Greenbub mentioned above.
I do not expect to see major growth from either EFS of Bakken unless oil prices rise substantially, as I do not think many there are motivated to drill in excess of cash flow. The Permian is different, as the hype machine is still turned on in the Permian.
Whiting Twin Valley Field
June, 2016 16 wells 124,209 BO
July, 2016 16 wells 41,148 BO shut in part of month
August, 2016 16 wells 4,191 BO shut in almost all month
September, 2016 29 wells 98,807 BO 16 old plus 13 new wells partial month
October, 2016 29 wells 630,606 BO 29 wells all active
November, 2016 29 wells 605,302 BO 29 wells all active
The above are oil runs. Very strong wells , both the older and new. Part of the reason for the variance from July – November, as not only were 13 very strong wells added, but 16 very strong wells were shut in to complete the 13 new wells.
That makes sense – thanks for taking the trouble to repeat it. So I guess the anomalies were the big drops in August and September and we are back to approx. 10 to 12% yearly declines, maybe with larger seasonal variation coming due. Two other questions – sorry if you may have answered before as well: How many older wells is one of the larger Whiting wells equivalent to (I’m assuming they are longer or drain a bigger area in some way)? And what is the “other” formation that has shown such a large increase this year as shown on Enno Peter’s charts – could that develop into a big producer like Bakken?
George,
Confidential wells, with an unknown formation are also part of this “Other” formation. That is not intuitive, I will assign them in the next update to formation “Unknown” instead. Good catch.
I made an update to the “Well status map” overview. Easy to see now where wells were completed, and where the DUCs are. All wells that started production in Nov were located in the core, which you can nicely see if you only select the status “first flow”
Thanks – map looks good.
Baker Hughes North America rig count is out. Canada up 110 after Xmas break and 88 year on year. And what are all the headlines about – USA oil is down for the first time in 11 weeks. In fact the one additional GoM rig probably has a big impact than all the reductions in on shore drilling (which are all vertical rigs).
I have a new post on North Dakota, based on the just released production numbers, available here.
Verwimp,
Would be great to see your updated graph with ND Production vs your model.
General question to all,
What do you think the US Production in the end of 2017 will be? I suspect that most shale oil plays (maybe apart from Permian) will continue to fall about 20% and I use 4% natural decline for the conventional fields, giving an average natural decline of rouhgly 10-12 %. As Permian may increase about 5%(??), I expect the total US C+C production to be around 8-8.3 mboed. So far it seems that the increased # of rigs will not increase production other places than in Permian. Any opinions?
Thanks
The EIA disagrees with you. They have total US C+C at 9.22 million bpd in December 2016. They have Alaska at .49 million bpd, the Gulf of Mexico at 1.82 million bpd and the lower 48 at 6.92 million bpd in December 2016.
So the EIA Short-Term Energy Outlook is about 1 million bpd higher than you. I think they are a bit too high but I think you are a bit too low. My guess would be 8.8 million bpd or about the same point we were in October.
Hi Ron,
Your guess sounds excellent to me, possibly we might get close to the EIA guess, but not at the oil prices they predict. If their oil price guess is correct, your guess will be about right, if prices are higher, output might be a bit higher, but probably not likely more than 9 Mb/d.
I have no idea what future oil prices will be, but my guess is higher than today, but less than $85/b.
Hmmm. I thought the explanation for the signif uptick in Bakken output last month was essentially transient.
There should have been a much steeper decline this month if those theories from last month were true.
Don’t remember the specifics, but I thought it was about an unusual collection of events (well starts) all in that month. Something like that.
It’s not really clean coal if the captured CO2 is used to extract more oil that gets burned with it’s CO2 entering the atmosphere. In fact, numbers would have to be run, but it could turn out to a net CO2 emission increase over just having let the CO2 from coal escape in the first place. Why? Because it’s very likely much of the supposed captured CO2 dissolves and becomes part of the oil being extracted, then releases to the atmosphere during the refinery process or later when the refined product is used in one manner or another.
There was another CO2 capture I heard about the other day in which the CO2 was used for carbonating drinks. Well, once the beverage is consumed the CO2 enters the atmosphere from the people who consumed it, so that isn’t permanent capture either.
But people also think electric cars are emission free, when in fact if 60% of the grid energy is Fossil fuel based, then the energy usage even in an electric car is only 40% emission free. That’s what it should say on the bumper; 40% emission free.
Which gets to my point that we all need to think the cycle through in each instance in which it benefits the people making claims to only look at the first stages of the full cycle.
OFM said: “We need better terminology than just “everything else equal” or “everything esle (sic) held equal” to describe what happens when you change just one variable in an economics discussion.”
But, I wonder how much easier the cost of living would be if those that do just went back to drinking water out of faucets instead of out of bottles. I think that the first bottled water showed up in the 1970’s??
OFM can probably remember pumping it out of a well by hand into a jug for a day in the field. And, did not put it in a refrigerator before drinking it.
Maybe Boomer knows how many equivalent windmills to manufacture the plastic, fill it with water, transport it, chill it, etc. [You are right if you assume that I do not drink bottled water. And, I am still mostly alive.]
I can remember Momma toting water from a spring a five minute walk DOWN a steep hill. She toted me on one side and a bucket in the other hand, until I was old enough to walk. But Daddy had a truck and a job away from home, and brought most of our water home in five gallon buckets until I was six.
Digging the well was one hell of a HAPPENING. I remember it like it was yesterday. A year or so later, we got an electric pump. I can’t remember when we didn’t have electricity. That went in within a month of the old two room green oak board and batten house Daddy hired built by a local carpenter before I was born. It took the two of them two months to build the house. No power tools, they didn’t own a single one between the two of them.
Daddy and his Daddy, my maternal grandfather “Poppa” logged the timber off Poppa’s farm, hauled it to a sawmill on his farm truck, and back home. From the time they were married, until they were in a home of their own, paid for, my parents rented or lived with relatives less than six months. The initial acre plus home stead WAS a gift from Poppa though, or it would have taken longer to save enough money to buy a home site. The purchased materials list consisted of metal roofing, nails, masonry block and mortar for the chimney, minimal wiring, one exterior door, four windows, sheet rock, and a few odds and ends. I still have the hand made table we used in the kitchen, the original wood fired cookstove, and a few other things out of the old house.
We were happy, proud, and relatively self sufficient. I was nearly a grown up before .
I could deal with the thought of living in a house on a lot, not having any real control over life. buying every bite of food, every speck of fuel, not having room to roam, not welcome anywhere unless spending money, except maybe a friend’s house, nearly everybody encountered a stranger, no hunting, no fishing, going on vacation to visit places for a few days less pleasant than our farm, etc. We got a farm of our own before I was ten, and before that we used land belonging to the extended family. Over the years, we got to be reasonably well off, not by pure money measure, but we lived better lives, taken all around, that people making top wages in cities.
WITHOUT borrowing money.
Now I use some credit myself, because it’s a good tool, if you spend what you borrow wisely, but I don’t see that banksters, as the industry exists today, are NECESSARILY an ESSENTIAL part of stable sustainable economy.
Useful, yes. Trustworthy, no. There are other ways of getting capital together in sufficient quantity to do the things that NEED doing.
Banks would be ok if they were properly regulated, and forced to take ALL chances taken to be taken with one hundred percent of the stock holders money before ONE DIME of tax money is used to bail them out.
But that solution will never suit the Trumpsters and the Italian suit and Prada crowd that dominate D politics these days.
would 2017 or for that matter 2018 be the year the shock news go around the world – ghawar is *empty*, saudi production rapidly decline – triggering the next biggest oil shock and central bank reactions around the world – raise interest rates steeply – global economic collapse while oil price shoots up 90 degrees … to infinity
CBs raising rates to address a price rise? No. Not the Fed, anyway. Fuel is non core. They invented core vs non core so they can make decisions of this sort whimsically and not be formulaic.
$$$ numbers on a screen are never going to kill millions. If there’s too little oil, that can kill millions. The price can be decreed if that’s what it takes to keep your people alive. But the real death avalanche comes from too little oil, regardless of price.
That’s core CPI, I mean. Or PPI.
Some people have an expectation that new technological developments will facilitate getting more oil out of the ground.
But it just occurred to me that I never read about who is going to pay for the research to get these new technologies. Big oil companies should have the funds to do so, but are they doing any technology R&D?
The government funds research, but it seems like those who have faith in technology extending the life of oil also tend to want to cut government-funded energy research.
Venture capital could fund new technology research, but why bother with oil when there might be a much bigger pay-off with renewables?
Who funding this research in the past 150 years?
Do you think that technology in the oil and gas industry is the same as in the days of Colonel Drake?
The potential for gas and oil was much greater in the past, so it was reasonable to continue to improve the technology.
Now, with the energy market shifting, the big discoveries are likely to come from technologies other than the oil industry.
Gates and others just set up a $1 billion fund to invest in clean energy technology companies. Is there anything comparable for oil start-ups (if there are any)?
Here you go:
Oil Price Plunge Hurting Academic Research In Energy Sector As Industry Curtails Funding: “Battered by lower oil prices, the U.S. oil and gas industry is curtailing funding for research as part of a broader effort to slash costs and protect bottom lines. At academic institutions in America’s energy-rich states, the money for innovation and exploration is shrinking, according to the heads of several prominent energy schools.”
Like investments, spending on R&D is cyclical
What I am saying is that the hope for new technological developments to produce more oil may not happen if the funding for that research isn’t there.
If government funding is cut, if oil companies don’t have the money to spare, and if investment fund favor other industries, that research won’t be done.
Even if it is cyclical, if the money isn’t there (because prices stay low or supply runs out or demand drops) or the government doesn’t fund it, or investment funds stay away, it doesn’t happen.
The premise of this forum is that oil is peaking and there is unlikely anything much to bring it back. Oil is less likely to have a cyclical future than a declining one.
And it is something of a circular argument if one says oil will increase again once there are new technologies, but currently there isn’t the money for new technologies, so oil won’t increase and the funding won’t be there as a result.
Oil prices are cyclical. We are past the lowest point in this price cycle. As prices rise, spending on R&D will increase.
Oil companies’ guidance already suggest an increase in global upstream investments in 2017. R&D will follow.
I guess we’ll have to wait and see. Even the “miracle” of LTO wasn’t about new technology. Just high oil prices and low interest rates.
I’m just calling into question the idea that we’ll continue to push the date of peak oil out further and further due to new technologies.
And you are absolutely correct to question the role “technology” will play in our energy future and where the money is going to come from to improve that technology, Boomer. We’ve just had six years of incredibly high, stable oil prices and I am remiss to remember any earth shattering breakthroughs that lowered finding costs sufficiently enough to improve profitability.
Service providers that typically lead off on R&D are for the most part worse off financially than producers. Far more money has been spent on interest expense the past decade than improving old technology. That won’t be getting a lot better anytime soon.
ConocoPhillips: Big New Oil Discovery In Alaska Could Produce 100,000 Barrels Per Day
Yesterday ConocoPhillips’ Alaskan unit announced a big discovery in Alaska. The Willow discovery lies in the COP’s Greater Mooses Tooth (“GMT”) unit and consists of two wells which encountered 72 feet and 42 feet of net pay. 3-D seismic appraisal work will start this month, however initial estimates indicate the discovery could contain a recoverable oil potential of 300 million barrels of oil. As a result, Willow could produce up to 100,000 bpd of oil and first oil could come by 2023.
ConocoPhillips has a 78% working interest in the play while Anadarko Petroleum (NYSE:APC) holds a 22% interest.
Sportsfans – more red meat from JHK on the Shale Demonstration experiment “Problem” running up your debts @ 14:30. Cry or Laugh ?
Oil > $75 crushes economies
Oil < $75 crushes Oil companies
? Going to work for us ? https://www.rt.com/shows/keiser-report/373666-episode-max-keiser-1019/
Already mentioned last year, but seems a bit more concrete now.
Sign that we are at peak oil or very close (before or after)?
Peak or not, it makes sense to utilise solar resources and increase export availability, no?
Maybe Saudi Arabia is about to peak. At least its very cheap reserves may have. But some countries have not peaked. It will be very interesting to see what happens in the coming decade.
My personal take, for what it’s worth:
The Saudi’s announced some years ago that they intended to build solar farms on the grand scale, but so far, they haven’t.
But they have run the numbers, and if they can continue to sell oil at moderately high to high prices, solar power is a no brainer for them, because they can save at least half and likely a lot more than half, of the oil they have been burning to generate electricity, and come out gazillions of dollars ahead even the first year, if they finance the solar farms. The oil saved will sell for more than the payment on the solar farms.
My guess as to the reasons why they are not moving forward are one , that there has been a long running struggle inside the royal family for control of the country, and that this has delayed any major initiatives of any sort.
Two, the price of oil crashed , but AFTER the power struggle was already old news, thus making it infinitely harder to justify short term investment in long term projects, because the country started running in the red.
And three, the people who actually make the final go/ no go decision on a real time basis understand that solar power has been getting cheaper by the year, and they are NOT dummies, when it comes to counting money.
It’s a way better deal for them to delay the construction, from one year to the next, so long as the costs of construction are falling more than maybe ten percent ( a rough guess ) annually. The present money value of a barrel of oil in the ground that may not be sold for a generation or two down the road is close to zero.
( If you have a brand new thirty year mortgage, you can pay off the final payment of say a thousand bucks for around five or ten dollars TODAY. )
A barrel of good quality crude will probably be worth a couple of hundred bucks in present day money, maybe more, a couple of decades down the road, because it can be used as the raw material to manufacture a hell of a lot of very useful products such as lubricants, and we will probably still be burning some diesel and gasoline as well.
But it might sell for a lot less than that, if the market for oil as fuel crashes hard enough.
There will likely still be some crude that can be brought to market for less money, maybe a LOT less.
It would probably be cheaper for me to pay a five or maybe even ten dollar a gallon environmental penalty tax for the amount of diesel I would need to run my small farm than it would be to scrap diesel tractors and other machinery in good running order and buy new equipment powered by super duper batteries that don’t exist today…… and may not exist thirty years from now.
Cheap hydrogen and cheap mobile hydrogen tanks are possibilities, but not realities. There’s no grand scale infrastructure to manufacture or distribute hydrogen , and no surplus wind or solar power available on the scale needed to run that so far non existent infrastructure. Storage tanks are expensive as hell, and getting the cost of them down to a practical level MIGHT prove to be impossible.
Bottom line, we may continue using some gasoline and diesel fuel for the foreseeable future.
kWh generated from Desert PV Equalivant to a Barrel of crude = $50 +/- 20% . Cocktail napkin calc.
5.6 million BTUs per barrel
3414 BTUs per kilowatt hour
1640 kilowatt hours per barrel of oil. Oil temp matters. Some conversions say 1700.
More like 656 kWh/bbl at 40% conversion efficiency.
Longtimber may be close, but since solar is so capital intensive up front, it depends on what discount rate he used. Also, O&M for solar in a desert environment might either be higher or lower than usual, depending on wind speeds and therefore cleaning requirements.
Investment in the oilsands has plunged and future growth is in question
By Kyle Bakx, CBC News Posted: Jan 15, 2017 5:00 AM ET
The Bad
“The question of the last couple of years has been, ‘Why would I invest in that when I can invest in Texas, Oklahoma, North Dakota and now even in other parts of Alberta, Northeast B.C. and Saskatchewan,'” said Tertzakian. “I can get a better return and I don’t have to wait 15 years.”
The Ugly
If commodity prices slump again, environmental policies become more stringent and costs rise, some projects may prematurely close their doors. An early shutdown would be highly unusual as these massive projects are built to run for at least 40 or 50 years, but it could happen.
“If we project out one or two decades and some of these projects require increasing cost and capital expenditures, I’m sure the proponents will say, ‘hmm, is it better just to pack it up or continue,” said Tertzakian. “It’s nothing I foresee in the next 10 years, but beyond that, who knows.”
Trudeau’s ‘phase out’ oilsands comments spark outrage in Alberta
By Kyle Muzyka, CBC News Posted: Jan 13, 2017 12:13 PM MT
“You can’t make a choice between what’s good for the environment and what’s good for the economy,” Trudeau said. “We can’t shut down the oilsands tomorrow. We need to phase them out. We need to manage the transition off of our dependence on fossil fuels.
“That is going to take time. And in the meantime, we have to manage that transition.”
New $305 million fund focused on unconventional oil and gas
by Scott Deveau and Doug Alexander, Bloomberg, January 13, 2017, 4:30 PM EST
The fund will target controlling positions in private, unconventional oil and gas companies in regions like the Montney and Permian basins.
Technology in unconventional oil and gas has produced returns that are becoming increasingly attractive, Waterous, 55, said.
“The returns have gotten better because the reserves each well is producing has gotten larger and larger,” he said. “Now what you’re having for the first time — and you see it most obviously in Western Canada in the Montney — are companies recording astounding production gains on a year-over-year basis,”
The increasingly effective use of diversion proppant, both near the wellbore and so called far field, is playing a big role in increased output.
The massive amount of sand in these recent completions is to both scour/sandblast the fractures and to prop open the vastly expanded network of fissures no more than 300’/500′ feet out.
Until fairly recently, only 60% or so of the entry points were productive.
Now it is regularly close to 100%.
In addition, both the speed and precision of targeting has greatly improved over the past two years.
China’s crude production seen dropping as much as 7% this year
Bloomberg News – 17 January 2017
China is seen leading a trend across the region. Asia-Pacific’s crude output will drop by about 1 million barrels a day to 6.5 million by 2020, according to Wood Mackenzie Ltd., as exploration since 1990 has yielded mostly natural gas and capital spending was cut because of the slump in oil prices. China will account for 47 percent that decline, according to the consultant. https://www.bloomberg.com/news/articles/2017-01-17/china-s-inescapable-oil-slide-is-a-record-breaking-gift-to-opec
Yo Mike, aka Mr. Almost Never Right?
The world’s biggest publicly traded energy company is joining the land rush in the prolific Permian Basin. Lookie here a “MAJOR” adding LTO assets, who would have guessed that. It damn sure would not have been someone named “MIKE” from a 4 generation oil family. Better odds getting investment advice from a chimp with a handful of darts. just saying ?
TT, you always seem to be posting about energy stock prices going up. That’s mostly important to people who are selling stock or who need to boost their net worth for some reason.
I continue to believe you want to promote oil stocks for a reason: either to sell them or to raise money for a company you own or represent.
If you are buying more stock, then you’d be more interested lowering the price so you could get more.
Are you selling, and if so, why?
Hi Boomer,
I think your misjudging TT. Anyone reading this blog, who buys stock from TT post isn’t going to make a difference in the value of any stock. In general this is not a time to be selling oil stocks. It’s more likely to be the last opportunity to buy stocks at a 30 to 75 percent discount from a depressed market because of low oil prices for more than two years. It’s been a buyers market for the last two years and anyone paying attention should have been bottom shopping. I’m loaded up and always looking for opportunity but not selling at this point. There is still easy money to be make out there. Don’t put all your eggs in one basket.
But HB, most of your posts aren’t about energy stocks.
I’m suggesting that repeatedly posting about buying energy stocks in a forum that isn’t devoted to touting investment opportunities suggests to me someone who wants people to buy energy stocks.
But why? To increase their value?
Stock valuations are often not tied to underlying value. I think people here are generally more interested in how much oil is available, at what price, and for how long. People who want to buy energy-related stocks can factor that in, but I don’t think it is the heart of the discussions here. We have had some discussions about how forthcoming companies are about their reserves, and that does factor into stock prices, but the focus is on the oil and gas, not on the stock price.
In terms of investments, one might be wise to consider all possible investments, energy stocks and otherwise. As I mentioned in a previous comment, for the average investor, just buying the S&P 500, on a regular basis rather than trying to time the market, is usually the best strategy. The way trading happens these days, it’s pretty hard to stock pick and actually stay ahead of computerized trading by the big firms. They are going to exploit advantages that most of us don’t have.
I have followed online stock discussion boards and stock picking advice, and you have to take at least some of it with a grain of salt. It’s a sales pitch.
“Stock valuations are often not tied to underlying value.”
That’s correct. Which makes discovering under value stocks such an opportunity. That’s what I think a lot of oil stocks are today.
“for the average investor, just buying the S&P 500”
I agree the average person shouldn’t be trading individual stocks. They don’t have the skill or knowledge and most likely lose their investment. But, on the other hand I don’t think a lot of the regulars here are average. That’s probably why their here in the first place.
“rather than trying to time the market”
Now here I totally disagree with you regarding someone who is market savvy. I believe that’s what investment advisers want you to believe. They love to sell the idea of you just giving them your money on a blind regular basis.
“I don’t think it is the heart of the discussions here”
I agree it’s not. But it was the unexplained collapse of my refinery stocks back in early 2008. That lead me to The Oil Drum and eventually here. For me, the everyday counting of drilling rigs, holes in the ground or daily production gets boring. I’m more interested in the trend or the vast oil industry workings. Also, and how I can take that information and make money on it. That makes it real world for me.
“you have to take at least some of it with a grain of salt”
True, it’s why I stay in my little world of large companies in energy, material, telecoms, transportation and utilities for the last 25 years. I avoid tech, retail and new issues. There is a lot of cons and trash out there. Buyer beware.
Salud
This is not an investment blog.
The difference between a man and a boy is the price of his toys.
Mr. Tea,
Exxon buying Permian does not say anything how prolific Permian play will be. What it does say that policy is getting in place with the steps to weaken the dollar and toward the rise of the price of oil. Exxon is only capitalizing on that (with tiny conflict of interest by having ex boss as Sec of State :)). Any US administration has no control over the Federal Reserve and its determinations of the base interest rate. So there are not enough mechanisms to lower the value of the dollar. Without lower value of dollar it would be impossible to reindustrialize country. The key to weakening the dollar is precisely in the price of oil. US currency is secured by oil and the value of oil itself is in inverse proportion. Raising the price of the dollar leads to a decline in the oil and vice versa. So the only policy combination for the next administration for job revival in US is cheap dollar- expensive oil.
Have a nice day.
Exxon is using stock for the purchase. So it might be the best use of its stock right now, especially if the company anticipates a stock price decline.
XOM bought XTO a few yrs ago.
They are a nat gas fracker.
What is the rational, for Exxon, to buy these assets?
1/ Exxon had treasury stock worth $230 billion as of Sep. 30, 2016.
$5.6 billion in stock the company is planning to pay for the Permian assets is a small part of that amount. It will also make cash payments totaling up to $1 billion, from 2020 through no later than 2032, corresponding with the development of the resource
Exxon’s net debt of $23.8 billion is low relative to its size. Net debt/equity is only 13.5%, one of the lowest in the global oil and gas industry. (This compares with >100% ND/E ratio for most shale operators).
That means that Exxon has significant financial potential for growth through organic capex and acquisitions. However growth opportunities outside the U.S. are limited: Gulf countries are largely closed for foreign investments; contract terms in Iraq are not lucrative; there remain serious problems in U.S.-Iran relations; Russia is largely closed for U.S. investors due to the sanctions; security situation in Nigeria and Libya remains dire; Canadian oil sands are a high-cost resource, etc. That leaves the U.S. upstream sector one of a few remaining investment options for a U.S. supermajor, like Exxon. A short investment cycle in the shale sector makes it particularly attractive compared with long-term projects in the deep offshore, given the uncertainty about future oil prices (I do not necessarily agree with that view, but it is shared by the majority of oil analysts and experts).
2/ The properties are a major addition to Exxon’s unconventional liquids portfolio managed by its unit XTO. Its output from the basin is currently about 140,000 boepd, net. The deal covers an estimated resource in the Delaware basin of 3.4 billion boe, of which 75% is liquids, more than doubling ExxonMobil’s Permian resource to 6 billion boe. The acquired companies, which include operating entity BOPCO LP, hold about 275,000 acres of leasehold and production of more than 18,000 net boe/d, of which 70% is liquids.
No doubt, Exxon expects some synergistic effect from this acquisition.
3/ By buying assets in the Permian, Exxon is following a trend visible from 2016.
“Dealmaking in the U.S. oil and gas sector rebounded strongly in 2016, as buyers scooped up prime acreage that can produce at a profit while crude prices are low, according to a new report.
Mergers and acquisitions activity in the oil patch hit $69 billion last year, more than doubling the total in 2015, according to data compiled by Houston-based oil and gas research firm PLS. That marks a sharp reversal after total deal value slumped 62 percent in 2015.”
“The biggest contributor to the reversal was the Delaware Basin, a portion of the larger Permian Basin located in Texas and New Mexico. The Delaware generated $18 billion in M&A activity” (more than a quarter of U.S. total), up from $3.3 billion in 2015 and $0.3 billion in 2014.
