148 Responses to Open Thread Petroleum, Jan 12, 2018

    • 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 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.

        • oilbull says:

          Politics and oil are intertwined in Venezuela. The removal of Maduro and the communists will start the recovery of oil production. I suppose you are a radical liberal

          • Westexasfanclup says:

            I just oppose propaganda, be it from the right or from the left. Venezuela’s problems with oil production may or may not be politically motivated, but it is absolutely obvious for everybody who has eyes to see and a brain to analyze, that producing large amounts of bitumen (the light venezuelan oil peaked decades ago), requieres high market prices. If you compare the development in Venezuela with these world market prices you can obviously see a correlation. While a tomahawk shot on Maduro might make oil prices spike, I don’t think this is the solution we should propose here.

        • OFM says:

          Considering the history of communism, anybody who is not a radical anti commie is mentally impaired.

          Lets not display our ignorance by confusing or conflating communism with democratic socialism. In socialist countries, the people vote…. for more than one candidate, lol. I’m a supporter myself of some major aspects of democratic socialism, such as universal tax paid medical care, etc.

          This is not to say that a communist government can’t be a good government in certain respects. The Castro regime for instance has made sure the Cuban people are literate and get universal if only very basic medical care, and it has managed to feed the people despite the loss of support from the old USSR and in the face of sanctions, but otoh….. Cuba is a place where producing food is really easy, and any government that simply kept out of the way would not have a problem with food supplies.

          The Maduro regime may or may not be a commie regime, that’s splitting hairs, but it’s sure as hell one of the most incompetent and corrupt governments in control of a large country in the entire world. Probably THE most corrupt and incompetent. I can’t think of another country with ample resources, decent climate, etc, where the people are starving, can you?

          • Westexasfanclup says:

            Lamentably Cuba has to import 90% of its food. That’s one of the biggest problems of the country. And while I would really support your idear of democratic socialism for the post Castro era, I doubt this will come about that easily. You need a country with vast resources or a highly developed industry. None of both exist in Cuba. There could be a solution because of the excellent human resources and the beauty and high level of organization in the country. But in the short term nothing will prevent that the cuban core problem, the equal distribution of almost nothing, will continue, while a shadow market is already producing the first millionaires.

            • GoneFishing says:

              I think you will find a much more scientific and non-propagandized review of Cuban agriculture in this article. It appears that that state view of 84% imports of food is in reality only a 16% dependence (see Chart 1 and 2 along with their associated text) despite the increase in population since 1962.

              Sadly there is government interest in pursuing high cost chemical means of agriculture despite their previous failure.


              Will history repeat itself again in Cuba, now with an even higher population than before? Or will they find a better agricultural model overall?

              • Westexasfanclup says:

                Thank you very much GF, that article is in fact an interesting approach. As somebody who spent a lot of time in Cuba, I’ll enhance the data with some explanations about the cuban mindset: Obviously they did a great job to survive the famous “periodo especial”, and if Cubans would change to a mainly vegetarian diet they could probably become self-sufficient.

                But their habits are very US-american. A cuban who can afford it, will immediately have a lifestyle like his relatives in Miami. Same is probably true with medicine and agriculture: All the alternative methods in Cuba were imposed by shortage. If there is no shortage, they will change back to industrial stye medical treatment and agriculture.

                Now: There’s a longterm shift in human consciousness allover the world and the cubans are certainly not the slowest in adopting it. So the later they can change to an industrial model, the more advanced and sustainable it will be.

                If the cuban examples implies some hope, then it is the one that there are ways to survive post peak oil times. Cuba was in fact that test tube experiment (this is not meant as a conspiracy theory but as a review). And I can tell you that, although they survived, they’re still traumatized by that experience.

  1. Energy News 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.

    • Stavros H says:

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

    • 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 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 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 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.


    • George Kaplan 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.

      • SouthLaGeo says:

        Thanks George, and same to you for the new year.
        I’ve made a stab at comparing numerous production profiles for the 2018-2027 window – your’s from above, my midcase and downside estimates from a little over a year ago, and BOEM’s estimates – both their total estimate, and their total estimate minus any new resources/discoveries.
        I plan to expand on this in a future post – including revised EUR estimate ranges.

