95 Responses to Open Thread Petroleum, Jan 12, 2018

    • Fernando Leanme
      Ignored
      says:

      PDVSA employees are quitting in large numbers because inflation is running about 80 to 100 % per month, and they don’t get sufficient raises. The communists insist they’ll hang on to power no matter what, and they continue to send money, oil and products to the Castro dictatorship even though people are starving.

      The new PDVSA military management has given orders to increase oil production and won’t accept any “excuses”, so the chokes have been opened up, and some plants are shipping water in oil emulsion they report as oil. Thus in recent days production “bounced back” to almost 1.8 million BOPD.

      The increase should be short lived, because the open chokes drop flowing bottom hole pressure, and this increases asphaltine deposition in the big fields. It also cones gas and water, drops condensate in the reservoir, and in some cases sands up the wells. I suspect pdvsa employees are obeying orders and will simply destroy the well stock to make production crater in a few weeks or months, which will drop production and continue the trend we have seen in recent months.

      The situation in Venezuela is dire, there’s a lot of looting, government agents are arresting, killing and even leading some of the looting. The UN announced they will work with Colombia to build refugee camps for fleeing Venezuela, and the first corpses of drowned Venezuelans are now being found in the Netherlands Antilles. Meanwhile the Castro dictatorship, which controls to a large extent what happens in Venezuela, insists it will hang on to its colony, and the European Union sends a mission to Havana to congratulate them for being such good rulers. Raúl Castro seems to be getting a bit senile, and has been moving corpses of Patriots and revolutionary heroes to Santiago (this included pulling my uncle’s casket out of his grave, because he was an officer in the revolutionary army and very close to Raúl).

      Castro’s obsession with graves and death rituals impacts what happens in Venezuela, be cause Maduro doesn’t really make decisions, and something has to break soon. Venezuela just can’t continue with this amount of looting and starvation. Somebody has to go and put a tomahawk on Maduros head.p, or Castro has to give up, withdraw his military and agents from Venezuela, and let Maduro fall.

      • Westexasfanclup
        Ignored
        says:

        I suppose your are of cuban ancestry and as a cuban American a radical anticommunist. We all know about the complex conditions in Cuba and Venezuela, even if we have a leftist angle of view. To desire a tomahawk on Maduros head goes ways too far. With all due respect to your political point of view, please comment on Venezuela and Cuba from a scientific perspective. This site is about oil, not politics.

  1. Energy News
    Ignored
    says:

    EIA record natural gas demand
    During the recent cold weather event that affected much of the eastern United States, more natural gas was withdrawn from storage fields around the country than at any other point in history. Net withdrawals from natural gas storage totaled 359 billion cubic feet (Bcf) for the week ending January 5, 2018, exceeding the previous record of 288 Bcf set four years ago.
    https://www.eia.gov/todayinenergy/detail.php?id=34512

    • Stavros H
      Ignored
      says:

      Amazing. It can get really cold in America it seems.

    • Fernando Leanme
      Ignored
      says:

      I read a couple of articles attributing the cold wave to global warming. It was really funny. Here in Europe the weather has been cold, but the Mediterranean is still running a bit warmer than average. The increased demand for electricity and gas are driving up prices, and the commies are bitching because we don’t have cheap energy.

      • Eulenspiegel
        Ignored
        says:

        Not really cold here in mittle Europe – haven’t seen snow here in normal heights since November. Temperatures up to 10 degrees (Celsius) in Germany, not quite a cold January.

        Look for jet stream oszillation – this was forecasted for much higher global warming, but we have it since 2 years.
        Lower temperatur contrast between arctic and the land masses leads to a more chaotic jet stream -and this means thawing weather in Russia in January for example – or cold US weather the same time.

        We had east winds a few days ago for about half a week. This normally means really cold weather, since the air comes from russia then.
        But there was no cold air in russia.

        • Westexasfanclup
          Ignored
          says:

          Exactly. But as Trump is living in the US he considers that his climate concepts are confirmed. The jet stream oscillation is too complex for the average climate sceptic.

  2. SouthLaGeo
    Ignored
    says:

    Interesting BOEM report attached – their prediction of GOM oil and gas production from 2018-2027.
    They predict oil production will increase from 1.65-1.67 mmbopd in the 2017-2019 window to 1.74-1.77 mmbopd in the 2023-2027 time frame. They include future production from current reserves, contingent resources and undiscovered resources. Contingent resources are mainly field expansion projects, new fault blocks, new reservoirs, and resources from discoveries that have not been put on production.
    They have initial production from undiscovered resources occurring already in 2019 – suggesting that a few discoveries will be made and be on line by the end of 2019. Seems rather ambitious even for subsea tiebacks.
    Given the lack of GOM exploration success in the last few years, my biggest challenge to these predictions are their estimates of production coming from new discoveries. They show about 1 BBO of production comes from currently undiscovered resources in this 10 year window.

    https://www.boem.gov/BOEM-2017-082/

    • George Kaplan
      Ignored
      says:

      SLG – hope you are well and had a good holidays. Here is my updated effort at the same thing. I’ve added some new discoveries, but not as big or developed as fast BOEM show. I’ve included all qualified fields as named entries except a few discovered in 2016 and 2017, and for a lot I’ve had to make guesses for reserves based on the expected development size (numbers in brackets show nameplate capacity). I might be able to improve things a bit when BOEM reserve numbers for end of 2016 come out, but it’s still not going to look much like their estimates. It’s noticeable that there’s a lot of activity in short term, small tie backs now – but these only add about 5 to 10 kbpd and immediately start to decline. So like you I don’t know where they are getting such high contingent resource production additions from unless it is all on existing developments – I guess if a lot of fields get to grow like Mars-Ursa has and Atlantis might this year then there’d be enough, but that seems unlikely to me, especially at the rate they show it.