“Another section of the Permian, the Midland Basin, attracted $9.1 billion in dealmaking. Much of the Midland’s top acreage got purchased in 2014.” http://www.reuters.com/article/us-exxon-mobil-deals-permian-idUSKBN15120F?il=0
“Prices have skyrocketed in two parts of the Permian, the Midland and Delaware basins. The average price for the three most expensive deals in the Midland Basin this year was nearly $49,000 per acre, compared with an average of $38,300 per acre for the top three purchases in 2014.
The run-up has been even more spectacular in the Delaware Basin. RSP Permian paid $48,157 per acre in the region’s most expensive deal this year. Primexx Energy paid just $14,615 per acre in the Delaware’s biggest acquisition of 2014. ” http://www.cnbc.com/2016/12/16/land-rush-us-oil-drillers-pack-into-the-permian-basin.html
Having said all that, I should note that Exxon’s upstream operations in the U.S. were loss-making in 2015-16. If oil prices remain low for a relatively long period, Exxon will struggle to add value through this acquisition.
TT:
What is interesting to me is that, even though the XOM spokesperson stated most of the recently acquired locations are attractive at $40 WTI, the seller, BOPCO, LP drilled and completed less than ten Hz wells in 2015-16, after drilling and completing over 200 Hz wells in 2014 and prior on this acreage.
Why did they stop if attractive at $40 WTI?
Looks like BOPCO, LP has had some good Bone Spring wells in New Mexico, but at $40 WTI?
Maybe the Bass Family is like the small producers you like to attack? Maybe, being privately held, also have to make money on the product, and not the ways management at public firms make their money?
This acreage is almost all HBP, and should do fine at $90 oil. Could be awhile till oil gets back to $90? I presume XOM will take their time developing this? Note that payments to Bass Family out of production do not start till 2020.
Shallow,
See below the ultimate recovery profiles for all Bopco’s horizontal wells in the Permian (both Texas & NM). I’ve highlighted the thin 2015 vintage, which indeed consisted of just a few wells. Interesting to see that the general trend of ever higher initial productivity isn’t shown here; instead it appears that since 2013 its wells haven’t shown any improvements.
Enno,
Is that possible to get similar chart for XTO operation in the Delaware basin
(or NM portion of the Permian; or Permian in general).
Thanks a lot. Your website is unique!
World needs to invest $25 trillion in new oil capacity over next 25 years, Saudi Aramco’s CEO saysDemand for oil and gas will continue to grow for the next few decades and any fall in capital investment for the industry will cause “spikes” in prices and affect the global economy, according to the president and CEO of Saudi Arabian Oil Company (Saudi Aramco).
“He said that more expansion is need needed in the sector and more capital would be required.”
So it sounds like he’s on a mission to raise more money. The article didn’t make mention of the fact that all that investment money might not return much in terms of increased oil.
So, you could say, “Give us your money. We’ll spend it, though we may not have much to show for it.”
We need to keep in mind that people don’t always agree on the future of oil. And some of their pronouncements may be tied to who is going to make money.
“Saudi oil minister doubtful on US shale production surge: Saudi Arabia’s energy minister, Khalid al Falih, said on Tuesday he did not believe the US could add 2-3m barrels a day of oil production any time soon, despite the recovery in prices.”
Asia-Pacific oil production declining at record levels: Wood Mackenzie
Here are two articles which illustrate why it might be hard to know where energy stocks are headed. There isn’t even an agreement on where oil prices and production are headed.
The Fuse | EIA Forecast Prompts More Confusion than Clarity – The Fuse: “With so many different projections, there is no clarity where government forecasters see the oil market headed. Critics can cherry-pick through the scenarios to justify almost any outlook that suits their bias. The lack of clarity matters because industry, analysts, policy makers, and consumers look to the agency for a rigorous examination on where markets are headed in order for them to make decisions.”
The Fuse | Chart of the Week: “In a year-end Twitter poll, SAFE asked several prominent energy reporters and oil market analysts to offer their predictions on Brent crude oil prices by the end of 2017. Ten responses were collected by @leslietron, SAFE’s Vice President of Content and Communications. Predictions ranged from a high of $72 per barrel to a low of $33 per barrel with most forecasts concentrated around the $60 per barrel mark.”
Rystad summary on 2016 discoveries:
“Rystad Energy concludes that the 2016 total offshore discovered liquids resources reached only slightly below 2.3 billion bbl, 90% lower than in 2010. This drop is most significant to the overall decline in discovered volumes; in fact, total global discovered volumes (oil & gas combined) are at an all-time low since the 1940s.”
They don’t show UK but I think it ended up with the best year since 2008 for overall volumes (but not high in absolute terms).
No discussion on gas but I think last year had a bigger drop than liquids, although that maybe more from reduction in exploration than poor success rates (both are impacting oil).
1,590,525,938
Cumulative total of Bakken Formation oil production.
One billion of those barrels produced in the past five years, four billion barrels to go with the projected 5.7 billion recoverable, another 20 years of production in the pipeline to go.
https://www.dmr.nd.gov/oilgas/stats/statisticsvw.asp
Click on cumulative totals by formation.
By 2035, the Bakken oil will be about done, can’t get anymore.
75 new wells per month, 12×20, 240×75=18,000 more wells over twenty years time.
The price of oil at 50, 4.5 billion barrels of oil, 225 billion dollars.
5,000,000 dollars of cost per well, 90,000,000,000 dollars invested in drilling those 18,000 new wells, 400,000,000 barrels for the extraction taxes, money for the state, 20% for royalties, 80,000,000 barrels for mineral owners, 480,000,000 barrels to keep everyone happy all of those years.
The oil companies can keep 3.52 billion barrels to sell to get them some money.
Times 50 USD per barrel to assess a value, 160,000,000,000 dollars in future income to pay the 90,000,000,000 dollars owed for oil wells drilled. After twenty years of production you will have 70,000,000,000 dollars left over for the buzzards to pick clean.
A measly 3,500,000,000 dollars per year for the oil companies to share. 350 oil companies working, ten million dollars to share amongst stockholders and employees.
The price of oil has to be more or the Bakken will slow to a crawl, then an end.
Made a mistake by a factor of ten. The 20% for royalties, it is 800,000,000 barrels for royalties, not 80,000,000.
2.8 billion barrels for the oil companies, not 3.52 billion.
Friend of mine attempted to make a “predator-prey” dynamic model of the oil price cycles, curve fitting from 2014. Fun. Trying to model the swings. Not a great fit, though.
The more fascinating part of the exercise is the realization that pressure on demand from alternatives (making demand more elastic) and pressure on supply from the decline of conventional fields in favor of unconventional fields which require more yearly capital input (making supply more elastic), combined with a continuing significant lag time between price and supply, will make the oil price *more and more volatile*. Higher highs and lower lows.
Anyway, he’s thinking maybe two more cycle tops — maybe ’18 and ’23 — before demand destruction causes the permanent price decline. I’m thinking probably that’s about right, but it might be only one more cycle top.
No evidence of consumption decline.
I hope Natural gas is petroleum related enough for this thread.
EROI of NatGas from Soviet Kanuckistan
http://energyskeptic.com/2017/eroi-of-canadian-natural-gas-a-peak-was-reached-despite-enormous-investment/
More than related. Note the inclusion of the word “gaseous” in this definition of petroleum from the aapg. http://www.aapg.org/about/petroleum-geology/petroleum-through-time/what-is-petroleum
I’ve a new post on the Niobrara, available here.
Weld County is interesting in that it is right next to major population areas in CO. It’s involving land that is used for housing developments and agriculture. So there is an on-going debate as to the extent to which the state should facilitate drilling at the potential expense of housing and farming.
With gas and oil prices staying low and with rapid decline rates, the potential disruptions may not be worth it in the long run. Colorado has had its share of boom and busts linked to natural resources, and, as a consequence, operators who go bankrupt and then aren’t around to clean up messes.
Boomer II.
Anyone buying a home in a region which has or had mineral production should always have a title search of the oil, gas and other minerals performed before purchasing the home. If the mineral ownership has been severed from the surface, the mineral owners typically will have the right to develop them. In most states, the mineral estate is dominant and the surface estate is servient. This is why local efforts to stop mineral development through zoning have been challenged successfully in the courts.
Undeveloped minerals are real estate, and prohibiting the owners thereof from developing them many times results in an unconstitutional taking.
The problem, of course, is that buyers of homes and other surface real estate in these areas are not advised as to the law, and therefore do not find out about the potential problems that may arise until it is too late and they have already purchased the real estate. Unfortunately, ignorance of the law is not an excuse in these matters any more than it is in any other matter.
Most in the business of developing oil and gas do not want to be anywhere near residential development. Unfortunately, many times, instead the development comes to them after the fact. In our area, many now want to “live in the country”. Most wells we operate have been there from 30 to over 100 years. Almost all of the minerals were long ago severed from the surface. Unfortunately, many have built homes very close to existing wells and other facilities. I feel that one who “comes to the nuisance” has very little room to complain. We recently had someone build a new home and a detached garage/shop on one of our leases, the minerals are severed. One well is less than 50 feet from the shop. They cut our electric lines and flow lines more than once during construction. The lease has been in continuous operation since 1977.
There are different facts in every situation, and at least two sides to every story when it comes to mineral development v. housing development. One thing is certain, if something is of record concerning real estate title, there is notice to anyone considering purchasing the real estate.
In Colorado most homeowners do not own mineral rights, Only recently have they become aware of that fact.
There have been ways to limit drilling. Zoning laws are what the local governments are turning to. And voters are asking for tighter controls from the state government in regards to set-backs from buildings and schools. Drillers have never had unlimited control over where they drill even if they do own the mineral rights.
Water is another issue. Water needs to be divided up among homes and communities, agriculture use, and drillers. So there are conflicts there.
I’m with Shallow Sand when it comes to people moving to the country, and then raising hell about industries and businesses that were there before they arrived.
It’s getting to be quite a hassle to run a farm these days, in some places. I haven’t had any problems, personally, but I know folks who have, and more who WILL.
Now about mineral rights, and surface rights and solutions:
As Shallow Sand and others have pointed out, the LAW as it exists, and existed in the past, is mostly very much on the side of the owners of mineral rights in most places in the USA, with surface rights playing second fiddle.
But in the END, the law is basically what PEOPLE want it to be, although the wanting and the getting are often separated by a good many years.
The people of a political subdivision, such as a city or county, might have a HARD time stopping mineral rights development via local ordinances, but at the state level, once they have state level support, there are some things that WORK.
States can tighten up environmental regulations to the point that development is either impossible, or delayed for decades, and states can mostly put a tax on pretty much anything they please and mostly at just about any RATE that pleases the state legislature. Fighting a tax that is deliberately set high enough to simply prevent mineral right development deliberately is possible, but that may well take decades as well, and then the state only has to LOWER the rate…………
There is zero doubt in my mind that even though the owners of the California agricultural industry, taken collectively , are as “rich as an Argentine”, they DON’T have enough money to keep the PEOPLE of LA from eventually taking their irrigation water away from them, if the people of LA really NEED it.
And it looks like they WILL really need it, within the next few decades, if the current trend toward drier weather on the shaky side holds.
“I’m with Shallow Sand when it comes to people moving to the country, and then raising hell about industries and businesses that were there before they arrived.”
That’s not what happened. For the most part, the housing developments and the schools and the parks were there first, and then oil companies came in and wanted to drill next to the developments. They got pushbacks as a result.
If the drilling was confined to unpopulated areas of Colorado, there would have been little said about it. But when it started to happen within established communities, then it didn’t go over well.
But economics will likely keep drilling much more restrained than what was expected a few years ago.
If you have a housing development, and there is so little space between houses for a drilling rig to set up, then there isn’t going to be drilling.
That’s one of the realities which will constrain drilling in populated areas.
If there is an empty field or a farm or even a park, maybe a drilling rig can be set up. But if there are nothing but houses and modest backyards, there won’t be enough space to allow a rig to be established and be far enough from a house to meet state guidelines.
Here are Colorado state rules for setbacks.
“The new regulations increased the minimum setback distance to 500 feet, adding a 350-foot setback from outdoor recreational areas such as playgrounds or sports fields, and a 1,000-foot setback from high occupancy building such as schools or hospitals. It also included 1,000-foot buffer distances from these outdoor areas and buildings within which facilities are permitted but require increased on-site mitigation to prevent air, noise, and water pollution. These rules took effect on August 1, 2013.”
As you can see, it there isn’t a lot of room to put drilling rigs in established neighborhoods.
Parts of Weld county are open areas, and parts of it are not.
in Texas (and most states)mineral rights are superior to surface rights. The principle is owners of the surface do not have the right to deprive owners of the minerals the right to develop their property. Much in the same way one surface owner can not deprive the surface owner of a land- lock tract access to his land. I know it is a difficult position for many here to grasp but these private property rights are fundamental in the USA?? Minerals are largely owned by private citizens/companies. One citizens or group of citizens does not have the right to deprive another the use or enjoyment or the income from their private property. Mineral owners don’t tell surface owners what they can or can not do with the surface and surface owners by law and common sense should not try to to tell mineral owners how or when or if they can developed their minerals.
As an aside, one of the poorest counties in the country, Mora County in Central New Mexico. These goobers passed a “frac ban” while at the same time started a multi million dollar new court house that they do not have the money to finish. Government goobers defined.
http://nmindepth.com/2015/03/21/capital-outlay-projects-often-controversial/
“That’s not what happened”.
True enough, but the mineral rights and the surface rights were pretty much mostly separated a LONG time before the houses arrived.
The homeowners troubles are still the result of their failing to act like adults, and hire ADULT lawyers, when searching title, lol.
Anybody who trusts anybody else just because they have created fancy trade organizations to help them make more money, as the real estate industry has done, is a few bricks shy of a full load. The real estate industry is one of the worst. I have been indignantly called ignorast by a real estate agent/ broker for referring to her by that legally recognized proper term. She INSISTS on being called a REALTOR, lol. She has customers who believe she’s actually somehow BETTER, and not to be confused with MERE agents and MERE brokers, lol.
And we all know all the lawyer stories. They usually rank either slightly above or slightly below car and truck salesmen, depending on one’s personal opinion. 😉
I’m not sure you guys are getting what I am saying. There are setback requirements spelled out by the state.
In housing developments, there isn’t room to put in drilling rigs in those neighborhoods.
It’s a done deal. There’s no space for the rigs.
So when drillers want to drill in pre-existing neighborhoods and don’t have places to drill, they can’t do it.
So the collision between developments and drilling happens, and it has nothing to do with homeowners being difficult or unreasonable.
I was thinking more along the lines of drillers, and coal miners, coming onto a farm or rural property used as a home, and making a mess of the place, which is within their rights, as owners of the mineral rights.
A guy like Shallow Sand would do what he could to create as little disturbance as possible.
But other oil guys and coal miners are not necessarily much interested in playing nice.
I have a home in Denton, on top of a gas field. The wells in that neighborhood were set in pads on open land near I35 about five-six blocks away, and thus far there’s no problem. The town has a large college student population which tends to bat left, so they tried to forbid fracking, but it didn’t get far.
I like the results thus far, the town gets a wad of tax income, house prices are up. I tried to get the antifrackers to focus on things they could change, like the emissions from condensate tanks and silencing compressors, but they turned out to be a bunch of idiots.
as an aside to your point. Several years back I had a prospect that sat under a housing development. Mostly small manufactured homes or mobile homes. There were not a lot of open surface areas to drill so we bought a couple of mobile home lots (2 acres) and moved our rig in and to keep the peace we put up closest neighbors in a hotel for a couple of week. It was a dry hole so we cleaned up the lots and sold them. No big deal. If there is a will there is a way.??
Home buyers rely on title insurance to protect their interest. And of course a mortgagee (lender) requires the buyer or seller to obtain a title insurance policy to protect the lender in the event of title failure. The title company attorney prepares the deed of trust and the warranty deed approves the issuance of a title policy which is issued by the insurance company.
Now that I think about it, I’m not really sure who is the client of the title attorney because he probably owns the title company/abstract office.
Generally that is the extent of a home owners interest in the chain of title to a particular property.
Title insurance DOES NOT cover the mineral estate. And that is why home owners generally don’t know anything about mineral ownership.
John S,
Every title insurance policy I’ve seen did mention mineral rights, and they are often mentioned on deeds, at least in Florida. May vary by state, I suppose.
People who don’t use financing might forgo title insurance thinking it isn’t worth the cost, in which case they may not know about mineral rights, because they are sticking their heads in the proverbial sand. They will howl loudly because they didn’t know.
Jim
Jim,
In your situation, could the mineral rights have been listed as an exclusion from coverage in the event of title failure?
Title insurance protects a buyer/lender from a financial loss due to title failure but it is limited, I believe, to the purchase price/mortgage.
What is the value of a non developed mineral estate? If you don’t know the value of the mineral estate how do you price title insurance? For that matter what is the value of a developed mineral estate?
The oil & gas industry does not use title insurance when selling or purchasing oil and gas properties. The industry relies on title opinions prepared by oil and gas attorneys, due diligence title reports prepared by Landmen. Mid-stream facilities are probably different but that’s not my field.
Many of these people obtain error and omission insurance policies to protect themselves from liability, but I can assure the value of the policy will never be adequate in the event of a title failure.
Anyway, that’s from my experience for what it’s worth.
.
My experience is that title insurers never will insure minerals.
The title insurance simply notes that the mineral ownership has been severed from the surface rights and is not part of ownership. The title insurance guarantees the title to what you do own. Mineral rights do not come into play since they are clearly indicated as not being owned.
Jim
SPR Drain — Buy High – Sell Low ?
http://www.zerohedge.com/news/2017-01-09/us-sell-8-million-barrels-oil-strategic-petroleum-reserve
Why? To fund the pumps and stuff that have rusted away.
Even if the money is needed for repairs and infrastructure, why sell when prices are low? Why didn’t they sell when the prices were high?
More SPR things:
720 million barrels in the US SPR when full. It’s usually not 100% full and when it is (last happened Dec 2009) it’s not really full because you can’t recover 100% of what you store. Oil gets into pores in the rock and won’t come out. Just like less than 100% recovery of oil from an oil field.
The usual calculation is 720 / 20 mbpd US burn = 36 days of consumption storage. With US production at about 8.5 mbpd that number seems to rise to a little less than double — call it 70 days.
But not true. Maximum extraction rate is only 4.4 mbpd (takes 13 days from the word go for the first barrels to enter the system). Not 11.5. So the total embargo of imports scenario because Canada wants to save it for their grandkids means the country goes from 20 mbpd consumption to 12.9 mbpd — for 160ish days (720/4.4) and then just the 8.5 is all we have to function.
Gonna have to compute oil consumption required to haul/deliver food to stores and for people to drive to stores to get it. Tricky for the haulage from central america (fruits).
Salt dome storage caverns don’t have pores. They’re caverns.
The papers are about incomplete recovery. Some stays behind in the rock, however low the porosity / permeability. Some escapes during fill/extraction cycles, which means loss during the process itself, I guess.
Total loss is specified at what looks like under 1%. The papers by enviro ppl opposed to storage in their neighborhoods said 1%, so that’s probably top end. They added spillage to the loss mechanisms other papers talked of.
The rock is salt, which has zero permeability. I suppose some oil will stick to the salt cavern walls.
Where’s the Money go if the Feds sell SPR Crude? Gov Black hole?
Latest from Art:
http://www.artberman.com/the-opec-oil-production-cut-another-year-of-lower-oil-prices/
“In fact, tight oil production is a plus for OPEC. The U.S. must import i n c r e a s i n g amounts of OPEC heavier oil for blending in order to refine the ultra-light oil produced from tight oil plays.”
Useable North American Tight Oil just 16 x the US SPR ? Seems like a whole heap of Fracking trouble and crude imports to make all that LTO useable.
These are only proved reserves of LTO. Recoverable resources are much bigger.
Berman compares proved LTO reserves classified under strict SEC rules with unaudited “official” reserve numbers for OPEC countries shown in BP Statistical Review. Most experts do not trust these numbers, particularly for Saudi Arabia.
Look, for example, at Rystad Energy’s resource estimates, which are much bigger for the U.S. than KSA, Canada or Venezuela.
If we consider only economically recoverable resources, I’m not sure that Canadian oil sands or Venezuela’s ultra heavy oil is a lower cost resource than LTO.
These are only proved reserves of LTO. Recoverable resources are much bigger.
With all the LTO drilling done in US, thousands of wells, how could there be anything but proved LTO reserves in the US?
The Venezuela figure is BS. The reserves outlook gets grimmer by the year, because the current development strategy is incompatible with enhanced recovery. The areas under development are mostly the “sirloin steak” in the Orinoco heavy oil belt, and these high graded areas are now being gutted by pdvsa and partners. They are going after quick kill primary recovery, ruining the reservoirs. This means that not only is the 300 billion barrel figure a poor number, the “real number” is gradually degrading as they continue to lower reservoir pressures and allow water to penetrate the developed reservoirs.
Hi Fernando,
Based on what you know I think your estimate for URR for Orinoco is about 100 Gb, if I remember correctly, due to the poor development you outline above.
Please correct me if I am remembering incorrectly. Thanks.
I have a couple of things I wrote
http://21stcenturysocialcritic.blogspot.com.es/p/venezuelas-oil-reserves.html
http://21stcenturysocialcritic.blogspot.com.es/2014/10/is-venezuela-running-out-of-oil.html
http://21stcenturysocialcritic.blogspot.com.es/2015/05/venezuelas-heavy-oil-scam.html
Production is slightly below 2 mmbopd, so my forecast seems to be holding. Right now the regime is chaotic, the National Assembly is powerless, but they met and declared Maduro had abandoned his job. The constitution actually allows them to do it, it’s not very well written. Things are terrible, and there’s an increasing refugee flow, which of course is ignored by the media
https://www.caracaschronicles.com/2017/01/11/curacao-weary-venezuelan-boat-people-begin-arrive/
Meanwhile in Cuba repression is up, the new interior minister wants to show he’s a tough dude. This is also ignored by the media, which is focused on Trump being Putins lover and planning to send al gore to Guantanamo.
http://translatingcuba.com/cubas-new-minister-of-the-interior-inaugurates-his-tenure-with-a-repressive-wave-across-the-country-14ymedio-mario-penton/
Maduro named a new Vice President, Tareck el Aissami. The guy is known as “El Califa de Aragua”, was named in a confession made by Walid Makled, a large cocaine drug lord captured in Colombia, to be the facilitator for large cocaine shipments the Makled cartel shipped via Venezuela (the Makleds shipped FARC cocaine). El Aissami speaks Spanish with a mixed Cuban-Venezuelan accent, his family is from Lebanon, but he spent time in Cuba. El Aissami has so much power he convinced Chavez to demand Makled be turned over to Venezuela and not to the USA, which had an indictment issued by a federal court. Santos, Colombia’s president, seems to be a mole, or is an idiot, he shipped Makled to Venezuela, and the guy disappeared in Chavez’s jail system. This means Makled didn’t get to testify in USA court against el Aissami, Cabello, and the other high level druglords in the Venezuelan narco regime.
Some wags claim el Aissami has terrorist links, but that’s probably baloney. I asked my Russian contacts, and they say el Aissami is very tight with the Assad regime, but that’s just because he wants protection for his family left behind in Lebanon and Syria. They also mentioned he has a remote cousin (not Jewish) serving in the Israeli army, so you go figure how tangled all of this gets.
Thanks Fernando,
So with the 120/b scenario about 100 Gb of Orinoco URR. My estimate is about 250 Gb from Orinoco and 250 Gb from Canadian oil sands.
Probably a more realistic extra heavy oil (XH) estimate would be your 100 Gb estimate from Orinoco and maybe 200 Gb from Canada for a total of 300 Gb of XH URR. That would reduce my World URR “medium” scenario to 3100 Gb of C+C (with about 1300 Gb produced through Dec 2016), leaving 1800 Gb to produce.
Note that this scenario assumes high oil prices. If high oil prices leads to lower demand for oil as other energy sources are substituted for oil, then a lower scenario with URR=2800 Gb may be more realistic and depending on how low oil prices go, even that scenario may be too high as the XH URR will fall to 200 Gb or less, which would put C+C URR at 2700 Gb.
Using those assumptions, we might be at 50% of C+C URR by 2017 and a plateau in output from 2015 to 2019 may be pretty reasonable. How fast output declines will depend in part on oil demand (through the effect of oil prices on supply and demand for oil.)
Dennis,
The recent USGS estimate of world URR is much bigger than yours.
The chart below shows resources of conventional oil fields outside of the U.S. (excluding tight oil and tar sands).