        • George Kaplan says:

          They are all models with something worthwhile to add to the discussion, which is not what I would say about the EIA projections. They just add have some kind of growth rate, with no basis in actual numbers, and make it look fancy by adding a hurricane effect – and yet this is the number usually quoted in the MSM. I think their predictions a couple of years ago had an exit rate for this year of 2.2 mmbpd – miles off, and when they do try to provide bottom up justification they look ridiculously ill informed.

        • Dennis Coyne says:

          SouthLaGeo’s Sept 2016 estimate at link below


          About 30 to 47 Gb of cumulative GOM output with a midcase of 37 Gb.

  3. robert wilson 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 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 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 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 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 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 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.”

          • 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 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.

        • oilbull says:

          Keystone XL (2020), Trans Mountain (2020) and Enbridge Line 3 (2019) add ~1.5 million a day of capacity, and then there is the oil by rail option which can add significant volumes if the arb warrants. Green field oil sands mining operations are the long lead time items, and are least likely to see sanctioning by the operators for the forseeable future. Existing mine expansion and insitu SAGD development are quicker development and easier to control costs with. Beyond 2018 Canada will see more measured growth of 100 to 200 k/d per year from these type of expansions.

  5. OFM 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 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 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.

        • HVACman says:

          Get a Sunfrost refrigerator. 15 kWh/month. 500 watt-hrs per day – You don’t have to mess with making ice or anything to shift the load to match the sun. Just add 100 watts of PV and 75 AH to a 12-volt battery system to provide full buffering. It would just take 1 hour of power/day from your 500-watt hydro.

          Built right in “sunny” Humboldt County, California .


    • Dennis says:

      So you’ll save a little more next year by waiting. And then a little more after that by waiting another year. Have you worked out the math including how much you’re currently paying? I mean, each year, you’re still paying full price until you install.

      Just checking.

      • OFM says:

        Hi Dennis,

        I use only a trivial amount of electricity these days on the farm….. a few days here and there to run a couple of small pumps, only one horsepower. That’s basically negligible in terms of deciding to spend ten to twenty grand on a solar system.

        My domestic consumption runs from sixty to a little over a hundred bucks per month, depending on how much ac I use. I’ve been shedding load right and left, lol.

        So….. even if I could cut my purchased juice expense by half, that’s only five or six hundred bucks a year. If I went off grid, I would save only a thousand or so, and I do need ten kW or more to fire up the welder, etc, once in a while.

        I am realizing a far better return on my money by putting it into other projects. I believe the vast majority of people in circumstances similar to mine are better off pursuing other projects if their capital is limited, and they aren’t in a position to take advantage of tax rebates. I’m not, since I have very little taxable income. Such income as I have is a very modest SS check, a little net rent, and capital gains if I sell some land, which I will eventually have to do.


        Later this winter or early spring I plan on spending three or four k on planting some over grown steep hillside land, logged by the previous owner, that is otherwise best left undisturbed, with white pine. If prices hold about the same as the last three years, I will be able to sell just the lower limbs ( that need trimming anyway in order to get nice clear ( knot free ) lumber later ) to people in the Christmas supply business for eight to ten thousand dollars. They harvest, I cash the check. They cut off the limbs and use the tips with needles to make disposable green ornaments. Of course I won’t live to see the mature timber harvested, but if I live another ten years, and have to sell, I estimate that having that pine plantation established will add at least another ten to twenty k to the price I will get from the farm.

        So over ten years, I get at least 20 twenty K from the pine plantation, because the land is otherwise basically worthless, and not salable without creating problems with other people, not necessarily my friends, passing thru my place at will, anytime at all.

        And for 20K I can and am putting in a new well, septic system, drive way, electric service drop, and used mobile home at the edge of the farm next to the public road. That will keep me busy for a couple of months, but I have more time than anything else, short term anyway. Long term doesn’t mean much to me at my age anymore, lol.

