Petroleum Open Thread August 4, 2016

Comments and news about oil and natural gas.

World C+C using EIA data, but substituting the Russian Ministry of Energy Data for Russia shown in the chart below.  The monthly peak was 81, 047 kb/d in Nov 2015.  The centered 12 month running average is also shown with a peak at 80,642 kb/d in Sept 2015.  The annual decline rate since the Nov 2015 peak has been 4.2% per year or about 3.4 Mb/d over a 12 month period if the rate does not change before Nov 2016.  That would imply 77.6 Mb/d by Nov 2016.

Output was 79,784 kb/d in April 2016, I believe the decline rate will decrease by Oct and output will be around 78.5 +/- 0.5 Mb/d in Nov 2016, decline will continue into 2017 and the rate of decline may reach zero some time in 2017.

http://www.eia.gov/totalenergy/data/monthly/index.cfm

http://minenergo.gov.ru/en/activity/statistic

Worldcc/

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246 Responses to Petroleum Open Thread August 4, 2016

  1. Guy minton says:

    Your projection that the decline will level out in Oct., contrasts to Core Labs projection that the decline will persist through 2017 for worldwide.

    • Dennis Coyne says:

      Hi Guy

      I said the rate of decline would level out.

      I should have said that I expect the rate of decline will decrease.
      There may continue to be some decline in 2017 as core labs predicts.

      I expect oil prices will rise to a level that halts the decline sometime in 2017.

      When that occurs will depend on many factors including the price of oil.

      • Guy minton says:

        Everything you said sounds extremely plausible, thanks. I agree, and thanks for the post.

  2. Toolpush says:

    BH rig count is out.
    Oil up 7
    gas down 5

    Permian up 5
    Eagle ford up 4

    I wonder when the gas rig count is going to kick in. Gas supply is on a downward trend, demand is on the increase. Something is going to have to change when the winter draw down starts.

    One for Shallow Sands.

    Looking at Enno’s charts. If you look at the monthly well starts. Oct 2015 has 15 wells in the Permian that seem to be stand out performers. How can you cross reference this with source. These wells after 7 months are producing 478 bopd with a CUM of 135,000 bo. I would expect them to be the subject of many a presentation.
    The thing I don’t understand is. If they had this sort of success in Oct 15, why are they not repeating the same success in their later wells?

    • Stu from New Jersey says:

      I think it was oil up 7, gas down 5.
      Gas rigs at 81……
      Anyone know how many of the DUC’s are primarily gas??
      Combined with the negative injection last week, gas data will soon be more interesting.

      (It’s always interesting to me. In addition to investments, it keeps me warm in the winter.)

      • Toolpush says:

        Thanks Stu,

        I got to edit it just in time. Next year gas should get very interesting in deed.

      • Coffeeguyzz says:

        Stu

        As per the Ohio regulatory site – oilandgas.ohiodnr.gov – there are currently 1,764 drilled unconventional wells in the state and 1,302 of them are producing.
        Balance being 464, although many are undoubtedly oil/condensate weighted.

        The site marcellusgas.org comprehensively tracks every unconventional well in the commonwealth of Pennsylvania and recently stated there were 9,918 drilled or under development with 7,618 of them producers.
        Some ambiguity exists with the term ‘under development’ as it does not necessarily mean all production infrastructure is in place and only awaits fracturing. Still, it might be a safe assumption to claim near 2,000 Pennsylvania wells are in some near state of production. (Lack of gathering pipelines has played a role in wells not being fractured/turned in line).

        Push
        There has been a definite uptick in proposed activity in the Appalachian Basin as many operators are frac’ing/turning wells in line and planning on bringing rigs back in the coming months.
        That marcellusgas.org site now says 50 wells have been turned in line in the past 21 days. This is up from about 30 or so these past several months.

    • shallow sand says:

      Toolpush. I recall reading in PXD’s presentation that they are choking back new wells

      The reason for this is they do not want to overbuild facilities.

      Acreage in the Permian many times comprises of thousands of acres in one lease, so many wells’ production can be ran into the same facility.

      So, say a total of 50 wells were
      going into one facility. They have to plan this out, because the 50 wells at their peak production might produce a combined 50,000 barrels of oil and 150,000 barrels of water per day plus 100,000 mcf of gas per day.

      However, in three years, those wells will be producing in the neighboorhood of 2,500 barrels of oil and 5,000 barrels of water per day, plus maybe another 1,000 mcf of gas.

      My numbers are hypothetical, but imagine how much less equipment will be required after 3 years in that scenario.

      There has been a lot of discussion about facility over build in the Bakken and Permian, where large facilities are, 5 years later, handling a
      fraction of the production.

      I think you need 12 months minimum to get an idea of what wells will produce long term. That is where I am getting criticized by the believers, they say I am ignoring recent well improvements.

      The bottom line is the companies have found US land based oil. They know it is there, and as long as they are given the money to drill for it, they will, regardless of ultimate profitability. The CEO’s are more in the position of promoter than business owner. Promoters talk about IP and exaggerated ultimate recoveries. It is interesting how much similarity there is between company presentations and the promotion materials I have read seeking to sell 1/16 non-operated WI to doctors and other unsophisticated investors.

      We have guys in the industry who make their money, not off the oil, but off the promotion of new wells. It has been that way for decades.

      I assume few CEO’s have taken a pay cut during this downturn. If they suspend drilling, they have nothing to promote at investor forums and quarterly conference calls. So they will drill. Heck, Halcon is still running rigs even though they are bankrupt.

      It is going to take action by Russia and OPEC to drive prices higher in the next few years, at it appears there are still a lot of locations left to drill in the US shale basins.

      In fact, several of the leases we own were originally promotion projects. That was extremely hot in our area in the early 1980s. Then, the price crashed and about all of the dumb money gave their interests back to the operator, as the operator billed hard for overhead, and they were paying $15+ per barrel in expense while selling oil for $10 in 1986.

      • texas tea says:

        I would make a conjecture here after listening to a few CC and following our own production and talking with a number of operators, not to mention 30 years in our business.
        When oil prices were high, lets say over $80, when producing a depletion drive reservoir many, perhaps most if not all, LTO producers produced their wells at maximum flow rate. They did not intend to have and keep an inventory of DUCs, they did not voluntarily cut back production etc. All that has changed. While debt serviceing remains a issue for many, many others have push out, restructured, paid down, issued stock etc giving them the latitude to produce wells below maximum flow rate, maintain an inventory of DUC, and voluntarily hold production off the market waiting for higher prices.

        For the purposes of comparing one year cumulative production to the ultimate recovery of any well, with those wells brought on during high prices, may not be a apple to apples comparison and conclusions drawn from those comparisons maybe way off the mark. For those in our business, we should keep in mind, reserves in depletion drive reservoirs are a function of production and pressure, without knowledge of both it is risky propositions to predict reserves or any one well or group of wells.

        With respect to our LTO wells, I do not make conclusion because/when I do not have all the needed information. For instance how long with they flow, way to early to tell; after they cease to flow how much additional production can be achieved with gas lift or pump, I do not know, way to early to tell. Like many wells I have been involved in, we don’t normally install artificial lift until the well becomes near its economic limit or we want to achieve higher production rates to take advantage of prices. In any event, drawing conclusion without all the necessary information and using only a couple of data points, like one year production and then extrapolating seems inherently ripe for being wrong. Additionally, I can point out the charts showing production meeting some type EUR curve as seen in various presentations, can be manipulated by opening chokes to keep production steady, without knowing what the flow pressures and choke size along with production we can never know what the wells may ultimately produce so it can work both ways. It is only because I have wells with real production history, with real checks over a long period time that give me confidence in areas we are active, not some lack of critical thinking, not ceo’s words, not colorful presentations. Just standard business practices😜

      • texas tea says:

        SS says, “We have guys in the industry who make their money, not off the oil, but off the promotion of new wells. It has been that way for decades.”
        it has been that way since the very start of our industry 😊

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

        • shallow sand says:

          I agree, probably even pre dated spindletop.

          Interesting that now we have multi billion dollar companies doing the same.

          Just listening to Harold Hamm talk, he seems little concerned about the price of oil and gas. He seems most concerned about regulation of the industry.

          The catch phrase now is every well not drilled in the US is funding terrorism.

          Hamm claims we can be completely oil independent. Interesting he doesn’t mention what oil price he thinks is needed to accomplish that goal.

          • Reno Hightower says:

            You know why Aubrey started paying $10,000/acre in the Haynesville? After spending 2+ years putting together his acreage block at an average of $500-1000/acre?

            So he could flip 20% to Plains at $15,000/acre and a huge carry on the front end. That deal paid for all his bonuses paid to that point and he pocketed a nice chunk of change.

            Aubrey was a world class promoter. Here is a link to the Reuters article
            It is funny looking back at what they have for estimated reserves. Significantly more than what has played out.

            http://www.reuters.com/article/chesapeake-plains-idUSWNAS999420080701

  3. Ablokeimet says:

    “The annual decline rate since the Nov 2016 peak has been 4.2% per year ”

    ??? We’re only in August 2016. Was that supposed to mean Nov 2015?

    • Caelan MacIntyre: Typo Alert? says:

      I noticed that too and suspect it’s a typo, as it seems implausible.

    • Dennis Coyne says:

      Thanks, that was a typo, as implausible as that seems. 🙂

      • Are You Kidding? says:

        “Thanks, that was a typo, as implausible as that seems.”

        Yes, Dennis, your usual problem is not some simple typo, it’s much more likely to be a major thinko.

  4. George Kaplan says:

    Baker Hughes international rig count for July: oil up 3, gas up 4 (there are 4 more miscellaneous – I don’t know what they are – water? – there are a lot in Turkey).

    This may be the bottom but there were bigger rises in oil last August and September, and then the decline continued.

    Norway up 4 – possibly as the Barents Sea opens up ice free in July, but their rig count has been much changed so far through the downturn. Algeria down 4 to only 5 rigs now. Venezuela down 3, Algeria up 4 gas rigs.

    Not all rigs are equal. It’s noticeable how the GoM numbers continue to fall, from 63 in late 2014 down to 17 now (15 oil, 2 gas) as a lot of the majors and large independents pull out of deep water. One decent deep water well such as at Thunder Horse would equal a few hundred or so Bakken wells, but at least at the moment it doesn’t look like there are suitable targets worth the risk.

    • Reno Hightower says:

      Big independents do not drill exploration wells anymore. Wall Street does not like the risk and will give them money to mine oil/gas in these resource plays but punish them for drilling expensive dry holes in the GOM and international.

  5. Chart Monkey says:

    Baker Hughs – International Rig Count for July 2016
    If you’ve not looked at the new figures, then this might save you the effort.

    • Coffeeguyzz says:

      Texas Tea

      There is little-recognized shift that has been ongoing regarding fracturing these past couple of years, namely the much greater control of the frac radius and the role that sand is playing.

      In several of this week’s conference calls, especially Cimarex’, a good bit of discussion involved diversion improvements. Both near the wellbore and the so-called ‘far field’ diverting capabilities.
      There is some oufit doing field tests this summer using nitrogen along with the proppant mix to ‘halt’ the outward/upward spread of the fractures and enabling much more comprehensive rubblizing near the wellbore.
      The Riverview well that EOG fractured in the Bakken used 12 million pounds of #100 mesh sand and 1 million pounds of #30-50 sand.
      Lateral was 4,300′ long.
      The 100 mesh was clearly a scouring/sandblasting agent while the 30/50 provided the conductivity.

      In Pioneer’s recent presentation, the fact that they stated they are doing 100′ stages with perforation clusters 15′ apart is almost unbelievable.
      It was just two years back that Whitng was testing 3 versus 5 perf clusters over football-field – size stages (300’/350′).
      There is no way that clusters could be spaced that closely absent very high control of the frac propagation.
      This control seems primarily due to the effective use of diversion processes.

      2017 unconventional wells may look a lot different from the earlier years’.

      • Mike says:

        Yes, more expensive and far less profitable.

        A 12M pound frac requires every bit of 600,000-700,000 barrels of fresh, potable water suitable for human consumption to perform. That is enough water for nearly 1.6 million human beings in one day. You boys that are so intent on convincing people that shale oil is a gift from God and it is un-American to questions it’s costs, or it’s lack of profitability, have NOTHING vested in it; little money, no water, nothing other than some “internet” time. If you cheerlead for a shale oil well that requires 1.6 million gallons of water to frac, because its a hobby for you, or so your RI revenue goes up, or your stock prices increase, or you feel more “American,” or more Trump like, you should actually be ashamed of yourselves. The 1.6 M gallons of water will be, very soon, far more valuable than a stinking shale oil well that will never pay back costs, no matter how much sand you cram in it.

        • John S says:

          Amen!

        • R Walter says:

          Oil is more important than water and more important than people.

          Everybody knows that. People are expendable.

        • Nick G says:

          Farmers pay nothing for water. If they paid as little as .01 cents per gallon, they’d use water far more efficiently: no rice paddies in the desert.

          Water at .01 cents per gallon is .4 cents per barrel, versus 40 dollars per barrel for oil. It’s not hard to see which is more valuable.

          You’re seriously arguing that water is a barrier to oil production??

      • Watcher says:

        Why would there be discussion of frac techniques in quarterly earnings analyst conference calls?

        Those are usually conducted by the CFO to present the quarter’s results and offer forward guidance. The analysts wouldn’t care about this stuff.

        Did you mean investor presentations, errrrrr, hype?

        • Coffeeguyzz says:

          Watcher
          The conference calls can often be the single best source for up-to-the-moment operational particulars for specific companies or the industry in general.

          In addition to the CEO, the CFO is always on hand to explain why losing hundreds of millions of dollars should be no cause for alarm (nor to sell the stock).

          There are always a couple of VPs on hand to more granularly describe recent operational activities.
          EOG, for example, has two VPs to describe in depth their areas of expertise … one for the EF and Permian theaters, and one for the Bakken, Niobrara and Powder River activities.
          If the analysts are sharp (crap shoot there), many interseting things can become unveiled.