Total number is 3,300 BBO
Excluding cumulative production: 2,500 BBO.
Probably, you underestimate future reserve growth in discovcered fields and potential resources of yet undiscovered fields.
source: U.S. Geological Survey Assessment of Reserve Growth Outside of the United States. December, 2015
https://pubs.er.usgs.gov/publication/sir20155091
That chart is so absurd it is funny. Of course it includes those OPEC fictional reserve numbers.
And 565 billion barrels of undiscovered oil. At the 2015 rate of discovery, 2.7 billion barrels, that would take about 210 years to find it all. And at the 2016 discovery rate, less than 1 billion barrels, it would take over half a millennia.
But the biggest joke of all is that 665 billion barrels of reserve growth. Hell, they don’t even need to look for any new oil. Just sit back and let what we have already found grow and grow and grow.
The updated number for oil discoveries in 2016 is 3.7 billion barrels, according to Wood Mackenzie.
In 2015, it was slightly higher.
The estimate for 2016 is preliminary and can be revised upward.
Still, this is indeed a multi-year low. But global exploration activity last year was also at multi-year lows, both in terms of spending (about a third of 2014 levels) and the number of wells drilled (also a third of 2014 levels)
Before 2015, the average discovery rate was around 10 billion barrels.
Exploration activity is expected to rebound in 2018.
https://www.bloomberg.com/news/articles/2017-01-10/oil-discoveries-seen-recovering-after-crashing-to-65-year-low
In my view, a more important issue than the absolute level of discoveries (which may rebound) is that these new discoveries are mostly high-cost resources. Their development may be postponed if oil prices are not sufficiently high, and that may result in serious supply deficit in the next decade
Hi AlexS,
I believe the USGS overestimates both undiscovered resources and reserve growth. They also include all OPEC “reserves” which are not audited, these are likely to be 300 Gb lower than reported for conventional OPEC reserves (Jean Laherrere’s estimate).
So let’s assume extra heavy oil plus LTO has a URR of 500 Gb and we will call everything else conventional oil. My estimate is 2800 Gb for my “medium scenario” and 3100 Gb for my “high scenario” for C+C less extra heavy oil. LTO is likely to be a rounding error so we could put it in either category and not much would change.
I expect discoveries will be about 300 Gb and reserve growth another 300 Gb and that current 2P reserves plus cumulative production (excluding extra heavy oil) is about 2200 Gb.
Perhaps I am too conservative, but Ron, Doug, George Kaplan, and many others think my “medium scenario” is too optimistic.
Fernando thinks I am in the right ballpark, I think.
If oil prices remain under $100/b long term, even my “low estimate” of 2800 Gb (2500 Gb conventional and 300 Gb extra heavy) might be too optimistic.
If oil prices can be sustained at $120/b, we might see C+C URR of 3100 to 3300 Gb.
I just don’t think the USGS estimate is realistic because by 2040 we may see lower demand and lower oil prices which will leave a lot of oil in the ground because it will not be profitable to produce.
Hi Fernando,
You already know I think you are have told it like it WAS, in the past, and that you are telling it like it IS in Venezuela and Cuba today. You may be off some as to the matter of degree, but my take is that things are as bad or WORSE than you have described them.
Anybody in this forum who doubts you is probably a well educated and basically political liberal individual, because there aren’t more than maybe half a dozen or so of all other kinds put together, at least not among the ones who post comments indicating their political leanings. Figuring out a man’s politics is easy, if he talks much.
Now there is this magazine , with a web site of course, called THE NEW YORKER, which is one of the highest quality most reputable publications around, and you are hearing this from a guy who is occasionally called a Trumpster, or nazi, or pervert or even worse, by more than just one liberal, in more than one place.
Every big D Democrat I ever met who reads the news has a HIGH opinion of the New Yorker.
So- Anybody who doubts you, because you are of a different political tribe, is WELCOME to google Venezuela plus failed state plus The New Yorker, and they can read a long, detailed, high nuanced article about the situation in Venezuela on their web site, free, without even registering.
This article touches on the relationship between Venezuela and Cuba, but not to any great extent. But it verifies that Cuba HAS HAD secret police types , etc, in Venezuela, who are so far as I can see, are very likely still there, helping Maduro run his own little police state.
Because make no mistake, Venezuela is now close enough to a police state that using that term is hardly an exaggeration at all.
The situation there is nothing less than desperate, it’s bad enough to make a grown man cry, if he allows himself to think about it.
Given that you are in my estimation proven correct by an unimpeachable source, about the political and economic picture in Venezuela, and that are an oil guy with first hand and second hand but recent knowledge of the Venezuealan oil industry, I believe you should be taken as seriously as the proverbial heart attack when you talk about Venezuelan oil.
Other people’s mileage may vary.
Mac: thanks for your kind words. I’d like to point out I’m in daily contact with people in Venezuela and people who go in and out of Cuba, and I also monitor events in Venezuela and Cuba by simply looking at videos people manage to upload. I also get the US State Department communications for USA expats living in Venezuela. These warn (and give the location) of ongoing riots, lootings, marches, and other events which threaten safety.
By the way, I just wrote a post, it’s about a time traveler from 1967.
I am probably one of the very few forum members who takes Fernando seriously, in respect to the history of Cuban and Venezuelan politics, etc.
But I ‘m assuming just about all of us take what he has to say as an oil guy seriously, as I do. Does anybody have any reasons to offer as to why I should change my mind?
Hi Old Farmer Mac,
Mike, Shallow sand, Fernando, George Kaplan, SouthLaGeo, and AlexS are some of the best people here for inside knowledge of the oil industry in my opinion. Rune Likvern is great as well, but he doesn’t offer his opinion much these days here at POB.
What goes on in Cuba and Venezuela gets almost zero coverage in the USA media, and what you see about Cuba is mostly distorted, I guess because the USA elites are following the Obama line, and/or tend to be left wingers who admire the Caribbean’s Stalin, just like USA fascists loved Adolf Hitler in the 1930’s.
One thing is for sure, I don’t expect fair coverage from the media, I’m going to continue to be insulted and trashed for telling the truth, and life will go on. Eventually the Castro dictatorship will fall, and we may, or may not, find out about the regime’s crimes. This world isn’t known for accurate information, and people tend to avoid recognizing their mistakes.
I don’t think I ever doubted that the Castro regime was a cruel dictatorship, and obviously the USSR was run, usually, by a bunch of bad actors as was communist China.
However I do think there has been great hypocracy in the way the US has dealt with nasty regimes. China is still avowedly communist yet they are now one of our major trading partners. We trade with Viet Nam, also communist. Both countries probably rival Cuba and Russia today as nasty regimes. Why the difference?
Cynical me thinks it is because the US establishment was/is convinced that there was money to be made by dealing with these particular nasty critters. It was clear for a long time that there would be no benefits to business dealing with Soviet Russia so no serious effort was made to understand what made them tick. I believe that when Stalin died there was a real opportunity to come to some reasonable arrangement with the USSR instead we, the US, chose to up the ante.
I don’t know if Venezuela or Cuba or the USSR would have taken other paths with less US belligerency but I certainly see an ugly assymetry in our behavior.
Nothing ugly about bashing a commie dictator on the nose if it’s a low cost issue. As it turns out, obama’s friendly attitude towards Raúl Castro has encouraged Maduro, Ortega, and Morales to become dictators in their respective countries. And all of them keep spouting the vilest comments about the USA. Just a few days ago Raúl Castro held a military parade in which his troops chanted they wanted to fill Obama’s head full of lead.
When I watch obama’s foreign policy “experts” I cringe. They are the biggest bunch of retards I’ve seen on the job ever since Rumsfeld, Cheney, and the neocon kiddie corps took over the White House.
The point is that Cuba doesn’t really matter one way or the other to the US, and it is politically expensive to keep the nonsensical embargo in place, as it obviously doesn’t have the power to remove the regime.
Politically expensive with whom? Chilean communists?
Focus on the point I’m making: by legitimizing the Castro dictatorship that utter imbecile known as Barack Obama has encouraged the transformation of the Venezuelan autocracy into a dystopian dictatorship, which is now allied with the Castro Mafia, and aiding the emergence of more dictatorships in Nicaragua and Bolivia.
I thought Bush was incredibly stupid when he invaded Iraq. And now I assert Obama isn’t far behind. The USA has endured 16 years of crappy leadership. But wait, there’s more…
Fernando,
From your standpoint, what would be a good course for the USA to pursue in regard to policy with Cuba or Venezuela going forward?
I think most Americans really don’t know what would be good/ constructive policy.
Speaking of blends
“reportedly no one has bought any, as refiners are unsure about the quality of the blend and are concerned about the effects of commingling with other batches of different crude blends shipped on Line 3.”
http://seekingalpha.com/news/3234342-reuters-refiners-shun-new-canadian-crude-blend-offer-enbridge-line
Oops!
http://www.reuters.com/article/us-enbridge-pipeline-wisconsin-idUSKBN14U02L?feedType=RSS&feedName=domesticNews
The natives are getting restless—
HSBC Global Research Report on Global Oil Supply
“Will Mature Field Declines Drive the Next Supply Crunch?”
Short answer: “yes.”
What with 81% of conventional fields in decline!
https://drive.google.com/file/d/0B9wSgViWVAfzUEgzMlBfR3UxNDg/view
I have been making the points as outlined in that piece for sometime…i repeat long carbon based energy. dumb money indeed?
Hi TT,
We DO have our differences of opinion, but I am with you, when it comes to the prospects of making a lot of money in the oil biz.
It’s quite possible the industry as a whole will stay in the pits, over the long haul, and that we might leave oil, before oil leaves us.
There’s an old story about some Saudi prince saying that the Stone Age didn’t end because of a lack of stone, and that the Iron Age didn’t pass into history due to a lack of iron, and that the Oil Age will not end due to a lack of oil. He may well have been right, there might be one hell of a lot of stranded oil, EVENTUALLY.
But in the short to medium term, somebody who KNOWS the industry has in my opinion an EXCELLENT shot at making very handsome profits. It’s going to be ten to twenty years, at least, before electric vehicles cut very deeply into the demand for oil.
Depletion and the increasing cost of extracting,shipping and processing smaller fields and lesser quality crude will force the price up, and low cost producers will be probably be sitting pretty for some years to come. MOST years. And if you KNOW what’s going on, you will have a pretty good idea when it’s time to get OUT, for the last time.
These are my personal opinions, based on observing commodity markets as a commodity producer, over the years. The only real difference is that so far at least, lol, nobody is marketing a product that will render food obsolete. 😉
If I could I would buy Mad Dog or the Atlantis fields. But those won’t be producing that much in 20 years.
There might be money to be made by buying and selling oil-related stocks, but there is also money to be made buying and selling stocks in other industries.
What I have been pointing out is that anyone who is encouraging you to buy a specific company or a specific industry may already be holding stock in those and looking for buyers.
Owning stock without being able to sell it doesn’t make you any money unless you are collecting dividends.
I collect dividends. I bought my shell shares at such a low price they pay 9 % on the investment. And I really don’t think any of you should buy any. I want them all for me.
some things to think about from Art B.
https://www.oilvoice.com/Opinion/1227/Despite-OPEC-Production-Cut-Another-Year-Of-Low-Oil-Prices-Is-Likely
I continue to predict 63 average for the year. I think I put my price forecast in my blog a while back, and I don’t see a need to change it.
Which year? 2017?
Obviously he means 2017. The Brent price averaged about $44/b in 2016 (nominal) and is about $54/b at the end of the year. My guess would be about $75/b by the end of 2017 in 2016$. If Fernando’s estimate is in 2016 $ and is the average Brent price for 2017, I agree with his estimate.
That means he may be wrong, because I am rarely correct on my oil price estimate.
Sure, 2017. Take $63 and multiply by 1.015 to account for the inflation factor. That’s my forecast. I can also predict the retail price of cat food tuna.
I mentioned that zoning laws can prevent drillers from drilling in certain areas.
Here is an older article explaining how it is done.
REGULATION: In the oil patch, zoning is no stranger to drilling — Wednesday, November 21, 2012 — http://www.eenews.net: “MIDLAND, Texas — Wes Perry, the CEO of a midsized drilling company in this oil and gas town, says city government has piled on so many regulations, it’s pointless to drill a well inside the city limits.
‘It doesn’t make economic sense,’ said Perry, standing in the back of KD’s Bar-B-Q, a local favorite. ‘It adds a few hundred thousand dollars for each well. That’s 10 or 20 percent more.’
But that doesn’t mean he dislikes the rules. He wrote them, or at least helped write them, as part of his other job — mayor of Midland.”
“And in Oklahoma, where the fervor for drilling is no less intense, some cities flat-out ban drilling within their city limits. Among them is Tulsa, which once billed itself as the Oil Capital of the World.”
Keep in mind many new wells onshore US are horizontal. So, location may be 1-2 miles away, yet well can go under subdivision, lake, park, etc.
The 18,500’+/- lateral from Eclipse’s Purple Hayes well was just the first of several ‘super lateral’ designs with 22,000′ the present goal. Vertical depth there was over 8,000′ with TMD about 28,000′. This well is producing primarily condensate.
In the Bakken, an operator (QEP?) is currently drilling several 15,000′ laterals under Lake Sakawea at a vertical depth of over 10,000′.
What % of US oil consumption is food transport? This got tricky quickly.
Average US person eats about 5.4 pounds of food a day. That’s just the food. Average meal travels 1500 miles to reach your mouth.
First tricky item — packaging. It has to transport, too. Amazing variance on this. Glass jar of pickles vs paper around candy bars. The only estimate out there is numbers for municipal solid waste and estimates of % of that is food packaging. Year 2000 US waste generation 4.5 pounds/day/person, and growing. Probably over 6 by now based on the curve, but will use 5 lbs/day cuz round number.
31% of that is packaging and half of that number is food packaging. Some 2006 study. So 15% of 5 lbs a day is 0.75 pounds added to the 5.4 pounds of food is 6.15 pounds shipped a day per person.
For 1500 miles.
Eyeballing some charts looks like typical/average truck hauling weight for stuff hauled is 60,000 lbs. Typical diesel mileage 6 miles/gallon.
6.15 pounds X 320 million mouths = about 2 billion pounds of food moved each day
1500 miles / 6 = 250 gallons truck burned
2 billion lbs / 60,000 lbs = 33,333 truck trips X 250 gallons/truck trip = 198.4K bpd to move food.
Ain’t much. Maybe there’s an error in there. Top of my head . . . things not included, hauling spare parts for the food moving trucks, spare parts for the packaging gizmos, plastic packaging, agricultural consumption itself.
[Edit] Blurb says 17% of total US oil use is agricultural, up and downstream (fertilizer plus fuel). This would be far more than food transport.
I am suspicious of that fifteen hundred mile figure, but it may be accurate. Or it may have assumed a life of it’s own, after being tossed out by one or two people who really just guessed at it.
Most of the food that is produced in truly huge amounts, staple food, is shipped by water, and or by rail, if it travels a LONG way. A VERY limited amount of food, in relation to the total amount, is air freighted.
Here in the USA, it’s not too likely that very much in the way of unprocessed or processed staple food is shipped more than a thousand miles by truck. Exceptions will be mostly fresh high retail value produce, shipped as directly and quickly as possible from grower to retailer.
The REAL food miles come at the very tail end of the distribution chain. I never owned an eighteen wheeler, but I did once own a C70 Chevy which would legally haul about sixteen thousand pounds of apples to market. The farthest local growers usually go with their own truck of this sort is about a hundred miles, one way. Thirty gallons of diesel would take me that far, and home again.
The people who actually bought my apples at retail, after they were picked up at the wholesale market and delivered around town in smaller trucks, usually bought no more than five pounds at a time.
I’m guessing, pulling numbers out of my hat, but I suppose a typical shoppers average grocery purchase weighs from about twenty five to thirty pounds, up to a hundred pounds,depending on family size, and is made on roughly a weekly basis, on average.
And I’m guessing that the average trip to the super market is at least six to ten miles, round trip. THAT’s where the food miles really pile up. A liter of gasoline burnt to get fifty pounds home, the last five miles, times around a hundred million households, times fifty weeks, adds up. FAST.
Maybe. The pickle jar weighs a LOT and there’s not much food weight part of that. The whole packaging thing is a significant thing, and that’s another food item I didn’t include, disposal of it.
I’m going to guess the 1500 mile thing came from the coasts’ pop centers and their daily bread from Iowa and Nebraska. The various websites talking about this like to talk about a head of Imperial Valley California lettuce going to England. X calories burned for 1 or two calories delivered to the mouth. But that sort of thing definitely would drag the average up. 1500 miles maybe is legit.
I am surprised the total transport is south of 1 mbpd, if it truly is. As for shipping, I can’t see Iowa bread going to NYC any way but by truck. Not going to fly it there. And the canals don’t reach.
Everybody driving the last 5 miles to the store . . . maybe that really doesn’t show in the diesel calc. Oh! Of course. The issue is not diesel. It’s the 60,000 pounds per trip. A car is carrying the much lower weight per your estimate. Will redo.
14 billion pounds of food move the last 5 miles by car per week, probably at 150 lbs per weekly load (family of 4 at 6 lbs/day/mouth incl packaging)
14 billion / 150 lbs = 93 million car trips per week.
5 miles in a 25 mpg car is 0.2 gallons. X 93 million /7 and /42 = an additional 63,000 bpd from the car trips added to the trucks above. About 260K bpd for food transport.
Hmmm of course if it’s 5 miles each way that’s a X 2 on the 63K. And SUVs for that trip, not a Datsun. Might be up nudging 400K.
It occurs to me that Pepsi and Coke may not be food, and they are heavy.
I’m having problems with this 400ish K number because the famous 2004 pie chart of US oil consumption said 65% transportation, and of that 65% it was only 37% passenger cars, 18% heavy trucks and 27% light trucks (sums to 45%), and that was before SUVs (called light trucks) had swept up sales. Though F-150s may have arrived.
0.37 X 0.65 is only 24% of consumption. Trucks light and heavy rather more. So what are they hauling. Food as a daily consumable would seem to be the dominant hauled stuff, but apparently not.
Most of the grain or flour that goes from the midwest to the northeast probably gets there by rail, where it will then be baked into bread, packaged, and shipped by truck to food distribution centers, or directly to supermarkets. But the distribution center food warehouse seems to rule these days, because it’s better to load a truck up to the doors with a variety of stuff all destined for one address or maybe two or three, than it is to have a truck stop to deliver bread and nothing but bread to a bunch of different stores. That means a lot more total time and miles invested in stop and go driving, compared to the one stop load. That still happens, but not as often as in the past.
Grain is milled into flour near where it’s grown, when possible, because this reduces total shipping costs, being that the weight and volume of flour is less than the weight of whole unprocessed grain, plus the tailings are used mostly in livestock rations, and customer for that product is most definitely NOT in NYC, lol.
Most of the cows,hogs and chickens we eat are raised in confinement, and are raised in the mid west and southeast, closer to the feed supply, and where land and water are cheaper, and neighbors less fussy, and mostly in localities where neighbors are relatively few in number.
Nobody’s ever going to operate a modern supersize hog farm anywhere close to the BIG APPLE, 😉
Watcher’s conclusion is probably right – not much fuel used to transport food compared to the total available. On the other hand, some random thoughts. 5.4 pounds/day/person is too high. Babies, young children, seniors, etc. Second, the 1500 miles is too high. Some of the basics make up a significant amount of the weight – like liquid milk, along with other dairy products, cheese and eggs. These products generally will never go 1500 miles. Vegetables, seafood, fruit, etc yes. But, chicken, pork and beef – I think that 1500 miles is too high.
OOPS! Of the 5.4 lbs, 30% – 40% is wasted.
Pre oil, railroad cars had no refrigeration to speak of in summer months. That’s where the term cattle car came from. Had to ship beef alive to the cities.
40-50% of a steer by weight is not edible.
I am not at all sure just HOW much of a cow winds up as nekkid ape chow these days, but YOU most definitely don’t WANT to know much about what goes into processed meat products, if you plan on eating them.
Fifty years ago when I had the “insider tour” of a huge and extremely famous hog slaugher plant that you get only by personal invitation from management,even back then, they bragged about selling everything but the squeal.
I’m pretty sure that well over fifty percent of the live weight of a cow winds up as nekkid ape chow these days, but how much over I can’t say. Fifty to fifty five percent would be a reasonable guess. Farmers have been breeding cows for more milk and meat, and less waste, since the beginning. For the last seventy five years or so, this breeding has been based on high tech such as artificial insemination, a solid understanding of genetics, and very sharp pencils. So a typical cow TODAY is going to yield significantly more more than she did a decade or two back.
Boomer – If you lived in my neighborhood, you would be right: No place to put a drilling rig. But, I see all of these articles talking about 5000 foot to 10,000 foot laterals. If that means what I think it does, there are hundreds of places to put a drilling rig and drill under my property.
I have a sketch for a plastic and fiberglass church mock up to put over a stealth drilling rig. 6000 ft laterals aren’t a big deal. This means the fake church site can be used to drill at least 8 wells and nobody will notice.
Yes, there are companies putting down long laterals in Weld County, but some of them are shifting attention to Texas.
Top producers invest in west Texas but insist Colorado’s D-J Basin still has room to run – The Denver Post
Alexander Khurshudov:
Petroleum exporters need not fear revival shale(Russian language):
http://www.angi.ru/news/2845356-%C0%EB%E5%EA%F1%E0%ED%E4%F0%20%D5%F3%F0%F8%F3%E4%EE%E2%3A%20%CD%E5%F4%F2%FF%ED%FB%E5%20%FD%EA%F1%EF%EE%F0%F2%E5%F0%FB%20%EC%EE%E3%F3%F2%20%ED%E5%20%EE%EF%E0%F1%E0%F2%FC%F1%FF%20%E2%EE%E7%F0%EE%E6%E4%E5%ED%E8%FF%20%F1%EB%E0%ED%F6%E5%E2/
google translate is so bad it’s almost incomprehensible, but there are a few sentences that seem to know something about shale. Doug, time on your hands?
eg
Slate companies can prevent a sharp drop in production, because then they do not have anything to write off the money already invested. At the slightest opportunity, they will step up drilling. The forthcoming increase in oil prices will cause a second shale boom, but it will be weak like the first, because in a year or two good sites for drilling have already left.
Don’t waste your time on translation. Nothing interesting.
The author is a petroleum geologist, but he knows geology of conventional fields.
His understanding of U.S. tight oil reservoirs is very limited.
Alex, forgive me, sir, but you are all over the map on a number of issues, seem to have first hand knowledge of the Russian language and certainly of Russian production and reserve estimates and I cannot make up my mind what you think of the shale oil miracle in the US. One day you quote the EIA has having downgraded its US LTO estimates because of (direct quote), ‘poor well quality off of sweet spots,’ the next day you seem to criticize Art Berman for comparing unaudited ME reserves to reserves reported by the shale oil industry under “strict” SEC rules…an oxymoron if I ever heard one. Strict SEC reserve rules went out the window in 2010. You will agree with me (and Shallow) occasionally about ( the lack of) LTO profitability but then are always quick to imply there is abundant P2, P3 LTO reserves to consider. Its confusing.
I would ask you as I have a hundred people, including LTO CEO’s and CFO’s the past 3 years; how are all those magical reserves going to paid for? If y’all don’t know (Dennis included), why talk about them? They are not probable reserves and are only possible reserves if the price of oil is sky high. Or as Watcher says, the shale oil industry starts getting crop subsidies from the government.
“The forthcoming increase in oil prices will cause a second shale boom, but it will be weak like the first, because in a year or two good sites for drilling have already left.” I actually think this statement, if correct, is pretty spot on. The first “boom” hasn’t even been paid for yet, the second one, with higher costs, and lower well productivity, is going to be even harder to pay for. So, to the Russian geologist I say, nostrovia, comrade.
Mike,
The number in Art Berman’s chart is for proved reserves of U.S. tight oil (11.6 billion barrels), as recently reported by the EIA [ “U.S. Crude Oil and Natural Gas Proved Reserves, Year-end 2015”, December 2016
http://www.eia.gov/naturalgas/crudeoilreserves/ ].
It’s not an estimate of technically recoverable resources, which, according to the EIA Annual Energy Outlook 2015, exceeded 72 billion barrels.
I agree that estimates of the LTO TRR are highly speculative, but I have no reason to question the reliability of proved reserves estimates, which are made in accordance with SEC rules.
Proved reserves according to SEC definition are more conservative than all other proved reserve estimates (SPE; Russian A+B+C1, etc.).