        I’ve already graded the lot, graveled the driveway, and bought the mobile home. It’s sitting there, paid for. Another thirty days of actual full time work will finish the job, and it will return a net of at least four thousand a year, after all expenses including management time at two hundred a day, which works out to a respectable fifty k annually for my time. Gonna have to find something to offset that new additional income at tax time, lol. Maybe a new truck. Never owned one in my entire life, lol, and it’s time I wrote one off on my taxes.

        Permanent improvements appreciate due to monetary inflation and to growth. Mobile homes appreciate these days, if properly sited and well maintained, although most people don’t realize the truth of this statement. I’m not real happy that my community is now a “destination” community, but there’s nothing I can do about it, and so I’m going to cash in like just about everybody else. What’s one more new family when there’s a hundred new families within a few miles, and more arriving every month?

        Ten or twenty grand worth of solar infrastructure is going to depreciate if the price of panels and inverters keeps falling.

        This is pretty hard arithmetic, and I believe the Saudi’s in particular have not yet went whole hog on solar power for the same basic reason, that it’s getting cheaper so fast it makes more sense to delay the purchase and invest the money in other projects.

        They will go pedal to the metal on solar , in my opinion, as soon as they resolve any internal political problems preventing the undertaking of vast new initiatives, and the price of oil is high enough that they are sure they will save enough oil ( to be sold ) to pay for solar farms and come out ahead, in money, bottom line.

        My layman’s opinion is that time has arrived, in terms of the price building new solar farms versus the price of oil.

        But it may take them a while yet to get going on building out solar on the grand scale because of internal political problems.

        Bottom line, I will buy my own solar system because I want one, and because there is a real but remote possibility that the grid may go down and stay down, but not because it’s a worthwhile investment in terms of dollars and cents under my circumstances.


        There IS a spot on my property that is ideally suited to building a very pretty and nice little private lake for recreational purposes, except there’s no water there. If I can make the numbers work, I can lay a water line, and pump the water to this spot, from a nearby stream, running the pump any and every day I have enough sun juice to run it. That will be about four or five thousand watts. I’m thinking the total cost will be less than the added value, so I will likely go for it sometime within the next two or three years.

        I can feed any surplus when the lake is full into the house , and use it to run electric heaters or air conditioners as needed, to help justify the cost. Or maybe I can figure out an economical way to run appliances on either ac or my new supply of free dc, without too much hassle.

        I’m all for solar power, but I don’t think many rural people who have opportunities to use the money for other projects can justify owning large personal systems so long as they have dependable grid juice. People in town with incomes sufficient to collect any tax income savings, will find that the numbers work out in their favor.

        • Dennis Coyne says:

          Hi Old Farmer Mac,

          This might be true at today’s prices, in the future probably not.

          Electricity prices will probably increase in the future, and it may be that Utility scale solar makes the most sense in any case. At some point, solar costs may fall enough that cutting out the transmission and distribution costs for a system that meets your peak load at peak output, so that very little of your output goes back to the grid will make sense (you will breakeven or better from a DCF point of view where the Discount rate is your return from alternative investments.)

          What’s your electricity rate per kWhr and what’s your average usage in your peak months (kWhr/month).

  6. Longtimber says:

    John Batchelor show broadcasting from QATAR for a week. Geopolitical and Hydrocarbon talk,

  7. Rational Analyst 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…

    • 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 says:

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


        • Rational Analyst says:


          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 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 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.

          • oilbull says:

            Good luck with that. It was tried twice, in the 70s and again last decade to build a pipeline from Canadian Arctic down to Alberta when gas prices warranted. If a Canadian pipeline with Aboriginal equity participation couldn’t get done the chances of a US one are basically slim and none.

        • Dennis Coyne 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 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 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 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?

                • Dennis Coyne says:

                  Thanks SouthLaGeo.

                  Eventually oil prices will be very high and perhaps some states will be open to offshore drilling. Some of the conservative Southern states might allow drilling, doubt it will happen north of Virginia and probably not on the Pacific coast, in my opinion.

                  Probably we will need to see a run up to $200/b (maybe in 2026) before we see a Senate investigation.

                  I agree the issue is highly political and unpredictable. I tend to think for environmental reasons we should move away from fossil fuels and in addition limited resources will make this necessary even if one believes fossil fuels cause no environmental problems.