  3. robert wilson
    Ignored
    says:

    In recent years we have had relatively warm winters. We are now in a new ball game. Stay tuned. http://www.natgasweather.com

  4. OFM
    Ignored
    says:

    My personal opinion is that sooner or later there will be another oil supply crisis, based on my gut feeling electric vehicles won’t sell fast enough soon enough to offset the combined effect of depletion and growing demand.

    So……. It would be interesting to hear opinions about how fast Canada could increase oil production, if the Canadians were to decide to throw money and men at the job. I understand that it takes a long time to bring on a NEW tar sands project, but is there any real reason MORE new production projects can’t be started on short notice……. if the political will and financing were to become available?

    Personally I don’t see why the Canadians couldn’t increase production substantially within a relatively short period of time…… meaning maybe three years, if they were to decide to go all out on doing so.

    Some people will argue that the environmental movement is powerful enough to prevent such a scenario from coming to pass, but imo is that if the world in general and the richer countries with close ties to Canada are desperate for oil, the odds are in favor of it happening.

    Let’s not forget that the Canadian people aren’t necessarily going to look a giant gift horse of tax revenue in the mouth. They’re doing well, economically, but just about everybody would like to have a little more money in their pocket, a little more in the way of government supplied goodies, from school lunches to sidewalks to shiny new cars for the local cops.

    And I see the Maduro regime collapsing sooner rather than later, within another year or two most likely.

    If a new Venezuelan government were to come to agreement with other countries and money and manpower pour into Venezuela, how long would it take to reverse the decline there and get production up significantly ?

    It’s great to TALK about electrified personal transportation, and even an electrified trucking industry and all that sort of thing, but for now, and for at least another ten plus years, we’re going to be in one hell of a spot if our daily oil fix comes up short.

    There’s no doubt that if a shortage appears to be more or less permanent, a war time economic approach to curing it will be justified, considering the consequences of NOT curing it, and will be implemented by the international community.

    It’s true that a major part of the response will be to work on reducing demand, for instance by tightening up fuel economy standards and building more mass transit and so forth, but the nature of the political animal is such that increasing supply will dominate the decision making process.

    It’s a hard fact that the large majority of us are NOT in a position to buy a new electric car, and there aren’t any cheap used ones in car lots. Only a small fraction of us are in places we will be able to ride new city buses and new subways.

    Trucking companies might like to buy new electric trucks, if such trucks are actually available in significant numbers ……. but they own large fleets of diesel trucks most of which have a monthly payment due on them.

    Houses are where they ARE, and stores and factories and hospitals and schools and government offices and farms and food processing plants are where they ARE.

    Rearranging society to get along with far fewer trucks and cars is more or less impossible in the short term from the standpoint of politics and elections, although it’s doable from the technical point of view.

    So …. If we come up short of oil, and the price shoots up past a hundred bucks, and stays there, how long would it take for the industry to ramp up production one more time ?

    CAN the industry up production again, even with prices north of a hundred bucks, given the depletion of old giant fields ?

    It looks like the potential for the price of diesel to double sometime within the easily foreseeable future is there, whereas the likelihood of the price of it going down very much appears to be small.

    Storage looks like a good bet, if you have cheap and secure storage available.

    • Guym
      Ignored
      says:

      Canada is running up against the wall on transporting increases. It’s not that they can’t. According to George, it would take years to get Venezuela back up. Everything is pretty well damaged. Wartime conditions, and subsidies for energy? Anything is possible if the price gets too high, and it could.

    • Jeff
      Ignored
      says:

      Canada lack pipline capacity and it takes ages to get approval to construct new ones. WCS trades for a hefty discount to WTI.
      Some new heavy production will come online in the next couple of years. I don’t expect much increase after that untill pipeline bottlenecks have been resolved.

    • George Kaplan
      Ignored
      says:

      One thing I haven’t figured out with Canada is how they come up with the reserves estimates. If you look at the Alberta oil sands quarterly reports all the projects that are operating, in development (not many now) or approval are listed. Even given the long operating times for these projects the reserves included can’t be much more than 50 Gb left. Presumably these are also the best prospects, and given some have lost quite a bit of money in the last couple of years, and often just operate as arbitrage – turning energy in gas to energy in oil – then the remaining 100 and more Gbs must be really difficult to get at. Presumably it will need even more and longer wells (i.e capital) and natural gas (which would have to come from shale now I think); and maybe the EROI cliff starts setting a real limit somewhere, no matter what the price rises to, as the deposits get deeper, thinner, harder, heavier or whatever it is that has made them less attractive.

      • OFM
        Ignored
        says:

        Thanks , guys.

        In a long term emergency situation, I believe the process of permitting and getting started on construction will take place on a war time economic pace, once it becomes clear that the emergency is long term.

        I don’t know any more than the next layman about pipelines or railroads, other than welding, which is a minor consideration in terms of the big picture. But it seems to me that laying another pipe, or another track parallel to an existing pipeline or track could happen pretty fast, maybe within a year, or two at the longest, once the decision is made to do so on an emergency footing.

        When it comes down to arbitraging gas for oil, George makes a really important point. Eventually gas is sure to get to be really expensive, given that depletion never sleeps, and when it does, this means cost of oil sands will necessarily have to go up quite a bit, maybe even to the point that it becomes necessary to burn some oil sands crude on site to continue production.

        If things get to this point, the environmental camp will have a hissy fainting fit, but I doubt it will matter, because once the majority of people realize that they are going to be doing without gasoline, they will forget all about the environment…… and this includes the ones who don’t even drive, as often as not.

        The vast majority of us depend on the smooth functioning of the automobile centric economic model to make a living. Even though she doesn’t drive, a waitress who lives over the restaurant where she works won’t be able to pay her rent if half of her regulars cut way back on eating out due to being short out of work or working short hours themselves. Even divorce lawyers can’t make much money when people don’t have it to lose. Fruit’s good for you, an apple a day is priceless, if it’s all the fruit you can afford, but I can buy chicken and beans cheaper than I can buy apples at the nearest supermarket, and compared to chicken and beans….. apples are starvation food. If the overall economy crashes, apples will be a luxury rather than an every day item for people thrown out of work or on short hours. If growers lose even a fifth of our market, half of us will be out of business, and the other half won’t be buying very many new cars.