On the other hand, Art Berman shows proved reserve numbers for Saudi Arabia and other OPEC countries, which were never audited and which are considered by a large number of experts as significantly inflated.
My point is that comparing these two sets of numbers is not correct.
Thanks, Alex; as to Berman, I agree that is not a good comparison but only because I no longer have any faith in SEC “rules.” A number of very smart people analyzing the shale oil industry have determined, categorically, that LTO EUR’s might be inflated by a factor of 50%. Everybody lies about reserves and for all the rhetoric directed at the ME for its lack of reserve transparency, ours are now worse in American, IMO.
I suppose all this reserve discussion and predicting and modeling is important, though I am not sure why. I live in a practical world where only PDP reserves count and with regard to LTO, I have my doubts even about those PDP reserves and PUD reserves is a stretch. It is not sufficient to simply say “when” oil prices rise, or “if” oil prices rise when making predictions about the nature and recovery of hydrocarbon reserves. I want to know how this miracle of shale oil abundance, P1 to P4, is going to get paid for.
Thanks again. Your comments I know are very much appreciated here.
Thanks, Mike
I highly appreciate your comments, as well as Shallow Sand’s and other people with practical experience in the oil industry. You give us a much needed dose of reality.
As regards LTO EUR estimates, it depends on which estimates we are talking about.
I totally agree with you, Shallow Sand and others that EUR numbers in shale companies’ presentations are not realistic (to put it mildly). When a company says that their average shale well EUR is 500-600 or even 700-900 kbbls, these are pure lies. As indicates a recent article in BTUAnalytics, well production profiles shown in a shale company’s presentation as “average” is actually better than the best wells operated by this company. It seems that showing fake data in investor presentations is a widespread practice among shale producers.
However average EUR numbers used by the EIA for calculation of technically recoverable resources look much more realistic. For example, the EIA’s average EUR estimates for various subplays of the Bakken vary between 77 and 263 thousand barrels per well.
The range for the Eagle Ford subplays is between 90 and 199 thousand barrels.
For the main subplays of the Permian:
Avalon/Bone Spring – 128 kbbls
Spraberry – 167 kbbls
Wolfcamp – 99 kbbls.
These numbers do not look too high compared with what Enno Peters shows in his excellent website.
The LTO TRR estimates in EIA’s reports are calculated very simply:
total area with resource potential (in square miles) x average well spacing (wells per one square mile) x average EUR per well.
If we think that EIA’s TRR estimates are too high, in my view, that may be due not to inflated EUR estimates, but to exaggerated area or too dense assumed well spacing.
Alex, thanks. I agree that the EIA’s EUR estimates per type well per shale basin are far more realistic than P4 presentations made by shale oil companies themselves. Having said that, simply calculating PUD’s per square mile is absurd. And that is why I put no stock whatsoever in the EIA’s TRR assessments and TRR estimates in general in unconventional shale resource plays. Forget the extenuating circumstances of the price required to extract the stuff, no shale play I have looked at is one big homogenous rock pile ripe for the pickings.
Using decline curve analysis in resource plays, in the Eagle Ford trend that is 350 miles long, for instance, is easy. And lazy. And grossly inadequate. I have seen cross sections across sweet spots where TOC, GOR, oil and water sats, thickness, carbonate brittleness, etc. etc., all of the wonderful “attributes” the shale oil industry adores, vary drastically over hundreds of linear feet. Move off those sweet spots and extend those cross sections out 3000 feet and it is like going from the moon to Pluto. Trying doing volumetric calculations of OOIP in shale beds, the way it should be done, then using historical recovery factors. Its ugly. But is more accurate than decline curve analysis. We’re not talking about, in the Eagle Ford, 350 miles of 500 millidarcy Frio sand. The shale industry, and apparently the EIA, thinks so. Not me.
Take for instance being able to book PUD reserves based on “proximity” to a type well. And being able to call those reserves assets, to be able to borrow money against. Its nuts !! I have never heard of such a thing in my entire life until the stinking shale industry came along.
Anyway, that’s my story. I give no credibility to any reserve classification other than PDP in resource plays. It is deceptive, funky math and no way to make guesses about our energy future. The EIA owes America more.
Hi Mike,
Thanks. I don’t have access to the information needed to do such an analysis.
I do assume that EUR will decrease as poorer areas are drilled and assume that the USGS and David Hughes estimates are roughly correct.
As I have mentioned before my estimates are far lower than EIA estimates for TRR (which seem to assume the plays are uniform) and more in line with the estimates of David Hughes and the USGS.
This URR estimate is roughly 25 to 30 Gb for the Bakken, Permian, and Eagle Ford combined and maybe another 5 Gb at most for other US LTO areas.
As I have mentioned this is a drop in the bucket at the World level where my estimate of total C+C URR is about 3300 Gb (including a 500 Gb extra heavy (XH) oil URR from Canadian oil sands and Orinoco belt). If the XH URR is 300 Gb as suggested by Fernando’s comments), then World C+C URR falls to 3100 Gb. Roughly 1300 Gb of cumulative C+C has been produced to the end of 2016, leaving 1800 to 2000 Gb left to produce. Based on my WAG of future output from 2017-2024 (plateau at 2015 level), 50% of the 3100 Gb URR is reached in 2024.
I expect gradual decline after 2018.
Mike, Dennis, thanks
I agree that TRR estimates for LTO are much less reliable than for conventional fields.
I just want to point out that EIA estimates do not assume the shale plays are uniform.
Each play is divided by subplays, with different average EURs and well spacing.
Furthermore, it seems that there is a more detailed division by smaller units within each subplay, where well profiles are more or less uniform.
For example, in the recently released Assumptions to the AEO-2016, the EIA shows separate estimates for 42 units in the Bakken.
In my view, where the EIA may be wrong is the assumed number of potential wells, not the average EUR per well.
Another important question: which part of these TRR is economically viable at different price levels.
There is no doubt that economically recoverable resources of LTO at oil prices below $100 are much lower than TRR.
Alex, you are correct, I recall, that there is actually some form of Tier system for the quality of shale resources and I stand corrected on that.
I simply wish to say, for the last time, I promise, we need to be careful about predicting the role that shale oil is going to have in our energy future. America has been lied to about shale resources and it must stop, now. It is up to smart people like you, Alex, and Dennis (sans the what if’s <;)) to keep everyone on planet earth.
I assume the EIA directorship will change along with everything else in DC; it will be fascinating to me to watch if, and how, its reporting changes in general accordance with the balls to the wall, wide open on everything scheme the new fella seems to have. If America can now be re-conned into a push for energy independence (which will cause the price of oil to go back to 28 dollars, in spite of OPEC cuts), the EIA will need to support that push with higher reserve estimates, IMO. It has become very clear to me that no "reporting" entity in the government system is exempt from political influence. To keep your job, one does, and says what the boss wants.
01/11/2017 at 8:26 pm
AlexS said:
However average EUR numbers used by the EIA for calculation of technically recoverable resources look much more realistic. For example, the EIA’s average EUR estimates for various subplays of the Bakken vary between 77 and 263 thousand barrels per well.
The range for the Eagle Ford subplays is between 90 and 199 thousand barrels.
For the main subplays of the Permian:
Avalon/Bone Spring – 128 kbbls
Spraberry – 167 kbbls
Wolfcamp – 99 kbbls.
Thank you for this data, I supposed something like this, but the exact numbers are always better.
But now they are not reserves at all. Nobody will drill a well with EURof 100 kbbls even with the oil price $100/bbl. So it’s no use talking about TRR, let me go to the proved reserves calculation.
I’m sure, the method is the same, but we have to take into consideration the wells (areas or blocks) with profitable EUR only. Now it is more than 250 kbbls. However, there are several circumstances to be impediment to the pay-off, such as:
1. Geometric problems of wells’ allocation (habitations, lakes and wetlands, too long plot, etс.)
2. The wells’ interference (http://info.drillinginfo.com/well-spacing-bakken-shale-oil/)
3. Low natural fracturing.This is the main enemy; it can reduce all your EUR estimations to zero. This topic is described in more detail here http://en.angi.ru/news/453-Alexander%20Khurshudov%3A%20Oil%20exporters%20don%92t%20need%20to%20worry%20about%20shales%20renaissance/
In my opinion those factors may decrease reservoir recovery by 30-40%. This being so, Bakken proved reserves have to be reduced from 4.6 to 3.0 bln bbls and this is close to reality.
That sounds reasonable to me – we’ll know better when this year’s results with new reserves numbers come out. At the moment we are at about 10% y-o-y decline, or about 100,000 bpd per year absolute. At pure exponential decay this would give 3.6 Gb. However decay in a basin is often more linear as frequency and quality of new production gradually declines. For the Bakken that would give 1.8Gb. Somewhere between the two then. I think we’ll likely see a plateau this year and then a faster decline as drilling drops off quickly. The problem with all the LTO is there is no history. Expecting responsible (third) parties to come up with numbers of the same accuracy as for well understood conventional fields isn’t practical. It’s almost guaranteed that the E&Ps can and will overestimate initially (and they are the ones providing the data for USGS and EIA in a lot of cases – so those are not really independent analyses).
To George Kaplan, 01/16/2017 at 4:14 am
The problem with all the LTO is there is no history.
Absolutely right for the whole shale play, not for a single well or any small block. That’s why I think fluid-dynamic modeling will be useful for better understanding of formation processes. Of course, it should be done with dual porosity. As a first step we can make the single well model, try to calculate it with different fracture porosity and compare them with well geophysical data. Maybe such works had been already done, but I don’t know any results.
Thank you for this opinion. I hope English translation of the article will be published tomorrow, so it is better to continuer later.
Hi Mike,
I think if oil prices rise and LTO companies learn from past mistakes, that LTO output can pay down the debt owed. Oil prices will need to be at least $95/b for this to occur.
I think oil prices could remain at that level for about 10 years and possibly the F95 TRR estimates of the USGS (EIA TRR estimates are not reliable in my view) might be economically recoverable.
Note that the EUR for the average well that I use in my models is quite a bit lower than the typical LTO investor presentation and is in barrels of oil rather than boe.
Generally you are correct that I don’t think the wells can be paid for if oil prices remain under $85/b and I rarely predict future oil prices correctly.
If IEA estimates for supply and demand are correct, oil supply will be short of demand and oil prices will increase by the end of this year.
I don’t know how much they will rise or the rate of increase.
Yes,author geologist maybe .It will be interesting to other
his job:Half of the proven reserves of shale oil already extracted(In Russian):
http://www.angi.ru/news/2830673-%CF%EE%EB%EE%E2%E8%ED%E0%20%E4%EE%EA%E0%E7%E0%ED%ED%FB%F5%20%E7%E0%EF%E0%F1%EE%E2%20%F1%EB%E0%ED%F6%E5%E2%EE%E9%20%ED%E5%F4%F2%E8%20%F3%E6%E5%20%E4%EE%E1%FB%F2%E0/
English translation of the first article is available:
http://en.angi.ru/news/453-Alexander%20Khurshudov%3A%20Oil%20exporters%20don%92t%20need%20to%20worry%20about%20shales%20renaissance/
North Dakota rigs are falling again. A couple of weeks ago they were at 40, today they are at 36.
Current Active Drilling Rig List
It will be interesting to see what happens to the permits over the next few months. Last month there were only 31 net (new minus cancelled), the lowest since 2007 I think, and this year they are so far negative (more cancelled than approved). The number of open permits has been gradually falling since August as there have been more spuds than net new permits, but now the drop might be picking up. The EIA resource estimates gave (I think) by far the largest proportion remaining in Three Forks, but I don’t see anything much happening there, it’s still all in the Bakken. Maybe there is a new, and much higher, price threshold needed for that, or maybe there just aren’t many attractive sites left in any of the formations.
The EIA Short-Term Energy Outlook for January was released today.
From the report:
“EIA estimates that total U.S. crude oil production averaged 8.9 million b/d in 2016, a decline of 0.5 million b/d from 2015 levels, with all of the production decline in the Lower 48 onshore. However, based on the latest available monthly data from October and production estimates from November and December, EIA estimates that production began increasing in the fourth quarter of 2016, averaging 8.9 million b/d for the quarter, up from an average of 8.7 million b/d in the third quarter. If confirmed in final data, this would be the first quarterly production increase since the first quarter of 2015. Although most of the fourth-quarter increase came from the federal Gulf of Mexico, EIA estimates that Lower 48 onshore production also increased by almost 60,000 b/d.”
According to the EIA, U.S. C+C production bottomed in September at 8.58 mb/d and increased to 8.90 mb/d in December. Further growth to 9.22 mb/d is projected by December 2017 and to 9.44 mb/d by December 2018.
All monthly projection for 4Q2016 and 2017 were revised upwards. The new number for December 2017 is 220 kb/d above projections in the December 2016 STEO and 940 kb/d higher than in March 2016 STEO.
EIA forecasts U.S. crude oil production will increase from 8.89 mb/d in 2016 to an average of 9.00 mb/d in 2017 and to 9.30 million b/d in 2018. “Production levels in 2017 are 0.2 million b/d higher than in the previous forecast. The upward revision largely reflects assumptions of higher drilling activity, drilling efficiency, and well-level productivity than assumed in previous forecasts.”
The new EIA annual estimates for 2016 and 2017 are higher but projections for 2018 slightly lower than in the recently released Annual Energy Outlook (8.74 mb/d; 8.70 mb/d and 9.32 mb/d, respectively).
U.S. C+C production forecasts
“EIA expects Lower 48 onshore crude oil production to average 6.8 million b/d in 2017, up slightly from the 2016 level. In 2018, EIA expects Lower 48 production to increase by almost 0.2 million b/d. EIA expects that declines in Lower 48 onshore crude oil production have largely ended, and production will be relatively flat in the first quarter of 2017 compared with the previous quarter, averaging 6.7 million b/d. Lower 48 crude oil production is then expected to increase at an average month-over-month rate of 20,000 b/d from April 2017 through March 2018 before leveling at just under 7.0 million b/d from April 2018 through December 2018. The growth in Lower 48 onshore crude oil production primarily reflects increased oil production in the Permian Basin in Texas and New Mexico.”
U.S. Lower 48 states (excl. GoM) C+C production forecasts
Projections for C+C production in the Gulf of Mexico were revised downward (by 150 kb/d in December 2017).
Thanks for the update Alex. I didn’t realize the EIA made monthly revisions to their GOM projections. Still think they are too high for 2017. I don’t think monthly averages will consistently be over 1.7 mmbopd in 2017 like they show. The highest actual production we’ve seen in recent years is about 1.66 mmbopd in September 2015 – every month since then has been between about 1.5 and 1.61 mmbopd.
And with 2017 being too high, I think their 2018 estimates are also too high, but, maybe with new projects coming on line, 2018 could be higher than 2017.
The report has:
“Gulf of Mexico production is forecast to average 1.7 million b/d in 2017, an increase of 0.1 million b/d from 2016, and then increase to 1.9 million b/d in 2018. The anticipated expansion of the Tahiti field (in the Gulf of Mexico) and start of production from the Horn Mountain Deep field in 2017 and the Big Foot and Stampede projects in 2018, along with other projects that will begin operations in 2017 and 2018, are expected to contribute to the increase in the Gulf’s production.”
For 2016 Chevron has Tahiti Vertical Expansion and Tahiti Upper Sands Development as future options. They had previously (2015?) discussed possible FID in 2016 for these, but I don’t think it happened. Even if it did, I doubt that the project would come on line in 2017, and I don’t think the added flow would be that big (10 to 20 kbpd). Freeport McMoran had earmarked Horn Mountain Deep for 2017 but I haven’t seen any mention of it proceeding since their sale of all GoM assets to Anadarko started to be discussed; If it is proceeding it would only be 25 to 30 kbpd, probably split over 2017 and 2018. Big Foot isn’t due for installation until the end of 2018 and wouldn’t contribute flow until 2019 ramp-up (75 kbpd nameplate). Stampede should ramp up through 2018 – it’s nameplate is 80 kbpd but most recent project have been slow and haven’t achieved full design rate (if at all) until longer than one year.
The only definite new projects next year are Phase II of Jack (maybe 20 kbpd) and Thunder Horse South (up to 40000, but probably not all in 2017), plus some small gas tie backs. There is nothing else approved for 2018 or anything in 2019, and it’s getting to the point now that nothing larger than a single well tie back could be achieved by then. There are still projects ramping up – Stones, Heidelberg, Coelacanth, Gunflint – but equally some recent additions are already in decline. I think it will be a struggle even to maintain a plateau after mid this year given the 10 to 12% decline rates we see in mature fields.
As an example of the decline issues this is what is predicted for Lucius, one of the larger recent additions (and is probably in the optimistic side).
Rex Tillerson compromised ?? US Petro diplomacy and THE ENERGY MATRIX
https://www.rt.com/shows/keiser-report/373172-episode-max-keiser-1017 @ 15:00
I was wanting for an ‘open’ petroleum thread. So here is a question for those geology folks. Considering all the oil that has been taken from below our feet throughout the world. What will eventually happen to all these vast empty caverns left behind below the ground as the oil leaves? There have been several worldwide reports about sink holes developing in places geologists never would have predicted. Something has to give after the oil is removed from the ground?
Would appreciate some ‘sound’ comments about the subject. Thank you.
There are no vast empty caverns. Geologists routinely will take a rock core sample from a prolific oil field and put it on their desk as a paper weight. The oil is in microscopic pores in the the rock (porosity). The pores are connected by microscopic veins (permeability). So, after the oil is gone, it is just solid rock down there.
Even if there were caverns [and there are not], similar to empty swimming pools, they would be tiny. 1 trillion barrels of oil can be contained in about 38 cubic miles. Spread that around this vast planet and it is not that much. Over 26 billion barrels in one cubic mile. A huge oil reservoir is 1 billion barrels – 1/26th of a cubic mile. So, do not worry about those grandkids of yours.
Surface subsidence due to hydrocarbon extraction is, as far as I know, either very rare, or very minimal.
One notable exception is Ekofisk field in the Norwegian North Sea where a fairly shallow, very porous and permeable chalk is the reservoir. After years of production, feet of subsidence were observed and it became a big deal for the operator to deal with it.
I’m most familiar with the Gulf of Mexico. One might think that all of the hydrocarbon extraction from the many bay and marsh fields in south Louisiana could be a contributing factor to coastal subsidence and wetlands loss. As far as I know, though, hydrocarbon extraction either does not contribute at all, or, has resulted in a very small component of the subsidence.
Good information SouthLaGeo. But as far as Grandma is concerned, hopefully none of her grandchildren live in a house in the middle of the Norwegian North Sea.
Hopefully not, though I did come across another field that has experienced subsidence that is in a populated area, Wilmington field in the LA basin. That’s a 3 billion barrel field. Also came across examples from the Houston area, and the Netherlands. I suspect one of the contributing factors is how well lithified the reservoir is, and how prolific the field is. The core sample that clueless referenced is a case of a well lithified reservoir, and after the hydrocarbons are produced, the rock fabric remains unchanged. If, on the other hand, the reservoir is not well lithified, as can often be the case with young, shallow reservoirs, production can result in some degree of reservoir compaction, and this could manifest itself in subsidence.
To get back to the original question of granmaofsix – what happens to the space left behind by the produced oil (assuming only primary production)? That depends on the drive mechanism that provides the energy for the oil to be produced.
If it is pure water drive, then, the oil is displaced by water. It is often the case that aquifer volumes are much larger than reservoir volumes, so the relatively small amount of produced oil has little impact on the overall system. Pure water drive systems can have some of the best recovery factors. I’ve seen recovery factors over 50%.
If the drive mechanism is pure depletion drive, then, the reservoir pressures depletes until the well is no longer able to flow. The oil in the reservoir isn’t replaced by anything, it just becomes a lower pressure system. Pure depletion drive oil reservoirs have very low recovery factors – maybe 10-15%.
If it is pure compaction drive, where compaction of the reservoir provides energy to produce the oil, then, again, nothing “replaces” the produced oil, it just becomes a more compacted system.
If it is gas cap expansion, then the produced oil is replaced by the expansion of the gas cap.
I don’t have enough experience with either compaction drive or gas cap expansion to know what there recovery factors can be. Most that I have dealt with in the Gulf Coast have been some hybrid water drive/depletion drive system.
The old Maracaibo basin fields have caused subsidence at Lagunillas, Bachaquero, etc. it’s similar to the Long Beach case.
I think the voids we leave behind, which have low pressure fluids, eventually fill up with water, and the rock expansion and compression from above rebuilds the pressure, but this probably takes thousands of years, or in some cases millions of years.
Grandma – I do not know if you have been reading this thread, but you did ask a good question.
WoodMac sounds optimistic about seeing an increase oil and gas industry activity but I guess it depends on prices.
Bloomberg 2017-01-11
The oil industry will shake off the effects of the biggest downturn in a generation this year as they more than double project approvals and increase exploration spending for the first time in three years, according to Wood Mackenzie Ltd.
Drillers, led by U.S. shale operators, will also increase spending on exploring for new oil and developing existing projects by 3 percent to $450 billion following two years of cuts.
Bloomberg https://www.bloomberg.com/news/articles/2017-01-11/oil-industry-starts-to-grow-again-as-project-approvals-to-double
The article says barrels but the first project listed is natural gas…
Bloomberg 2017-01-11
Majors set for biggest production gains since start of decade
Rystad estimates that the seven companies will boost output by about 670,000 barrels a day next year. Still, years of under-investment during the time when oil prices were low mean the production gains may be short lived.
“Output should start declining eventually for the majors that slowed project-sanctioning,” said Rob West, an analyst at Redburn (Europe) Ltd, a London-based equity broker. “Field-by-field models suggest that’s a problem for 2020.”
Much of the expected increase is coming from offshore oil and gas projects approved at the start of the decade, said Espen Erlingsen, vice-president for analysis at Rystad. They’re the kind of mammoth projects that are difficult to shut down once they get going.
Included is Chevron Corp.’s Gorgon liquefied natural gas project in Australia, which partly resumed operations last week, and Kazakhstan’s Kashagan field, in which Eni SpA, Exxon, Shell, and Total SA all have stakes, which began producing last year. Eni expects oil and gas production to climb to a record in 2017 even as spending continues to fall.
https://www.bloomberg.com/news/articles/2017-01-11/big-oil-hits-sweet-spot-as-new-projects-reap-rewards-of-recovery
A few more listed on Reuters…
Projects most likely to get the nod include Exxon Mobil’s Liza discovery offshore Guyana, deepwater projects in Brazil and in the Gulf of Mexico. BP late last year approved the development of the second phase of the Mad Dog field in the Gulf of Mexico and its partners will decide on it this year.
http://uk.reuters.com/article/oil-production-spending-idUKL5N1F03US
I’ve a new post on LTO production from all the 8 states I cover, available here.
Enno: Thanks very much for all of your updates!
I will look over your most recent post more closely later today, but are there any trends in any of the states that you are noticing (better wells, worse wells, etc)?
I encourage all to review Enno’s posts. Incredible amounts of data, very organized. He is a pro at this.
For those who do not have the time, I note, per my review of Enno’s data, the following:
For wells completed in the following years, barrels of oil per day per well for 9/16 was:
2015 – 90.89 barrels per day per well.
2014 – 47.67 barrels per day per well.
2013 – 29.01 barrels per day per well.
It appears most wells will not hit 200,000 barrels of oil before they have fallen below 50 barrels per day. Once wells fall below 50 barrels per day, it becomes difficult for the wells to generate much net income in comparison to well cost.
For example: a well producing 50 barrels per day, likely is generating 40 barrels per day or less for the working interest owners. Once taxes, LOE, G & A, interest, etc. is paid, there is likely under $300,000 net income annually at $50 WTI. For a $7 million + well, this means the annual return is less than 5%.
It appears from Enno’s data the typical US LTO well will stabilize around 15-25 BOPD. If we take the midpoint, 20 BOPD, assuming 20% royalty, that is just 5,840 barrels of oil to the working interest owners. After payment of all expenses, there is likely little to no income, possibly we are now in the red when things like G & A and interest payments are included.
I have been very interested in decline rates as a predictor as to whether it makes sense to expand in Colorado. As I said in an earlier comment, Weld County, where most of Colorado’s oil activity is currently happening, is also near population areas. If there isn’t a long-term opportunity for these wells, and if they conflict with other land and water uses, to what extent are they worth doing, both for the companies that own the rights and for the communities where drilling might happen and for the state?
In rural areas, where the land might otherwise sit idle, then expanding operations (as long as they are profitable) makes sense. In other areas, where other forms of economic development will likely happen, they may not make sense if they are going to be relatively short-lived projects.