                  • OFM says:

                    It’s damned unlikely to happen in Virginia waters, unless oil is so scarce gasoline must be tightly rationed.

                    Virginia politics are fast turning blue. It won’t be long now until this is for sure blue state. Most of the population is located in Northern Va now, and along the coast or within fifty miles or so of the coast. The rural conservative areas are no longer in control,for the most part. When the Boomers are gone, and they’re already going pretty fast, and at an increasing rate, Va will be very reliably blue. Ten more years at the most. This is going to be a demographically as well as an economically and culturally based transition.

                    I’m thinking some communities have more new “damnYankee” migrant voters from one year to the next than they do new eighteen year olds born to local people.

                    The conservative rural culture, based on religion, farming, hunting, property ownership, self reliance in terms of being self employed or employed by a small local business, etc, is melting away like a late spring snow.

                    Count Va safe for the D’s, within the next five ten years at the most, so long as they don’t run such polarizing candidates as HRC, and even she whipped Trump’s ass here.

      • Dennis Coyne says:


        Good point on the Natural Gas, probably far fewer environmental risks due to a “spill”.

        For now the US has very cheap natural gas prices so I would think the economics of a “gas only” offshore project would not be good. It would be oil that would drive any project, gas would be a by product or produced after the oil output has become negligible (if profitable to do so.)

  8. Daniel says:

    Interesting statements by venezuela. 2.4 mbpd in 2018


    • Eulenspiegel 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 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 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 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 says:


      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 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 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 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 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 says:


              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 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 says:


              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 says:


            Mostly 31-36.

            A few leases are in high 20s.

            All considered sweet, low sulfur.

            • Dennis Coyne 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 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 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 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.


                  • GuyM 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 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 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.

                  • Dennis Coyne says:


                    Thanks. I expect oil prices not to be close to $25/b for quite a while (maybe in 2060), but I agree that they are likely to be volatile.

                    I guess I am less optimistic than you that World oil supply will be anywhere near high enough to satisfy World demand for oil at $25/b, even if we assume (as perhaps you do) that a severe economic recession is imminent.

                    You have never said you expect a recession, but your comments on too much debt suggest you believe another financial crisis (like 2008/9 or worse) may be in the cards.

                    I think such a scenario is possible, but believe constrained oil resources after 2023 and the high oil prices that are likely to result will cause the economy to slow down and eventually grind to a halt by 2030, then there might be a financial crisis and depression.

                    Hopefully people will not blame debt, because in an economic crisis debt is the solution rather than the problem. The experience from 1929 to 1945 confirms this, government debt and government spending in the Depression and during World War 2 (after 1932) got us out of the economic crisis.

                    Hoover recommended reducing debt from 1929-1932 and made the problem much worse, Europe followed the same plan in 2009 and slowed their economic recovery relative to the US.

      • Heinrich Leopold 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 says:


          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


          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.


          See Table 1 line 1 and line 16.

          • Guym 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.

            • Dennis Coyne says:

              Hi Guym,

              You are probably correct. A significant difference between weekly and monthly estimates is that the weekly estimates never get revised, but the monthly estimates do get revised.

              So from time to time there is a big shift in the weekly estimates (a “re-benchmarking”) that may have little to do with actual changes in output.

              From Weekly Petroleum Status Report page

              Crude Oil Production Re-benchmarking Notice: The weekly estimates of domestic crude oil production are reviewed monthly when the Short-Term Energy Outlook (STEO) is released to identify differences with recent trends in survey-based domestic production reported in the Petroleum Supply Monthly (PSM) and other current data. If a large difference between the two series is observed, the weekly production estimate may be re-benchmarked on weeks when the STEO is released. This week’s domestic crude oil production estimate incorporates a re-benchmarking that raised estimated volumes by less than 50,000 barrels per day, which is roughly 0.5% of this week’s estimated production total.

              It is interesting that the estimate was raised by 50 kb/d, so without the re-benchmark it would have been 340 kb/d lower than the previous week. The new report will be out later today.