        Bottom line, environmental considerations are NOT going to stop the exploitation of the oil sands, or coal to liquids, or any other tech that will keep the economic wheels turning.

        There’s NOTHING that we can substitute for affordable oil in the very short term, and how fast we can switch to electrified transportation is anybody’s guess.

        Mine is that we are going to be utterly dependent on having pretty close to as much oil as we do now, on a daily basis, for at least another ten years, and probably closer to twenty. Maybe by then there will be enough electric vehicles on the road to offset depletion and demand growth due to growing population.

        • Jeff
          Ignored
          says:

          The pipeline issue is not complex at all. Canada’s heavy oil is landlocked in Alberta (and Saskatchewan) and need to be transported to US or to the coast (west or east). Provinces that produce oil are pro new pipelines but British Columbia (transit and export province) is against. I fully understand landowners (especially first nations) that neither want new pipelines nor expansion of current ones. Once a pipeline has been constructed it will transport crude for many decades, enable production to increase, possibly leak and it´s uncertain what will happen when the pipe reach its end of life.

          To some, pipelines are more than just a few bucks.

          “When the last tree is cut, the last fish is caught, and the last river is polluted; when to breathe the air is sickening, you will realize, too late, that wealth is not in bank accounts and that you can’t eat money.”

          • Fernando Leanme
            Ignored
            says:

            The keystone XL pipeline and a full upgrader (by full I mean a 200,000 BOPD plant making 38 degree API syncrude) should help reduce the bottleneck. The upgrader takes about 7 years to design, permit and build. Meanwhile they’ll have to make dilbit and ship that to the USA gulf coast,

            The situation in Venezuela is very fluid. Turning production around and raising it to 2.5 mmbopd may take ten years if the current conditions are allowed to continue during 2018. I have a difference of opinion with some youngsters I see discussing more emphasis on light oil production. Problem is I know they are mostly inexperienced MBAs well versed in PowerPoint but lack education or experience taking over an oil field, refurbishing it, and getting it to increase production. I’ve been doing that on and off since 1978, and it’s not easy.

            • OFM
              Ignored
              says:

              Hi Fernando,
              Excuse my ignorance. I am only a rule of thumb backyard engineer.

              But it seems to me that a generic upgrader design, or a design easily copied from a previously built upgrader, ought to work just fine, so long as the crude going it is of similar composition. So why should it take a year or two to come up with blue prints? I hear this is commonly the case.

              The time frame for permitting is long, but this is mostly a political rather than an engineering or economic problem.

              Once construction is actually started, how long does it take to build an upgrader if large crews are on the job around the clock and around the calendar, weather permitting ?

              Is there any real reason a lot of components, maybe half or more of them, cannot be fabricated offsite and shipped by rail or truck to the job site ? I know some components are too large to be shipped of course, and thus must be built on site.

  5. OFM
    Ignored
    says:

    About oil and electricity:

    More than a little is burnt in the Middle East to generate electricity.

    Unless I’m mistaken, burning a barrel of crude in an electrical power plant yields around seven hundred kilowatt hours. A new state of the art high efficiency plant can probably produce about nine hundred kilowatt hours per barrel. These are back of the envelope numbers, and may be off a good bit.

    So if they are sure they can sell their oil for a high price, it’s obvious that countries such as Saudi Arabia are in a position to build solar farms on the grand scale, depending on the cost of solar power. It looks as if they are in a position to use as much as fifty to seventy five percent solar power ( a personal wild ass guess ) during the daylight hours, given the reliable sunny weather in that part of the world, maybe even close to one hundred percent. They already have the oil fired plants in place which can be used as back up anytime it does get cloudy or in case of wind storms and so forth, and they can continue to burn oil at night as necessary, plus they can shift a lot of demand to daylight hours, given time. Night time air conditioning can be accomplished by using water ice frozen during the day when juice is dirt cheap, etc.

    If anybody has links that show how the numbers work out, or probably will work out in the real world, as the price of oil and the price of solar power varies, please post them, and thanks in advance.

    My thinking is that the Saudi’s in particular have not yet much more than getting started on solar, for two basic reasons. One is that they understand that the cost of solar power has been dropping so fast that they are have been better off to delay building solar farms on the grand scale up until now.

    I have delayed buying a solar system of my own for the same reason. The purchase cost savings I have realized by delaying the purchase of a system of my own from one year to the next have consistently been greater than the monetary value of the electricity I could produce. Given the rate at which the price of system components is falling, I may not live long enough to justify owning my own solar system on the basis of dollars and cents alone, unless I can find a good use for midday production day after day other than charging batteries.

    The other reason, other than the possibility that oil will stay cheap, that the Saudi’s have been slow to get going with solar is probably mostly to do with internal politics. It’s hard for any country, even one controlled by a single family, to really change the way things are done, because there are so many people with invested interests in the status quo…… including members of the controlling family.

    • Ian H
      Ignored
      says:

      I have delayed buying a solar system of my own for the same reason.

      Wow!, we have some high net worth green posters here!, Even the purchase of a single small, blue-green planet is beyond my resources at the moment – All though if I could issue some negative interest bonds maybe I could swing it with a little help from Goldman Sachs. Trouble is I would probably have to insure it against loss/damage to qualify for the loan. Oh well. Maybe next year – if Brent goes above 100USD.

      • OFM
        Ignored
        says:

        I have some minor guilty twinges due to not supporting the environmental movement by buying solar panels by now, but on the other hand I do spend just about every spare dime on environmentally positive projects, such as reforestation of part of my farm, improving wildlife habitat, improving my energy efficiency, etc. All these projects pay off in both environmental and economic terms.

        When I do buy solar panels, probably within the next three years, I’m planning on doing it right and putting in a ten kw system, which will be enough I can run just about everything on it while the sun is shining nice and bright.