The projects will likely not be short lived. Private companies will eventually buy the wells and likely operate them for many years. The private companies will not have large office buildings, private jets, and seven and eight figure annual compensation to pay to top management out of the oil and gas sales.
There could be a problem, however, in that these wells are very deep wells, even concerning the vertical portion. If there are a lot of failures, LOE will be high, maybe too high to justify buying them as strippers. Further, I am concerned about how long these wells will last given the “records” being set on time to drill them. Give me a slow drilled cable tool hole any day. The faster drilled, the more likely there will be a crooked hole, which will mean more rod and tubing wear, and more expense.
I think in the US over the course of many years, many wells were losers financially for those who invested in drilling and completing them, especially those that were drilled in the 1982-1985 time period. At that time, costs had skyrocketed as rig counts were at all time US highs. In 1986, prices crashed and many of those who invested in those wells went bankrupt, or saw the equity they had invested go to zero, or pennies on the dollar. We operate many wells from that era, drilled and completed by companies that long ago went out of business. They are in the black at current prices. It does not make sense to drill new ones at current prices, as it did 2010-2014 and 2005-2007.
It is very difficult to make money drilling wells in my opinion. Smaller companies, like Mike’s, can if prices are high enough and they are able to keep costs down.
However, if you are a good promoter, you can make lots of money drilling and completing wells from those who invest. LTO companies are very large versions of good promoters. They have the best promoters in the world, Wall Street, promoting them too.
What specific problems are arising in CO regarding mineral development? It is my understanding that CO is a highly regulated state in that regard.
I believe Colorado has the strictest regulations in the country.
Many cities wanted to impose their own restrictions and the governor shot that down. He didn’t want a different set of regulations in each city and county. So he sought some compromises — better regulations at the state level and none more restrictive at the local level.
With oil prices being down, there has been a lot less focus in Colorado on fracking in the last couple of years. There would have been relatively little fuss if the oil areas were located in low density parts of the state. But when the drilling activity is in areas near, or even in, major Colorado cities, residents make their concerns known.
At the very least, these areas would need to put more money into roads and other infrastructure and county services if there were an explosion of gas and oil drilling. Economic development plans need to be weighed.
I’ve considered the Bakken as an example of what could happen in Colorado. But Colorado has had a boom-and-bust history tied to natural resources. The state has worked hard in recent decades to lessen its economic dependence on them. With that economic diversity comes more questions about what regulations to establish to provide the greatest good for the population of the state as a whole.
Shallow
The sale of marginally producing wells from bigger operators to small outfits has been taking place for sometime now in the Bakken.
Just Continental and Whiting alone have sold over a hundred, maybe a lot over, I’ve not kept close track.
On a completely unrelated topic, a federal grand jury in Bismarck is investigating the violence relating to the DAPL protest.
An individual named Martinez is refusing a subpoena to testify in the incident where the homemade explosive devices, fashioned from propane cylinders, severely injured a woman handling one of them.
coffee. I have noticed that, and have been very surprised at the prices paid. For example, I wonder how the new buyer is doing with all of the stuff they bought from OXY.
Edit: Decided to look up stuff on Lime Rock, real quick. Does not take long. They paid OXY $1/2 billion in 2015 and have also had three other smaller Bakken acquisitions.
Some of the stuff they have bought I assume is non-operated, but Enno shows 326 active Bakken wells in ND for Lime Rock.
Here is how they performed in 10/16, by date of first production:
1 well 2016 98 bopd
10 wells 2015 69 bopd
62 wells 2014 60 bopd
74 wells 2013 38 bopd
77 wells 2012 31 bopd
59 wells 2011 38 bopd
24 wells 2010 38 bopd
15 wells 2009 34 bopd
4 wells 2008 16 bopd
In 10/16 the 326 operated wells produced 13,462 gross bopd, I assume there are many non-operated interest owners in these wells, however, if we assume Lime Rock has 100% gross working interest, and 80% net revenue interest, this comes to 10,770 bopd net to Lime Rock.
So, assume Lime Rock sold 333,870 net barrels of oil in October, 2016. Also assume they had no hedges in place, and received $40 per barrel for that oil, which would be a good price.
Gross Revenue $13,354,800
Less severance: 1,335,480
Net check $12,019,320
Less LOE 4,006,440
Net operating 8,012,880
I assumed LOE of $12, which I do not think is unreasonable given they type of production they bought.
Lime Rock is a Private Equity Firm. Says on their website they have invested $7.2 billion in US onshore since 1998. Looks like all of their non-operations guys (non-oil guys) previously worked for Goldman Sachs.
I think what we will find is that most of the sales of “stripper” shale wells are not going to private operators so much as they are going to private equity funds that employ in house engineers, geologists, and other operational personnel. I assume the private equity funding is largely coming from areas like state and municipal pensions, etc?
You know, I haven’t modeled it, but I think these wells really ought to be drilled straight as much as possible, to make a steep turn but gentle enough to allow a 1500 meter lateral, and have the pump set in the straight hole section above the kick off. That should stretch the well life, although it doesn’t allow treating or cleaning out the lateral without getting into a huge workover expense.
Thank you, Shallow. The actual realized production from America’s shale oil wells is stunning when compared to the lies we have been told over and over and over again about EUR’s. I am embarrassed for the US LTO industry; I am unclear how those reservoir engineers that make those EUR claims can brush their teeth in the morning.
You are welcome Mike. However, I think Enno really deserves much more credit than I do. He has put out a ton of data for free, in a very easy to follow format.
I am waiting for someone on a conference call with an LTO firm to mention Enno’s site and ask the CEO about the disconnect. Seems it would be easy to ask, “How do you come up with an oil EUR of 875,000 barrels, when your average LTO well, per shaleprofile.com shows 147,xxx barrels at 60 months, with current production of 21.xx barrels per day?”
Oh yeah, I forgot, all those guys asking cream puff questions on conference calls are on the same side of the promotion as the LTO CEO’s. LOL.
Yeah, well, I have asked two of the biggest the exact same question. All they can do is give you the ‘ol Washington (political) thousand yard stare and bring up the weather.
Of course it is Enno doing the work; the 2013, < 30 BOPD figure saved me some work, however. By the by, there are numerous, unpublicized EF production sales on the market in S. Texas and not too many of them are getting done for reasons we both can speculate, mostly having to do with increasing GOR, increasing OPEX (remember about horrendous operational problems rod lifting low fluid entry wells at 8,000 ft.), no upside or behind pipe potential and ever increasing PA&D costs. No major integrated company has bought any "used" shale oil production I am aware of; nobody wants the stuff.
Mike: While looking around about Lime Rock’s purchase of OXY, I found where Resources Can Am purchased Samson’s Bakken assets out of BK for $75 million. I bet that amount is many times below what Samson originally had booked for those assets. Can probably look at some SEC stuff and find out some time.
Resources Can Am is sponsored by Apollo Group, which is a huge private equity fund. They manage over $200 Billion.
For whatever reason the private equity companies are the ones going after the “used” shale assets. I suppose they have the money and can pay higher prices than anyone else that might be interested.
It just amazes me how much money is out there in these private equity firms.
Mike. Is private equity the buyer of used shale in EFS, as it appears to be in the Bakken?
Yes, in the form of small start-up companies funded entirely by private equity, with a principle stake in the assets. It seems, so I have read, that much tighter banking regulations and asset to debt ratios (that you correctly pointed out over a year ago) have finally caught up to banks and that form of lending to the shale industry is over, as is junk bonds. Older shale companies laden with debt are struggling raising more capital and are relying on credit swaps and more shareholder dilution, that sort of thing. New companies are finding private equity funding; new companies and the skunks that filed bankruptcy to lower debt. They appear to be getting more money also. For instance Halcon, PV, etc.
So from my perspective the shale oil industry is down to private equity funding. A couple of years of big losses, realized production to EEUR (exaggerated), and rising interest rates, will put the brakes on that too, IMO.
Not to beat a dead horse but extenuating circumstances like where the CAPEX comes from has a direct baring on PDNP and TRR “reserves.” I just cannot see how the shale oil industry is going to survive short of a price miracle. Its a house of wet cards.
Thanks a lot Shallow, that’s great to hear!
“I will look over your most recent post more closely later today, but are there any trends in any of the states that you are noticing (better wells, worse wells, etc)?”
Looking at the oil basins, the basin that is showing the most noticeable improvements is the Permian. But also here drilling in the first 9 months of 2016 was quite a bit less than the year before, so part of it can be explained by reduced drilling in the fringes. Now that we see drilling picking up again here, I’m curious whether the average results will be negatively impacted.
We’ve heard stories about longer laterals, and bigger fracks, so I’m also wondering how much of the improvements can be explained by this as well. Looking at the extra $ spent per well, have the improvements been worth it? I hope that more people will publish their findings on this topic.
In the other oil basins I find the improvements rather small, given the low completion numbers.
What I find so surprising with each update is how predictable these production curves seem to be, on the aggregate. See the below picture. Only the oil basins are selected. Where 2012 wells peaked at around 300 bo/d in the 2nd calendar month, 2015 wells did so about 50% higher. It’s clear from these curves that they are unlikely to increase ultimate recovery by 50% (the improvement seems more like a one-time gain, early on), but that is how most improvements in initial productivity are (quite successfully) marketed. Given the clear data, I would have expected more controversy about this, as it has major consequences on well economics and reserves booking.
A straight line on this semi-log plot indicates a decline function with b = 1. I think this provides strong evidence that b in most cases is clearly not (much) bigger than 1. Wells that have been refracked are not even filtered out.
“For wells completed in the following years, barrels of oil per day per well for 9/16 was:
2015 – 90.89 barrels per day per well.”
Note that these overall statistics also include gas wells, so the gas portion is not insignificant, and better be considered as well. (Just don’t mix them up to “BOE” please 🙂
““How do you come up with an oil EUR of 875,000 barrels, when your average LTO well, per shaleprofile.com shows 147,xxx barrels at 60 months, with current production of 21.xx barrels per day?””
Indeed, “please give me some color on that”! 🙂
I’m already pleased to see that several people are comparing company claims with actual results. Jim Brooker is active with this, and I’ve seen now a few more on SA also doing so. The results are remarkable. There are still many stories left untold in my opinion; it’s going to be an interesting year again.
Shale EURs in the news today. The number Rystad gives is in BOE, I would be interested to hear if anyone has any views on this, it says oil well but then gives BOE units…
FT newspaper, US shale oil output remains resilient despite rig count fall
One measure of productivity is known as estimated ultimate recovery (EUR), or the total amount of hydrocarbon extracted from a single well. In 2016, the EUR of the average US horizontal shale oil well was 736,000 barrels of oil equivalent, more than double the volumes of four years ago, according to Rystad.
(paywall but gives one free) https://www.ft.com/content/73c5297e-d813-11e6-944b-e7eb37a6aa8e
I am not seeing more than double the volume from 2012 to 2015 from Enno’s post above Energy News, at least with regard to OIL.
2016 wells must be really be something, or more than likely the GOR continues to go up.
I do think that many of the OK resource play wells from 2015 and 2016 will produce a large amount of BOE, but I still think most of that will be gas, and not oil.
Per IHS Energy most recent month, 12,141 active hz wells in OK. Only 98 have hit 200,000 cumulative oil, but 2,325 have hit cumulative gas of 1.2 million, or 200,000 BOE.
I really wonder about the marketing of the “oil window” in the OK resource plays, given the data as of now indicates these wells do give up a lot of liquids early, but pretty much go to gas within two years or less. I would think until there is more history of the “oil window” actually producing oil with some duration, the term “oil window” should not be used.
At 20:1 (dollar value), not 6:1 gas to oil, 1.2 MMCF is 60,000 BOE and that puts those better wells at only 15-20% to payout. WOW. I thought that STACK stuff was going to make America great again?
My oldest “oil” wood ford well has produced 126,000BO and 1.25BCF in 18 months. Currently producing 140BODP and 2000mcfd. I am not complaining? I expect this well will make 300,000-350,000 BO and 7-10BCF if it follows the production of my older “wet gas” wells.
I can only imagine that the Rystad figure of 736,000 barrels EUR for 2016 wells, is just their own assumptions and theory, they must be modelling a less steep decline curve or longer life span. Although that’s not explained in the news article.
Just out of theoretical curiosity if you convert the whole of Rystads shale well EUR of 736kb BOE (oil+naturalgas) to just natural gas
736000 barrels of oil equivalent = (1BOE to 6Mcf) 4.416 Bcf
And then if you look at just Appalachia PA for just natural gas it does look realistic? Not that I’d know 🙂
Marcellus Shale in Pennsylvania: A 3,800 Well Study of Estimated Ultimate Recovery (EUR) – March 2016 Update
For 3,846 horizontal wells with enough history to forecast a decline profile, the estimated ultimate recovery averages 4.7 billion cubic feet equivalent (Bcfe) per well with a median of 3.9 Bcfe. The results vary considerably by region – in six counties in the Northeast part of Pennsylvania, the average is 5.5 Bcfe per well and in Wyoming County the mean EUR is 8.8 Bcfe. In that Northeast region, there are a number of wells exceeding 15 Bcfe EUR. (Lease condensate was converted to an equivalent gas volume using a price ratio of 20 thousand cubic feet (Mcf) per barrel).
http://gswindell.com/marcell.pdf
I guess that natural gas can pass through sand grain wide fractures more easily than oil, perhaps over 6 times more easily?
Energy News
If you go over the comment thread on Enno’s site on the most recent Marcellus post, and/or count the ‘Cumulative Production’ wells posted there, one will find over 600 Pennsylvania wells have already produced over 5.8 Billion cubic feet … the energy contained in one million barrels of oil.
To be clear, not Ohio, not West Virginia, only Pennsylvania wells, with the vast majority being online four years or less.
coffee, recent well in Grady County Woodford, 2.5BCF in 9 months from a 5500′ lateral. This was a deep test and took 4 months to drill, but they will get that time down in 1/2 before long if past is prelude. Smells like money to me?
February 0 0
March 0 325275
April 0 361951
May 0 325275
June 0 283721.9201
July 0 265929
August 0 247929
September 0 224401.7468
October 0 219422
November 0 194723.5618
December 0 0
http://occpermit.com/WellBrowse/Webforms/WellInformation.aspx?ID=592475
TT
These past several months, Cabot, Chesapeake and Range have been bringing online 3 to 5 wells at a time on the same pad with the output nothing short of astonishing.
Ongoing flows run from 15 to 25 MMcfd each for several months. Vertical depth slightly deeper than 8,000 feet with laterals generally 6/7,000′.
EQT plans on 119 Marcellus, 81 Upper Devonian and 7 Deep Utica wells in 2017.
When they finally nail down the effective Proppant protocol for the Deep Utica wells, that formation may well surpass the Marcellus.
EQT”s Scotts Run, arguably the most productive unconventional well ever drilled (11 Bcf in 15 months online) has a lateral 3,200 feet long.
Hi Dennis or somelse
How many P2 or P1 barrels of oil and gas are in Vaca Muerta (Dead Cow) Argentina, ?
Thanks
EIA says 16.2 billion barrels. 308 trillion cubic feet gas. May be resources, not p1 or p2 reserves.
Resources. The Vaca Muerta hasn’t been developed enough to understand what’s commercial. I used to look at properties in that area, and there’s a very nice sand in that package, which has oil trapped in relatively small fields. So I expect you’ll get confusing news when a well taps the sand rather than the tight rock.
Sorry, tablet, can’t find reply thread above easily.
“In the United States, 400 gallons of oil equivalents are expended annually to feed each American (as of data provided in 1994).” This from a website about “energy inputs to US agriculture — re the stuff above about food and packaging transport. And it’s 23 yrs later, that site is filled with talk of corn yields up 350% since 1950 with oil inputs to the process of corn growing up 843% (to achieve it). Steep graph. Gotta be much more now.
400/365 X 320 million = 351 million gallons / 42 = 8.2 mbpd. It ain’t all oil. “oil equivalents”, but THIS is where the food risk is for insufficient oil. Ya 400K bpd to move it, but . . . call it 6 mbpd to get a crop out to the people. GDP is not the key item hit by scarcity.
Went chasing the source of those numbers. It’s from a 1994 study out of Cornell. This was not the focus. It was mostly about how crop yield improvements had been achieved via fertilizer and insecticide.
Population 1994 263 million. 22% increase to now. That 8 mbpd number included transport of insecticide and stuff to farms, not just what’s in the insecticide itself. They also seemed to have quantified transport of fuel to farm stuff. Not just the fuel itself.
I’ll tell ya what’s curious . . . there don’t seem to be follow up since 1994. These are pretty serious numbers. Surprising.
Damn near 1/2 of US consumption associated with food production. Credible?
https://www.theguardian.com/world/2017/jan/05/costa-rica-renewable-energy-oil-cars
“Costa Rica produced 98% of its electricity last year without fossil fuels but the sustainable success story unravels with the rising demand for gasoline and cars.”
The usual green crapola doesn’t withstand scrutiny.
Actually it presents a great opportunity. Start replacing those vehicles with EVs and continue to run the country on renewables. Hawaii may accomplish it first (renewables and EVs), but if you have already made the switch to getting rid of fossil fuel electricity generation, you’ve made an important step.
It’s like natural gas was a necessary step to phase out coal in the US.
A very interesting article based on the HSBC report that I commented on in the last petroleum thread. I think all you Pollyannas out there are just way off base here and are in for a rude awakening very soon.
Is an Economic Oil Crash Around the Corner?
A report by HSBC shows that contrary to industry mythology, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline, while European government scientists show that the value of energy produced by oil has declined by half within the first 15 years of the 21st century.
The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil—unless we choose a fundamentally different path.
Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.
New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.
The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply in coming years will be insufficient to sustain rising demand.
Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain of the industry’s hype about “peak demand”: it vindicated what is routinely lambasted by the industry as a myth: peak oil , the concurrent peak and decline of global oil production.
The HSBC report you need to read
Insurge Intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest. Read and/or download the full HSBC report.
10 things you need to know
1. The oil market may be oversupplied at present, but we see it returning to balance in 2017e.
2. By that stage, effective spare capacity could shrink to just 1% of global supply/demand of
96mbd, leaving the market far more susceptible to disruptions than has been the case in
recent years.
3. Oil demand is still growing by ~1mbd every year, and no central scenarios that we recently
assessed see oil demand peaking before 2040.
4. 81% of world liquids production is already in decline (excluding future redevelopments).
5. In our view a sensible range for average decline rate on post-peak production is 5-7%,
equivalent to around 3-4.5mbd of lost production every year.
6. By 2040, this means the world could need to replace over 4 times the current crude oil
output of Saudi Arabia (>40mbd), just to keep output flat.
7. Small oilfields typically decline twice as fast as large fields, and the global supply mix relies
increasingly on small fields: the typical new oilfield size has fallen from 500-1,000mb 40
years ago to only 75mb this decade.
8. New discoveries are limited: last year the exploration success rate hit a record low of 5%,
and the average discovery size was 24mbbls.
9. US tight oil has been a growth area and we expect to see a strong recovery, but at 4.6mbd
currently it represents only 5% of global supply.
10. Step-change improvements in production and drilling efficiency in response to the downturn
have masked underlying decline rates at many companies, but the degree to which they
can continue to do so is becoming much more limited.
Thanks for the info, Ron. As an old fart, I would like to remind everyone that there a few other intersecting trend lines that are also important.
First, since the oil shock of the early 1970’s, the amount of energy wasted has declined sharply. Cars get better mileage; all appliances use a fraction of what they used at that time; LED light bulbs; OLED TV’s will probably be standard by 2040, etc. Will energy efficiency continue to get better?
Second, since the energy shock of the 1970’s, world wide population has exploded. But, in Japan, China and most of Europe [excluding immigrants] declining population trends have already started. Will this declining trend expand to most of the world by 2040?
Substitution has made a significant impact, and is expected to continue its growth – solar, wind, batteries, etc.
I will not be around to know, but I can envision a world in which oil is $150 per barrel or more [in today’s $’s] in 2040 and it is no big deal economically.
First, since the oil shock of the early 1970’s, the amount of energy wasted has declined sharply. Cars get better mileage; all appliances use a fraction of what they used at that time; LED light bulbs; OLED TV’s will probably be standard by 2040, etc. Will energy efficiency continue to get better?
World population has just about doubled since that oil shock, far more than wiping out any gains in efficiency.
World Population Growth
At 3 billion we were already in deep overshoot. We are on track to reach 9.2 billion by 2040. That will be a critical mass. The earth simply cannot support that many people, wind and solar power notwithstanding.
China and most of Europe [excluding immigrants] declining population trends have already started.
Sorry but China’s population is not declining. they are still increasing by .5% per year.
China Population Growth
Will this declining trend expand to most of the world by 2040?
You must be joking. No, world population will be 9.2 billion in 2040, give or take a couple of hundred million.
Wake up and smell the coffee, we are destroying the world with our massive population. Our population continues to increase at greater than 1% per year.
World Birth and Death Rates:
19 births/1,000 population
8 deaths/1,000 population
• 131.4 million births per year
• 55.3 million people die each year
• 360,000 births per day
• 151,600 people die each day
• 15,000 births each hour
• 6,316 people die each hour
• 250 births each minute
• 105 people die each minute
• Four births each second of every day
• Nearly two people die each second Average life expectancy at birth is approximately 67 years.
Hi Ron From 1965 to 2005 the World total fertility ratio decreased from 5 to 2.5, when it decreases to 2.1, population stabilizes and when if falls to less than this population declines. World population is likely to peak around 2070 at 9 to 10 billion and will then start to decline. This is what many demographers expect to occur. If total fertility ratios fall to 1.75 by 2050, and continue to fall thereafter to 1.5,population decline will be fairly rapid reaching 4 billion or less by 2200.
Dennis, you are placing all your bets on a declining fertility rate and convincing yourself that this is the answer to the population problem. It is not. From the same link that I posted with the first chart above:
World Population Growth
II.1 Fertility
Perhaps the most direct and obvious determinant of population growth is fertility. In the following visualization we show the rate of fertility, defined as the average number of children that would be born to a woman over her lifetime if the woman were to experience the exact current age-specific fertility rates, and the woman were to survive from birth through the end of her reproductive life. This data comes from the UN Population Division. As we can see, fertility rates were stable across the world until the 1960s, with some differences in levels between ‘developed’ and ‘developing’ countries. After this point, fertility rates started dropping and levels began converging. This coincides with the decline in growth rates that has already been discussed. In the next section we explore the combined effects of changing fertility and mortality. You can read more about these factors in our fertility and life expectancy entries.
Even with the declining fertility rates, we still get 9.2 billion people by 2040.
If total fertility ratios fall to 1.75 by 2050, and continue to fall thereafter to 1.5,population decline will be fairly rapid reaching 4 billion or less by 2200.
Hell, while you are “iffing,” why don’t you “if” the fertility rate down to .5 in the next 10 years. That would help a lot. Unfortunately reality will set in and the fertility rate will settle at about 2 until the mortality rate begins to rise. I expect that to happen by 2040… or sooner.
I did not see Dennis placing any bets, let alone “all” his bets. Neither did I. Just “sayin” that population doubled since the 70’s oil shock, but it is not going to double again. So, maybe it might, maybe, possibly be manageable.
If you do not think so, place your bet and take action now within your family to start eliminating the excess. My wife and I did – had our 50th anniversary and no kids.
If I recall, since it stopped snowing in the US 10 years ago, that you believe in a few years that the continent of Antarctica will be ice free so billions can move there or else to Greenland or Northern Canada.
If I recall, since it stopped snowing in the US 10 years ago, that you believe in a few years that the continent of Antarctica will be ice free so billions can move there or else to Greenland or Northern Canada.
And just where did “recall” that I believe that from? Nothing that I ever wrote, that’s for sure.
Clueless, don’t make up shit if you expect to get a reply from me.
why don’t you “if” the fertility rate down to .5% in the next 10 years. That would help a lot. Unfortunately reality will set in and the fertility rate will settle at about 2%
Ron,
I don’t think you’ve really gotten an intuitive feeling for what “fertility rate” means. It’s not a percentage, either .5% or 2%. That’s a growth rate. A fertility rate is the ratio of children to women: if it’s less than about 2.1, then women are not replacing themselves, and fairly soon the growth rate absolutely has to go below zero.
In China, the fertility rate is far less than replacement – around 1.3, IIRC. That means they’re pretty close to where Japan is now: an absolute decline in population.
Nick, you are right but this was just a slip on my part. Of course I did not mean 2%, or .5%. I meant 2 or .5 children per woman.
But thinks for correcting my error. I will now correct my mistake.
” A fertility rate is the ratio of children to women: if it’s less than about 2.1, then women are not replacing themselves, and fairly soon the growth rate absolutely has to go below zero.”