          Go … and sin some more.

        • wake says:

          And here I had thought you were a finance guy watcher. As explained below, conference calls can be very interesting, particularly as executive are on record

      • texas tea says:

        Coffeeguyzz,
        I always learn something from your contributions and greatly appreciate you sharing your knowledge with us. I think it is under appreciated by many here, just how much as a industry, we constantly are improving our drilling and completion techniques. Comparing horizontal wells drilled and competed early on in the Barnett, for instance, with what is being done now is like comparing cable tool rigs to rotary rigs. However, we have “experts” here who seem not to be able to understand how both drilling and completion techniques have improved and will continue to do so. While I hate to be dismissive of anyones views, the lack of understanding and their reliance on over used clichés’ to define LTO plays seems to be agenda driven rather than an opportunity to learn and apply that knowledge to some useful purpose like making money.
        I assume for instance the professional engineers and officers of companies like CLR, MO, EOG, and others actually have a idea where this technology will ultimately take them in terms of their production. (it is not all smoke and mirrors) Given they have the resources to play worldwide, they chose to pursue and allocate their resources here in various resource plays. A open minded person interested in oil and gas production, for what ever reason, with any level of critical thinking skills, would not be so easily dismissive. I suppose it helps when a person has some actual experience in the oil field👍

        • Coffeeguyzz says:

          TT

          Keep an eye on the Rogersville.

          Cabot’s vertical well produced near quarter billion cubic feet first eight months online. (Turned in line May, 2015).

          Cimarex spud their second well this past Wednesday.

          There have been several thousands of leases signed in the Kentucky and WV counties thought to be most prospective by numerous prominent operators.

          Many of the permits that Shell – operating as SWEPI in Tioga county, PA – has for their Utica wells also list the Trenton Limestone as a target.
          This, amongst other events, continues to fuel speculation that the Trenton Black River, which is beneath the Utica, may once again hold promise as one of the largest sources of hydrocarbons in the US (as it was in the late 1800s.

          People who are unwilling or unable to recognize what is going on in this field will have the most to lose.

        • Mike says:

          You guys should get a room.

          EOG lost 4.5 billion dollars in 2015 and 747 million thus far in 2016. CLR and MRO are also net losers in 2016. In fact, of the 17 public shale oil companies I’ve looked post 2Q 2016, total losses are over 7.5 billion dollars. NONE of them made money in 2015 and none have thus far made money in 2016.

          I have run a 12M pound frac described above using pre-pads, spacers and increasing sand concentrations per incremental stage commonly used in shale wells thru my computer programs and indeed a frac like that would require every bit of 600,000 bbls of fresh, potable water suitable for human consumption. That’s 25 million gallons, not 1.6 gallons (my bad), enough water for 335,000 people to consume…one well. Fresh water is a big deal, particularly in the arid West, and for all the bullshit about use of wastewater, or brackish water in the Permian, for instance, very little of that has actually been done yet. The shale industry, after all, is not well known for telling the truth.

          For those “open minded oil men with actual experience in the oilfield, capable of critical thinking skills,” its possible, it seems, to ignore lack of profitability, debt and the complete failure of the shale oil business model. That’s all fine and dandy; you can’t be helped much by way of thinking. But forsaking fresh water to cram more sand in a stinking shale well that is STILL not going to pay out at any oil price less than 80 dollars a barrel… is pretty stupid. Oil prices remain low, primarily because of an oversupply of light, tight condensate we cannot get rid of (imports are up, not down) and drilling any shale oil well right now makes no sense whatsoever. Its keeping prices low and people out of work. It may be entertaining to surf the internet for techno-dribble about the shale industry but the US LTO industry is now foolishly drilling wells that are unnecessary and unprofitable. That is NOT good for America’s energy future.

          I don’t think you “hate to be dismissive of anyone views,” you do it all the time and in a rude, condescending manner, Tea. The only way you can make a point appears to be at others expense. We’re all close minded, or incapable of intellectual process, it seems, if we don’t agree with you.

          How about changing that handle to Kansas Tea? As a Texan, I am offended.

          • Reno Hightower says:

            well said Mike. I thought turning a profit was the goal but apparently reserves, IP rates and IRR are the name of the game. Hell with profit.

            • shallow sand says:

              Till the LTO companies release payout statements, I call bull sh#%.

              If I was getting wells to payout at current prices, I’d be advertising it to the world, were I a public company.

              But no one is, so therefore I assume they are all losing their a$@es.

              XTO has lost a fortune in the shale basins since Q1 2015. So has Statoil. I’d think given the brain power these companies have, if anyone could figure a way not to lose money at LTO, they could. But they haven’t. Why? LTO is high cost.

              Schlumberger’s CEO says little new tech has been unleashed, that most of the cost savings is the result of service companies slashing costs to the bone. He says that cannot continue, is not sustainable.

              Hang in there Mike. When I hear the LTO guys say it is possible that US can be oil independent, if only the gubment would stay out of the way, I know they are full of it.

              What price would we need to get US oil production to 17 million barrels per day?

              • me says:

                If America wants oil independence, it needs to work on the demand side. That is where the low hanging fruit is.

                • Javier says:

                  The US rather starts a war and invades a country than reduce their oil consumption to European levels.

                  • Watcher says:

                    And so it should.

                    There is zero merit in conserving oil so that the Chinese can burn it to elevate their society and military and achieve dominance.

                  • Caelan MacIntyre says:

                    Humans May be One of the Early Intelligent Species in the Universe

                    “Arthur C Clarke once wrote that a trillion years from now an advanced civilization will look back at us with envy and say ‘They knew the Universe when it was young.’
                    We may soon discover that intelligent life, indeed, may be in it’s ‘very young’ stage in the observable Universe. Its 200 billion galaxies show a clear potential to continue on as we see them today for hundreds of billions of years, if not much longer. Because planets and life are so young in our Universe, says Harvard’s Dimitar Sasselov, perhaps ‘the human species are not late comers to the party. We may be among the early ones.’ “

                    It is possible that an extraintelligent species that can manage a state of harmonious equilibrium with itself– its own members– and its natural environment (That’s not us, yet, if ever.) will be the one to hang around relatively-intact and long enough to inherit the rest of the cosmos.

                    Until then…

                    Forlorn

          • Coffeeguyzz says:

            Mr. Roughneck

            The Riverview well from EOG which I cited used 12,806,930 pounds of proppant and 153,270 barrels of water.

            From the very beginning of your ‘engaging’ with me on this site, you have been innaccurate on so many things, Things such as our original ‘chicken fight’ (your description) of the running out of room in the sweet spots in the Bakken.
            After – and even now, Mike – you condescendingly refer to ‘internetnet analysts’, what did you do? You went and posted, from an INVESTOR PRESENTATION (as could be readily seen by the shaded, leased geometric areas), a map seeking to show it was all full up. You didn’t even realize the dimensions could be readily ascertained by the scale.

            You were completely unaware of the early phases of the EF development regarding Petrohawk and EOG.

            You claimed the 8,000/9,000 psi Utica wells were not possible as ‘flying steel space noodles’ or some such would occur.

            You displayed a stunning ignorance of Cabot’s production in Susquehanna county.

            You seemed completely unaware of why a formerly-held-in-high-esteem academic from BEG is now sitting over in the sandbox. (Check out the role he played in the unprecedented public rebuke by both the EIA and his former BEG colleagues).

            Mike, your whole way of making a living is getting upturned and putting forth non stop innaccurate bluster, ad hominems, sweeping condemnations to any and all whom you deem a foe will not change any of that.

            The people on this and other sites who WANT to believe the big, bad shale boys WILL fail (or ought to), are far along on being shown to be wrong.

            • Reno Hightower says:

              They need to turn a profit coffee. Until they do that, their reserves, IP rates, etc are irrelevant.

              During the boom these companies were drilling hundreds of wells a year and they never got ahead to where they could drill out of cash flow.

              What does that tell you?

            • Mike says:

              Coffee, I occasionally work with good men who were directly responsible for the very first Eagle Ford shale wells in DeWitt County, men that comprised Petrohawk; they got out of the shale business as fast as they could for smart reasons. Ask BHP how they feel about that acquisition. I have numerous interests in shale oil wells and know precisely what they cost, how much they decline and how unprofitable they are. Next comment….

              You cannot do anything more than plagiarize shale oil company press releases off the internet, as thought you actually know something about the business of making money from oil and natural gas production. Its a hobby for you. Or you have stocks in shale companies, I don’t know and don’t care. Next comment…

              I am not “ignorant.” That is the 2nd or 3rd time you have said that to me and I resent the hell out of it. I have forgotten more about the oil business than you will ever know. The shale oil business model has failed miserably. The shale oil industry cannot stand on it’s own two feet…the only way it will succeed, as you so desperately need for it to succeed, is thru government intervention. The government will have to intercede and pay to have shale oil wells drilled. Ultimately the government will have to bail out the shale oil industry. I suspect that is a great contradiction in terms for you and Tex…Kansas Tea. Supporting an industry who needs bigger government to help them out has got to be a little hard for your to swallow. Otherwise, short of 100 dollar oil, forever, how is it they can pay back those hundreds of billions of dollar they still owe and still grow? You can’t answer that. Your last comment…

              I am 3rd generation oilman; it is part of my heritage. I represent 4.5 M BOPD of conventional oil production in America that declines at the rate of 4% each year and that has been up-ended by overleveraged oversupply of shale oil. You, on the other hand, promote a six year old industry that cannot tell the truth if their lives depended on it, and borrows money that it cannot pay back. I will let others decide what that says. If you want me, and Shallow Sand, and thousands of others just like me to fail, or change our way of lives, so an unprofitable and overleveraged shale industry can succeed, and you and your big ego can be right, me wrong, then on behalf of myself and hundreds of thousands of men and women just like me, you may kindly kiss my Texas ass.

              I think people on this blog see thru your weak bullshit and don’t need me to tell them how irrelevant your comments are about sliding sleeves and stupid perforation clusters. 150,000 BW to pump 12 million pounds of sand is a really bad lie.

              • shallow sand says:

                Coffee.

                What is your motivation? Do you have any $$ at risk?

                No one who is producing oil and gas in the US is making an acceptable return for the risks involved. Most are losing money. Success is now defined as losing less in a quarter than predicted.

                Sure, the EOG Riverview well is a big well. EOG is still losing money, as are the rest of US E & P.

                Payout statements. Until we see those, this whole debate is pointless.

                I am willing to bet that a look at all but the very best LTO well payout statements would end this debate.

                It doesn’t take an expert to figure out a wells $3+ million from payout won’t make it anytime soon by netting $25 K per month. That is the reality.

              • texas tea says:

                Mike, now I understand why you see things the way way do. This comment: “I am 3rd generation oilman; it is part of my heritage. I represent 4.5 M BOPD of conventional oil production in America that declines at the rate of 4% each year and that has been up-ended by overleveraged oversupply of shale oil.” Ok fair enough, as a 3rd generation oil man you should know how oil prices have been controlled over that time. I am a little surprised that you choose to blame the “oversupply of shale oil” rather then the “dumping” of oil on world markets by a portion of OPEC producers, or the lack of discipline by the OPEC cartel, or the supply of higher cost oil such as the Canada oil sands. https://insideclimatenews.org/news/23022016/tar-sands-becoming-worthless-production-rises-even-prices-plummet

                While those of us with conventional oil production have lost significant revenue over the last couple of years, we also had more than a decade to put money away, plan for a rainy day because as a 3rd generation oil men we should have seen it coming, it always does.

                It is wrong to blame “shale oil” for what is happening now in the oil patch, it plays only a small part of the equation, 4,000,000BOPD(peak) in a world that produces +90,000,000 BOPD. The world will need this oil and gas, prices will raise and mineral owners and producers in a free market will prosper, those who can not or refuse to adapt will be sidelined just as they always have.

                If you want the word to stop evolving, if you want to stop millions of mineral owners from having our minerals developed, if you want to stop technology from evolving and thereby employing 100,000’s of new workers just so you can stay in business…well then I think it should be you doing the kissing🇺🇸

                • Coffeeguyzz says:

                  Shallow/TT

                  Shallow …”What is your motivation?
                  “…this whole debate is pointless.”

                  With apologies ahead of time to Mr, Leighton who, in a recent post succinctly asked for a continuation (return?) to a civil cyber environment in which both participants and observers may benefit from a wide array of diverse views, accurately and cogently presented … I’ll address your post, shallow.

                  My keen interest in this shale stuff -emanating from the earliest stirrings out of ND in 2008 – spring from my witnessing the huge impact hydrocarbon discovery can have on areas.
                  This was seen by me with the discovery wells both in the Philippines and Thailand when I worked on the drill ship the Tainaron.

                  When I worked out of Aberdeen during the early development years of the North Sea, the same effects occurred, and, to a lesser extent, in Brazil, where I was involved in the delineation efforts of the Campos field.
                  The unsuccessful wildcatting off New Jersey in 1978, in which I was a participant, nonetheless prompted a significant display of resource allocation that, had the drilling been successful, a major commitment of funds would have followed.

                  In short, shallow, when the numbers out of the Bakken started to arise, I took notice.

                  I do not now nor ever will have ANY financial involvement in this field.

                  Like you, I own a small business, and have for nearly 40 years. As such, the significance of the money aspects are not lost on me.

                  It is both exasperating and somewhat
                  puzzling to me that you (and others) seem to continuously respond with valid (usually) financial data when I make observations of an ALWAYS operationally slanted nature.

                  Shallow, I am NOT now, nor will I EVER ‘debate’ this stuff as I have no stance whatsoever in the viability/righteousness/morality/sustainability of this ongoing, unconconventional field that is starting to spread on a larger global canvas.
                  That is NOT to say I am disinterested in these aspects … rather, with the limited time my 60+ hour workweek allows, I choose to focus upon that which holds my interest … hands on, in the mud, micro level ‘how-does-it-work stuff.