              Chart below compares monthly estimates with 4 week average estimates from the EIA for C+C output (data downloaded today Jan. 18,2018)

        • Guym says:

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

    • Dennis Coyne says:


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

      • Dennis Coyne says:

        From that footnote (footnote number 7 below Table 1 on page 1 of the report linked below)

        7 Formerly known as Natural Gas Liquids Production, prior to June 4, 2010, this included adjustments for fuel ethanol and motor gasoline blending components.


        Note 7 refers to line 16 of table 1 in the Weekly Petroleum Status Report

        (16) Natural Gas Plant Liquids7

  10. likbez says:

    Brent crossed $70 recently. It might well be that banks switched from short to long on paper oil front. As Jamie Galbraith states:
    == 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 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 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 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 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 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.

        • Dennis Coyne says:

          Thanks Tim,

          Nice to hear from someone who knows which way the bit turns. 🙂

        • Guym says:

          Same thing happened in the Eagle Ford, when it was younger. E&P presentations were that it was fairly homogeneous, and that you could drill without worrying about a dry well. Acreage was going for over $20k an acre. Before reality became a factor. People write about what is happening in the oil fields that have no concept about it. But I had to assume the author meant undeveloped, which means the area has not been drilled.
          I really think that reality is beginning to catch up with the Permian hoopla, too:
          I admit I am less than knowledgeable about the Permian formations, but the impression I get is that they are layered, but fairly sporadic.
          I think an interesting book could be written on the disconnect from reality from the hoopla put out by the E&P community. The latest ones that come to mind are Apache’s Apine High, and EOG’s “we can replicate our Austin Chalk production anywhere in the Eagle Ford.” Yeah, Alpine High has a lot of wet gas, exactly what they need out of the Permian, now. Karnes County is as far as they could replicate Austin Chalk.

          • Dennis Coyne says:

            Hi Guym,

            Mike S seems to indicate that they are running out of room to drill more wells in the sweet spots of the Eagle Ford.

            From your comments I believe that you are also in the Eagle Ford area, do you agree with Mike’s assessment that even with $65-$75/b oil prices that the Eagle Ford is unlikely to maintain the plateau in output that has been evident since about May 2017 (based on EIA tight oil estimates)?

            Chart for EF Tight Oil output below data from page linked below


      • Eulenspiegel 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 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 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).

          • coffeeguyzz says:

            If you check out Bruce Oksol’s Milliondollarway site today, you may see an example of how the operators, in this case Continental, are dealing with down spacing issues, well communication, and pressure management, among other things.

            Following 2 new, nearby fracs, an older Continental well showed immediate production increase from 3,300 bbl/month to almost 17,000, and then dropped WAY back down next 2 months. Taking into account the numbers are accurate.

            There is very little specific info being given out about what is going on, but the speculation is the elevated, induced formation pressure can be successfully controlled to boost older offset output.

            This was clearly stated as far back as 2012 by the then CEO of Kodiak.
            This is the most likely explanation behind the data shown in Freddy’s graphs.

            • shallow sand says:


              Still, question in my mind, is it better to spend less per BOE, or not, especially during the low prices from 2015-2017?

              My view is much different. My view is that I want to own the production for decades, hopefully. Therefore, do not want to be short sighted and do something that doesn’t make economic sense over the long haul.

              Planning for the future, however, is not the American way.

              I know many who have tried to trade stocks over the years. I don’t know one who was successful.

              I know a few who were the boring buy and hold types, and they may have held a few losers, but generally have built holdings in the seven figures ballpark, without necessarily being high wage earners.

              OPM is the name of the game in the US. Some of it is mine, as the index like mutual funds I own in my retirement account have such gems as CLR, PXD, EOG etc. Also have plenty of Amazon, Google, Apple, Tesla and other high flyers. When the market crashes the balances will tank, like in 2008-2009. When it surges like now, the balances rise.

              • coffeeguyzz says:


                How much did Continental need to spend to get the incremental increase from the older well?
                Mr. Oksol just posted a followup profile of another nearby well which was offline for several months and then showed a dramatic increase after the nearby frac’ing occurred.