        Then will be the time to install a big dc refrigerator with a large ice reservoir and that sort of thing, shifting the load to sunny hours.

        I can do all the laundry and almost all the electric tools I own with that much juice, excepting only the welding machines, and I can arrange my schedule to accommodate the sun. Been doing that all my life anyway, making hay when the sun shines, doing something else when it’s cloudy, lol.

        I have for instance built a solar domestic hot water system using mostly salvaged materials that produces all our hot water most months, and at least half of our hot water even in the middle of the winter.

        And I’m in the process of building a personal water power generating station, which will produce a steady five hundred watts, around the clock and around the calendar, except maybe a few days during extreme cold weather, when it will probably freeze up.
        I was hoping for a couple of thousand watts, but I can’t afford a big enough and long enough flume to get that much water onto the wheel.

        Except for a couple of yards of concrete needed to anchor it, it will be built entirely out of salvaged materials, except for one part. I’m going to use a heavy duty 24 volt truck alternator, which will actually output DC current. I suppose I will have to buy an inverter to change the 24 v dc to 120 volt ac.

        500 watts is enough to run my night lights, charge up a few old golf cart batteries, or run some small power tools such as drills and grinders.

        During cold weather I plan on feeding the any surplus output into a heater in the house. I may be able to find an air conditioner that runs on as little as five hundred watts. If so, I will use it in a small room that serves as my office.

        And I’m working on a wood gasifier that will eventually be used to run an old four by four truck I set aside specifically for this purpose.

        If I could find a drivable electric car for three thousand bucks I would buy it, but I’ve never paid that much even once for a vehicle for my own personal use, as opposed to use in my business. I do my part by driving as little as possible and driving old cars. They pollute, but not very much, because I don’t drive them much, and each old one kept running means one less new one is needed.

  6. Longtimber
    Ignored
    says:

    John Batchelor show broadcasting from QATAR for a week. Geopolitical and Hydrocarbon talk,
    https://audioboom.com/posts/6592798-on-the-road-to-doha-small-country-big-lng-plans-for-the-21st-century-dr-mohammed-bin-saleh-al-sada

  7. Rational Analyst
    Ignored
    says:

    Does anyone have a link to info on how much oil is estimated to be off the coats of the United States? I saw such info on here or TOD and I can’t find that so far searching the internet. I recall the amount of oil estimated to be recoverable from Atlantic and Pacific coasts was not remarkable compared to the amount of oil used every year. I want to show some people this information in my attempt to make the case that the environmental damage risk is not worth the reward.

    Thanks in advance for any insights…

    • Fernando Leanme
      Ignored
      says:

      If there’s little oil then the risk is also reduced. The risk is increased if the target has high pressures, unusual lithology, and/or heavy oil. On the other hand, if the target is a natural gas or gas condensate, the risk is negligible. Seems to me your audience may lack the background or the drive to get too deep into this issue, so you may want to argue simply from your gut: say you hate oil companies and people who work in the oil business.

      • SouthLaGeo
        Ignored
        says:

        RA,
        See the link below to BOEM’s 2016 assessment. I think this is what you’re looking for.

        https://www.boem.gov/National-Assessment-2016/

        • Rational Analyst
          Ignored
          says:

          SouthLaGeo,

          Thank you, this scratched the itch!

          So, the info in the referenced paper is thus:
          (OCS=Outer Continental Shelf)

          Mean Technically Recoverable Resources

          OCS Bbo Tcfg

          GOM 49 142
          AK 28 132
          PAC 10 16
          ATL 5 38

          This correlates well with my memory of similar information presented on TOD some time ago. In addition, I remember the assertion back then on TOD that the PAC and ATL oil and gas resources were not only low overall but may not be concentrated in a few ‘fields’ each with a large amount of resource, but might be scattered among a large number of formation scattered in location, thus making extraction of a significant portion of the the resources more expensive and time consuming.

          It seems to me that going after the PCA and ATL OCS oil and NG resources may be a fool’s errand. However, the GOM certainly seem lucrative due to its high resources and mild weather (save for hurricanes, but the industry seems to be able to deal with those) and its close location to the continental U.S. for ease of transporting resources to existing refineries. Of course no one wants another Deepwater Horizon debacle, so it would be wise to try to keep safeguards to mitigate those incidents. As for AK, it seems that there may be significant onshore and offshore NG resources, so it may be desirable at some point to build a NG pipeline (through Canada?) to bring that desirable CH4 to Canada and the U.S. to help carry the energy production load along with solar and wind and hydro-power and well-managed legacy nuclear plants. Just my two cents…

          • George Kaplan
            Ignored
            says:

            I’d like to know what sort of recovery factor “technically” recoverable means. Recent highly touted discoveries in the deep water have not been doing well: Kaskida, 3GB OOIP – lease expired; Julia, 6Gb resources – production at 16 kbpd and declining; Buckskin/Moccasin – I think about 5 Gb resources combined orifginally – Moccasin lease expired, Buckskin tie back at about 20 kbpd; Leon/Yeti/Phobos/Shenandoah/Constellation and others, all with initially very large expectations and now ether lease relinquished or reduced to a couple of wells tie back.

            Brent just went through $70 again and WTI is closing in on $65.

          • Synapsid
            Ignored
            says:

            Rational Analyst,

            About a pipeline for North Slope gas:

            The State of Alaska has been trying to find interest and funding for a gas pipeline from the North Slope to the Kenai Peninsula for some years now. Early on some of the majors, I think BP, ConocoPhilips, and Exxon, were involved but they pulled out saying that they’d be happy to use it if Alaska ever figures out how to pay for getting it built. In the last year there have been mild expressions of interest from China and, I believe, Japan or Korea.

            The pipeline would be about 800 miles long. There would be LNG trains and export infrastructure built on the Kenai Peninsula. Nothing is happening very fast, at any rate.