                  TT

                  I’m a big fan of a fellow Texan of yours (albeit fictional from Lonesome Dove), Woodrow Coll … especially that immortal scene wherein he remarks upon, after ACTING upon, his feelings about ‘rudeness in a man”. (Viewable on YouTube).

                  Mr. Mike Shellman has put forth a continuing debasing of discourse that, to me, at least, displays a lowering of integrity pointing in his direction. My take, anyway.

                  Should anyone reading these words wish to spend two minutes looking up the Frac components on Fracfocus.org for EOG’s Riverview 102 32H, API #33-053-06603, permit #30286 (I get the data straight from ND’s subscription site), you may find both the truth and accuracy of what I state versus what Mr. Mike Shellman says … and come to your own conclusions.

                  Or not …

            • texas tea says:

              Coffee, you are much more the gentlemen than I. While I am first to admit my rather meager intellectual talents, I am not so ignorant as to not recognize the need to constantly learn, adapt, explore and grow. At a minimum that gives me a leg up on some here. I have done well recognizing when and who I can learn from, rather than dismissing them, again thanks for your contribution.

          • texas tea says:

            Mike,
            You do understand don’t you that just like conventional plays and fields, some are uneconomic, some are barely economic, some are highly economic. LTO and Gas or the same way. Some, maybe even most will not be economic under prices that consumers can afford, but others will be, they are NOT all the same and it is wrong to put them all in the same basket.

            When people tell me the Woodford does not have a oil window, even when I am being paid for the oil it is producing, I am dismissive of those views. When I am being told the shale production in the gas condensate window of the Woodford is uneconomic, when for over 5 years I have made money, I am dismissive of those views because I have been making money during that time. My friend, as a life long Texan 3rd generation oil man, I am not at all surprised you are offended, seems in your case it maybe gender identity related affliction😍Maybe your dad should have taken advice from Sheriff Buford T Justice, who famously said, “There’s no way, *no* way that you came from *my* loins. Soon as I get home, first thing I’m gonna do is punch yo mamma in da mouth!
            Bitching ain’t no way to make a living boy…have a great day😊

        • Professional engineers don’t really have a magic wand. This is why there’s a lot of trial and error. Sometimes we have differences inside a company, some ideas are pursued, others are tossed. Sometimes the field trials are abandoned too early. Sometimes a test fails because the three guys put in charge neglect to dot the i’s.

          About four years ago I consulted on a new technology being developed by a large company. One of the engineers blew the well completion specifications, which accidentally led to new insights. These new insights in turn were eventually ignored. This happens a lot more than gets disclosed.

          The design of horizontal wells drilled in very tight rocks can be improved. I got the feeling some of the improvements will come from operators learning what they should have known five years ago if they had been a bit more sophisticated.

          But eventually there’s a limit to what can be done with very tight rocks. Fracture improvements help rate, but recovery factor doesn’t go up nearly as much. And eventually the recovery per well will dictate what can be done. This in turn can be influenced by the decline curve. If the wells arrive at a low, relatively steady decline rate with too much water, too low a rate to cover costs, then that’s it, well life is shortened and only high oil prices allow production to continue.

  6. Chart Monkey says:

    While looking at the latest update, this is what stood out, the big decline in First Flows (completions) into April.

    Visualizing US shale oil production – by Enno Peters
    US – update until 2016-04
    https://shaleprofile.com/index.php/2016/08/05/us-update-until-2016-04/

  7. Chart Monkey says:

    Bloomberg – Crude Slump Sees Oil Majors’ Debt Burden Double to $138 Billion – August 5, 2016
    As crude trades well below $50 a barrel, Exxon Mobil Corp., Royal Dutch Shell Plc and other oil giants have seen their debt double to a combined $138 billion, spurring concerns they’ll need to keep slashing capital spending and that dividend cuts may eventually be necessary.
    The first-half results indicate that oil companies “are likely to generate large negative free cash flows for the full year,” said Dmitry Marinchenko, an associate director at Fitch Ratings in London.
    http://www.bloomberg.com/news/articles/2016-08-04/oil-slump-sees-majors-debt-double-to-138-billion

    • shallow sand says:

      From my memory, but I am pretty certain XOM lost $1.4 billion in North American upstream in the first six months of 2016. $850 in Q1, $550 in Q2.

    • SRSrocco says:

      Chart Monkey,

      You will notice that from 2011 to 2013, debt stayed the same even though the big oil companies were getting close to $100 a barrel for that three year period.

      Basically, the high oil price did nothing to reduce debt. These companies are going to be in big trouble in the next few years.

      Steve

      • Petro says:

        …we are ALL going to be in big trouble in the next few years Steve, and that is saying it mildly…..

        Be well,

        Petro

      • Debt optimization and leverage studies tend to show some debt is optimum. The amount of debt to equity should be reduced to the low teens but it should never disappear. Because share prices go up during high oil price periods shedding debt to the optimum level can lead to steady total debt.

        Evidently if a company knows oil prices are going to crash it cuts CAPEX, sheds debt and sells marginal properties at a fast clip.

        • SRSrocco says:

          Fernando…..

          During a Thermodynamic EROI collapse of Global oil production, debt optimization and leverage will be totally worthless financial metrics.

          With the rapid collapse of Global oil EROI causing a doubling of Global bonds with negative rates, $13 trillion, in six months…. I’m surprised supposedly intelligent individuals still regurgitate that soon to be meaningless accounting crap.

          …. with all due respect.

          Steve

          • Some of us think your thermodynamic EROI collapse hypothesis is for the birds. You should remember well run oil companies tend to be run by fairly conservative folk who follow tried and true rules and procedures. A company president who sounds like the depressed robot in the Hitchhiker’s Guide isn’t about to last very long on the job.

          • Survivalist says:

            Whats a “Thermodynamic EROI collapse of Global oil production'”, you mean an EROI insufficient to maintain BAU or an EROI of 1:1 or something? Why is it necessary to use the word ‘thermodynamics’ when discussing the EROI of various fuels and the net energy flows available to society? The word is unnecessary to the discussion. From what I’ve read it’s pretty hard to get accurate and meaningful EROEI measurements because different studies measure different/various/not all energy inputs. I don’t believe a thermodynamic model of the global economy would be any easier or accurate. Whats the difference between EROI and thermodynamic EROI? I think folks just like using big fancy words.

  8. In the Monthly Energy Review
    http://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf

    in table 11.1a on page 166 Venezuela crude production was supposed to be flat at 2.5 mb/d in 2014 and 2015, and 2.4 mb/d in Jan-Apr 2016

    However, according to PDVSA data production has declined by 11% yoy since 2015
    http://crudeoilpeak.info/venezuela-peak

    Although PDVSA data are higher what matters here is change in production

    Of course, the quality of EIA data has substantially decreased as the International Energy Statistics
    http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?
    have stopped in October 2015

    • EIA data on Venezuela is fake. Tracking Venezuela production can be tricky. They have been importing crude oil, plus they do some runs with tankers going back and forth to Curazao, which take out loads and return partially filled. This allows them to increase their reported production and bamboozle bond holders.

      Venezuela’s exports to the USA dropped 50000 BOPD in July. We will have to see what OPEC says next week.

  9. Watcher says:

    One more time:

    Money is a substance that exists only the mind; it matters only as a consequence of agreement between counterparties. Things having to do with money are not going to destroy civilization. Therefore debt is not going to cause any significant problems. How can it? If some tremble inducing Mountain of Debt threatened the lives (not lifestyle, lives) of a country’s population, then the debt will just be declared expunged, or money will be created by a CB and in some obfuscated mechanism be vectored to pay it.

    Civilization will be destroyed by oil scarcity. Not anything having to do with money.

    • Strummer says:

      That’s only true in the global, overall sense. In the meantime, if let’s say 70% of the world “believes” in money and “respects” it, then the remaining 30% can very well be destroyed by it. You can not simply declare a debt expunged if all your neighbours (upon whom you depend for trade and security) continue to claim that it’s real. There are very few countries who could pull that off currently.

      • Watcher says:

        Well, there is certainly a difference between sovereign and corporate debt, and the items above were all about US shale’s Mountain of Debt, which I have seen no one suggest is largely from international lenders, but it may be best not to equivocate.

        Nowhere is going to have their people die because of money. The Red Cross will show up, free.

        Note, btw, Venezuela has starvation in the news, but they are not in arrears a single debt payment. And they owe only $10 B. Money just doesn’t have to be relevant to threat of death.

        • Strummer says:

          “Money just doesn’t have to be relevant to threat of death.”

          But it can, if someone decides it to be. It was to the Germans in the 1920s and it can be anytime again to someone else.

          • Caelan MacIntyre: Peak Oil, Trade, Specialization and Systemic Risk says:

            This just in…

            The way you get the division of labor to work is by combining it with trade. Once you get to the point where you conclude that the division of labor is something you want to take advantage of, trade is a necessary next step…

            Specialization ties your entire wellbeing to a single industry. If you decide that you are going to become a web designer, your fate is very closely tied to the market for web designers. As a result, while Smith’s plan dramatically increases overall productivity, it also exposes us to incredible risk

            I don’t mean to imply that all or even most of the alarming increase in inequality is due to the division of labor and trade. I would guess that modern technology (which allows people to leverage luck to extreme degrees by cheaply reproducing and transmitting ideas and information) and inheritance, both play a significant role in creating inequality… ” ~ Chris House

            This seems to lend some support to the contention that, in the face of a failing, and/or, charitably, a ‘restructuring’ ‘Adam Smith economy’, continued specialization may be a dubious personal and community strategy to adhere to, such as in terms of resilience.

            WRT how things shake out, we might want to pay attention to specialization & hyperspecialization and (global) trade and peak oil’s effects on them.

            The finance industry… What kind of specialization is it? And how much risk does its practitioners and it as a whole carry, such as for the global industrial world?

            I am still chewing this so if you want to help, by all means.

    • ktoś says:

      Watcher – What matters is increase in energy dissipation rate by world economy. So yes, money (currency) won’t matter in destroying civilization, but debt expunge also won’t change anything in this regard.
      Failing oil companies indicate us, that it is no longer profitable for world economy, to use all the oil that is extracted. If it would be profitable for world economy, these companies would be fine.

      • Watcher says:

        This is not being understood, people.

        You CAN expunge debt by decree. It’s done in bankruptcy all the time. If your populace is starving and debt is preventing you from feeding them (let’s say . . . shale producers are all bankrupt and can’t produce, as is Canada’s oil sands), then the debt will be expunged, the owners wiped out and the wells put back producing — under government ownership if need be.

        Wrap your minds around it. Money isn’t going to wipe anything out. It can be redefined. The party harmed by the redefinition can be machine gunned if they complain.

        Come on. Think. It’s whimsically created by the Fed and other CBs. Why would any president let that starve America?

        • Caelan MacIntyre says:

          “Of course, markets do have responses to risk. The typical response is for the market to provide insurance contracts to reduce risk. In this case however, the type of insurance needed is actually income or job insurance. These types of insurance contracts are not typically available. It is possible that you might be able to use the stock market to insure yourself against job risk. For instance you might be able to short-sell claims on the company you work for. I suppose I could short-sell stock based on the profitability of the University of Michigan Economics Department. In the event that the U of M Econ department gets in serious trouble, my short position in these assets would have a huge payoff and I would be insured. In reality, few people have asset portfolios like this. Moreover, it doesn’t seem like insurance companies are able to provide ‘career’ insurance.” ~ Chris House

          “The party harmed by the redefinition can be machine gunned if they complain.” ~ Watcher

          That seems like a bit of a fly in the ointment.

    • Are You Kidding? says:

      “Civilization will be destroyed by oil scarcity. Not anything having to do with money.”

      Wrong. One more time:

      Financial System Supply-Chain Cross-Contagion

      http://www.feasta.org/wp-content/uploads/2012/10/Trade_Off_Korowicz.pdf

      “This study considers the relationship between a global systemic banking, monetary and solvency crisis and its implications for the real-time flow of goods and services in the globalized economy. It outlines how contagion in the financial system could set off semi-autonomous contagion in supply-chains globally, even where buyers and sellers are linked by solvency, sound money and bank intermediation. The cross-contagion between the financial system and trade/production networks is mutually reinforcing.

      It is argued that in order to understand systemic risk in the globalized economy, account must be taken of how growing complexity (interconnectedness, interdependence and the speed of processes), the de-localization of production and concentration within key pillars of the globalized economy have magnified global vulnerability and opened up the possibility of a rapid and large-scale collapse. ‘Collapse’ in this sense means the irreversible loss of socioeconomic complexity which fundamentally transforms the nature of the economy. These crucial issues have not been recognized by policy-makers nor are they reflected in economic thinking or modelling.

      As the globalized economy has become more complex and ever faster (for example, Just-in-Time logistics), the ability of the real economy to pickup and globally transmit supply-chain failure, and then contagion, has become greater and potentially more devastating in its impacts. In a more complex and interdependent economy, fewer failures are required to transmit cascading failure through socioeconomic systems. In addition, we have normalized massive increases in the complex conditionality that underpins modern societies and our welfare. Thus we have problems seeing, never mind planning for such eventualities, while the risk of them occurring has increased significantly. The most powerful primary cause of such an event would be a large-scale financial shock initially centering on some of the most complex and trade central parts of the globalized economy.

      The argument that a large-scale and globalized financial-banking-monetary crisis is likely arises from two sources. Firstly, from the outcome and management of credit over-expansion and global imbalances and the growing stresses in the Eurozone and global banking system. Secondly, from the manifest risk that we are at a peak in global oil production, and that affordable, real-time production will begin to decline in the next few years. In the latter case, the credit backing of fractional reserve banks, monetary systems and financial assets are fundamentally incompatible with energy constraints. It is argued that in the coming years there are multiple routes to a large-scale breakdown in the global financial system, comprising systemic banking collapses, monetary system failure, credit and financial asset vaporization. This breakdown, however and whenever it comes, is likely to be fast and disorderly and could overwhelm society’s ability to respond.”