                Thing is, with all the daunting engineering challenges to recover oil from long horizontals over many decades, with the massive costs involved in both securing leases and building infrastructure, the viable companies going forward could be in strong positions, somewhat like Cabot is in today.
                (Cabot is preparing to drill way over in Ashland county, Ohio. Some speculation that the target could be the Trenton Black River).

                Conversely, outfits like Exco will go bankrupt, which they just did.
                This company has some very attractive assets in the AB and those will be scooped up by a stronger company.

                The fundamentals in the hydrocarbon industry have changed drastically within the last decade. No turning back the clock.

                • Mike says:

                  Bullshit. The “fundamentals in the hydrocarbon industry” are the same as the way they were 50 years ago…it is a business and you must make money for the business to succeed. Using 20, 30, 40% of one’s revenue to service long term debt is the kiss of death in any business, particularly the oil business, particularly in the shale oil business where the asset you borrowed on is declining at the rate of 35% per year for the first 3 years, then 12-14% annually thereafter. But neither you, nor Oksol or Filloon would know that because you were all selling insurance, or in the health care industry ten years ago. You think the answer to everything is… increased productivity, regardless of what it costs.

                  You also seem to think, incredibly, that shutting a well in for 4-6 months awaiting a nearby frac, then turning that well on to see an increase in productivity from obvious induced pressure fronts, is some kind of miracle. There is NOTHING that suggests well interference is adding UR to wells in the Bakken. NOTHING. The parent well that is getting frac’ed costs 30% more than offset wells, with longer laterals and more sand, do you have that calculated into your magical numbers? Hell no. Nor do you know that this sort of stuff may actually be detrimental to long term recover rates.

                  Any American with an IQ above the price of oil should look at what the US shale business is doing to our last remaining oil and gas reserves and think, immediately, whoa…what in the world are we going to do 10 years from now? What about my kids? Why is my government printing more money every day to loan to these yahoos, so Al Walker, or Scott Sheffield can make $20M a year in salaries? When are they going to start paying this money back?

                  The shale industry exists on the backs of other peoples money; if America had any energy leadership it would be on a mission to save our expensive resources and use ‘other peoples oil’ right now.

                  Your message of revolutionary abundance, regardless of cost, is horse dookey and most people know it.

                  • shallow sand says:

                    I know we have a new thread, but I also want to say, “this time is different” has been said many times in this industry, yet the ONLY thing that I see that is different is price volatility, which has increased greatly.

                    Independents will drill if given the money to do so, regardless of economics, if they have the locations. Seems that happened in the 1860s in Pithole, PA, 1901 at Spindletop, TX, 1930 in the East Texas Field, in the early 1980s everywhere (see rig count) and today with US shale.

                    Management of public corporations will draw large salaries and other compensation regardless of profits (applies to pretty much all US public corps)

                    Technological advances are made, but never are enough to overcome the importance of the oil price.

                    During periods of “boom” service costs skyrocket, which greatly eat into profits, and during times of “bust” service costs plummet, as service companies try to keep the lights on.

                    At all times, oil is very tied to politics, see Teapot Dome, Jimmy Carter with the sweater, windfall profits tax, the Bush Family, drill baby drill, the leave it in the ground folks, Obama and his “big oil tax breaks” talk, which primarily were small oil tax breaks, the Koch brothers, Trump wanting to open up everything, then back tracking.

                    And forever, shale will be tied to Make America Great Again, while those of us invested in oil working interests would greatly like for the politization to stop, shale resources to be developed in a sane manner, and prices to be stable and fair to producers and consumers.

                    When shale hits its limit, it will be interesting to look back and see how many billions of barrels of it was exported to other nations, some friends, some not so much.

                  • Mike says:

                    Shallow, that is all well said and expected from someone who has actually been in the oil business a long time. Thank you.

                    Unfortunately, because you and I are small stripper well owners the general assumption might be that we are opposed to shale oil and shale gas simply because we have been adversely affected by its overleveraged oversupply, rising costs, and ensuing collapse of prices. It has “rained on our parade,” as Mr. Stehle liked to say.