        • Dennis Coyne
          Ignored
          says:

          Thanks, so at $100/b it’s about 11 Gb for Atlantic and Pacific (excludes GOM and Alaska). Even at $220/b the UERR is only about 13 Gb for Atlantic and Pacific offshore US.

          • SouthLaGeo
            Ignored
            says:

            I would like to see the oil industry at least be given the chance to explore these offshore areas. Get some new seismic shot, have some lease sales, drill at least some rank wildcats. Let them make informed decisions as to whether to develop any discoveries or not.

            • Dennis Coyne
              Ignored
              says:

              Hi SouthLaGeo,

              If the States believe it is a good idea, fine. Otherwise most oil companies would not waste their money. Seems to make more sense to focus on the GOM where states don’t have a problem with offshore oil development and where most of the resources can be found.

              Just one person’s opinion.

              Eventually fossil fuels may become expensive, and perhaps development will make more sense at that point.

              • SouthLaGeo
                Ignored
                says:

                Appreciate the comments, Dennis.
                I actually think big oil would spend money on some of these areas – offshore Atlantic is particularly appealing to me. If they knew an area that is open to exploration would stay open even with a change in Washington I think they would invest.

                Do you think we’ll ever see a time again where oil prices are high, gasoline prices are high, and big oil executives are lined up to face a Senate subcommittee like we did during the big run up in prices in 2007/2008?

  8. Daniel
    Ignored
    says:

    Interesting statements by venezuela. 2.4 mbpd in 2018

    https://www.google.no/amp/mobile.reuters.com/article/amp/idUSKBN1F30OQ

    • Eulenspiegel
      Ignored
      says:

      All these wonders, increasing oil production without investing much. Why spending all these billion dollary on equipment when just a few over hours will do it?

      Perhaps they are simply opening the chokes – the oil men here could tell how much and how long this helps before the reservoir is damaged?

  9. Heinrich Leopold
    Ignored
    says:

    The recent decrease of 290 k bbl per day in the recent EIA weekly oil production estimate has stunned friend and foe of the shale community. However, the 290k bbl per day were re-classified from oil production to Natural Gas Plant Liquids NGPL. So, the total liquids production stayed the same. What is behind of this surprising and quite embarrassing move?

    Until 2008, oil, condensate, Natural Gas Liquids, natural gasoline….. were – although quite different hydrocarbons – nearly identical in price (see below chart red WTI, blue plant condensates and green spread) as plant condensates are a valuable feedstock for the chemical industry. So, in economic terms all of these hydrocarbons could be considered as ‘oil’. Nevertheless, with the advent of shale production things considerably changed as shale increased vastly supply of plant condensates, which consequently fell steeply in price. In 2015, the situation became so extreme that some companies had to pay that plant condensates were removed from their facilities and the spread between WTI and plant condensates reached more than 60 USD per barrel. Although prices for plant condensates recovered, they command a steep discount to WTI. As most of the shale production comes as plant condensate, it does not help to bring down the WTI price when shale ramps up production, it only will bring down plant condensate prices to new depths. The dilemma for shale production is now that shale cannot enter the market for transportation fuels, which is a far bigger market (65% of oil) than chemical feedstock (15% of oil) due to lack of content of middle distillates and octane rich liquids. This is why the oil price soars – and the dollar falls – despite higher shale production.

    • Guym
      Ignored
      says:

      Interesting, but historically inaccurate. Texas RRC reports oil and condensate. EIA has matched their numbers for years, and now they are not? I have read nothing on the EIA site that gives this explanation, although I have read some postings by others that raise some speculation, but speculation is just that.

      • Heinrich Leopold
        Ignored
        says:

        There are many articles about what is condensate, lease condensate, LPG, NGPL, natural gasoline, so we could discuss ages here. However, for the first time, we get a price discount to crude oil. This is my main message as this is now very important as what the US can achieve on exporting plant Condensates and has to pay for importing crude oil.

    • Dennis Coyne
      Ignored
      says:

      Heinrich,

      Do you have any actual evidence that oil was reclassified from C+C to NGPL?

      I think you are blowing smoke.

      The weekly estimates are garbage in any case and not worth paying attention to.

      Only the monthly production estimates are worth paying attention to (even those are far from perfect, often they are off by as much as 1 to 2%, especially the most recent few months).

      Usually the drilling info estimates that are about 3 months old and older are pretty close. We have pretty good estimates through July 2017 (the most recent Drilling info estimate I have seen is from Sept 2017, the August and Sept 2017 estimates are incomplete).

      • shallow sand
        Ignored
        says:

        No doubt the percentage of API 40+ is going up. I am sure EIA has data on this.

        I have to think API 30-39, light sweet is in high demand.

        Our basis in 2003 was $3 less than WTI. That widened all the way to $8. We are now back to almost $3 again.

        • Dennis Coyne
          Ignored
          says:

          Hi shallow sand,

          What is the average API in your basin?

          You are correct, the percentage of output from 40 to 45 API has increased.

          • ktoś
            Ignored
            says:

            Is shallow sand, and every other person on this site your friend? If no, then why the fuck do you say Hi to everyone?

            • shallow sand
              Ignored
              says:

              Dennis is probably a small town person like me.

              We say hi to people when we pass them on the street. Wave to them when we meet on a country road.

            • Dennis Coyne
              Ignored
              says:

              ktos,

              Just habit. I like to include a greeting just as I would in person to a stranger I met on the street when greeting them.

              This is common politeness in most cultures I am familiar with.

              Perhaps where you live it is different.

              In many cases there are several replies to the same comment, and in many cases there is no reply button after several replies (so the indents run out) especially in those cases, mentioning the name of who you are responding to makes the conversation easier to follow.

            • Stephen Hren
              Ignored
              says:

              Hi ktos, instead of popping on the site just to insult our moderator, why not try thanking him for his excellent work instead?

            • OFM
              Ignored
              says:

              Ktos,

              Your manners are even worse than mine, which can be pretty rotten sometimes.