      • Watcher says:

        Gobbledygook.

        2008 was as bad as has been seen. Food flowed. Blah blah cross contagion blah blah supply chain systemic risk blah blah
        . . . The Food Flowed. The Fed printed 4.1 T and took the mortgages onto its balance sheet, and there ain’t no reason they and cooperative CBs can’t do the same again, and again, and again. You got 50 zillion in credit default swaps, net or notional and they are going to wipe out all the banks? Declare them all invalid. Instruct the courts to hear no lawsuits about them. Or declare martial law and shoot anyone who tries to file suit.

        No one starves. Some people get shot for thinking money mattered, but Food Flows.

        It’s stuff created on a whim. It’s not physics. It’s not BTUs. It’s whatever is decreed.

        The end arrives when oil doesn’t flow because there isn’t enough permeability, artificial millidarcies or natural, to keep the wheels turning.

        • Are You Kidding? says:

          Gibberish.

          The central banksters can’t keep pulling the same rabbit out their hat again and again. The world economy runs on energy, not money. They don’t call them petrodollars for nothing.

          Physics runs the show.

          The second law of thermodynamics made the price of oil rise until it couldn’t anymore. And the punctuated equilibrium so characteristic of highly complex non-linear systems means that we can expect a rapid, uncontrolled collapse and massive human die-off.

          The consumers of oil have to pay for their fix with dollars generated by an economy that runs on the energy provided from oil. But the rapidly rising entropy production in the oil production process finally broke that thermodynamic/economic loop. Turns out there was a thermodynamic limit to the price of oil. Who knew? The upshot of all this is that the total energy immediately available to the world economy is now falling and will continue to fall quite rapidly. This has already caused the world economy to begin to contract. As that contraction continues, eventually a major hub like the financial system will freeze, and supply chain cross contagion will take out just in time delivery systems world wide in a matter of weeks. Cities only have about three days of worth of food supply on hand at any given time.

          • I think this is the same angry Futilitist guy that commented here last year

            Be prepared for how the discussion will go:
            http://peakoilbarrel.com/oil-shock-model-dispersive-discovery-simplified/#comment-505403

            • Caelan MacIntyre: Decaf says:

              Shshsh! Don’t set him off and he’ll be ok! If he gets set off, it will be on your head, Paul! Don’t we have enough here already with Mike, coffee and tea🇺🇸?!

              Hey, Futilitist, if that’s you, don’t let yourself get set off this time!

              🙂 🙁 🙂 🙁

              <3

              Mathematics of Chaos

              • Judgement call on my part. If the reminder to keep it civil doesn’t work, I’ll take the blame.

                • Are You Kidding? says:

                  “Judgement call on my part. If the reminder to keep it civil doesn’t work, I’ll take the blame.”
                  ~WHT

                  It doesn’t matter. Everybody behaved just fine and we had a good dialog going. But Dennis just decided to block my IP again anyway. It seems very unfair to me. It really amounts to censorship.

                  BWHill has been invited to submit a paper on the Etp model to Charles Hall’s peer reviewed biophysics journal. The Etp model is obviously valid and the oil price keeps declining as forecast. But around here, the Etp model hardly even gets mentioned. Why is that?

                  • Dink says:

                    Isn’t Louis Arnoux’s name going to be on that paper as well? I thought you called LA a confidence man? So guilt by association, BW Hill is a ???

                  • Survivalist says:

                    The Etp model is a very poor model in my opinion. Maybe BWHill could drop by sometime and defend the thesis. Or better yet put up a detailed video presentation on youtube that details the model. As it is the only way to get a good look at it is to buy it. Oh, and by the way. I looked through the link below and I guess I have one question- what do you think the word ’empirically’ means?

                    http://www.sciforums.com/threads/the-etp-model-has-been-empirically-confirmed.152487/

            • Watcher says:

              What are you guys on about?

              Here are things he said correct:

              Physics runs the show.

              Cities only have about three days of worth of food supply on hand at any given time.

              Other things are a bit misguided, but not bizarre. What is causing global deflation and negative interest rates in most of the world . . . well that can’t be from declining oil production — since it’s rising (per mazamascience.com/oilexport).

              It COULD be from declining EROEI. Oil is, in fact, the engine behind civilization, but he worded it as behind the “economy”, and since that’s measured in currency which has been corrupted in recent years by QE from various countries, you can’t find any information in things like “price” or “GDP”.

              • R Walter says:

                New York City has a three HOUR supply of food.

              • Caelan MacIntyre says:

                Thanks for the elaboration, Watcher and Are You Kidding?. That seems to make sense.

              • Are You Kidding? says:

                Watcher,

                You said:

                “What is causing global deflation and negative interest rates in most of the world . . . well that can’t be from declining oil production — since it’s rising . . . It COULD be from declining EROEI.”

                Bingo. Not only COULD it be, but that is exactly what is happening. Barrels are still rising even as net energy declines.

                You also said:

                “Oil is, in fact, the engine behind civilization, but he worded it as behind the “economy”, and since that’s measured in currency which has been corrupted in recent years by QE from various countries, you can’t find any information in things like “price” or “GDP”.”

                The price of oil is still declining. There is a lot of information in that fact.

                Measures like World GDP are too distorted by politics. But there is another measure of world economic growth that is more accurate. It is called Gross Planet Product (GPP). Rather than trying to count everything from the ground up like World GDP, GPP is generated like a balance equation that zeros out trade balances to arrive at the answer. According to GPP, the world economy has actually been shrinking since 2014, when the price of oil began to plummet. And it is not shrinking slowly. GPP shows that the world economy is now in a recession and has declined by more than 4.9% so far. That is very close to the 5.3% decline experienced in 2009.

                Because of the rapidly declining energy return from oil, the world economy can only get worse from here on out. It will eventually collapse no matter what the central banksters do.

                • Dink says:

                  The use of the word ‘eventually’ does not inspire confidence.

                • Nick G says:

                  “Oil is, in fact, the engine behind civilization

                  That quote would make you think that electric motors just didn’t work. In fact, EVs get you to work just fine. Heat pumps heat your house just fine. Electric trains move freight just fine.

                  But, good point: oil is very risky, and increasingly expensive. Not to mention polluting.

                  It’s time to move away from oil ASAP. We’ll all be better off: we’ll have fewer wars, less pollution, less noise, and more disposable income (or leisure) for other things.

                  • HuntingtonBeach says:

                    “Oil is, in fact, the engine behind civilization” is ignorant Tverbreg nonsense.

                    Humans are the engine of civilization and oil is currently one of many energy sources used by civilization. The study of economics teaches us that the substitution effect is one component of the effect of the change in the price of a good upon the amount of that good demanded by a consumer.

          • R Walter says:

            Are you kidding must be shortonoil over at PeakOil.com.

            Could be, maybe.

            When oil goes to zero and none is available, the number of humans who are slaves will increase from the current 30 million or some number like that to probably 2 billion, the rest of us will be dead.

            There is no saving this conundrum and there is no fixing it.

  10. Chart Monkey says:

    Natural Gas – It’s difficult to know how much spare production capacity there is? I think pipeline capacity is still limiting new production. I saw a forecast that was based on company reports but I can’t remember the numbers.
    Figures for May

    • Chart Monkey says:

      Natural gas is in the news – Mon, 08 Aug 2016
      Working natural gas storage inventories posted a rare summer net withdrawal of 6 billion cubic feet (Bcf) for the week ending July 29, 2016, according to EIA’s Weekly Natural Gas Storage Report. Record-high consumption of natural gas for electric power generation drove this withdrawal. Although withdrawals in the summer are not unprecedented, and happen regularly in the South Central storage region, the last time a net withdrawal in July occurred on a national basis was in summer 2006.

    • I’ve designed large gas field developments in the past. The design for a field connected to market with a very long pipeline or an LNG plant is a bit different of what many of you are used to seeing. We set up the pipeline or the LNG system to be the bottleneck , and have the field designed with excess capacity. Some companies don’t know how to do this the right way.

  11. Chart Monkey says:

    Oil Sands Magazine – As expected, big dip in Alberta’s May oil production due to wildfires
    The latest production data from the Alberta Energy Regulator
    http://www.oilsandsmagazine.com/news/2016/8/3/alberta-oil-production-declined-sharply-during-may-wildfires?

  12. Chart Monkey says:

    Chinese crude imports still look strong
    There is a worry that China is close to filling it’s new SPR which will lead to a loss in demand for crude. Although China is said to be building another new SPR with 441mb capacity. No timeline provided.
    Bloomberg – Crude imports slow third month to 7.35 million b/d in July
    http://www.bloomberg.com/news/articles/2016-08-08/china-crude-imports-fall-to-6-month-low-as-teapot-demand-slows
    better chart https://pbs.twimg.com/media/CpVvyEYWgAAqoQi.jpg

    • Watcher says:

      maybe there was a domestic production increase.

    • Oldfarmermac says:

      “Although China is said to be building another new SPR with 441mb capacity. No timeline provided.”

      I haven’t personally seen anything about this new extra Chinese SPR, but I have been saying here for a while that putting more oil into storage would be a great bet for the Chinese and any other importing country with the money on hand to build and pay for the facilities and the oil.

      Oil is sure to go up, barring the world economy going entirely to hell. Depletion guarantees it, and there is only a minuscule chance that electric cars, railroads, etc will scale up fast enough to outrun depletion over the next decade or so.

      From what I read here, hardly any body at all will be bringing any new “from scratch” production to market with oil selling for less than fifty bucks. This would leave only a couple of countries such as Iran with the capacity to sell more at that price, with everybody else mostly holding off on starting the development of new fields until they are ready to bet on a higher price.

      • Are You Kidding? says:

        “Oil is sure to go up, barring the world economy going entirely to hell.”

        Wrong. Oil is sure to go down, taking the world economy entirely to hell.

        Read this:

        http://www.doomsteaddiner.net/forum/index.php?topic=4287.15

        • Greenbub says:

          India’s love for fried food could help curb its crude oil imports.

          The nation of 1.3 billion people can make at least 2 million tons of biodiesel annually by processing used cooking oil from restaurant chains, said Ramakrishna Y.B., the head of an Indian government panel that’s looking at the potential for fuels derived from plants.
          (not a reply to A.Y.K., just ended up here.)

          http://www.bloomberg.com/news/articles/2016-08-08/emerging-oil-giant-sees-a-deep-fried-path-to-lower-crude-imports

          • Watcher says:

            India became the world’s 3rd largest oil consumer last year with an 8% rise, overtaking a Japan in decline (not because they want to decline), and KSA will likely overtake Japan this year (with their 5% rise of last year).

            That ain’t going to change. Nor should it, if India wants to grow.

            (and yes, KSA with its pop of 29 million is about to be 4th largest oil consumer in the world)

          • Oldfarmermac says:

            I don’t actually know much about Indian agriculture and culture in general, but I strongly suspect that damned little used cooking oil goes down drains.

            It is almost certainly used as feed for various animals, or reprocessed for other uses. Used cooking oils are EXCELLENT feed supplements. Calories count, big time, feeding animals.

            If you are short of money for food, you can also consume it in limited quantities as part of the diet.There are probably plenty of people in India who are still short of calories.

            Personally I think a little warm properly seasoned pork sausage grease is the last word as a salad dressing on my favorite wild greens. Any leftover cooking oil I put on the dog and cat food, and if they leave anything, the chickens clean it up.

            INCIDENTALLY, anybody who has a tick problem, which can be a VERY serious problem, can get rid of nearly all the ticks around their houses by keeping a few pet free range chickens, if they can do so without too many hassles with the neighbors and local government.

            Four chickens and one rooster running loose keep my home site virtually tick free. Lime disease is a MAJOR problem locally, my physician has lost track of the number of cases he has treated.

            • Duncan Idaho says:

              I agree.
              I even have a elderly hen who has quit laying, but keep her around for insect control.
              The eggs are the best!
              I backpack quite a bit, even at age 70, and got a tick bite in the back country, and by the time I got out had a full bulls eye.
              The put me on antibiotics pronto.

        • Oldfarmermac says:

          I have a MUCH higher opinion of my own opinion than the opinion of whoever wrote that.

          LOL.

          Cheap oil is basically only a problem for the producers of it, short to medium term.

          Any body who DOESN’T understand that needs to start over in kindergarden.

          Long term, cheap fossil fuels have enabled us to create modern civilization.

          But then again, cheap fossil fuels may mean the END of modern civilization, if we keep on burning them in such huge quantities.

          • Are You Kidding? says:

            “Cheap oil is basically only a problem for the producers of it, short to medium term.”
            ~OFM

            This is false and very misleading. Oil is not currently “cheap” in the usual sense of the word. It is being produced expensively and sold cheaply, with loose credit making up the difference so the producers don’t go bankrupt. This obviously can’t continue for much longer.

            Oil use in the economy must produce sufficient GDP/barrel so that consumers can pay for the entire oil production process. That is the thermodynamic loop. Once that loop is broken, due to the rapidly rising entropy in the oil production process, the price of oil must decline. The Etp model tells us what the decline rate will be, and when the age of oil will be over, forever. The timing is very precise since it is dictated by the second law of thermodynamics. The Etp Maximum Price Curve represents only the best possible case, however, and the oil age currently looks set to end a year ahead of the Etp schedule.

            Here’s the deal, though. Civilization cannot shrink uniformly in the face of the drastic energy loss forecast by the Etp model (see the Korowicz paper). That means that when the financial hub gives way, the whole system will experience rapid collapse. The likelihood is sooner, rather than later. That means that the logical outcome of the Etp model forecast is world wide rapid collapse that could begin as soon as tomorrow. I think people are very afraid of this very logical outcome. Thus the wide spread resistance to the Etp model.