“Fairly soon” is a matter of opinion. Nowhere near soon enough, in the opinion of the vast majority of scientists who consider such questions as part of their day to day work.
I understand the math.
I’m with Ron, mostly, because I also understand that while the population will continue to grow for quite some time, barring a miraculous lucky accident, we are depleting our one time gift of nature reserves of resources at an ever accelerating rate.
But over the last few years, I have grown cautiously optimistic that things might not get as bad as Ron thinks they will.
Once the energy and resource shit storms hit hard enough to force most governments to really take them seriously, it will probably be too late for substantial part of the human race. Many hundreds of millions of people, maybe billions, are at very high risk of dying hard, before this century is out.
But with good luck, meaning good management, mostly, there’s not too big a risk of people starving or dying of exposure or contagious diseases, etc, in countries such as the USA, those in Western Europe, Brazil…. many others.
The amount of energy and resources we waste in such countries is such that only a rather minor fraction of it is more than enough to maintain food production, maintain essential infrastructure, and maintain public order.
But most of the people used to eating ribeye are going to have to get used to eating chicken. Ribeye will be for old farmers and the one percent. 😉
Highly processed and expensively packaged convenience foods may be taxed to such an extent that most people will as a matter of choice or necessity will go back to cooking and eating the way their great grand parents ate.
That tax revenue could easily be justified by earmarking it as food stamp money.
This would actually be a VERY good thing, in terms of public health.
Hi Ron,
There are different estimates of what will happen to the total fertility ratio (TFR) in the future.
The UN Medium fertility scenario simply assumes that TFR will tend towards 2.1.
The experience of many advanced nations does not support this assumption.
The fact is that over a 40 year period the World TFR fell from 5 to 2.5 (from 1965 to 2005), we do not know what will happen in the next 40 years.
There are some demographers that expect the TFR to fall to about 1.75 by 2060 with population peaking at about 9 billion in 2070 and then falling as TFR continues to fall to perhaps 1.5 by 2150.
In the chart below mortality rates gradually decrease so that average life expectancy approaches 90 and then remains at that level.
Dennis, this is all well and good. But the sad fact of the matter is the world is being destroyed while just trying to support 7.4 billion people.
Has Half of World’s Wildlife Been Lost in Past 40 Years?
This “Living Planet Index” declined by 52 percent between 1970 and 2010, “a much bigger decrease than has been reported previously,” according to the report.
The 52 percent figure refers to a general trend of vertebrate species populations shrinking, on average, to about half the size that they were 40 years ago, according to WWF spokesperson Molly Edmonds.
And the sad part is Dennis, though this carnage began well over a century ago, half of what remained has gone in the last 40 years, since the mid 70s when the earth’s population was half of what it is today.
You guys really amaze me. You seem to be saying “all we have to do is wait about a hundred years and the population will be back down to about where it is today.
Are you kidding me? Even at our current level of population, all the earth’s wildlife will be gone in 100 years. All that will be left will be man and his domestic animals. And the earth will swiftly be turning into a desert.
Hi Ron,
The fall in wild animal populations was in response to very rapid population growth since 1970, the rate of population growth is now falling this may reduce the rate of wild animal population decrease (along with conservation efforts.)
Better access to birth control and better educational opportunities for women will increase the rate of decline in TFR.
Perhaps it will be too little too late, but try we must IMO. I don’t believe the future is known, or not by me.
Interesting.
What is the animal population doing in the areas where human population is not growing?
Even at our current level of population, all the earth’s wildlife will be gone in 100 years.
The rate of devastation of wildlife has little to do with population.
The US managed to extinguish the buffalo, wolves, and the Carrier Pigeon (and many, many other creatures),in a very few decades, with a much smaller population. On the other hand, countries like the US are now choosing to support improved biodiversity, despite high population density:
“Latin America, home to many low-income countries, has borne the brunt of animal loss, with “a dramatic decline” of 83 percent cited in the report. The opposite was found in countries where income is high—those nations show a 10 percent increase in biodiversity.”
http://news.nationalgeographic.com/news/2014/09/1409030-animals-wildlife-wwf-decline-science-world/
Humanity will choose whether to greatly reduce biodiversity, or not, and that can and will happen whatever the population level.
“Will energy efficiency get better?”
EVs are four times as efficient as ICEs. A quarter the energy, same number of miles driven, using current technology. The efficiency effect has not even begun.
you forget the efficiency of producing electricity from either photons or another fuel…. electricity does n’t freely fall from the sky
DrTskoul,
Of course electricity is not magically produced.
The point would be that 100 EJ of electricity can replace 300 EJ of fossil fuel because there is much less energy wasted as heat, much more energy can be converted to work.
If the recession is severe enough, demand will go down. Non-essence oil use will be eliminated if people don’t have the money for it. Even if the population continues to rise, people without money aren’t going to be buying cars and putting gasoline in them.
Boomer – how long did the longest recession since 1940 last?
Or, do you have a Phd in Economics and are making a prediction with a peer reviewed paper that there will be a new recession that never ends?
PS: People with a job will buy gasoline before they buy food – they have to get to work, you know, in order to have money for anything .
I am making a prediction that the global economy will contract unless there are significant changes. The high cost of oil is what we are discussing here. So unless there are adequate substitutes, it probably reasonable to talk about a permanent economic decline.
What I think we are in for is another recession comparable to 2008, because I don’t feel there have been any fundamental changes in the world economic situation to prevent one. I don’t know what might trigger it, but I think a lot of current economic growth is mostly financial fluff and can disappear pretty quickly.
As for people getting to work, if they don’t have jobs they don’t need to drive. I think global labor competition, automation, and recessionary forces will limit job growth.
Look, this forum is mostly populated by people who expect hard times ahead because of declining oil supplies and/or environmental damage. The fact that I, too, expect hard times ahead shouldn’t be all that much of a surprise here.
No, but that is because there are more pessimists in the world than optimists.
Like Warren Buffett, who states that he will always bet on a better future, is in the minority.
None of us here is going to influence the future. It’s going to unfold as it does and we can prepare or react to it as we can.
I’ve always been fiscally conservative. I don’t believe into going deep in debt. Don’t buy a house based on the best possible future ever. I’ve seen people having to sell houses as a loss or even have them foreclosed.
This whole forum is about the future of energy, and most here assume that oil supplies will get scarcer and more expensive. Now people are free to make investments based on those predictions.
But you can also make investments in other industries which look to take advantage of changes in fossil fuels.
Having followed the market since the 1970s, I personally believe the best option for most individuals is to stick with the S&P 500. And it is probably best to buy a little each month, through good times and bad, rather than trying to time the market.
I used to read the tech discussons boards around 2000. I learned to recognize the hype. So “pump and dump” pitches are pretty easy to recognize, and often there will be other investors (often those who are taking a short position) who will poke holes in the hype.
Let’s turn the tables a bit. I know the reasons why a coming global recession is likely. What would be the reasons to tell me that one of the longest recovery periods in history will keep going? What’s happening in Europe and China and the US to suggest we headed for an extended boom?
Here’s a quote from that article posted. This is what I believe, too.
Is an Economic Oil Crash Around the Corner? | Alternet: “Today, we are all supposed to quietly believe that the economy is in recovery, when in fact it is merely transitioning through a fundamental global systemic phase-shift in which the unsustainability of prevailing industrial structures are being increasingly laid bare. The truth is that the cycles of protracted economic crisis are symptomatic of a deeper global systemic process.”
Sorry for off topic.
Boomer, You gave some good advice – “And it is probably best to buy a little each month, through good times and bad, rather than trying to time the market.” And, I do not try to time booms or busts either.
But, I think that your question is a little off. No one has to forecast an “extended boom” in order to say things might be better in 25 years.
I am 75. Today, I sit in a climate controlled room in my house, turn to Amazon, and I can find hundreds of items that I use, cheaper and delivered to my front door [many without a shipping charge.] You can imagine the thousands of hours that I wasted in my lifetime driving to different locations, trying to find something that I needed, only to find out that the size or color, etc. was wrong or they did not carry it, or that it was sold out – check back in a week etc. Of course, because of those problems, we just did not have as much in the 1950’s. No POS inventory systems back then. Now, for example, there are so many different lightbulbs that one has to be either insane or a huge optimist to drive to a store to find some of them.
In the 40’s and 50’s you had a screw driver. And, if you could afford it, a hole starter punch. Then you put soap on the screw and used muscle to screw it into hardwood. Everything is hand-held power tools now – zero back then.
In short, in literally hundreds of ways, living is easier and, in my opinion, better today than when I was born.
The future – it will get better even faster. Robots will take over many tasks. Like the first $30,000 plasma TV’s, only the rich will be able to afford the first useful robots, but they will become mass market products. This is not an “all in bet” that robots will save us. Just one of hundreds of new things that are coming. And, I would rather not get into genetics.
I’m a few years younger than you and, in contrast, I have never been less optimistic about the future.
If we would phase out fossil fuels and find ways to use energy more efficiently, I would be optimistic about the economic growth those actions could provide.
But I see too much capital going into businesses that contribute relatively little to the quality of life, too much focus on wealth through financial juggling, and too many “smart” people using their skills to extract money rather than to invent things.
I also anticipate that with the wealthy getting wealthier and everyone else either staying at the same level they are now or even falling behind, whatever cool things come along will be out of reach for many people. But increasing income inequality doesn’t distress me as much as others because I think it results in less consumption, which is better for the environment.
I think we are leaving at the end of the industrial and fossil fuel ages. Could something better come along? Maybe. But it will be disruptive, some will fight it (as they are doing now), and there will be anti-science and anti-progress movements (as we see now).
The big question is if society has enough time to make a transition to something better, or if the combination of a decline of oil and global warming are going to limit the future.
I remember in the 1950s being told that nuclear power would provide electricity for next to nothing. It didn’t happen.
I remember in the 1960s we learned in school that the end of colonization in Africa would usher in a new era of progress and democracy for that continent. It didn’t happen.
I remember in the 1980s yuppies believed that if they dressed the right way and bought the right stuff, success would be theirs. For many it didn’t happen that way. Just the same old problems.
I remember in the 2000s that the Internet would enable more participatory democracy and everyone who have more information available to them. Yes, the Internet has changed some things for the better, but it has made some things worse.
The only thing I can be hopeful for is more renewable energy.
Warning somewhat off topic comment. Skip unless interested in the ways poor people deal with the cost of driving.
” People with a job will buy gasoline before they buy food – they have to get to work, you know, in order to have money for anything .”
True enough, but except for people who are already cutting it fine down to the last five dollar bill paycheck to paycheck and HAVE to commute a long way, most of us can cut WAY back on gasoline.
And even then, you can do something about buying a lot of gasoline.
It doesn’t happen often these days, with gasoline done to about 2.25 in my area, but I know a guy who just recently landed a good job about one hundred eighty miles round trip, and drove his four by four full size pickup there for a couple of weeks while he shopped for a commuter car. He bought a little Toyota econobox with some cosmetic damage for peanuts, and he will save enough on gasoline alone to pay for the car and all the expenses associated with it within about eighteen to twenty four months, considering how much he is saving on depreciating his truck due to putting close to a thousand miles a week on it.
He’s afraid to move,at least until he has been on the new job for a year or two, and very reluctant to do so, because he has roots here, and living costs in Charlotte are thru the roof compared to this community. So his eight an a half including lunch works out to about eleven and a half hours daily, but you gotta do what you gotta do these days.
Something that is not often taken into account when holier than thou types criticize working class guys for driving large pickups is that a lot of them really don’t put many miles on their trucks, because they live close to work. And while such trucks cost a lot up front, and use a lot of gas, and a lot to repair, if you take care of them, they can outlast the original owner, while enabling him to save or make some significant bucks once in a while, even if he mostly uses it to commute.
A number of my neighbors sell firewood, and use their full size pickups to deliver it. They can net from fifty to a hundred and fifty bucks on a Saturday,above and beyond their out of pocket expenses for the day, while putting delivering a couple of loads, typically within ten to fifteen miles of home.
Another fifty or sixty miles on the odometer of a pickup truck a couple of times a month is such a trivial expense that it hardly even matters, except for the gasoline. Five years down the road, another five thousand miles on the odometer means a five hundred dollar lesser trade in value. And a lot of deliveries are combined with the work commute, or going for groceries, etc.
I routinely abuse the hell out of my twenty six year old Chevy four by four by putting three times the load on it that it’s SUPPOSED to haul, but I did add helper springs, and top quality light truck tires, and I take it EASY when loaded that way. Never yet had a problem with it as the result of using this way, no broken springs, or axles, or wheel bearings, or transmission or clutch troubles, EVER. Alternators, starters, water pumps, batteries, brakes, etc, all go bad no matter how you use a truck , as the years and miles accumulate.
Redneck whites laugh at old black working class guys for driving huge old luxury cars,the stereotype being a Cadillac out front and an outhouse out back, but old black guys know about cars.
You can buy such a car for peanuts, once it has some age on it, with not so many miles on the odometer, and it is actually less apt to break down that anything else you can get for twice or even three times the money. People who buy really nice cars can and do usually maintain them properly, whereas you can never really know for sure how an old Civic or Corolla has been treated unless you know the past owners personally. You spend up to three times as much for gasoline, per mile, but your total cost of driving amounts to peanuts, if you are retired, or work very close to home.
There are a ton of ways to adapt to higher energy prices, and higher gasoline prices in particular.
My elderly Escort died recently, and the elderly full sized family Buick that used to be handy for family affairs is more or less retired to a spare barn, because I wasn’t using it enough in recent years to justify the insurance and tags. I won’t be replacing the Escort, because I no longer drive far enough often enough to save any money by getting another econo car. The Buick is ready, except for an inspection sticker, and a call to DMV for tags, so if the truck quits, I won’t be without wheels for any longer than three days.
The thing to do now is squeeze the last few good miles out of the truck , and the first time it needs major repairs, get a newer one, with better brakes, air bags, better fuel economy, etc. .
Y’all remember not too long ago we were estimating portion of GDP derived from oil output, mostly shale? That was when the price first started its decline and we projected diminished activity.
but
Y’all also remember the old “$10 decline in the price of oil is like $XXXXbillion tax cut to stimulate consumer spending?”
Factoids–
Gasoline is part of retail sales. Raise gasoline sales total (not volume), you raise retail sales. The algorithms will trade on that number. Not why that number. That’s all you have to have happen to raise NYC tax revenue (from wall street bonuses).
We didn’t get any huge economic boost from the crash in oil prices. Consumer spending didn’t explode.
Mostly, it’s all crapola since we learned money is created from nothingness via QE.
You want disaster, look at barrel total, not dollars. You aren’t going to get megadeaths from dollar numbers on a screen. Those numbers will just be changed.
We need better terminology than just “everything else equal” or “everything esle held equal” to describe what happens when you change just one variable in an economics discussion.
Watcher sez that when the price of gasoline crashed, the money that consumers saved on gasoline did not have a positive impact on the rest of the economy.
I say bullshit. It’s true that there was no sudden burst of prosperity. But suppose that the price of gasoline had stayed at four bucks instead of declining to two bucks. I have a lot of neighbors who buy from ten to fifteen gallons a week to get to work.
And you can take it to the bank that instead of banking the twenty or thirty bucks they saved on gas every week, they spent just about every dime of it. Some went to pay off old bills, and the rest went to buy things they were doing without previously.
So – there was no noticeable uptick in the economy , maybe, but if the price of gasoline had stayed up, then my neighbors who commute would have been spending twenty or thirty bucks a week LESS on groceries, clothing, medical care, entertainment, or whatever.
So – while cheap gasoline didn’t lead to things getting noticeably better, it’s perfectly reasonable to say that the crash in the price of gasoline KEPT THINGS FROM GETTING WORSE.
There ought to be a readily recognized short hand phrase that covers this situation, using less words.
There are countless situations where it could be usefully used.
My health has been declining as I get older. My doc has designed a treatment regimen to SLOW my decline, and I follow it . But I ‘m not getting younger, OR healthier. What I AM doing is going downhill at a SLOWER rate.
Watcher would say that since I am not getting healthier and younger, my meds and recommended diet and exercise program are useless, since there is has been no noticeable positive improvement in my health.
NO, consumer spending didn’t explode, but most of us benefited from declining gasoline prices.
The article says this.
“A new scientific research paper authored by a team of European government scientists, published on Cornell University’s Arxiv website in October 2016, warns that the global economy has entered a new era of slow and declining growth. This is because the value of energy that can be produced from the world’s fossil fuel resource base is declining inexorably.”
I agree that the world has entered an era of slow and declining growth, but I don’t think it is caused by the value of energy at this time.
Businesses aren’t expanding right now because of lack of energy. Rather they aren’t expanding because they don’t see a growing need for their products. So they put their money into financial investments rather than production increases. Giving the world’s businesses more cheap energy would not increase their markets unless their customers have the money and the inclination to buy. In the developed world, most people have more stuff than they need already. They are spending more on services and health care, and I suppose you can call that economic growth, but most of those expenses don’t require lots of cheap energy.
I agree that a lack of cheap energy will cause problem when even life’s basics become unaffordable, but I don’t think that’s the current cause of global economic growth decline.
“Pemex expects to produce around 1.9 million barrels of crude per day (bpd) in 2017, down from around 2.1 million bpd in 2016 and well below a peak of 3.4 million in 2004.”
http://www.reuters.com/article/us-mexico-pemex-idUSKBN14V2NM?il=0
That looks like 200,000 barrels a day is coming off of 2017 exports unless domestic consumption drops to offset. That’s a big drop in proportion to current exports.
Thanks for that HSBS article Ron.
This was also a great comment and chart by Mr Kaplan in last oil post.
Zero net exports by 2041 got my attention. Sounds like one way or the other its a population bottleneck. Get ready for a damn mess.
http://peakoilbarrel.com/iea-oil-market-report-december-2016/#comment-590653
The HSBC article/analysis appears to be spot on to me.
If we do achieve a declining demand/population by 2040 (and I believe we definitely will), it will very likely be due severe economic hardship related to insufficient energy supply in the interim.
Fossil fuel decline will far outpace renewable ramp up, for most countries.
The interconnected economies of the world will suffer big time, including the big exporters like Germany, S. Korea, China and Japan.
Thats how I see it.
“Fossil fuel decline will far outpace renewable ramp up, for most countries.
The interconnected economies of the world will suffer big time, including the big exporters like Germany, S. Korea, China and Japan.
Thats how I see it.”
I believe Hickory is right.
Poor people pay ten times much to do their laundry at laundromants as better off people spend to do their laundry at home, because they can’t get enough money or credit together for a washing machine………..
Moderately well off people often rent for years past the time they COULD buy a house of their own, even though they know that owning is a superb long term investment….. because they want nice cars, and nice clothes , and vacations, NOW.
The only class of people who customarily and habitually make long term investments are the rich. Ditto countries, and even countries as rich as the USA and Germany have a hard time investing in long term infrastructure because so many people have their hands out .. for a hand out. I get one myself, every month, as regular as regular can be and have been getting it ever since I hit that magic sixty fifth birthday.
But I believe Germany will be in better shape than any other large , well developed, highly industrialized country, in terms of using lots of domestically produced renewable energy , thus avoiding paying blood for imported fossil fuels. A couple of very small countries with lots of wind and or water power might use a higher percentage of domestically produced energy than Germany, but they’re special cases.
They’ve been pedal to the metal for a long time, compared to any body else, in terms of effort in relation to the size of the country, and I read about some grumbling because of the cost, but the German people seem to be solidly in favor of continued investment in renewable energy.
Hardly anybody except somebody like me ever mentions it publicly, but the Germans haven’t forgotten their country’s history, and they aren’t anxious to have to deal with ANYBODY, to any greater extent than absolutely necessary, to ensure their energy supply. They won’t have to, if they succeed in going totally renewable.
OFM, I’m not so sure about Germans ability to deal with a shortfall in energy available for import- they are heavily dependent on importing energy-over 60% of net energy use (compared to 14% for USA- year 2013 data). They do have coal to use.
But I was referring to the risk of the economies of countries like Germany, S. Korea, China and Japan due to their heavy reliance on exportation of goods to countries who, during hardship times, will stop buying as much. I believe that Germany will suffer a big drop in GDP within 5 years, due to loss of customer buying power.
Back atcha , Hickory
I agree with your conclusion about Germany not being able to function now and near term without importing huge amounts of energy. But long term, I believe Germany will be able to produce enough energy domestically , and use it so efficiently, that Germany will be one of the last countries, probably THE last one, making a go of the importing raw materials and exporting finished goods economic model.
And I believe you are right that Germany is up against it long term because you can’t sell to customers who can’t pay.
On the other hand, they can tighten up their belts and give up some of their living standard, and by doing so, they can probably do OK even after losing most of their export markets by putting most of the people in the export industries to work on producing goods and services for domestic consumption.
We ain’t seen nothing yet, in terms of what can be done in terms of efficiency and recycling, and Germany is likely to be the country that leads the way on both fronts.
They may have to import the raw materials needed to upgrade their existing housing stock to near zero or better than zero net energy but they can and will do it, imo, when the time comes that enough industrial workers are in need of the work by putting such industrial workers on the housing upgrade job. ETC
German workers are a hell of a lot smarter and better trained, on average, than Americans, or just about any others in any country. They won’t have any trouble at all transitioning to new jobs at the individual level.
( It’s not that we Yankees are less intelligent, but rather that we don’t make equal use of our intelligence, on average. )
Fossil fuel decline will far outpace renewable ramp up, for most countries.
The interconnected economies of the world will suffer big time, including the big exporters like Germany, S. Korea, China and Japan.
When you say “exporters” you should qualify exactly what kind of exports you are talking about. Germany, South Korea, China or Japan, then you are talking about exports of manufactured goods. But they have massive imports of fossil fuels. In fact they import almost all of their fossil fuels.
So when crunch comes to comes to crunch, these nations will get nothing, and they will export nothing.
But nevertheless all will still be right with the world… according to the Pollyannias.
Yeah right!
I’d like to point out that perhaps grain exports are primarily the processed products of water and energy inputs. Countries that export grain and import fuel may indeed see their grain production decline and/or become costly. Perhaps in the future oil exporters will only want food in return for their fuel.
Imagine that. Someone decides he doesn’t want any more pieces of paper for something valuable.
““Pemex expects to produce around 1.9 million barrels of crude per day (bpd) in 2017, down from around 2.1 million bpd in 2016 and well below a peak of 3.4 million in 2004.”
That looks like 200,000 barrels a day is coming off of 2017 exports unless domestic consumption drops to offset. That’s a big drop in proportion to current exports.”
That’s not a big drop in proportion of total Mexico’s exports.
Oil and product exports now account for only 5% of Mexico’s total exports, down from 16% in 2011. A further decline of 200 kb/d is not significant for Mexico’s economy.
http://peakoilbarrel.com/iea-oil-market-report-december-2016/#comment-590774
I don’t know the exact numbers but I’m guessing Mexico exports about 1.2 million barrels a day. Knock that down to a million. 16% decrease seems significant to me. They’re overall export values are declining as per your chart from 400 to 300 between 2014 and 2016. I’m not sure what they have planned but if they keep doing what they’re doing they’re gonna keep getting what they’re getting, which is a greased pole to failed state. Perhaps going from barely functioning state to failed state is not a big move on the scale of things but I’d suggest its ramifications are highly significant. I can’t imagine how they’re gonna get by as an oil importer.
http://www.upi.com/Business_News/Energy-Industry/2017/01/11/Oil-Trump-leave-Mexico-in-dire-economic-straits/2131484140882/
Mexico is in a damn mess.
http://www.reuters.com/article/us-mexico-immigration-idUSKBN1442Z0?il=0
200 kb/d at $50 per barrel is around $3.65 billion per year.
Mexico’s total exports in 2015 was $380 billions, and $306 billions in January-October 2016.
So this represents only 1% of total exports.
Declining oil production is a problem forMexico; but not the main problem.
Does anyone here know how Pemex actually functions. They make a loss every year but nevertheless pay a load of taxes. They then get some of that money back to cover the loss. They seemed to be asking not to pay taxes on KMZ so they could retain some money and maybe look like a proper company – but no go. It makes no sense.
Note KMZ has been on a long plateau, when it comes off it will almost certainly decline like Canterell did at 20% or more per year. 10% average production decline might look like the good old days.
Survivalist (and George Kaplan)- thanks for bringing up that comment/chart by G. Kaplan from the prior post. Quality work/analysis as always.
I would be very interested to see a similar charted projection of global oil export capacity. This will have major implications for global economic trade / growth / relations. Thanks.