              But at least when I go out of my way to insult somebody, I have a reason for doing so, which usually involves contrasting my talking points with those of the target of my insults.

              I’m not claiming credit, but back when it wasn’t customary here in this forum to address comments to somebody by name, I mentioned several times that it can be hard to figure out who is replying to who sometimes. At times it’s helpful to mention not only the person’s name , but also the TIME he posted his comment, so as to make it easier to follow the conversation.

              A lot of us say hi now. It makes it easier to follow the conversation. The threads can get to be pretty long and involved.

              Dennis is as good as any moderator I have ever encountered anywhere, and head and shoulders above just about every other one I can think of.

              He’s nice to EVERYBODY.

              You owe him an apology.

          • shallow sand
            Ignored
            says:

            Dennis.

            Mostly 31-36.

            A few leases are in high 20s.

            All considered sweet, low sulfur.

            • Dennis Coyne
              Ignored
              says:

              thx shallow sand,

              So do you get a slightly lower price because it is outside the WTI range of 38-42 API even though it’s sweet?

              • shallow sand
                Ignored
                says:

                No. We get a lower price because we have just four options to sell to and because we sell small volumes. We get the same price for the lease with 26 gravity as the one’s that are 35-36.

                The largest producers here get $1-1.50 more than us. They are not that large. 500-1,500 BOPD. Those that sell less than 10 BOPD get $3-4 less than us.

                However, since about 2012, after getting hammered down on our differential to WTI, things have went the other way.

                I have heard that our oil is very similar to some light sweet Far Eastern crudes that sell for a $3-5 per BO premium to Brent. But that is just talk. I don’t know how we stack up in relation to those.

                Just glad to be headed the right direction, and it appears that what we are selling is not in oversupply in US, as are some of the much higher gravities.

                • Dennis Coyne
                  Ignored
                  says:

                  Got it, thx. Would love to get a post from you on whatever you like (financial stuff on LTO companies or anything related to energy that interests you). I am thinking you might have more downtime in winter, but I know very little about how oil is produced.

                  peakoilbarrel@gmail.com or my other e-mail address if you have it.

                  If Mike S is reading this, you are also welcome to contribute a post at any time.

                  I have learned much from both of you and I thank you.

                  • Mike
                    Ignored
                    says:

                    Thank you, Dennis; I appreciate that. I was astounded a few days ago how many large, 5000 bbl. storage tanks are being built on-lease (operator blocks of leases) in both basins of the Permian. I am told there are now significant bottlenecks developing for both liquids and gas, which, by the way is being flared in larger volumes than when I was out there a few months ago. Parts of each basin are becoming gassier and liquids lighter and that appears to be disconcerting to a lot of folks. Everyone seems intent on getting this light stuff to Canada and China; China via another pipeline to Corpus, which has its own port limitations.

                    I think the EIA has severely missed the mark with regard to LTO growth. It is clear that both the Bakken and Eagle Ford are struggling to maintain, which I believe must now be a function of sweet spot saturation, and if all that LTO growth has to come from the Permian…its facing a lot of headwinds of its own with regards to takeaway, water, iron and personal shortages. Hedges are getting harder to get because of lighter liquids market concerns and otherwise there are some significant price differentials to WTI in the Permian for those that are not hedged. In short, there is too damn much of the stuff around but lenders and onerous loan covenants now have complete control of the shale oil industry.

                    Mike

                  • GuyM
                    Ignored
                    says:

                    Reply to Mike,. Thanks for your insight to the Permian. Phil Flynn did a post months ago, where he stated his belief that the Permian potential was vastly over stated. My own understanding of the potential for growth in the Permian, was that it would be next to impossible to get to EIA’s growth projections, just based on limitations within the area, and that would be if the Permian even had the future growth potential that many thought. By June, there should be a clearing of thought based upon what has actually been recorded. In the meantime, we will be up and down with the price, as EIA sings its “rain dance” for the Permian.

                  • Dennis Coyne
                    Ignored
                    says:

                    Thanks Mike,

                    I guess we will see what happens in the future in the Permian. I agree the EIA future output estimates are too optimistic, but I think 400 to 600 kb/d annual growth rates in Permian output might be possible and perhaps 100-200 kb/d in the Bakken. If we assume Eagle Ford output is flat (no increase or decrease in 12 month average output), we might see 500-800 kb/d of annual LTO growth from 2018-2021. After that I believe there will be a peak with relatively rapid decline after 2025 (maybe 5% per year for 5 years then more gradual decline).

                    A lot depends on future oil prices and you won’t tell me what those are. 🙂

                    I know you have them written down on the back of a napkin.

                    I think the EF is in your neck of the woods, do you think they might be able to maintain output at $60/b to $70/b?

                  • Mike
                    Ignored
                    says:

                    Dennis, no, the Eagle Ford hotel is filling up. The price of oil, by the way, will be…around $50 per barrel, plus or minus $25. Furthermore, it will be very volatile. As I have said, you are focusing on the wrong part of the equation. The price of oil means very little to the shale oil industry; available capital, interest rates, impending debt maturities and ensuing loan covenants, who they can give the stuff to overseas, that all means more than product prices. Past performance is indicative of future results. The shale oil industry outspent its revenue by a wide margin in 2017, again. What is going to change?

                    You have a oil related section and a non oil related section; may I please suggest a “shale exuberance” section for tee tee and coffee, where well economics and the finances of the shale industry simply don’t matter. It will be just the two of them, but they’ll get on fine with each other and we don’t have to listen to this kind of bullshit anymore: 60 wells per section in the Permian Basin in various horizontal benches, all of which, I assume, are perfectly the same, with 1.5 MM BOE EUR’s, but not, however, subject to frac growth from above or below, and communication with each other, all capable of making us energy independent and great…again.

                    America does not have enough trees left to print the money to loan to the shale oil industry to EVER make that happen.