            A fun and logical way to understand the thermodynamic dilemma is to think of civilization as a pair of Siamese twins. There is the regular economy twin, and there is the energy producing economy twin. These conjoined twins share many of same organs, like the banking, financial, and economic systems. One twin, the energy producing twin, can no longer produce enough energy to sustain both twins. As a consequence, the energy producing twin has begun using more than half the total energy produced, starving the regular economy twin for energy. The regular economy twin, starved of energy, keeps getting weaker, so he simply can’t afford to buy the energy he needs to maintain economic growth. This lack of funding causes the energy producing twin to begin to die, putting both twins at grave risk. There is no way the twins can be safely separated. It is likely they will die simultaneously.

            • Survivalist says:

              Just because the Etp model forecasts collapse it doesn’t mean that collapse occurring validates the model. I think Etp model is out to lunch. I also forecast collapse. The two are not mutually exclusive nor does collapse validate any model that predicts it.

              • Caelan MacIntyre says:

                I am seeing a fair bit of online exposure and mention of BW Hill and their ideas, but little of Survivalist’s.

                • Survivalist says:

                  Would you like to know more about my ideas? Ask away. I’ll answer any questions you have. My opinion of the Etp Model is low. It is an attempt at some sort of economics. It is illogical to invoke the 2nd law of TD to account for an economic phenomenon such as oil price or supply/demand balance. Such things are determined by things like human behavior. I’d have thought that much would be obvious. Things such as the exploitation of oil and gas shale, the rate of take-up of alternative energy sources, economic policies (like QE) and geopolitical factors quite plainly are what determines the oil price, not physics. Moreover history shows that the oil price is almost impossible to predict with confidence. Global oil production and the EROI/EROEI of it is a far simpler way to analyse and discuss the topic of collapse due to decreased net energy flows through a complex system of civilization. A thermodynamic model of the global economy and the entropy of it to predict the timing of collapse seems unnecessarily and overly complex.

                  “Make things as simple as possible, but not simpler.” ~ Albert Einstein.

            • Dink says:

              “This obviously can’t continue for much longer.”

              And yet it does.

              Somehow.

              Continue.

            • Oldfarmermac says:

              If the supply of oil does not fall off TOO FAST, there is every reason to believe that the economy can and will adapt to higher priced oil in lesser quantities, given time.

              The last new pickup we bought gets almost twice the mileage the previous one got.

              Industrial civilization does NOT depend on cheap oil, in any fundamental sense, although I do agree that it is at this time ok to describe it as addicted to oil in the same sense that a hell of a lot of people are addicted to beer.

              Civilization worked just fine when we ate potatoes that came in big burlap bags, rather than potato chips that come in little plastic bags. That’s ONE truck load of potatoes versus probably twenty truck loads of potato chips.

              We use a quarter of the energy to heat our current house that we used to heat much smaller house I lived in as a young child, and I will be adding a heat pump soon, so as to reduce our consumption of heating oil from a hundred gallons a year to maybe ten or twenty gallons, using the current oil furnace as a backup unit to the heat pump and wood stove.

              I have a neighbor who owns a first generation Chevy Volt. It gets old listening to him brag about how he drives to work a couple of MONTHS on one tank of gas, whereas he used to use a tank a week. Most of our juice locally is coal fired, with some nuclear and water power. So far as I know, there is not a single utility owned oil fired generating plant within many hundreds of miles, not even an old standby unit.

              I am not arguing that the EROEI of oil is unimportant, but rather that it is only one of many factors which are drags on the current day economy.

          • Nick G says:

            Long term, cheap fossil fuels have enabled us to create modern civilization

            Not really. Cheap fossil fuels greatly accelerated the creation of modern civilization, but it would have happened in any case.

            • Petro says:

              Absolutely correct!

              ….one caveat:
              we would have had iAple 7…. 77……777… and similar advanced gadgets much later in the future, let’s say 5 hundred (or x amount of time) years from now – but even then,being primates (animals ) that we are, we would be in EXACTLY the same predicament we are now with regard to energy and environment.

              We have consumed our “agar in the petri dish” (read Earth) my friend.
              Feast is over!
              Time for hangover….

              Be well,

              Petro

              • Oldfarmermac says:

                Without fossil fuels, there would never have been an industrial revolution, and without that, the odds are EXTREMELY high there would never have been any of the high tech industries we have today.

                As one of my neighbors puts it, there has to be a way to git from here to THAR if you want to go THAR.

                Suppose you guys explain to me how you think a non fossil fuel powered industrial society would ever muster enough productivity to invent all the technologies, and scale them up sufficiently, in the meantime supporting enough well educated people to make it happen, to build an airliner or a computer chip fab plant?

                No, the odds are ten thousand to one there wouldn’t be an i phone at all in a thousand years.

                Yes , there would still be a “modern civilization”, and it might be pretty decent in a lot of respects. We could still have germ theory, we could still have basic vaccines, we most certainly wouldn’t have the population problem we have today, nor the climate problem.

                But there wouldn’t be any airliners, or computers of the modern sort, or electron microscopes, or super highways, unless they were built using horses, and utilized by people powered by horses.

                Reality is that there simply wouldn’t ever be capital enough to go directly from animal power to renewable electricity on the industrial scale. It’s just barely conceive able that this might be TECHNICALLY possible, but the nature of human nature virtually guarantees it wouldn’t happen.

                It’s possible to hit the lottery, but foolish to BET on doing so.

                • Javier says:

                  We found the treasure trove of fossil fuels and have consumed it at the fastest rate we have been able to. Prior to that we almost exterminated the whales for their stored biological energy (fat) while leaving their meat to rot. We have extracted every mineral resource high grade ore in the world.

                  What will be left for future lower energy civilizations will be scrapping, recycling, and cursing us for our foolishness. No chance to develop a higher tech civilization, but perhaps a wiser one.

                  • George Kaplan says:

                    We in the west should all give praise for the black death. Without it and the subsequent labour shortages we wouldn’t have property or workers rights as we do now or the democratic institutions we still, just about, have. Most of the the world would still work as indentured labour like 19th century Russian serfs.

                    (this is reply to Nick G. post below)

                • Nick G says:

                  Without fossil fuels, there would never have been an industrial revolution

                  It would have been an “evolution”.

                  the odds are EXTREMELY high there would never have been any of the high tech industries we have today.

                  High tech simply depends on scientific progress. That would have continued without fossil fuels. It would have been slower: a smaller economic surplus would have reduced the number of researchers, made the their equipment more expensive, etc. But, there’s nothing that coal does that can’t be done with wood. Just…less of it, so progress would have been slower.

                  On the other hand, it would have skipped all of the investment into fossil fuels, and focused on electricity and renewable energy. Electricity would have been developed. Hydro would have been built. CSP would have been much bigger.

                  But there wouldn’t be any airliners, or computers of the modern sort, or electron microscopes, or super highways, unless they were built using horses, and utilized by people powered by horses.

                  EVs would have been developed relatively quickly. Heck, they came well before ICE’s as it was.

                  Reality is that there simply wouldn’t ever be capital enough to go directly from animal power to renewable electricity on the industrial scale.

                  Renewables came before FF. They were a little harder to make cost effective, so FF had an advantage. But, they would have been developed. CSP, hydro, wind…they’d all have grown into what we see today, and eventually they would have grown to whatever scale was needed.

                  • R Walter says:

                    In the beginning of the auto industry, electric vehicles were 28 percent of the market. Didn’t last, everybody could buy gasoline for less and could go much further in distance. The preferred choice was the ICE, still is, won’t change until it is gone for good.

                    England and Europe would have been denuded of its forests 300 years ago if coal had not been used as a fuel and for industrial purposes. Before natural gas pipelines to homes, all were using coal furnaces with a coal bin in the basement. Propane bottles outside the house for the gas stove, be sure to light the pilot with a match. Facts don’t budge.

                    Coal terpenes give us artificial flavors, organic chemistry, artificial vanillin flavor is one.

                  • Nick G says:

                    England and Europe would have been denuded of its forests 300 years ago if coal had not been used as a fuel and for industrial purposes

                    Heck, they were at Peak Wood by the 14th century – that’s why Sherwood Forest was off limits to all but Robin Hood. The resulting population overshoot contributed to the black plague.

                    The United States, with it’s enormous forests, would have had an enormous advantage in a world without coal. IIRC, US trains ran on wood until well after the civil war.

                  • Oldfarmermac says:

                    “High tech simply depends on scientific progress. That would have continued without fossil fuels. It would have been slower: a smaller economic surplus would have reduced the number of researchers, made the their equipment more expensive, etc”

                    ‘ Yeah, about a thousand times slower. We probably wouldn’t have ANY sort of heavy duty long distance transportation except wooden sailing ships by now.

                    Iron produced with charcoal would NEVER have gotten cheap enough for anything except hand tools and weapons and the occasional piece used as a structural element in a cathedral tower, etc. The church could afford a handful of hand forged large pieces, but nobody else could.

                    A thousand, or ten thousand men, working on a thousand different problems accomplish a lot more than half a dozen men working on half a dozen problems.

                    Even paper for letters to be sent between the handful of scientists who knew each other would be a precious commodity.

                    Scale matters, in scientific progress, just like it does in industry.

                  • Nick G says:

                    Mac,

                    Economic growth didn’t go from .003% in the 16th century with wood to 3% in the 18th, with coal. I’d have to look it up, but the acceleration of growth was much, much smaller than that. Perhaps from 1% to 3%.

                    The US didn’t use a lot of coal in the 1st half of the 19th century, and it’s growth rate was around 5%, IIRC. The US would have started to run low on wood at some point, of course, but hydro, solar and wind would have started to pick up some of the difference. Growth would not have been as fast, but the difference would not have been anything like 1000:1. Perhaps 2:1.

              • Nick G says:

                we would be in EXACTLY the same predicament we are now with regard to energy and environment.

                Our current “predicament” is simply political: we’ve invested a great deal in fossil fuels, and those investors and employees don’t want to lose their money and jobs. So, they’re fighting change, desperately.

                If we’d never developed FF, we wouldn’t have that problem.

                • Petro says:

                  Yes we would have never had the problem, but not because of what you say.
                  We would had never had the problem, for without FF we would still live in “caves” so to speak relative to todays standards…..

                  I suggest you revisit the meaning of “predicament”…

                  Our predicament is NOT political!
                  Our predicament is mother Nature getting us back for mistreating her and indeed, raping her savagely …. politics is a tiny part of it , but even so it is nonetheless a PREDICAMENT!

                  There will be no transition to your beloved EVs (which I do love as well, heck I have 2 of them and a hybrid…).
                  And even if it were a transition, we would be where we are 50-100 years from now … with nature in a far worse status…..
                  WE ARE PRIMATES! We will never change!
                  We cannot defy millions, upon millions of years of evolution just because we call ourselves “Sapiens”….

                  Complex dissipative systems do not have a steady, “permea” state. They do not have “smooth” transitions ….. They either grow, or crash!

                  Wether you and I like it or not, FF (and oil in particular) are our blood!
                  Without it we are dead!
                  Our “healthy blood” (read cheap oil) is ending….. and we are going to die.
                  Sorry, that is the sugar free truth…. you and I better get on with it now, for we shall later whether we like it or not.

                  Be well,

                  Petro

                  • Nick G says:

                    WE ARE PRIMATES! We will never change!

                    Sigh. You’d think contraceptives didn’t exist, and that humans weren’t using them intelligently to bring population growth under control.

                    Oil isn’t our blood. It’s just an obsolete, dirty, expensive anachronism, that’s hanging on out of fear.

                  • Petro says:

                    I feel exactly the same as you do regarding oil!
                    On the other hand, I fully comprehend and consider what it means to our civilization and us as primates….
                    S**t is dirty, smelly and disgusting……, but EVERYBODY has to live with it in order to survive and grow…..

                    Such gentleman we are, let’s agree to disagree ………… and most importantly, let us ALL hope that you are correct and I am wrong!

                    Be well, Nick

                    Petro

                  • Nick G says:

                    I fully comprehend and consider what it means to our civilization and us as primates

                    Oil mostly means transportation. That’s easily replaced: EVs and electric trains would do most of it. Eventually the 15% used for planes and long distance ships would need to be replaced with something else: wind (for ships), batteries, synthetics (H2, methanol, H2C4, synthetic diesel, etc., etc.).

                    Oil has no mysteries, no magical powers. It’s just obsolete, even though it doesn’t fully believe it yet.

                    Ah well. Be well.

        • Survivalist says:

          OMG! a link to a debate by Futilitist on the Etp model. I’ll pass. I’d rather gouge my eyes out than read that drivel. Last time I read Futilitist he was using the words entropy and depletion as if they were synonyms.

        • Petro says:

          Hi Nathanael,

          ….so, now you’re kidding?

  13. Longtimber says:

    Of Interest: Podcast of a Novel examining Oil’s Impact on the people of Nigeria Delta.
    https://www.acast.com/thejohnbatchelorshow/oil-on-water-a-novel-may-16-2011-by-helon-kabila-

  14. Chart Monkey says:

    Saudi Arabia is investing in natural gas. I guess this is part of the plan to replace their oil fired electric power with combined cycle gas power. And increase their oil export capacity.

    Saudi Arabia contract awards down 75 per cent on a year ago – Michael Fahy – August 8, 2016
    Contract awards in Saudi Arabia dropped by a further 27 per cent quarter-on-quarter to just 20.3 billion Saudi riyals (Dh19.88bn), and are 75 per cent lower than the 82.8bn riyals awarded in the corresponding period last year.
    Research from the kingdom’s National Commercial Bank (NCB) stated that the decline was mainly owing to the lack of large contract awards by the Saudi government as it attempts its fiscal restructuring.
    One single contract award during the quarter – a 6.5bn riyals deal on a joint venture between India’s Larsen & Toubro and Singapore’s Emas for an offshore gas project for Saudi Aramco – made up 32 per cent of the total value.
    http://www.thenational.ae/business/economy/saudi-arabia-contract-awards-down-75-per-cent-on-a-year-ago

    • Oldfarmermac says:

      The Saudis have announced plans to build large solar farms, but the building of them seems to have been put on indefinite hold, maybe for the following reasons.