“I would be very interested to see a similar charted projection of global oil export capacity”
I second that. So much great thought and analysis is presented here.
Zero net exports within 25 years or so is gonna be a damn mess. Indeed it’ll be a damn mess well before that. To put it mildly, I’m not an optimist.
Modern industrial agriculture turns oil into food. And a few years ago when prices of oil got high enough folks said ‘hey let’s turn food into oil’. We’re just not equipped to deal with what’s coming. And there’s no stopping what’s coming. EVs might get your ass to Walmart, but why bother? It’ll be empty.
” To put it mildly, I’m not an optimist.”
Neither am I, at least not much of an optimist. I have often remarked that I believe there is a good to excellent chance that a substantial portion of our species will die HARD within the foreseeable future as the result of overshoot. Five or ten years ago, I was a more or less committed doomer, and expected that MOST or nearly all of the human species would be going to hell in a hand basket.
But renewables have come on like gang busters, and birth rates have been dropping like stones, and there IS reason to hope that most of us will manage to turn the overshoot corner without perishing in the process.
We all know that taking almost any argument to it’s logical conclusion leads to absurdities as often or more often that to useful answers.
Net oil exports will never fall anywhere close to zero, so long as some countries are still producing substantial quantities of oil, for a fairly simple reason. OIL is so intrinsically valuable that producing countries will find it VERY much to their advantage to cut back on domestic consumption so as to have oil to trade for things they really want, or MUST HAVE.
Food is the ultimate must have good, but there are lots of others. A country such as Suadi Arabia will never have a big enough and diversified enough economy to manufacture all the stuff necessary to HAVING an oil industry, so if the Saudi’s are going to produce oil, they WILL be importing the equipment needed to produce it.
And while they may jerk us around , sometimes, they will not never jerk TOO HARD, except by miscalculation, because the House of Saud would be living in exile, and quite possibly impoverished exile, if it weren’t for UNCLE SAM maintaining a military establishment adequate to keeping the family no the throne, and USING IT to do so. They wouldn’t last two years if we were to turn our backs on them. One or another country would move right in on them, and they wouldn’t be able to do diddly about it.
Oil will always flow in international trade, so long as oil is needed, and any significant amount of oil is being produced.
OFM- indeed there will be oil flowing on the markets (exported) for along time, but the quantities available will likely come up way short of demand before too long- that is the point of this discussion.
The repercussions of that little trend are immense, of course. For example, if Putin or someone strategically savvy is in charge of Russia as this trend unfolds, you can bet some big dollars that they will wield the petro-Ruble sword on a grand scale, just as we would if we were in that position.
There are dozens of big implications to consider, most chaotic. You have mentioned that Egypt is in a precarious position- food and energy. I completely agree seeing as how they are the biggest grain importer in the world, having grown far into overshoot territory.
I would add to that list S. Korea. They import about 83% net energy consumption, and rely heavily on the health of the economy of their overseas customers to enable purchase of their exported manufactured goods. There is a big risk that when oil prices rise next time, their costs will escalate and their earnings will plummet- like 2009 but perhaps much more prolonged and deeply. Fragile position.
I’m sure this is no news to you, but it is the big deal.
Back atcha once more, Hickory
We’re in the same book, and mostly on the same page.
But we are different paragraphs, sometimes. 😉
I bet I’ve posted ” DON’T get caught in Egypt” here at least twenty five times. 😉
Here’s a link to the Italian study references in the story/link provided by Ron
https://arxiv.org/pdf/1610.07298v1.pdf
Global oil discoveries, 1950-2016 (billion barrels)
source: Wood Mackenzie
https://www.bloomberg.com/news/articles/2017-01-10/oil-discoveries-seen-recovering-after-crashing-to-65-year-low
Exploratory wells drilled, 1960-2016
source: Wood Mackenzie
https://www.bloomberg.com/news/articles/2017-01-10/oil-discoveries-seen-recovering-after-crashing-to-65-year-low
Andrew Latham, head of exploration research at Wood Mackenzie, on conventional oil exploration:
“People do tend to look at the total volumes [of conventional oil] being added in recent years and conclude that we are running out of subsurface potential, I find that unlikely. It’s our view that conventional exploration is a perfectly viable growth and renewal option, particularly for those that are good at it. In reality, a lot of exploration’s recent decline is nothing more than the fact that it’s drilling fewer wells in the downturn.”
http://peak-oil.org/head-of-exploration-research-at-wood-mackenzie-on-conventional-oil-exploration/
There is indeed a perfect correlation: oil discoveries in 2016 are down about 3 times from average 2000-2014 levels. Exploration spending and the number of exploratory wells drilled also dropped about 3 times.
In my view, the key risks for adequate oil supply in the future are mostly related to economic factors rather than poor resource potential.
1) If oil prices remain relatively low, that may discourage a significant rebound in exploration activity;
2) Even if oil exploration and the volume of oil discoveries are increased, development of newly found oil fields may be postponed/delayed, again due to relatively low oil prices;
3) These risk are exacerbated by the fact that most of potential discoveries are high-cost resources located in deep offshore; Arctic zones, etc.
4) Oil companies may be discouraged from increasing both exploration and development spending on costly upstream projects with long investment cycle due to false signals from the supply-side (expectations of a second boom in LTO production, with annual growth of 1 mb/d over the next several years) and the demand-side (expectations of an imminent and rapid oil demand destruction from EVs and renewables).
In that sense, perception that costly conventional oil and tar sands resources may remain stranded, created by shale cheerleaders, on the one hand, and EVs/renewables cheerleaders, on the other, may have a detrimental impact on the future global oil supply/demand balance.
Oh for God’s sake. What else is a WoodMac employee going to say?
“There’s really not much left and no point in hiring my firm to consult on anything.”
The concept that if you increase spending on exploration you get more discoveries is likely true, but the concept that the magnitude or total of new discoveries will align itself to the amount spent on exploration CANNOT be true, because the total remaining must decline.
There MUST be diminishing returns on those expenditures.
Of course, there is a long-term trend of diminishing returns.
But the sharp drop in new discoveries in 2015-16 was due to the sharp drop in exploration spending.
All the oil will eventually be found unless there is a complete collapse in civilization. The best prospects are explored first. The current slowdown is only delaying discoveries by a few years and it might be a good thing to smooth out the decline rate. The main point is that frontier territories are getting sparser and success rates in them is declining. I think the most money per year ever spent on exploration was in 2011 to 2014, and discoveries kept on declining. Every dry well means one less prospect. Eventually we run out no matter how much is spent.
And alternatives (both alternative energy sources and new ways to use energy) will allow us to better use what oil we have left.
Why burn away oil for purposes where it is not necessary? Save it for critical uses, and eliminate it for unnecessary uses.
I remember reading that there was a time when pioneers routinely used beautiful hardwoods for fuel. Eventually the hardwoods became more scarce and it was a shame so much went up in smoke.
I’m pretty sure almost all the oil is going to be burnt – it is just too good. What we need to ensure is that we don’t go back to coal.
As long as natural gas is plentiful, there isn’t much reason to go back to coal.
We are, of course, talking about two different things. Oil for transportaton and coal and natural gas and renewables for electricity generation.
Reminder about oil types.
New discoveries relentlessly are of higher and higher API number. Jeffrey’s chart, which I have found and lost about 10 times, makes clear middle distillates essentially disappear from “oil” with API > 40.
No kerosene. No diesel.
Success rates for exploration wells dropped from 23% in 2006 to below 5% today, Half of that period saw record oil prices. Have Andrew Latham explain that.
This shows how small and rare discoveries in the North Sea are (this was from August – things have been a bit better since):
“Of the six spuds in the UK, two of three completed were small discoveries. In Norway, with 11 of 13 well results known, 6 were dry and 7 discoveries, of which only Brasse looks likely to be commercial.”
https://www.hannonwestwood.com/how-is-the-exploration-medals-table-shaping-up-for-2016/
These are the high impact wells for this year, with possible resources. Korpfjell, Mesurado, Eagle Deep, Dukchinskaya, Prospect B, Marina are oil, the others gas. Mesurado has been drilled and was dry. Th eothers would give about 1.5 Gb assuming 30% recovery if they all were successful. However recent success in frontier territories has been 5 to 8% depending how it’s measured. Deep and ultra deep drilling is being reduced and that is where the big finds might have been, maybe it’s mostly because of money but I think there is an aspect of running out of prospects. The big technological boosts from improved seismic and new generation rigs came in the early years of this century, and as is always the case in the oil industry every body does pretty much the same thing at the same time so there was big over investment, lots of good discoveries, and then another load of over investment in development of the off shore fields – which happened to coincide with USA LTO and recovery of Iran and Iraq. Hence a supply glut, but also maybe fewer good exploration prospects remaining than might be expected.
George, Do you know who the operators are of these wells?
Ironbark : BP
Korpfjell : Statoil
Halcon : Total
Mesurado : ExxonMobil
Antelope Deep 1 : Total
Eagle Deep : CGX Energy
Dukchinskaya : Statoil / Rosneft
Prospect B : Chariot / Serica (?)
Barque : NZOG Ltd
Marina : Karoon
(I think – may be out of date for some)
I’m not sure that estimates of global oil discoveries made by Rystad, Woodmac and others fully account small discoveries, of 50-100 million barrels and less.
2016 Review: Western Canada’s ultimate potential for natural gas jumps (Release date: 2017-01-12)
Since horizontal drilling and multi-stage hydraulic fracturing started being applied to Canadian tight and shale resources just over a decade ago, estimates of the ultimate gas potential of the Western Canada Sedimentary Basin (WCSB) has more than tripled to over 1 000 trillion cubic feet(Tcf).
Chart: Published Estimates for Ultimately Recoverable Natural Gas in the WCSB
(each dot represents a published estimate)
N.E.B. http://www.neb-one.gc.ca/nrg/ntgrtd/mrkt/snpsht/2017/01-05rvw-eng.html
It seems that low interest rates are helping to restart oil sands investments, +100kb/day…
MEG Energy Corp. is boosting production at its Christina Lake project in Alberta and tapped debt and equity markets for financing. The expansion at Christina Lake Phase 2B will increase output from the site by about 25 percent to 100,000 barrels a day by 2019.
Cenovus said last month that it will proceed with the 50,000-barrel-a-day phase G expansion of its own Christina Lake project and Canadian Natural said in November that it was resuming work on its 40,000-barrel-a-day Kirby North project.
https://www.bloomberg.com/news/articles/2017-01-12/meg-to-expand-christina-lake-project-as-oil-sands-growth-returns
Husky Energy to spend $1 billion on new heavy oil projects in Saskatchewan. The Calgary-based company said this week that it plans to build three $350 million thermal extraction plants in the region as part of its ongoing transition to “low sustaining capital” operations.
2016-12-14 http://www.vancouversun.com/Business/12527791/story.html
Suncor Energy announces $1.0 billion medium term note offering – Marketwired – Sept. 8, 2016
http://fuelfix.com/blog/2017/01/12/anadarko-to-sell-eagle-ford-assets-for-2-3-billion/
The sale to Houston oil producer Sanchez Energy Corp. and private equity firm Blackstone Group is expected to close in the first quarter. John Christiansen, a spokesman for Anadarko, said the acreage represents the entirety of its oil and gas-producing assets in the Eagle Ford, though it still operates midstream assets there through a subsidiary, Western Gas Partners.
Like you said, shallow, private equity.
I am sure Anadarko got tired of counting all the money they were making on these properties.
Well said, Mr. Hightower; their 5-6 year old wells are getting very wobbly (as in standing on one leg) at 165K, or less, of BOE. So not many of them even reached payout and/or for sure have not made any money. Sanchez, on the other hand, is quite certain it can turn one mans junk into another’s treasure and has promised its 50/50 partner, Blackstone, 400K EUR’s. They must have a secret. I know, bigger frac’s ! Sanchez’s 50% of the deal, by the way, was financed by guess who? Blackstone.
Anadarko, I guess, needs all the bucks it can get to develop its big “discovery” out near Balmorhea, which by the way has less billions of barrels of oil in it than its Eastern Montana, Bakken flop, that produced zilch. You almost have to have a TV guide to follow this shale stuff now days.
How exactly do you cheerlead for these shale guys when you essentially KNOW their lying thru their teeth? It says something about the cheerleader, I should think.
I guess you cheerlead if you’re trying to unload stock or wells that you own. Hype it until you can unload it.
Or its RI and ORRI (mail box money) and you can’t tell the difference in that and WI.
I assume those EUR’s are BOE, Mike.
From a quick review of these properties, it appears the produce more gas than oil. 2.4 million gross MCF gas isn’t going to generate enough $ for sure.
Yes, Shallow, BOE, and the ‘ol 6/1 BOE, of course. Anadarko’s block is in the gas to liquids rich gas leg and oil (condensate) production struggles to get to six figures. I don’t know what their WH prices have been for gas but I would assume a dollar and some change until recently, way south of HH.
With respect to my colleague, Mr. Hightower, I think Anadarko got tired of looking for where all their money (CAPEX) disappeared to.
Sanchez thought it was smarter than Shell and bought the Harrison Ranch block for slightly more than the GDP of Ecuador. Shell’s wells were awful and they could not wait to bail on that stuff. I have not checked to see if Sanchez is doing any better with it.
Sánchez bought this stuff to get a Wall Street pop in their stock. It was up 29% on the news.
Sánchez has lost money every quarter but one since the 4th quarter of 2014 per NASDAQ, and those losses have ranged from $1.18 to $9.91 per share quarterly. They posted a .36 profit q4 2015 somehow.
Investors love to invest in oil and gas. One only needs to look at Legend Oil & Gas Ltd to see how gullible investors can be. Ticker is LOGL.
As I recall, this company bought some insignificant Bakken undeveloped acreage, a few marginal wells in Canada and a few very low volume stripper leases in Eastern Kansas, and was able to raise around $100 million in an IPO. The value of their assets was maybe $2-3 million at the time.
I’m not saying the shale companies are like those involved with Legend. I am just pointing out how gullible investors can be.
I include myself in that. I bought some E trade stock during the internet bubble. Bought it at split adjusted $50, in a short time it went over $70, of course I didn’t sell until it hit $20, but that was better I guess than waiting till it hit $1. I think E trade did a 1/10 reverse split, so had I held on for 17+ years, I would just be at about $3.50.
To me, sales of LTO assets to private equity is bullish for oil. Private equity needs to make a return, I don’t think they generally drill in excess of cash flow.
Private equity has done well in the shale boom. They bought acreage, flipped it, let shareholders of public companies finance development, then are coming back in and buying the production once it has settled.
People look down on stripper wells, but those are the ones that actually make money, if they are bought right. However, I would much rather operate shallow ones than 20,000′ horizontals. I suspect the Bakken will have some decent strippers, as will low produced water areas in the Permian. I think EFS Hz strippers will be the least desirable of the three, but it is early.
Mike, what would a tubing hole at 8,000′ cost me, assuming nothing out of the ordinary? Dont worry, I’m not in the market to buy this stuff, just think it worth noting that a 1,000′ tubing hole costs $500-$800 right now here.
Edit: Per 2015 10K Sánchez PV10 all categories was $595 million. Long term debt $1.746 billion. Wow!! How does a company with debt to PV10 ratio get the $$ to buy out Anadarko EFS? Surely Blackrock has some onerous terms or is this really Blackrock buying the whole thing with Sánchez as operator and taking on some risk?
In the Haynesville, don’t look at their P4 reserves (I love that phrase and wish I knew who to give credit to) but at what they do. The four biggest players were Encana, Swepi, Chesapeake and BHP. Encana and Swepi sold out to PE backed companies. Chesapeake has sold off parts of their position trying to raise cash to retire debt and BHP has done nothing in the last 2 years. Gas production is a small part of this companies assets, so they can afford to be honest with their investors and do what most companies should do, which is quit drilling. It is WAY too early for the big boys to be getting out now while there are wells to be drilled, if these shale plays are as profitable (on average) as they say.
I first heard of P4 reserve classifications from a smart, oily fella named Jim Brooker, on Enno’s site.
This sort of thing is going to rain on the shale parade, big time: http://www.usatoday.com/story/money/2017/01/12/sec-cracking-down-fuzzy-math-company-earnings/96451422/
That is it.
Still waiting for the analysts to find Enno’s site
Mike, there’s a new Sheriff in town. If SEC regs are about to force shale operators to fire a bunch of non college degreed workers, then those regs are not going to happen. Harold Hamm will have his private phone number for this kind of thing.
If there are lenders willing to ante up, then Trump will say ante up and keep those people employed. Can’t make a profit? Don’t matter. Keep the wheels turning.
Greenbub.
A similar thing happened in the 1990s, as majors and large independents sold out of most of their US onshore conventional production.
However, they were not selling out less than ten years of producing the assets.
Hess stock was down yesterday because they are not planning to add many rigs in the Bakken this year.
If the Bakken and EFS aren’t going to add much more oil production, the US will possibly just see significant onshore growth in the Permian.
Saudi below 10 million barrels a day?
http://oilprice.com/Energy/Crude-Oil/Saudis-Cut-Even-More-Oil-Production-Falls-To-2-Year-Low.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+oilpricecom+(Oil+Price.com+Daily+News+Update)
China imports record high in December.
http://www.kuna.net.kw/ArticleDetails.aspx?id=2585843&language=en
Comments?
https://www.climatecentral.org/news/climate-change-worlds-biggest-risk-charts-21050
I notice that “Energy Price Shock”, isn’t rated anywhere near the top of either “Impacts” or “Likelihood”
North dakota numbers are out again. Roughly 10000bpd drop
“There was one significant precipitation event in the Minot area, eight days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F. December 2016 and January 2017 will be a different story.”
Probably means a big drop is coming. I still haven’t seen an explanation for the sudden increase in October that makes complete sense. According to Enno Peter’s charts the rise was only in McKenzie and it affected all the formations (Middle Bakken, Three Forks and, especially in percentage terms, “others” which went from 3 to 36000 bpd in Mckenzie). Also it looks like only CRL and Whiting were impacted.
The directors cut didn’t say much to explain the big drop in permits (over 70 to 35 – but actually only 31 net): “Drilling permit activity fell slightly from October to November then decreased sharply November to December. Operators are maintaining a permit inventory that will accommodate a return to the drilling price point within the next 12 months.” and “North Dakota leasing activity is limited to renewals and top leases in the Bakken – Three Forks area.” How many Bakken “Top leases” are left?
Interesting to note that SM Energy just announced it is marketing all of its Bakken acreage and production. We have been discussing that private equity firms have been the buyers of most of the Bakken production. These firms typically do not drill in excess of cash flow.
I noted, as did others, that the large increase from September to October was due partly to Whiting shutting in some highly prolific wells in order to complete some new ones in one field. Those impacted both August and September negatively, and then October positively, as the total BOPD was in excess of 20,000 once all wells were reactivated.
I see there are several EFS properties being marketed too. Anadarko just sold some, as Greenbub mentioned above.
I do not expect to see major growth from either EFS of Bakken unless oil prices rise substantially, as I do not think many there are motivated to drill in excess of cash flow. The Permian is different, as the hype machine is still turned on in the Permian.
Whiting Twin Valley Field
June, 2016 16 wells 124,209 BO
July, 2016 16 wells 41,148 BO shut in part of month
August, 2016 16 wells 4,191 BO shut in almost all month
September, 2016 29 wells 98,807 BO 16 old plus 13 new wells partial month
October, 2016 29 wells 630,606 BO 29 wells all active
November, 2016 29 wells 605,302 BO 29 wells all active
The above are oil runs. Very strong wells , both the older and new. Part of the reason for the variance from July – November, as not only were 13 very strong wells added, but 16 very strong wells were shut in to complete the 13 new wells.
That makes sense – thanks for taking the trouble to repeat it. So I guess the anomalies were the big drops in August and September and we are back to approx. 10 to 12% yearly declines, maybe with larger seasonal variation coming due. Two other questions – sorry if you may have answered before as well: How many older wells is one of the larger Whiting wells equivalent to (I’m assuming they are longer or drain a bigger area in some way)? And what is the “other” formation that has shown such a large increase this year as shown on Enno Peter’s charts – could that develop into a big producer like Bakken?
George,
Confidential wells, with an unknown formation are also part of this “Other” formation. That is not intuitive, I will assign them in the next update to formation “Unknown” instead. Good catch.
I made an update to the “Well status map” overview. Easy to see now where wells were completed, and where the DUCs are. All wells that started production in Nov were located in the core, which you can nicely see if you only select the status “first flow”
Thanks – map looks good.
Baker Hughes North America rig count is out. Canada up 110 after Xmas break and 88 year on year. And what are all the headlines about – USA oil is down for the first time in 11 weeks. In fact the one additional GoM rig probably has a big impact than all the reductions in on shore drilling (which are all vertical rigs).
I have a new post on North Dakota, based on the just released production numbers, available here.
Verwimp,
Would be great to see your updated graph with ND Production vs your model.
General question to all,
What do you think the US Production in the end of 2017 will be? I suspect that most shale oil plays (maybe apart from Permian) will continue to fall about 20% and I use 4% natural decline for the conventional fields, giving an average natural decline of rouhgly 10-12 %. As Permian may increase about 5%(??), I expect the total US C+C production to be around 8-8.3 mboed. So far it seems that the increased # of rigs will not increase production other places than in Permian. Any opinions?
Thanks
The EIA disagrees with you. They have total US C+C at 9.22 million bpd in December 2016. They have Alaska at .49 million bpd, the Gulf of Mexico at 1.82 million bpd and the lower 48 at 6.92 million bpd in December 2016.
So the EIA Short-Term Energy Outlook is about 1 million bpd higher than you. I think they are a bit too high but I think you are a bit too low. My guess would be 8.8 million bpd or about the same point we were in October.
Hi Ron,
Your guess sounds excellent to me, possibly we might get close to the EIA guess, but not at the oil prices they predict. If their oil price guess is correct, your guess will be about right, if prices are higher, output might be a bit higher, but probably not likely more than 9 Mb/d.
I have no idea what future oil prices will be, but my guess is higher than today, but less than $85/b.
Hmmm. I thought the explanation for the signif uptick in Bakken output last month was essentially transient.
There should have been a much steeper decline this month if those theories from last month were true.
Don’t remember the specifics, but I thought it was about an unusual collection of events (well starts) all in that month. Something like that.
I think it was said to be chokes opening up.
is there significant eor is the CO2 is available?
https://www.washingtonpost.com/news/energy-environment/wp/2017/01/10/americas-first-clean-coal-plant-is-now-operational-and-another-is-on-the-way/?utm_term=.4a7cd69bab0e
It’s not really clean coal if the captured CO2 is used to extract more oil that gets burned with it’s CO2 entering the atmosphere. In fact, numbers would have to be run, but it could turn out to a net CO2 emission increase over just having let the CO2 from coal escape in the first place. Why? Because it’s very likely much of the supposed captured CO2 dissolves and becomes part of the oil being extracted, then releases to the atmosphere during the refinery process or later when the refined product is used in one manner or another.
There was another CO2 capture I heard about the other day in which the CO2 was used for carbonating drinks. Well, once the beverage is consumed the CO2 enters the atmosphere from the people who consumed it, so that isn’t permanent capture either.
But people also think electric cars are emission free, when in fact if 60% of the grid energy is Fossil fuel based, then the energy usage even in an electric car is only 40% emission free. That’s what it should say on the bumper; 40% emission free.
Which gets to my point that we all need to think the cycle through in each instance in which it benefits the people making claims to only look at the first stages of the full cycle.
OFM said: “We need better terminology than just “everything else equal” or “everything esle (sic) held equal” to describe what happens when you change just one variable in an economics discussion.”
But, I wonder how much easier the cost of living would be if those that do just went back to drinking water out of faucets instead of out of bottles. I think that the first bottled water showed up in the 1970’s??
OFM can probably remember pumping it out of a well by hand into a jug for a day in the field. And, did not put it in a refrigerator before drinking it.
Maybe Boomer knows how many equivalent windmills to manufacture the plastic, fill it with water, transport it, chill it, etc. [You are right if you assume that I do not drink bottled water. And, I am still mostly alive.]
I can remember Momma toting water from a spring a five minute walk DOWN a steep hill. She toted me on one side and a bucket in the other hand, until I was old enough to walk. But Daddy had a truck and a job away from home, and brought most of our water home in five gallon buckets until I was six.
Digging the well was one hell of a HAPPENING. I remember it like it was yesterday. A year or so later, we got an electric pump. I can’t remember when we didn’t have electricity. That went in within a month of the old two room green oak board and batten house Daddy hired built by a local carpenter before I was born. It took the two of them two months to build the house. No power tools, they didn’t own a single one between the two of them.