                    The shale gas industry will soon drive the price of gas back down to below $2. The bad news for it, besides New York, is that it has the same forward thinking insights into markets that the shale oil industry has; the good news for it, if there is any, is at least it will not have to worry about more associated gas from shale OIL wells; they can’t give that stuff away now. Its all being vaporized into the atmosphere, where in the future even satellites will all have to have emission control standards.

      • Heinrich Leopold
        Ignored
        says:

        Dennis, IN the latest publication of the EIA weekly supply estimates oil production has been reduced by 290kb per day of and the NGPL supply has been increased by the same amount. Please check this out before you are accusing me of blowing smoke. I have been for 30 years in the refinery business worldwide and I know what I am saying. As a neutral mediator you are very fast to call others as incompetent smoke blowers despite your countless failures to judge what is going on in the oil market. It is time that you act more professialist.

        • Dennis Coyne
          Ignored
          says:

          Heinrich,

          Not the same amount, similar amounts. (-290 vs 275).

          My apologies, I don’t usually look carefully at the weekly data as it is not very useful in my opinion.

          I started with the page below

          https://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm

          and didn’t see anything on NGPL. Then I found the report you are referring to, which I rarely look at (link further down in the comment).

          So we will see if in the future these numbers match, I think that Guym suspects you are wrong that this will continue in future weeks.

          I agree with Guym.

          A single week might be coincidence, report back if the absolute values of these weekly differences matches for several weeks.

          https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf

          See Table 1 line 1 and line 16.

          • Guym
            Ignored
            says:

            It’s clear in the report, that they re-benchmarked the weekly, because the amounts differed so much from the monthlies. Had nothing to do with condensate, or NGL for the weekly petroleum estimate. What it will bounce back to on this weeks report should be interesting, but I am not going to try to outguess it. That’s as dangerous as guessing a woman’s age to her face. Look at the preface on the first page of the weekly webpage, and the note explanations on production in the full report. If the gas had an adjustment, too, it is, no doubt, a coincidence. After all, as you stated, the weeklies are highly suspect.

        • Guym
          Ignored
          says:

          Correcting post above, that was Art Berman, not Phil Flynn.

    • Dennis Coyne
      Ignored
      says:

      Heinrich,

      The definition of NGPL changed in 2010, read the foot note to line 16 of table 1 of the Weekly supply report.

  10. likbez
    Ignored
    says:

    Brent crossed $70 recently. It might well be that banks switched from short to long on paper oil front. As Jamie Galbraith states:
    https://www.marketwatch.com/story/economist-james-k-galbraith-isnt-celebrating-dow-25000-2018-01-08
    == quote==
    You have to have a situation where banks, which are publicly chartered institutions, serve a public purpose with some common objectives. Some banks blew out the mortgage market, [and] they blew out technology investment two decades ago. What are they doing now? They are financing energy investments, and they are financing consumer debt. This is an almost brainless approach.
    == end of quote ==

  11. coffeeguyzz
    Ignored
    says:

    North Dakota Director’s Cut released for November production.
    Slight increase over October and about 32,000 bbl/d below all time high.
    High probability of hitting new record production numbers this spring or summer.

  12. Guym
    Ignored
    says:

    More Permian insanity. I was reading that some of the companies were trying to divest some of their undeveloped Permian leases for 38k to 58k an acre. Ok, let’s say 80 acres per well. So, before you even drill, before carrying and drilling costs, your costs can be 4.6 million a well. On the flip side, the land owner probably only received around $800 an acre for the same lease.
    I hear the old Mr Rogers voice in my head, saying, kids, can you say “bubble”?

    • texas tea
      Ignored
      says:

      It may be 80 or more acres per well “per productive formation” with as many as 5-15 productive horizons depending on where you are. of course I have no idea where the land is located as there is no link, but based on the info you provided concluding that it is “insanity ” is a bit of a reach.

      In some area’s there will be 45-60 wells per section. Now do the math😊

      • coffeeguyzz
        Ignored
        says:

        The number of productive horizons in the Appalachian Basin is probably nowhere near as high as the Permian in its most productive spots, but EQT is now planning on 40 or more wells per pad going forward.
        Huge savings in infrastructure costs.

      • Timthetiny
        Ignored
        says:

        Assuming every formation is equivalent to core Wolfcamp is rank stupidity.

        Yes, it’s insanity. Those of us operating in the basin know it as fact.

      • Eulenspiegel
        Ignored
        says:

        You drill wells from these pads in every direction, several miles long. Yes, it saves lot of money in infrastructure. You get everything oily in reach of your drilling rigs, from this one point.

        So you need several sqare miles of land per pad with this technic, not just 80 acres.

        Let’s do the math. Lateral length 8500 feet, we drill modern wells.
        You reach everything oily in radius 1.6 miles, in every layer, from this pad. This are 8 square miles, 5120 acres.

        Perhaps they are settled a bit denser – but under 3000 acres, 150 million$ you don’t get your drilling pad.

        • shallow sand
          Ignored
          says:

          Look at ND maps.

          There it appears they put two 640 sections together for a drilling unit. Two miles by one mile.

          The companies then drill 8 wells from one end to the other, if on 660’ spacing. 16 if on 330’ spacing.

          There would be 4 40 acre tracts across each mile. Our 850’-1110’ wells are drilled such that there are four per 40 acre tract. An injection well is placed in the middle of those four wells. Ideally, the injected water pushes against the four producing wells, pushing more oil to the bottom of the producing wellbores. Our injection wellhead rates range between 200-700 psi, depending on the lease.

          So, when I see these wells that are over two miles TD, that are fracked at very high pressure, being drilled on spacing of 660’, 330’ or even less, my simple mind questions the long term wisdom of that.

          Makes me think of a lease near us where, in conjunction with the DOE, a large independent was allowed to space these shallow wells under 100’ apart. Of course, they drilled so many wells that they had high IP from the lease. But, it also had a higher decline and now is not very economic.

          I have often wondered if we have spaced our shallow vertical wells too tightly on 10 acre spacing.