      With the price of oil down, it is no doubt easier for them to justify burning the oil, rather than building the farms so as to sell more oil.

      Furthermore , since the price of building solar farms is falling fast, they may have decided the more economical route is to wait a few years so as to get a lot more solar juice per Saudi buck invested. This would also be placing a bet on the price of oil going up again as well.

      And maybe they have put the solar option on hold simply due to internal power struggles. The folks who are at the top of the heap in such a country have to make a LOT of promises to various underlings in order to get to the top and stay there.

      If they can sell their oil for a hundred bucks or more, the solar farm option is a no brainer from a dollars and cents pov. The sun shines almost every day, all day, and their air conditioning load sucks up one hell of a lot of oil.

  15. Chart Monkey says:

    Iran oil news…

    Iran July crude output 3.63 mill b/d, flat from June, according to PlattsOil OPEC survey. 1st time this year no month-on-month increase
    Last month: Iran oil output 3.66 mln bpd in June, up 50,000 bpd on May and up 750,000 bpd since sanctions were lifted.
    Iran says, oil exports over 2.5 million bpd, near pre sanctions level
    Iran: VP Jahangiri on Sunday: IPCs soon to be signed. $220 billion worth of projects are ready for investment in the oil sector.

    • George Kaplan says:

      Iran are just finalising the petroleum contract details and will start engaging foreign companies for JVs, although the coming Presidential elections might mean they have to start all over again. I can’t see there is that much difference now to what was happening before the sanctions, but the important point will be how much per barrel the outside companies can negotiate.

      The oil is mostly in mature, carbonate reservoirs; often originally developed without pressure support but now with gas and some water injection. I think they are only getting around 20 to 25% recovery. They are looking for more of the same to support increased production but also EOR (e.g. maybe miscible gas?) to increase recovery. Gas injection is not cheap – the gas has to be bought (might be 10 to 15% of the oil price if natural gas is used – even if you get it back during end of life blow down it doesn’t help current NPV much), and the compressors, treatment plants and pipelines needed are capitally and operationally intensive, and take some time to design and install. So Iran will be asking the foreign majors to take on even more debt and risk to increase production some years in the future, based on probably flat rate per barrel payments. It will be interesting to see how the negotiations turn out (e.g. what price per barrel the companies are looking for, their appetite to take all the debt burden and how much they get to know about the reservoirs), especially as the similar Iraq efforts may be looking a bit disappointing to some at the moment.

      • Chart Monkey says:

        It sounds like Iran might have started to sell some of its condensates stockpile…

        ThomsonReutersEnergy – Iran oil exports mixture shifts as condensates represent more than 20%, from 8% in Jan.

        • George Kaplan says:

          With South Pars still ramping up they should be around 18 to 20% condensate in their overall production mix, so maybe they took condensate out of the export’s while their were sanctions. Alternatively they have a strong petrochemical industry and use LPG for domestic car fuel as well so maybe the export mix is different.

        • AlexS says:

          Iran’s refinery expansion program includes construction of five new refineries and expansion of existing plants.
          At least three of the new processing plants should accommodate the country’s rising condensate supplies:

          • Already under construction in Bandar Abbas, the Persian Gulf Star Refinery, due for startup in 2017, will have capacity to process 360,000 b/d of condensate from South Pars field

          • Also under construction is 480,000-b/d gas condensate refinery in Siraf, which should process stabilized gas condensate feedstock from different phases of South Pars.

          • 120,000-b/d Pars condensate refinery in Shiraz, scheduled for startup in 2025.

  16. Longtimber says:

    ! Viva Strippers !
    http://oilprice.com/Energy/Crude-Oil/Is-This-A-Death-Sentence-For-US-Strippers.html

    Also worth a re-post. If an average of 6 kWh/USG is required to refine modern complex liquid fuels, shines a new light for an Distributed Energy Transformation.
    http://oilprice.com/Energy/Crude-Oil/Oil-Is-Facing-The-Perfect-Storm.html

    • Nick G says:

      I believe the EIA says refineries use about 5GW. The US refines about 19M bpd. that’s about .8M bphour. At 6kWh per barrel, that’s about 4.8GW.

      But, that’s per barrel, not per gallon. 6kWh per gallon would mean that refineries used about 200GW, or almost half of all the power in the US.

      • GoneFishing says:

        Nick, the 6 kWh per gallon figure is the total equivalent energy put into producing one gallon of gasoline.
        Here is the official calculation and inputs.
        http://peakoilbarrel.com/the-energy-transition/#comment-577620

        • Nick G says:

          In a 2008 report, Argonne National Lab estimated that the efficiency for producing gasoline of an “average” U.S. petroleum refinery is between 84% and 88% (Wang, 2008), and Oak Ridge National Lab reports that the net energy content of oil is approximately 132,000 Btu per gallon (Davis, 2009). It is commonly known that a barrel of crude oil generate approximately 45 gallons of refined product (refer to NAS, 2009, Table 3-4 for a publication stating so). Thus, using an 85% refinery efficiency and the aforementioned conversion factors, it can be estimated that about 21,000 Btu—the equivalent of 6 kWh—of energy are lost per gallon of gasoline refined:

          That’s not electricity, that’s total losses. A different animal. Just because a refinery has large conversion losses doesn’t mean that energy is easily available to EVs.

          Don’t get me wrong. I think EVs are great, and we should convert from oil to EVs ASAP. But, I think the 6kWh figure is misleading.

          • Watcher says:

            I think you didn’t read the Argonne study. I just did. It quotes about 90% efficient and a barrel of oil doesn’t yield 45 gallons of gasoline. It yields 45 gallons of petroleum products, not all of which are gasoline. You can wave a hand and reduce gasoline production efficiency only if you declare all the diesel and kerosene and asphalt to have no use in transportation.

            “The preliminary results from this examination show a petroleum refinery overall efficiency of 90.1% vs. the efficiency of 88% from an early Argonne analysis. “

            • We can build refineríes to convert asphalt to gasoline and diesel. I saw pilot results for a unit built in Germany that could take a mix of asphalt, coal, and chopped wood, and turn them into syncrude. It was expensive, and required a hydrogen feed. But a lot of the numbers we see aren’t necessarily the technical limits.

              I think in the future we may have nuclear plants used in cogeneration mode to provide heating as well as electricity. We already have some studies covering that concept.

          • GoneFishing says:

            I said it was total equivalent energy, if you read my comment. I, nor the article I cited was misleading. The energy needed to produce a gallon of gasoline at a refinery will move a current EV about 18 to 36 miles.
            If you want to go further upstream, look at the energy needed to produce the 42 billion kWh of just the electricity used by refineries. At 35% production efficiency and 5% transmission loss, that amounts to 140 billion kWh energy just to make the electricity. Then there are all the other energy inputs and their upstream losses.

            If one follows the energy that just goes into the refining of petroleum to gasoline, the energy used in all forms is greater than the energy needed to propel EV’s just as far as that gasoline propels an ICE car. That is just the refining process. Net negative useful energy at one process begs the question about what the whole process looks like. When EV’s are considered, gasoline is merely an energy carrier, like hydrogen.

            When one adds up even a portion of the energy numbers and comes up negative compared to disruptive new technology, the only question that comes to mind is why the replacement is not happening much faster than it is. A gallon of gasoline carries about 67 cents worth of useful energy at it’s final use, but it took more than that energy from other sources to produce that final product. We pay anywhere from 1.80 to over 4.oo dollars to get 67 cents worth of energy. Why? Because the energy system we currently use for transportation is bigger, more interdependent and far less efficient than we generally comprehend.

          • Caelan MacIntyre says:

            The Report makes the common claim that electric cars are four times as efficient as petrol driven cars.

            This seems to be misleading because it doesn’t take into account several relevant factors… a full accounting would include:

            o The weight and size differences. The average petrol driven car might get 9 km per litre, but it will be 3-4 times the weight and internal space of a typical electric car. Size and weight cab[sic] be important for security in crashes.

            o The loss of energy getting energy to the vehicle. The energy-return for petrol is quite high; only a small amount of energy is needed to produce it and to get the petrol to the service station and the petrol tank. For electric cars the amount is much higher. Large scale renewable systems [this assumes that they will be in place and powering things like EV-charging] will probably have to depend heavily on solar thermal farms thousands of km from users, meaning considerable embodied energy costs in building the plant (maybe 10% of energy produced in its lifetime), and maybe 15% energy lost in the long distance transmission and city reticulation.

            o Losses at the tank or battery. For petrol cars there is no loss in filling the tank, leaving petrol in the tank, or drawing petrol out. However to charge a battery and get energy out again will involve a 30-40% loss of energy, and there will be a further slight loss as the battery stands idle.

            o Replacement of the tank or battery. Petrol tanks do not deteriorate significantly and do not have to be replaced during the life of the car. Smil (2010) says Lithium-ion batteries last only 3 years, less in hot conditions, and a new set will cost $35,000. If this is so then in effect you will have to pay as much as would buy you two new small cars every three years. [Who will be able to afford, and in a shrinking economy, 2 new small cars every 3 years?] More important here is the embodied energy cost of a battery, containing fairly scarce Lithium. A minor consideration would be deterioration in battery performance as it approaches the end of its life, meaning less efficiency and more energy needed to charge it.

            o What will be the energy cost of producing and recycling the special plastics from which the new light bodies of electric vehicles are made, compared with the costs for metals etc? Mateja (2000) claims these costs are high. Plastics in general take maybe 4+ times as much energy to make than steel, tend to be difficult to recycle, and to be made from petroleum.

            If all these factors could be quantified and taken into account, especially those to do with the batteries, the net lifetime energy efficiency of an electric car [under conservative assumptions] might be no better than that of a modern diesel.” ~ Ted Trainer

            — — — — — — — — — — — —

            ” ‘Cost of repair crazy high” is how one Model S owner puts it in a thread on the Tesla Motor Club online owners forum.

            He describes a minor front-end collision, from which he was able to drive away, that cost him $20,327 to repair.

            Visible damage was limited to the front left fender, lights, and the corner of the hood. But the bill listed 92 hours of labor and almost $8,000 in parts, including a single self-piercing rivet billed at $35.

            Other owners report a litany of outlandish repair costs or estimates. Among them:

            A $10,000 estimate to repair a “minor but long” scratch
            A $45,000 estimate for “minor front-end damage”
            A $7,000 estimate for repair of a small dent and scratch that required no replacement of parts
            A $30,000 estimate for “minor fender and door damage”
            An $11,000 estimate for a minor scrape on the rear panel, including a $155 charge to “ensure battery remains charged” during the repair.

            Based on these reports, and many other similar ones, it appears that a small child with a baseball bat [wink-wink, nudge-nudge] could total a $100,000 Model S in about 30 seconds with a few well-placed whacks.” ~ David Noland

            • Ralph says:

              That report is incendiary nonsense. Every single paragraph is factually wrong.

              The first paragraph is so what? My electric car is larger and heavier than my ice car, and my ice car is quite capable of carrying 4 adults in safety and comfort. Small cars good. (less bad).

              #2 wrong and getting wronger. I am surrounded by solar farms and turbines, nearest refinery 100 miles away.

              #3 wrong. Charging losses at most 10-20% and getting lower with each generation of battery chemistry.

              #4 Car companies give 5-8 year guarantees on their batteries these days. With care they should last 10 years. A replacement battery for my Leaf is less than I paid in repair bills on my 4 y/o diesel engine last year.

              #5 ALL new cars are high in plastics, and in EU are mandated to be easily recyclable. Teslas are supercars, not mass market cars.

              I estimate the energy efficiency of my leaf to be twice that of my diesel when powered by CCGT electricity. I do not know how to measure efficiency when using renewable energy.

    • Longtimer says:

      Thanks, Makes more sense. ~140 watt/hours per USG or ~7 USG per kWh. Something like 25 ltr/kWh. Scale of such production is amazing.

  17. learner2 says:

    Does anyone have opinions on Whiting? Its one of the worst performers ie down 80% compared to EOG and FANG for example, which area actually up over last 2 years. Are they headed to bankruptcy or can they pull out? Same for Oasis.

  18. Chart Monkey says:

    Texas RRC – Summary of Drilling, Completion and Plugging Reports Processed for July
    Oil Completions down to 568 in July from 700 in June
    N.Gas Completions up to 243 in July from 165 in June
    (no update for the number of producing wells yet)

  19. Paulo says:

    Okay, time to lighten the tone with a blast of cornucopian analysis from CNN.

    http://money.cnn.com/2016/08/09/investing/us-energy-independence-oil-opec/index.html?iid=hp-stack-dom

    • OutLoud says:

      For crying out loud, North America could have had energy independence already. Switching over to more natural gas for transport, more alternatives and energy efficiency would have done it. We got our warnings about depending on oil imports decades ago, I don’t think the corporate/government system actually wants energy independence. It’s a cover story to reduce legal restrictions on fossil fuels and beg for more subsidies, especially oil. No one is really trying that hard to get us independent, just sell more oil.

  20. Watcher says:

    GAZPROM wins. Gas will flow thru Turkey to Europe. The amounts will increase. Ukraine will soon no longer be a conduit, and lose all clout when they try to dodge paying the bill for their own.

    Probably back in the Russian sphere of influence in a few years, assuming the EU won’t pay their gas bill, and the present leadership will be wards of the EU somewhere in Germany. Actually, were Russia wise, they would just refuse gas to the Ukraine at any price. Surrender or freeze. Maybe needlessly heavy handed. Just impose increasingly crushing conditions. With a smile.

    https://www.rt.com/business/355245-turkey-restart-tukish-stream/

    • Synapsid says:

      Watcher et al.,

      There’ll be still more NG heading to Europe through Turkey when the TANAP pipeline is completed and goes online. It will carry NG from Azerbaijan through Georgia and Turkey to Europe and I’m guessing that Erdogan gets a smile on his face every time he thinks of that. The EU wants to reduce its dependence on Russian NG.