Daddy and his Daddy, my maternal grandfather “Poppa” logged the timber off Poppa’s farm, hauled it to a sawmill on his farm truck, and back home. From the time they were married, until they were in a home of their own, paid for, my parents rented or lived with relatives less than six months. The initial acre plus home stead WAS a gift from Poppa though, or it would have taken longer to save enough money to buy a home site. The purchased materials list consisted of metal roofing, nails, masonry block and mortar for the chimney, minimal wiring, one exterior door, four windows, sheet rock, and a few odds and ends. I still have the hand made table we used in the kitchen, the original wood fired cookstove, and a few other things out of the old house.
We were happy, proud, and relatively self sufficient. I was nearly a grown up before .
I could deal with the thought of living in a house on a lot, not having any real control over life. buying every bite of food, every speck of fuel, not having room to roam, not welcome anywhere unless spending money, except maybe a friend’s house, nearly everybody encountered a stranger, no hunting, no fishing, going on vacation to visit places for a few days less pleasant than our farm, etc. We got a farm of our own before I was ten, and before that we used land belonging to the extended family. Over the years, we got to be reasonably well off, not by pure money measure, but we lived better lives, taken all around, that people making top wages in cities.
WITHOUT borrowing money.
Now I use some credit myself, because it’s a good tool, if you spend what you borrow wisely, but I don’t see that banksters, as the industry exists today, are NECESSARILY an ESSENTIAL part of stable sustainable economy.
Useful, yes. Trustworthy, no. There are other ways of getting capital together in sufficient quantity to do the things that NEED doing.
Banks would be ok if they were properly regulated, and forced to take ALL chances taken to be taken with one hundred percent of the stock holders money before ONE DIME of tax money is used to bail them out.
But that solution will never suit the Trumpsters and the Italian suit and Prada crowd that dominate D politics these days.
would 2017 or for that matter 2018 be the year the shock news go around the world – ghawar is *empty*, saudi production rapidly decline – triggering the next biggest oil shock and central bank reactions around the world – raise interest rates steeply – global economic collapse while oil price shoots up 90 degrees … to infinity
CBs raising rates to address a price rise? No. Not the Fed, anyway. Fuel is non core. They invented core vs non core so they can make decisions of this sort whimsically and not be formulaic.
$$$ numbers on a screen are never going to kill millions. If there’s too little oil, that can kill millions. The price can be decreed if that’s what it takes to keep your people alive. But the real death avalanche comes from too little oil, regardless of price.
That’s core CPI, I mean. Or PPI.
Some people have an expectation that new technological developments will facilitate getting more oil out of the ground.
But it just occurred to me that I never read about who is going to pay for the research to get these new technologies. Big oil companies should have the funds to do so, but are they doing any technology R&D?
The government funds research, but it seems like those who have faith in technology extending the life of oil also tend to want to cut government-funded energy research.
Venture capital could fund new technology research, but why bother with oil when there might be a much bigger pay-off with renewables?
Who funding this research in the past 150 years?
Do you think that technology in the oil and gas industry is the same as in the days of Colonel Drake?
The potential for gas and oil was much greater in the past, so it was reasonable to continue to improve the technology.
Now, with the energy market shifting, the big discoveries are likely to come from technologies other than the oil industry.
Gates and others just set up a $1 billion fund to invest in clean energy technology companies. Is there anything comparable for oil start-ups (if there are any)?
Here you go:
Oil Price Plunge Hurting Academic Research In Energy Sector As Industry Curtails Funding: “Battered by lower oil prices, the U.S. oil and gas industry is curtailing funding for research as part of a broader effort to slash costs and protect bottom lines. At academic institutions in America’s energy-rich states, the money for innovation and exploration is shrinking, according to the heads of several prominent energy schools.”
Like investments, spending on R&D is cyclical
What I am saying is that the hope for new technological developments to produce more oil may not happen if the funding for that research isn’t there.
If government funding is cut, if oil companies don’t have the money to spare, and if investment fund favor other industries, that research won’t be done.
Even if it is cyclical, if the money isn’t there (because prices stay low or supply runs out or demand drops) or the government doesn’t fund it, or investment funds stay away, it doesn’t happen.
The premise of this forum is that oil is peaking and there is unlikely anything much to bring it back. Oil is less likely to have a cyclical future than a declining one.
And it is something of a circular argument if one says oil will increase again once there are new technologies, but currently there isn’t the money for new technologies, so oil won’t increase and the funding won’t be there as a result.
Oil prices are cyclical. We are past the lowest point in this price cycle. As prices rise, spending on R&D will increase.
Oil companies’ guidance already suggest an increase in global upstream investments in 2017. R&D will follow.
I guess we’ll have to wait and see. Even the “miracle” of LTO wasn’t about new technology. Just high oil prices and low interest rates.
I’m just calling into question the idea that we’ll continue to push the date of peak oil out further and further due to new technologies.
And you are absolutely correct to question the role “technology” will play in our energy future and where the money is going to come from to improve that technology, Boomer. We’ve just had six years of incredibly high, stable oil prices and I am remiss to remember any earth shattering breakthroughs that lowered finding costs sufficiently enough to improve profitability.
Service providers that typically lead off on R&D are for the most part worse off financially than producers. Far more money has been spent on interest expense the past decade than improving old technology. That won’t be getting a lot better anytime soon.
ConocoPhillips: Big New Oil Discovery In Alaska Could Produce 100,000 Barrels Per Day
Jan.14.2017
http://seekingalpha.com/article/4036887-conocophillips-big-new-oil-discovery-alaska-produce-100000-barrels-per-day
Yesterday ConocoPhillips’ Alaskan unit announced a big discovery in Alaska. The Willow discovery lies in the COP’s Greater Mooses Tooth (“GMT”) unit and consists of two wells which encountered 72 feet and 42 feet of net pay. 3-D seismic appraisal work will start this month, however initial estimates indicate the discovery could contain a recoverable oil potential of 300 million barrels of oil. As a result, Willow could produce up to 100,000 bpd of oil and first oil could come by 2023.
ConocoPhillips has a 78% working interest in the play while Anadarko Petroleum (NYSE:APC) holds a 22% interest.
Sportsfans – more red meat from JHK on the Shale Demonstration experiment “Problem” running up your debts @ 14:30. Cry or Laugh ?
Oil > $75 crushes economies
Oil < $75 crushes Oil companies
? Going to work for us ?
https://www.rt.com/shows/keiser-report/373666-episode-max-keiser-1019/
Saudi Arabia seeks $30bn-$50bn solar and wind energy investment
https://www.ft.com/content/d370829e-dbfe-11e6-86ac-f253db7791c6
Already mentioned last year, but seems a bit more concrete now.
Sign that we are at peak oil or very close (before or after)?
Peak or not, it makes sense to utilise solar resources and increase export availability, no?
Maybe Saudi Arabia is about to peak. At least its very cheap reserves may have. But some countries have not peaked. It will be very interesting to see what happens in the coming decade.
My personal take, for what it’s worth:
The Saudi’s announced some years ago that they intended to build solar farms on the grand scale, but so far, they haven’t.
But they have run the numbers, and if they can continue to sell oil at moderately high to high prices, solar power is a no brainer for them, because they can save at least half and likely a lot more than half, of the oil they have been burning to generate electricity, and come out gazillions of dollars ahead even the first year, if they finance the solar farms. The oil saved will sell for more than the payment on the solar farms.
My guess as to the reasons why they are not moving forward are one , that there has been a long running struggle inside the royal family for control of the country, and that this has delayed any major initiatives of any sort.
Two, the price of oil crashed , but AFTER the power struggle was already old news, thus making it infinitely harder to justify short term investment in long term projects, because the country started running in the red.
And three, the people who actually make the final go/ no go decision on a real time basis understand that solar power has been getting cheaper by the year, and they are NOT dummies, when it comes to counting money.
It’s a way better deal for them to delay the construction, from one year to the next, so long as the costs of construction are falling more than maybe ten percent ( a rough guess ) annually. The present money value of a barrel of oil in the ground that may not be sold for a generation or two down the road is close to zero.
( If you have a brand new thirty year mortgage, you can pay off the final payment of say a thousand bucks for around five or ten dollars TODAY. )
A barrel of good quality crude will probably be worth a couple of hundred bucks in present day money, maybe more, a couple of decades down the road, because it can be used as the raw material to manufacture a hell of a lot of very useful products such as lubricants, and we will probably still be burning some diesel and gasoline as well.
But it might sell for a lot less than that, if the market for oil as fuel crashes hard enough.
There will likely still be some crude that can be brought to market for less money, maybe a LOT less.
It would probably be cheaper for me to pay a five or maybe even ten dollar a gallon environmental penalty tax for the amount of diesel I would need to run my small farm than it would be to scrap diesel tractors and other machinery in good running order and buy new equipment powered by super duper batteries that don’t exist today…… and may not exist thirty years from now.
Cheap hydrogen and cheap mobile hydrogen tanks are possibilities, but not realities. There’s no grand scale infrastructure to manufacture or distribute hydrogen , and no surplus wind or solar power available on the scale needed to run that so far non existent infrastructure. Storage tanks are expensive as hell, and getting the cost of them down to a practical level MIGHT prove to be impossible.
Bottom line, we may continue using some gasoline and diesel fuel for the foreseeable future.
kWh generated from Desert PV Equalivant to a Barrel of crude = $50 +/- 20% . Cocktail napkin calc.
5.6 million BTUs per barrel
3414 BTUs per kilowatt hour
1640 kilowatt hours per barrel of oil. Oil temp matters. Some conversions say 1700.
More like 656 kWh/bbl at 40% conversion efficiency.
Longtimber may be close, but since solar is so capital intensive up front, it depends on what discount rate he used. Also, O&M for solar in a desert environment might either be higher or lower than usual, depending on wind speeds and therefore cleaning requirements.
Future of the oilsands: the good, the bad and the ugly
Investment in the oilsands has plunged and future growth is in question
By Kyle Bakx, CBC News Posted: Jan 15, 2017 5:00 AM ET
Trudeau’s ‘phase out’ oilsands comments spark outrage in Alberta
By Kyle Muzyka, CBC News Posted: Jan 13, 2017 12:13 PM MT
link: http://www.cbc.ca/news/canada/edmonton/justin-trudeau-oilsands-phase-out-1.3934701
The transition will happen.
From oil to death.
David Hughes wasn’t that impressed with the Montney when he analysed (pdf) it.
Scotiabank’s Waterous Leaving to Start Private Equity Fund
New $305 million fund focused on unconventional oil and gas
by Scott Deveau and Doug Alexander, Bloomberg, January 13, 2017, 4:30 PM EST
The increasingly effective use of diversion proppant, both near the wellbore and so called far field, is playing a big role in increased output.
The massive amount of sand in these recent completions is to both scour/sandblast the fractures and to prop open the vastly expanded network of fissures no more than 300’/500′ feet out.
Until fairly recently, only 60% or so of the entry points were productive.
Now it is regularly close to 100%.
In addition, both the speed and precision of targeting has greatly improved over the past two years.
China’s crude production seen dropping as much as 7% this year
Bloomberg News – 17 January 2017
China is seen leading a trend across the region. Asia-Pacific’s crude output will drop by about 1 million barrels a day to 6.5 million by 2020, according to Wood Mackenzie Ltd., as exploration since 1990 has yielded mostly natural gas and capital spending was cut because of the slump in oil prices. China will account for 47 percent that decline, according to the consultant.
https://www.bloomberg.com/news/articles/2017-01-17/china-s-inescapable-oil-slide-is-a-record-breaking-gift-to-opec
Bloomberg World Gasoline Prices – https://www.bloomberg.com/graphics/gas-prices/#20164:United-States:USD:g
An example on Twitter: https://pbs.twimg.com/media/C2YGkxjXcAIx0Rt.jpg
Yo Mike, aka Mr. Almost Never Right?
The world’s biggest publicly traded energy company is joining the land rush in the prolific Permian Basin. Lookie here a “MAJOR” adding LTO assets, who would have guessed that. It damn sure would not have been someone named “MIKE” from a 4 generation oil family. Better odds getting investment advice from a chimp with a handful of darts. just saying ?
http://www.cnbc.com/2017/01/17/exxon-mobil-doubles-oil-and-gas-holdings-in-permian-for-56-billion.html
TT, you always seem to be posting about energy stock prices going up. That’s mostly important to people who are selling stock or who need to boost their net worth for some reason.
I continue to believe you want to promote oil stocks for a reason: either to sell them or to raise money for a company you own or represent.
If you are buying more stock, then you’d be more interested lowering the price so you could get more.
Are you selling, and if so, why?
Hi Boomer,
I think your misjudging TT. Anyone reading this blog, who buys stock from TT post isn’t going to make a difference in the value of any stock. In general this is not a time to be selling oil stocks. It’s more likely to be the last opportunity to buy stocks at a 30 to 75 percent discount from a depressed market because of low oil prices for more than two years. It’s been a buyers market for the last two years and anyone paying attention should have been bottom shopping. I’m loaded up and always looking for opportunity but not selling at this point. There is still easy money to be make out there. Don’t put all your eggs in one basket.
But HB, most of your posts aren’t about energy stocks.
I’m suggesting that repeatedly posting about buying energy stocks in a forum that isn’t devoted to touting investment opportunities suggests to me someone who wants people to buy energy stocks.
But why? To increase their value?
Stock valuations are often not tied to underlying value. I think people here are generally more interested in how much oil is available, at what price, and for how long. People who want to buy energy-related stocks can factor that in, but I don’t think it is the heart of the discussions here. We have had some discussions about how forthcoming companies are about their reserves, and that does factor into stock prices, but the focus is on the oil and gas, not on the stock price.
In terms of investments, one might be wise to consider all possible investments, energy stocks and otherwise. As I mentioned in a previous comment, for the average investor, just buying the S&P 500, on a regular basis rather than trying to time the market, is usually the best strategy. The way trading happens these days, it’s pretty hard to stock pick and actually stay ahead of computerized trading by the big firms. They are going to exploit advantages that most of us don’t have.
I have followed online stock discussion boards and stock picking advice, and you have to take at least some of it with a grain of salt. It’s a sales pitch.
“Stock valuations are often not tied to underlying value.”
That’s correct. Which makes discovering under value stocks such an opportunity. That’s what I think a lot of oil stocks are today.
“for the average investor, just buying the S&P 500”
I agree the average person shouldn’t be trading individual stocks. They don’t have the skill or knowledge and most likely lose their investment. But, on the other hand I don’t think a lot of the regulars here are average. That’s probably why their here in the first place.
“rather than trying to time the market”
Now here I totally disagree with you regarding someone who is market savvy. I believe that’s what investment advisers want you to believe. They love to sell the idea of you just giving them your money on a blind regular basis.
“I don’t think it is the heart of the discussions here”
I agree it’s not. But it was the unexplained collapse of my refinery stocks back in early 2008. That lead me to The Oil Drum and eventually here. For me, the everyday counting of drilling rigs, holes in the ground or daily production gets boring. I’m more interested in the trend or the vast oil industry workings. Also, and how I can take that information and make money on it. That makes it real world for me.
“you have to take at least some of it with a grain of salt”
True, it’s why I stay in my little world of large companies in energy, material, telecoms, transportation and utilities for the last 25 years. I avoid tech, retail and new issues. There is a lot of cons and trash out there. Buyer beware.
Salud
This is not an investment blog.
The difference between a man and a boy is the price of his toys.
Mr. Tea,
Exxon buying Permian does not say anything how prolific Permian play will be. What it does say that policy is getting in place with the steps to weaken the dollar and toward the rise of the price of oil. Exxon is only capitalizing on that (with tiny conflict of interest by having ex boss as Sec of State :)). Any US administration has no control over the Federal Reserve and its determinations of the base interest rate. So there are not enough mechanisms to lower the value of the dollar. Without lower value of dollar it would be impossible to reindustrialize country. The key to weakening the dollar is precisely in the price of oil. US currency is secured by oil and the value of oil itself is in inverse proportion. Raising the price of the dollar leads to a decline in the oil and vice versa. So the only policy combination for the next administration for job revival in US is cheap dollar- expensive oil.
Have a nice day.
Exxon is using stock for the purchase. So it might be the best use of its stock right now, especially if the company anticipates a stock price decline.
XOM bought XTO a few yrs ago.
They are a nat gas fracker.
What is the rational, for Exxon, to buy these assets?
1/ Exxon had treasury stock worth $230 billion as of Sep. 30, 2016.
$5.6 billion in stock the company is planning to pay for the Permian assets is a small part of that amount. It will also make cash payments totaling up to $1 billion, from 2020 through no later than 2032, corresponding with the development of the resource
Exxon’s net debt of $23.8 billion is low relative to its size. Net debt/equity is only 13.5%, one of the lowest in the global oil and gas industry. (This compares with >100% ND/E ratio for most shale operators).
That means that Exxon has significant financial potential for growth through organic capex and acquisitions. However growth opportunities outside the U.S. are limited: Gulf countries are largely closed for foreign investments; contract terms in Iraq are not lucrative; there remain serious problems in U.S.-Iran relations; Russia is largely closed for U.S. investors due to the sanctions; security situation in Nigeria and Libya remains dire; Canadian oil sands are a high-cost resource, etc. That leaves the U.S. upstream sector one of a few remaining investment options for a U.S. supermajor, like Exxon. A short investment cycle in the shale sector makes it particularly attractive compared with long-term projects in the deep offshore, given the uncertainty about future oil prices (I do not necessarily agree with that view, but it is shared by the majority of oil analysts and experts).
2/ The properties are a major addition to Exxon’s unconventional liquids portfolio managed by its unit XTO. Its output from the basin is currently about 140,000 boepd, net. The deal covers an estimated resource in the Delaware basin of 3.4 billion boe, of which 75% is liquids, more than doubling ExxonMobil’s Permian resource to 6 billion boe. The acquired companies, which include operating entity BOPCO LP, hold about 275,000 acres of leasehold and production of more than 18,000 net boe/d, of which 70% is liquids.
No doubt, Exxon expects some synergistic effect from this acquisition.
3/ By buying assets in the Permian, Exxon is following a trend visible from 2016.
“Dealmaking in the U.S. oil and gas sector rebounded strongly in 2016, as buyers scooped up prime acreage that can produce at a profit while crude prices are low, according to a new report.
Mergers and acquisitions activity in the oil patch hit $69 billion last year, more than doubling the total in 2015, according to data compiled by Houston-based oil and gas research firm PLS. That marks a sharp reversal after total deal value slumped 62 percent in 2015.”
“The biggest contributor to the reversal was the Delaware Basin, a portion of the larger Permian Basin located in Texas and New Mexico. The Delaware generated $18 billion in M&A activity” (more than a quarter of U.S. total), up from $3.3 billion in 2015 and $0.3 billion in 2014.
“Another section of the Permian, the Midland Basin, attracted $9.1 billion in dealmaking. Much of the Midland’s top acreage got purchased in 2014.”
http://www.reuters.com/article/us-exxon-mobil-deals-permian-idUSKBN15120F?il=0
“Prices have skyrocketed in two parts of the Permian, the Midland and Delaware basins. The average price for the three most expensive deals in the Midland Basin this year was nearly $49,000 per acre, compared with an average of $38,300 per acre for the top three purchases in 2014.
The run-up has been even more spectacular in the Delaware Basin. RSP Permian paid $48,157 per acre in the region’s most expensive deal this year. Primexx Energy paid just $14,615 per acre in the Delaware’s biggest acquisition of 2014. ”
http://www.cnbc.com/2016/12/16/land-rush-us-oil-drillers-pack-into-the-permian-basin.html
“The adjusted per-acre price for Exxon’s purchase comes in at about $20,000, “a very good number for New Mexico,” said Andrew Dittmar, mergers and acquisitions analyst at PLS.”
http://www.reuters.com/article/us-exxon-mobil-deals-permian-idUSKBN15120F?il=0
ExxonMobil’s purchase is the second announced this week for Permian-focused firms. Noble Energy on Jan. 16 said it has agreed to acquire Midland, Tex.-based Clayton Williams Energy Inc. for $2.7 billion in cash and stock.
http://www.ogj.com/articles/2017/01/noble-energy-to-acquire-clayton-williams-in-2-7-billion-cash-stock-deal.html
————————————————
Having said all that, I should note that Exxon’s upstream operations in the U.S. were loss-making in 2015-16. If oil prices remain low for a relatively long period, Exxon will struggle to add value through this acquisition.
TT:
What is interesting to me is that, even though the XOM spokesperson stated most of the recently acquired locations are attractive at $40 WTI, the seller, BOPCO, LP drilled and completed less than ten Hz wells in 2015-16, after drilling and completing over 200 Hz wells in 2014 and prior on this acreage.
Why did they stop if attractive at $40 WTI?
Looks like BOPCO, LP has had some good Bone Spring wells in New Mexico, but at $40 WTI?
Maybe the Bass Family is like the small producers you like to attack? Maybe, being privately held, also have to make money on the product, and not the ways management at public firms make their money?
This acreage is almost all HBP, and should do fine at $90 oil. Could be awhile till oil gets back to $90? I presume XOM will take their time developing this? Note that payments to Bass Family out of production do not start till 2020.
Shallow,
See below the ultimate recovery profiles for all Bopco’s horizontal wells in the Permian (both Texas & NM). I’ve highlighted the thin 2015 vintage, which indeed consisted of just a few wells. Interesting to see that the general trend of ever higher initial productivity isn’t shown here; instead it appears that since 2013 its wells haven’t shown any improvements.
Enno,
Is that possible to get similar chart for XTO operation in the Delaware basin
(or NM portion of the Permian; or Permian in general).
Thanks a lot. Your website is unique!
World needs to invest $25 trillion in new oil capacity over next 25 years, Saudi Aramco’s CEO saysDemand for oil and gas will continue to grow for the next few decades and any fall in capital investment for the industry will cause “spikes” in prices and affect the global economy, according to the president and CEO of Saudi Arabian Oil Company (Saudi Aramco).
http://www.cnbc.com/2017/01/17/saudi-aramco-ceo-says-oil-will-dominate-over-renewables-for-decades.html
This may be the key to that article.
“He said that more expansion is need needed in the sector and more capital would be required.”
So it sounds like he’s on a mission to raise more money. The article didn’t make mention of the fact that all that investment money might not return much in terms of increased oil.
So, you could say, “Give us your money. We’ll spend it, though we may not have much to show for it.”
We need to keep in mind that people don’t always agree on the future of oil. And some of their pronouncements may be tied to who is going to make money.
“Saudi oil minister doubtful on US shale production surge: Saudi Arabia’s energy minister, Khalid al Falih, said on Tuesday he did not believe the US could add 2-3m barrels a day of oil production any time soon, despite the recovery in prices.”
http://www.cnbc.com/2017/01/16/asia-pacific-oil-production-declining-at-record-levels-wood-mackenzie.html
Asia-Pacific oil production declining at record levels: Wood Mackenzie
Here are two articles which illustrate why it might be hard to know where energy stocks are headed. There isn’t even an agreement on where oil prices and production are headed.
The Fuse | EIA Forecast Prompts More Confusion than Clarity – The Fuse: “With so many different projections, there is no clarity where government forecasters see the oil market headed. Critics can cherry-pick through the scenarios to justify almost any outlook that suits their bias. The lack of clarity matters because industry, analysts, policy makers, and consumers look to the agency for a rigorous examination on where markets are headed in order for them to make decisions.”
The Fuse | Chart of the Week: “In a year-end Twitter poll, SAFE asked several prominent energy reporters and oil market analysts to offer their predictions on Brent crude oil prices by the end of 2017. Ten responses were collected by @leslietron, SAFE’s Vice President of Content and Communications. Predictions ranged from a high of $72 per barrel to a low of $33 per barrel with most forecasts concentrated around the $60 per barrel mark.”
Rystad summary on 2016 discoveries:
“Rystad Energy concludes that the 2016 total offshore discovered liquids resources reached only slightly below 2.3 billion bbl, 90% lower than in 2010. This drop is most significant to the overall decline in discovered volumes; in fact, total global discovered volumes (oil & gas combined) are at an all-time low since the 1940s.”
https://www.rystadenergy.com/NewsEvents/PressReleases/2016-offshore-discovered-liquids-resources-lower-than-in-2010
They don’t show UK but I think it ended up with the best year since 2008 for overall volumes (but not high in absolute terms).
No discussion on gas but I think last year had a bigger drop than liquids, although that maybe more from reduction in exploration than poor success rates (both are impacting oil).
https://www.mapbox.com/blog/monitoring-oil-reserves-from-space/
The company (Skybox) was bought by Google, website appears to have been taken down permanently.