          A friend of ours has a 40 acre lease where the intent was to drill a deep well, which required 40 acre spacing. The company ran into trouble and ended up plugging back the well and completing it in the shallow zone, 930-960’. That was in 1977.

          The well probably cost less than $25,000 to drill, complete and equip, including tank battery. The operator a couple years later drilled an injection well on an offsetting producer location.
          The well has made over 50,000 cumulative oil, and is still making 2 BOPD. My friend pumps the well himself, electric is $175 per month. Chemicals run one 55 gallon drum every two years, a drum costs around $1,000.

          The cumulative is about what I would expect 4 wells would have done over the same time frame, at four times the cost.

          Hopefully this is an example of why Mike and I think the motivations for this shale stuff are all wrong. There are sound scientific based reasons for well spacing rules.

          • Dennis Coyne
            Ignored
            says:

            Thanks Shallow sand.

            Some of this is a matter of wanting the money now rather than later.

            It would seem that a discounted cash flow (DCF) analysis should be used as a guide. Though guessing at future output and oil price makes this difficult.

            In a high oil price environment (more than $90/b), the strategy might make sense from a DCF perspective, in a low oil price environment (less than $45/b) probably not.

            The LTO plays were developed (or ramped up output) in a high price environment, it seems none of these companies were smart enough to change their strategy when prices fell.

            Pretty much I agree with you and Mike at current prices. When or if oil prices get to $80/b, the wells may be able to make a 10% annual ROR on a point forward basis (ignoring current interest payments in accumulated debt).

  13. FreddyW
    Ignored
    says:

    Hi,

    Here are my usual Bakken graphs. A mixed picture for both oil production and gas to oil ratio. For oil production some years see a drop in production but most are still increasing or are flat. 2016 is not visible in the graph but stays flat since last month at 170 bopd. They have been good att keeping up the production the last 3 months since the oil price started to rise. However logically this should probably result in higher decline rates later or at least return to normal. If that is the case, then people may be a bit disappointed by the production numbers later in the spring as the high increases in Bakken production during the autumn will slow down significantly unless completion rate increases noticeably. But from directors cut:
    “Current operator plans are to
    add 5-10 rigs in the second and third quarters of 2018 depending on workforce and
    infrastructure constraints.”
    So seems like the number of rigs will not increase that much.

    • FreddyW
      Ignored
      says:

      Here is the GOR graph. The curves are flat or decreasing since the last 5 months or so. Looks a bit strange that GOR stopped increasing about the same time. For some curves it was a rather abrupt change from increase to flat/decrease.

      • coffeeguyzz
        Ignored
        says:

        Freddy
        Thanks, as always, for your contributions.

      • Watcher
        Ignored
        says:

        There was no change other than capture of more gas rather than flaring it. That capture process almost certainly added liquids to the total. It’s really the only credible explanation for increases in wells multiple years old. No tech increase for those is possible.

        Bottom line, the liquid was being flared with the gas. Now it’s not. It looks like more production per well, but it’s not. No increase in flow.

        • Dennis Coyne
          Ignored
          says:

          Watcher,

          The liquids are valuable. I imagine the smart operators let the liquids condense in the storage tanks as the produced oil cools and then flare the gases that remain.

          Those NGLs would only be removed from the NG at the NG plant and have never been counted as “condensate” in the US where condensate always refers to lease condensate.

          In short, you may be wrong.

          It would be interesting to hear from someone who works in the field in ND or even Mike or Shallow sand who probably have a good idea how this works.

          In other words, I may well be wrong as I am not an oil producer.

      • Dennis Coyne
        Ignored
        says:

        Freddy,

        Do the completion numbers reported by the NDIC look correct, if you assume 99% of confidential wells completed are Bakken/TF wells? I believe in the Directors cut they said 60 wells were completed in November, Enno Peters often has a different estimate than the director’s cut. Not sure how difficult that is for you to pull out of the data.

  14. Longtimber
    Ignored
    says:

    Shell finds magic rocks of a different kind
    The pioneering US solar developer will now be backed by Europe’s largest oil and gas company.
    https://www.pv-magazine.com/2018/01/16/shell-to-acquire-44-stake-in-solar-developer-silicon-ranch/

  15. Watcher
    Ignored
    says:

    There was hype earlier this week about Ford choosing to increase investment in electric cars.

    Truth emerged today. Missed revenue and profit estimates. No sign of the poor trends improving. Choice being made to re-define the company. They will concentrate on low volume, high margin vehicles.

    This means EV totals aren’t going to be what is suggested by “Ford embracing EVs”. They won’t be making many. So most cars will continue to burn oil and the doom scenarios are unaffected.

  16. Energy News
    Ignored
    says:

    EIA Drilling Productivity Report, according to this there was a dip in Permian completions in June, maybe due to the dip in $WTI which touched $42 in June. But it took until November (not shown on chart) for the EIA to update it’s model with real data.

    • Dennis Coyne
      Ignored
      says:

      Hi Energynews,

      The data evolves over time, initial estimates tend to be based on very incomplete data so they will be high or low by as much as 90, especially for the most recent few months reported.

      The DPR is far from perfect, but it has improved a bit over the years. Remember that the DPR Permian includes both Texas and New Mexico, so comparisons with RRC data are hard to do.

    • Energy News
      Ignored
      says:

      Art Berman has a DUCs chart if anyone is interested
      More tight oil DUCs in 2017 than in any other year despite talk of living within cash flow.
      Chart https://pbs.twimg.com/media/DTv8omJVQAA8pre.jpg
      https://twitter.com/aeberman12

  17. Energy News
    Ignored
    says:

    16.01.2018 Norway, 34 companies will be offered a total of 75 new production licences on the Norwegian continental shelf. Of the 75 production licences, 45 are in the North Sea, 22 in the Norwegian Sea and 8 in the Barents Sea. 22 of the production licences are additional acreage for existing production licences.
    NPD http://www.npd.no/en/Licensing-rounds/Licensing-rounds/APA-2017/Ownership-interests-offered-in-APA-2017/

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