      Control over refugee influx to Europe? check

      Control over non-Russian NG coming into Europe? check

      Strategic importance for NATO forces targeting the Middle East? check

  21. Chart Monkey says:

    Trion field, Mexico… This is the sort of thing that makes me think that oil prices could be higher in the future… $23 per barrel just for capex, and that’s if they stay within budget…
    “the ultra deepwater Trion field with about 480 million bbls that would require at least US$ 11 billion in investments”. from here…

    OilPrice – Can Mexico Reverse Its Steep Output Decline?
    By Qarnain Foda – Aug 09, 2016
    The recent turmoil in the industry has heavily affected production, with PEMEX revenue decreasing by about 30 percent since year-end 2013 and about 3 percent decrease in producing wells. After about seven decades of monopoly by PEMEX, the Energetic Reform of December 2013 was implemented by the current government to privatize the industry.

    There are about 100 exploration blocks and more than 60 fields both producing and with certified reserves for auction. Due to capital and technical constraints, PEMEX has been unable to exploit to its full potential shale and deepwater resources in Mexico.

    There is an estimated 60 billion boe of untapped shale reserves, a potentially huge opportunity for U.S. drillers which with technical expertise and technologies optimized for shale plays. Next to onshore chances, Mexico sits on an estimated 29 billion bbls of untapped deepwater reserves. One of the blocks selected for bidding is the ultra deepwater Trion field with about 480 million bbls that would require at least US$ 11 billion in investments (although PEMEX will hold a 45% share) to be developed. This presents immense opportunities for foreign companies in deepwater exploration and production and requires deep technical skills, engineering capabilities and significant capital spend.
    http://oilprice.com/Energy/Crude-Oil/Can-Mexico-Reverse-Its-Steep-Output-Decline.html

  22. Chart Monkey says:

    An insight into the oil tanker tracking business…

    Oil Tanker Counts: Can You Trust The Data?
    By Ellen R. Wald, Ph.D.
    In an oil market easily impacted by speculation, data on oil exports and imports can easily cause the price of oil to fluctuate. Approximately 63% of the world’s crude oil is transported by sea; Thus, the business of collecting, aggregating, and extrapolating this data has become an industry unto itself, dominated by private companies that are not necessarily disinterested players. There are about ten companies that offer tanker tracking data and analysis to paying clients, a few of on which are discussed below.
    http://www.investing.com/analysis/oil-tanker-counts:-can-you-trust-the-data-200147045

    Also
    OPEC in the news today… OPEC crude oil production increases to 33.106 MBPD in July (from 33.059 MBPD in June) – secondary sources

  23. Heinrich Leopold says:

    The future of oil prices

    As oil moved down during the last few days, the question arises about where oil prices are heading for the next few years. Wall Street and friends have advertised for the x-th time that oil prices will be at 70 by year end , by the summer, by fall …
    …some people are not so sure about higher oil prices in the future.
    http://www.investing.com/analysis/oil-has-not-bottomed-bottom-200146938

    My personal view is that it is in the hands of Wall Street and US oil producers, where oil prices are heading. Below chart shows that US oil producers triggered themselves the fall in oil prices by rapidly reducing US net imports since 2008. From 1991 wordlwide increasing net imports – up a staggering 15 mill b/d – drove the oil price to record highs when net imports went over available net exports of 40 mill b/d.

    As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it wil take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years.

    It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors.

    With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current desaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario.

    • Watcher says:

      That shows nothing, of course. The price of oil in Argentina is now over $67/barrel.

      http://oilprice.com/Energy/Crude-Oil/Would-Regulated-Oil-Prices-Argentine-Style-Help-US-Shale.html

    • Eulenspiegel says:

      Oil price won’t be low for long – deep see oil will see no investments if prices keep low for longer, 3rd world states with low production costs but high deficit will go into political unrest – and won’t invest in infill drilling, gas injection to keep up performance, but in weapons and bribing important people.

      North sea oil will die, it’s already in decline and if a few producers stop the common infrastructure will be too expensive for the rest to maintain.

      No one except the US shale producers can keep producing red ink permanently – so if there will be cheap oil, it will be much less than now.

      It’s like filling a car in the socialistic countries in the 80s – you will pay only cheap money, but will have to wait to get some gas.

      • Dink says:

        “No one except the US shale producers can keep producing red ink permanently”

        Permanently? Then how can there be any problem?

        There will be a massive flood of cheap GTL to save the peoples if producing red ink permanently is no problem.

  24. Are You Kidding? says:

    “…some people are not so sure about higher oil prices in the future.”

    Have you checked out the Etp model?

    http://www.thehillsgroup.org/depletion2_022.htm

    It has been accurately forecasting the oil price decline since it first began. Since it’s initial plunge, the oil price has settled into a very stable declining pattern. It has been running below and parallel to the Etp Maximum Oil Price for the last 20 straight months.

    [IMG]http://i1064.photobucket.com/albums/u363/Futilitist/Etp%20UPDATE_zpso4do1et2.jpg[/IMG]

    • Survivalist says:

      Yeah we get it, you’re bonkers for the Etp model. You love it, you breath it, you can’t talk about anything else but it. You seem like a shill for it actually.

  25. Dink says:

    No doubt the Oil Industry (and surely the solar too) absolutely despises anything related to ERoEI. Its like flicking holy water at Linda Blair in the movie, The Exorcist.

    “It burns It burns”.

    Even the oil doom sites hate it.

    It must be a real problem.

    • Nick G says:

      Solar has a good ERoEI. Sadly, Hall’s latest effort on solar is unrealistic – IIRC his co-author, Prieto, has a serious bias against solar, so they did silly things like mixing energy and dollar costs to estimate ERoEI.

      • Dink says:

        Everything about the “renewables” is good, just ask Germany who has lost its shirt on a fundamentally sound higher oil prediction that has turned bad because the central banks prefer destroying fiat currencies rather than revealing the ugly truth about “renewables”.

        • Nick G says:

          Germany…has lost its shirt on a fundamentally sound higher oil prediction that has turned bad

          How did Germany lose it’s shirt?

          • Dink says:

            My guess is the Econ text books they studied said price of oil would go up.

            And it never will go up. Not enough to matter anyways.

            Want to transition to the silly “renewables”? You first, I’ll be last, Okay?

        • GoneFishing says:

          Controlled energy descent is a scary thought for many and it must be fairly severe to actually work. Fossil fuels use needs to descend in the developed countries at about 6 to 8 percent per year. The developing countries need to get off the slave labor, high pollution trend and start implementing low fossil fuel use now. World trade needs to be drastically scaled back. The industrial agriculture system has to be dramatically changed, it is a huge energy sink and polluter. We will now pay for all that growth and exuberance in the last few decades of ignoring reality, the debt has come due.
          However, a controlled descent is far better than a fast uncontrolled one.
          It’s not as difficult as one might think, but allowing the developed countries and the world to fall into a massive depression would be difficult in the extreme.
          Either we peak the oil or it will peak us. Just think of all the money you will save by not buying all that unneeded stuff, reducing the heating, electric and car fuel bills. Getting back to the 1970 energy levels without using much fossil fuel should be our first priority. Getting the spending under control needs to go right along with it.

          • bobby says:

            On the topic of “controlled energy descent,” has anyone noticed the crash in solar energy companies that’s been going on for almost a year?

            I suspect we may have hit “peak solar.” Perhaps related is the work of the Zharkovas which many of you may be familiar with as seen in this link – https://www.youtube.com/watch?v=7sh_nlz43Pc

            Thoughts?

            • Oldfarmermac says:

              At one time when the industry was just getting well started, there were over four hundred separate companies building automobiles in the USA.

              Eventually we got down to three big ones and a very small number of companies that were making a handful of custom made cars.

              That wasn’t the end of the auto industry , was it ?

            • GoneFishing says:

              The WTO agreements and other more regional trade agreements have snuffed solar companies, solar company expansion and climate change efforts around the world. The lawsuit slinging has been happening for years. Transfers of technology are being legally limited also, so efforts around the world are stunted by trade legalities.

          • Nick G says:

            Controlled energy descent is a scary thought for many and it must be fairly severe to actually work.

            6-8% is pretty fast. Are you primarily worried about depletion, or about climate change?

            • GoneFishing says:

              Both. Oil depletion effects are already showing up, countered by vast inputs of money into unprofitable ventures and other energy sources along with efficiency changes. Within ten to 12 years the shale fields in the US will be fading fast if not sooner. All the big producers will be showing strong signs of depletion. Initial transistion has to be fueled mostly by fossil fuels. Wait very long and demands from society will eat up the initial energy needed to build out alternatives. Also keeping the initiative for change going for an extended period of time will be difficult without a strong initial surge. Much of the change is cultural and political and we all know how politics can shift.
              I think aiming for one quarter current world energy demand is probably within the realm of sustainability. Possibly up to 1/3, no more.
              Wait too long and climate change stresses will be tapping the resources and will of many nations.

              • Nick G says:

                Wait very long and demands from society will eat up the initial energy needed to build out alternatives.

                Alternatives don’t require much energy. EVs don’t take significantly more energy to build than ICE’s. Wind turbines have very high E-ROI. And, of course, there’s a lot of FF consumption that has very marginal value, that could be diverted to higher and better uses. Think single occupant SUVs…

                I’d say 7% is too fast, at least for the first few years. 3% reduction per year in FF would do it. That would reduce FF by 50% in 25 years. After that the pace of change would accelerate, as alternatives swamped FF.

                Who knows. If we properly priced oil and FF to internalize pollution and security costs (with carbon taxes that got rebated back to taxpayers), we might get pretty dramatic reductions in FF consumption.

  26. Chart Monkey says:

    Texas RRC big drop in the number of Natural Gas Wells

    Distribution of Wells Monitored by the Railroad Commission
    As of June 30, 2016
    2,004 Wells Producing 1,000 to 5,000 MCF/Dy
    11,943 Wells Producing 250 to 1,000 MCF/Dy
    76,209 Wells Producing less than 250 MCF/Dy

    As of July 29, 2016
    1,835 Wells Producing 1,000 to 5,000 MCF/Dy
    11,059 Wells Producing 250 to 1,000 MCF/Dy
    68,243 Wells Producing less than 250 MCF/Dy

  27. Chart Monkey says:

    Well Distribution Tables – Well Counts by Type and Status

  28. Oldfarmermac says:

    I don’t see much in the news about Venezuelan oil production, but I suspect the domestic oil industry is in pretty bad shape, and might just implode, depending on how the political situation plays out.

    Maduro is obviously doing everything he possibly can to hang onto power.

    Sky Daddy alone knows what will happen in that unfortunate country, but it’s a safe bet that things are going to get a LOT worse there before they get better.

    http://www.thepeninsulaqatar.com/news/international/389142/maduro-gloats-over-venezuela-opposition-s-faltering-recall-bid

    • Survivalist says:

      OPEC MOMR states Venezuela is down 19,000 barrels a day from June to July.

  29. Survivalist says:

    OPEC MOMR is out. OPEC up 46,400 barrels a day from June to July.

    Iran up 12G, Iraq up 74G, Libya down 20G, Nigeria down 41G, Saudi up 30G, UAE up 20G, Venezuela down 19G.

  30. Watcher says:

    Europe Nat Gas consumption:
    1.132 billion cubic meters/day (from mazama and converted to m^3)

    minus Europe Nat Gas production –> about 570 million cubic meters/day imported (9.5% increase in 2015) X 365 = 208 billion cubic meters/yr

    Nordstream pipeline 55 billion cubic meters/yr plans to double by 2019 to 110 billion m^3/yr. That’s Gazprom thru Germany.

    Ukraine pipeline(s) into Europe presently: 142 billion cubic meters/year.

    Belarus pipeline(s) into Europe presently: 38 billion cubic meters/year

    Adds to 235 billion cubic meters/yr which is 20 some billion more than the Euro number above because some is going to Macedonia, Serbia and other none EU countries. Relatively inconsequential.

    Note that the popular phrasing that Russia only provides 31% of Europe’s gas is almost certainly bogus. More like 45-50%.

    Now then, Nordstream 2 (that’s all GAZPROM gas) will be chopped from Ukraine’s flow. Because GAZPROM can just force Belarus gas to be used by not flowing enough thru Ukraine.

    The TANAP pipeline is to flow only 16 billion cubic meters/yr of gas from a non Russia source thru Turkey.

    The agreement just reached between Putin and Erdogan is for a pipeline carrying Russian gas at 63 billion cubic meters/yr. Turkey will burn 14 of that (they burn 45 billion m^3 /yr) leaving 49 to flow to Europe.
    The EU is already trying to interfere, saying there is insufficient capacity in pipelines north thru Greece and other countries, but clearly Greece will burn it and that reduces what’s left going north.

    Bottom line. Nordstream 2 will be a new 55 billion m^3/yr of GAZPROM gas. TurkeyStream will flow another 49 billion m^3/yr. This will be new from present flows. And Ukraine’s flow is 142. They’ll be reduced to under 40.

    And that TANAP flow will cut them to 25ish.

    They might as well surrender now.

    • Greenbub says:

      Well, if the Russians and Turks can be best friends, maybe the Saudis and Iranians can too?

    • GoneFishing says:

      It’s one big family until the valves start to close.

    • Watcher says:

      Ukraine gets almost $3 billion/yr in transit fees.

      They have demanded just about a double of that 5 mos ago. GAZPROM has not agreed. The Ukraine transit pipeline system apparently also needs $19B in maintenance work GAZPROM had planned to pay for before Ukraine broke relations with Russia. No longer.

      Ukraine GDP 90B in 2015 and is falling this year.

      So either the EU picks up the $19B plus the $3B/yr in transit fees Ukraine will lose starting late next year (plus cost of Ukraine’s consumption itself(they are 5th largest in Europe)), or the fat lady sings.

      BTW Poland just completed an LNG import terminal. Look at those flow numbers above in the thread. Now . . . understand Poland is talking about sending Qatari gas from the LNG terminal to Lithuania and the rest of Europe, to reduce horrible dependence on Russian gas, even if LNG gas is priced 3X higher than piped GAZPROM gas. But yes, Poland is going to send gas to other countries from their LNG terminal.