                    Its a weak criticism directed at people who are genuinely concerned about America’s energy future and who are smart enough, and care enough to question the shale industry’s sustainability. Much of this entire debate, like everything else in our society, has indeed become politicized. Not have undying “faith” in the system, in America’s technological ingenuity, in its willingness to keep getting further and further in debt is…un-American, it seems. Its un-Trump like, I guess. As I said, that’s a dumb argument. We never have had much energy leadership in America and we don’t now; but to come to that conclusion you have to break from the herd and think for yourself:

                  • Dennis Coyne says:

                    Thanks Mike and Shallow sand,

                    I was going to say something about the “fundamental change in the oil industry” comment, but I thought I would leave it to people who know the oil industry.

                    Glad you guys are here.

                    No doubt without your input (and a few other oil industry folks) the blog would be much less interesting.

                • Lloyd says:

                  Hi Mike.
                  I agree with what you say, but would like to put a different spin on it.
                  What if shale oil financing is just collateral damage caused by other macroeconomic trends? The fed is busy keeping the interest rate low, which leads to an appetite amongst investors for riskier investments (as they need higher returns).

                  Oil is not the only risky investment- venture capital is active in other types of mining, and fields like software development. The problem isn’t only that people are investing in unprofitable oil ventures- it’s that they are investing in a wide variety of unprofitable ventures because of the government’s interest rate policies.

                  Seeing as Trump’s Tax cuts have just boosted the deficit by 1 or 2 Trillion over the next ten years, don’t go looking for the rate situation to change. Yeah, I know my input isn’t very hopeful…but maybe somebody else can see something useful here.

  13. FreddyW says:


    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 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 says:

        Thanks, as always, for your contributions.

      • Watcher 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 says:


          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.

        • FreddyW says:

          The trend has been increasing percentage of flared gas since the summer, except for November where it dropped.

          • George Kaplan says:

            That’s partly why the GOR has dropped – if you are having to flare the gas it makes sense to set the separation system up to minimise the amount you are losing and keep as much of the NGLs in the oil stream (i.e. higher pressures and cooler if that is controllable). Part of the reason GOR was rising before was because flaring was being reduced so it was easier to allow the NGLs to go the gas plant.

      • Dennis Coyne says:


        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.

        • Dennis Coyne says:

          Bakken scenario below assumes EUR decrease from 370 kb in Dec 2019 to 130 kb in April 2034 (annual rate of decrease in EUR of 7%/year) and to 109 kb in April 2039.

          Also assumed is 120 wells per month completed until April 2034 and a linear decline in completions per month to zero in April 2039.

          Finally it is assumed the well profile does not change from Jan 2017 to Dec 2019.

          Any of these assumptions could be incorrect.

        • FreddyW says:


          I only data for first production month for all ND wells as many Bakken wells are confidential in the beginning. Those numbers are 81 for November compared to 105 in October and 91 in September. But the majority are Bakken wells anyway.

          • Dennis Coyne says:

            thx, double checked Director’s cut. they estimate 60 completions in Nov and 81 in October.

            Your numbers seem more reasonable.

          • Energy News says:

            It doesn’t say how much oil has been cut

            BISMARCK, N.D. (AP) — Fearing sanctions by the state, some North Dakota oil drillers have begun cutting output to control the amount of natural gas that’s being burned off at well sites and wasted as a byproduct of crude production, industry and state officials say.
            Pipeline capacity is adequate to move the natural gas to market, but it’s the lack of gas-gathering and processing facilities in between that’s the problem. That forces some drillers to restrict oil output at some wells to meet gas flaring rules, said Ron Ness, president of the North Dakota Petroleum Council.
            ASSOCIATED PRESS January 16 http://www.houstonchronicle.com/news/texas/article/North-Dakota-oil-output-cut-back-to-meet-gas-12501426.php

            • FreddyW says:

              Interesting. But I can´t really see the effect in the data. Old wells are doing very well as you can see in the graph above and new wells have very high initial production.

              • Dennis Coyne says:

                Hi FreddyW,

                Do you include shut in wells in your data to avoid survivor bias?

                In other words, for 2007 and 2008 wells do you include all wells which initially started producing from Jan to Dec of that year and fill in zeroes for your averages for those wells that have been shut in permanently?

                I imagine total output from 2007 and 2008 wells is not that great as there were fewer wells completed in those years relative to 2013 and 2014.

                Based on Enno Peters data there were about 250 wells completed in 2007 and 500 wells in 2008, in 2013 it was about 2100 wells completed and in 2014 about 2300 wells.

                Also in Oct 2017 about 35 kb/d of total ND output was from wells completed in 2007 and 2008 of a 1147 kb/d total for the state (3% of total output was from 2007 and 2008 wells).

                Some of the increase in older well output may be due to more wells being brought online (wells temporarily abandoned when prices were low) as oil prices have risen.

                • FreddyW says:

                  Yes I include wells with no output. I set it to zero if data is no longer published for those wells.

                  There has been a small increase in number of producing wells, but not enough to explain the increases we have seen.

                  • Dennis Coyne says:

                    Thanks Freddy.

                    Could the explanation be that as these shut in wells are brought online there is a temporary boost in their output, relative to wells of similar age that have not been shut in recently.

                    No doubt it would be a nightmare to try to test such a hypothesis with the data.

                    A cursory look at the 2008 well productivity curve shows a boost in 2012-2014 when completion rates were relatively high. Maybe most of the 2008 wells were in the sweet spots and affected by the newly fracked wells around them.

                    Also most of the wells are probably in the sweet spots currently and possibly closer well spacing and infill drilling has led to the uptick in well productivity for the older wells from almost every year.

                  • FreddyW says:


                    As I wrote last month, I looked at some of the 2014 wells and could not find many examples of wells going from no production to high production. I found mostly small increases in many wells. I don´t plan to do any more investigation than that as it would take a lot of time. We will see anyway the coming months what happens.

  14. Longtimber 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.

  15. Watcher 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.

    • Guym says:

      Well, their experiment with Jaguar did not fare so well. Made the Jaguar look like a Taurus, and never came close to a profit. So, now they will make their own high dollar cars, which will all resemble a Taurus. To paraphrase Henry Ford, you can give them any color they want, as long as they look like a Taurus.

  16. Energy News 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 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 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

      • shallow sand says:

        Art Berman says about all the DUC, $4 billion of drilling CAPEX with $0 revenue.

  17. Energy News 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/

  18. Stephen Hren says:

    The low grade civil war in Nigeria may be heating up next week, with rebel strikes against oil infrastructure promised by the Niger Delta Avengers. Attacks in 2016 cut oil production by over a million barrels.


    • john keller says:

      Threatening to hit deep sea structures. These facilities have in the past been too far from shore to be affected by violence.

  19. Guym says:

    One should not drink spirits to excess, and drive soon, thereafter. Let’s extend that recommendation to drinking and writing:

    • Dennis Coyne says:

      Hi Guym,

      Not sure how this author gets 1.8 Mb/d. The trend for tight oil output fro the past 12 months has been about a 900 kb/d annual rate of increase in output (Dec 2016 to Nov 2017).

      For the Drilling productivity report over the same period the increase is a bit higher at 1100 kb/d and using the forecast through Feb 2018 the rate goes up to 1300 kb/d. I don’t think the DPR forecasts are very good and even assuming the 900 kb/d increase will continue for another 12 months is a stretch because much of the recent increase was recovery from the low activity at low oil prices, whether the completion rate will accelerate further is a big question.

      My guess is a 700 kb/d increase in shale output over the Dec 2017 to Nov 2018 period with a range of 500 to 900 kb/d, a lot depends on oil prices with the low estimate corresponding to an average oil price of $55/b over that period and the higher level corresponding to an average price (WTI) of $70/b over that 12 month period.

  20. Guym says:

    ??? bbls day increase in pipelines from Cushing to Pakota by third Qtr 2018:

  21. Guym says:


    Roughly, reflects my thoughts. Although, a disruption is probably not needed. We know Venezuela is swirling the drain, and their sudden increase in production may make what they have less salable. At some point in time, finding shippers may become more difficult. Also, the Nigerians rebels have projected an attack on offshore faculties.

    • Dennis Coyne says:

      Thanks Guym.

      Good article, which also reflects closely my oil price expectation.

Comments are closed.