      Oh, and the new LNG terminal has a capacity of 5 billion m^3/yr. Repeat. 5 billion m^3/year. That’s max in its final form.

      Poland burns 16.

  31. John S says:

    Fort Worth Star Telegram Article on Chesapeake’s Exit From The Barnett Shale. Some Interesting take always here:
    1) Chesapeake receives no cash;
    2) Chesapeake pays Williams $334 MM to get out of a volumetric pipeline deal;
    3) Chesapeake dodges more than 13,000 bullets from dissatisfied royalty owner lawsuits.

    http://www.star-telegram.com/news/business/article94951747.html

    Hmmm…….Reminds me of a divorce. Hurts like hell for a while but worth every penny to get rid of her!!

    • George Kaplan says:

      That would indicate not much future upside for the Barnett, giving 25 to 30 tcf ultimate recovery, not the 80 or even 200+ estimated by some early on. Almost a perfect logistic curve so far for production. Maybe a lesson there for the oil shale plays as well.

  32. John S says:

    George, I was told earlier in the year by a contact in CHK that it was costing It ~ $48MM/month to operate the Barnett.

    This deal must really sting because Lawler turned down a $2 Billion offer from Aubrey McClendon after he left & started AEP.

    Shale….the STD that keeps on giving!

    • John Keller says:

      2,800 wells producing 65,000 boe/day. I think it’s clear shale gas wells will not produce 20-40 years.

  33. daniel says:

    Can somebody explain the iea predictions for me? Next quarter we will go from a 1.5 mmbpd surplus to a 1 mmbpd deficit. In q4 this will revert back to a 1 mmbpd surplus. Those are huge swings…

    • Chart Monkey says:

      I don’t know, but I assume that the IEA is including the return of oil from outages in Q4, like Nigeria and Libya.

      Production outages, chart on Reuters EIA+UBS: https://pbs.twimg.com/media/Cpk7EC8XEAEXStj.jpg

    • Chart Monkey says:

      I don’t know, but I guess that, in Q4 the IEA is including the return of oil from outages, like Nigeria and Libya.

      Production outages
      Chart on Reuters EIA+UBS: https://pbs.twimg.com/media/Cpk7EC8XEAEXStj.jpg

      You can contrast this months IEA forecast with this balance chart from last month showing a forecast of less than 0.5 mbpd surplus in Q4 and Q1 2017
      here: https://s31.postimg.org/oekp420vf/iea_june_2016.gif

      • Chart Monkey says:

        The IEA can only be guessing about how much time it will take…

        INTERVIEW-Libya needs big spend to boost vital oil revenue-NOC boss
        by Reuters – Thursday, 11 August 2016

        $1 bln needed to repair energy infrastructure – Sanalla
        Libya’s oil storage capacity slashed to 750,000 bbl, from 6 mln
        NOC owes international oil service company $80 mln
        By Ahmad Ghaddar and Libby George

        Sanalla said it would not be safe to send repair crews to Es Sider and Ras Lanuf, two major terminals that are set to reopen under a recent deal with guards who had been blockading them, until force majeure from the two ports is lifted.

        But he said that the El Sharara and El Feel fields could add 200,000 bpd to production within weeks if a deal to reopen them were reached.
        Reuters: http://news.trust.org/item/20160811130822-w3uqg/

        Nigeria: Forcados pipeline back online mid-sept. Qua Iboe pipeline back in 4 months. Brass River pipeline no timeline. Oil Minister Kachikwu

      • Daniel says:

        Thats what i thought but it does not seem to match the timing of the outages. Most of them jappened in q2??

  34. Survivalist says:

    http://euanmearns.com/what-is-the-real-cost-of-oil/#more-14912

    Interesting post by Euan. Some good comments I think too.

  35. Enno Peters says:

    I have a new update on North Dakota, as the NDIC just released the data for June. You can find it here.

  36. Chart Monkey says:

    Baker Hughs, the number of oil rigs up 15 to 396, a level last seen around February 26th 2016, when there were 400 oil rigs.
    Bloomberg chart: https://pbs.twimg.com/media/CprT6SlWgAAnDuO.jpg
    Mostly added in the Permian, +12 to 189

  37. Daniel says:

    North dakota numbers are out. Production “only” down by 20 mbpd or so. But this with a lot of new wells, so not sure what is going on

    • Chart Monkey says:

      Yeah -20.5kbd m/m didn’t sound like much to me either, but it is nearly 2% which I guess is a lot in a single month, if it continues.
      Enno Peters has the figures on his website, wells were added but less wells than in prior months
      chart: https://s9.postimg.org/npo1qt8fj/bakken_first_flow.png

    • George Kaplan says:

      Gas up 18,500 mcf/d (1.1%) so GOR up 3.1%. I don’t know if much can be read into one month though – the trend would be more useful, somebody used to plot graphs for this here (or was it at Enno’s site).

      Permits are going up as well May 42, June 65, July 86.

      On the last page they have break even price estimates for each county, I have not seen those before but Dunn is lowest at $16 and Mountrail highest (with drilling still going on) at $38. Dunn had few or no rigs for many weeks until recently – I wonder what has changed

      • FreddyW says:

        There´s not alot of new wells. Only about 43. The new wells have very high initial production, but not enough compared to the decline in older wells. I have new graphs with GOR and production. But I guess Dennis or Ron will publish a separate thread for this? Better to put them there in that case.

  38. Toolpush says:

    BH is also out, Land up 18, Permian up 12.

  39. AlexS says:

    North Dakota and ND Bakken oil production (kb/d)
    Source: NDIC

    • AlexS says:

      According to NDIC data, the year-on-year decline in ND Bakken oil production accelerated from 12.9% in May 2016 to 15.5% in June, despite higher oil prices.
      Average oil output in the first half of 2016 was 1024 kb/d, down 9.3% year-on-year.

      ND Bakken year-on-year oil production growth/decline (%) vs. WTI oil price

    • AlexS says:

      Monthly-average Bakken sweet crude has remained below $40/bbl since July 2015.

      Average price in July 2016 was $35.57, a $9.08 discount to WTI.

      • GoneFishing says:

        How are the producers staying in business? Who are they not paying?

        • AlexS says:

          Producers are making losses and outspending their cashflows. That’s what they were doing over the past 6 years.
          There are still a lot of investors (share- and bondholders, private equity and others) ready to finance LTO and shale gas producers in a hope that higher prices will fix their financial problems.

    • AlexS says:

      According to Baker Hughes, Williston basin oil rig count has bottomed at 22 units in late May-early June (down 89% from the peak of 198 units in late September – early October 2014). Since then rig count has increased 7 units to 29 as of August 12, 2016.
      There was a 3.5-months lag between the cyclical bottom in oil prices (mid-February 2016) and the bottom in the Bakken rig count.

    • AlexS says:

      Bakken oil production estimates from 3 sources: NDIC (ND Bakken only); EIA report based on DrillingInfo data last updated on August 10, with the data for July (ND+MT Bakken LTO); and the EIA Drilling Productivity Report as of July 18, with projections for August (ND+MT Bakken LTO + some conventional output).

      Both EIA reports project continuing declines in the Bakken oil production.

      • Watcher says:

        Best that all just recognize operations in NoDak are running on borrowed money that won’t be repaid.

        And the lenders won’t lose money.

    • FreddyW says:

      No bakken post created yet. Perhaps Ron and Dennis are on vacation. So I will put my graphs here instead.

      Last month it looked like the GOR increase started to level off for all years except 2015. But this month it has started to increase again for all years 2009 and later. So perhaps it was only temporary. 2015 appears to be aiming for the stars and has already caught up with the speedy 2014. I have also included 2016 this time. Maybe a bit early as new wells are added every month. But it can give us some information. 2016 has higher initial GOR than earlier years. If that is because of gasier wells or communication with older wells, I don´t know.

      • FreddyW says:

        Here is the production graph. 2013 continue to be slighly bellow 2012 and 2014 seems to follow the 2013 curve.

  40. Oldfarmermac says:

    China may soon become the world’s largest oil importer.

    http://www.forbes.com/sites/timdaiss/2016/08/12/chinas-thirst-for-oil-spells-troubling-news-for-beijing/#8245570515d5

    Fortunately for them, in some respects at least, they have a technologically sophisticated top down leadership, and so they are pushing the development of renewables and electric cars, etc, very hard.

    But that doesn’t mean they aren’t ready to play hard ball, when it comes to securing their oil supply.

    They will be building up their navy and other armed forces as soon as they are able, at least to the extent they will be able to play for all the marbles in the South China sea, and maybe on land anywhere near their borders, but this is going to take a while.

    • Javier says:

      China seems to have hit a roof with wind and solar. It seems right now they have overcapacity of what they can absorb in their grid and there are reports that they are wasting about one fifth of the installed renewable capacity, which should make it extraordinarily expensive. No doubt they will solve the problem but right now it looks like they will have to step on the brake regarding renewables for a while. This will have ample repercussions globally.

      Reuters: China wasted 20 percent of wind power generated in 2015

      IHS Markit: Solar Industry Set for New Overcapacity and Shake-Out Cycle, As Outlook for the Second Half of 2016 Deteriorates

      “Solar PV installations in China in the third quarter of 2016 will fall by 80 percent, triggering a sharp global slowdown in global demand and an oversupply, particularly solar modules.”

      • Bobby says:

        Agree. It seems that we may have hit “peak solar” for now at least, and there is the chance that we have hit “peak solar” forever. Naturally, this has troubling implications

      • Oldfarmermac says:

        Hi Javier and Bobby,

        Other than the capital costs of the infrastructure, it costs virtually nothing to “waste ” wind power, except for the extra wear on the machinery, which I presume is not actually running when power is being “wasted”.

        Most likely the wind farms are simply shut down as necessary when there is is more potential generation than there is transmission capacity available to move it to market.

        Just about every kind of infrastructure I can think of is necessarily overbuilt, so as to be able to meet peak load situations, from highways to sewer systems. Most of the time they function at less than full capacity.

        Why should wind farms be any different?

        Most likely the Chinese will catch up on building transmission lines and gas fired peaker plants, so as to be able to use all the fuel cost free wind and solar power they can generate, rather than buying imported coal.

        Coal may be cheap at the moment, but only a fool in my opinion could possibly believe it will STAY cheap long term, unless renewable power destroys the market for it, or unless the world economy goes to hell in a hand basket.

        As fossil fuels inevitably deplete and consequently become more expensive, wind and solar farms will have to assume larger and larger portions of the total load.

        Most people never stop to think that the real world dollar cost of wind and solar power is a hell of a lot cheaper, as a practical matter, than is reflected by simple bookkeeping.

        We are already using at least five percent less combined of coal and natural gas as electrical generating fuel here in the USA, and will probably be using TEN percent less within the next three or four years.

        This has the effect of strongly depressing the selling prices of coal and gas, which is of course bad for the producers but a great bargain for every body else from General Motors right on down to itty bitty farmers and individuals like us because when gas is cheap, so is nitrate fertilizer, which means I can sell food cheaper too.

        I wouldn’t worry much about the future of the solar power industry. It will have its ups and downs, for sure , but the long term trend will be UP.

        • Running a turbine isn’t cheap. If you invest in a wind turbine expecting 30 % efficiency, and the figure drops to 24 % it’s bound to have a very adverse impact on economics.

  41. AlexS says:

    After a brief rebound in June, China’s crude oil production resumed its declining trend in July.
    According to preliminary data from the National Bureau of Statistics, average daily output fell to 3.94 mb, down 97 kb/d, or 2.4% from the previous month.
    July production was 7.6% lower than a year ago.
    It was also 470 kb/d, or 10.7% below the June 2015 historical peak of 4.41 mb/d.

    From Rigzone/Reuters:

    “Dominant domestic producers PetroChina and Sinopec have both projected output declines this year as many of their fields began to operate at a loss, especially during the first quarter when oil prices sank below $40 a barrel.
    Sinopec said in July that their domestic production in the first half of 2016 was down 12.95 percent to 128.38 million barrels, or about 705,000 bpd.
    In addition to production that is not viable economically, China is also grappling with aging oil fields that are increasingly running out of oil and gas.
    Daqing, China’s largest field, which produced first oil in 1960, will decline at a rate of 7.2 percent this year, its fastest pace in the last 20 years, according to consultants Energy Aspects.
    Natural gas output last month fell 3.3 percent compared with the year ago period to 10.3 billion cubic meters, though for the first seven months of the year production rose 3.1 percent to 79.4 billion cubic meters, the stats bureau said.”
    http://www.rigzone.com/news/oil_gas/a/146142/China_Crude_Output_Falls_To_FiveYear_Low_In_July

    China crude oil production, kb/d
    Source: China National Bureau of Statistics

    • Javier says:

      I suppose the Chinese are smart enough to shut down their production until prices recover, and in the meantime buy as much as they can from that excess cheap oil in the market. They are also building up storage as fast as they can to fill it with cheap oil. It is all very sensible.

      • Oldfarmermac says:

        I totally agree with Javier about the Chinese being smart enough to use some of their humongous cash stockpile to stock up on all the oil they can while the price is down.

        Nitwits in the business world live in each other’s echo chambers, and spend all their time telling each other and everybody else how peak oil is a night booger that only exists under the bed of us childish peak oilers.

        But the Chinese leadership is heavy on engineers and short on marketing specialists, marketing specialist being as good a description of western leaders as I know of. They are specialists in marketing themselves for public office.

        Engineers are not noted for ignoring OBVIOUS facts such as the depletion of an oil field.

        The Chinese domestic fields are declining fast, and there does not appear to be much they can do about it short term, and probably nothing at all they can do about it long term, except either import oil, or do without.

        Another useful insight is that they have to take into consideration the fact that WHEN the shit hits the fan, as it MUST eventually, their foreign currency holdings may actually decline in value to next to nothing.

        Money is after all nothing but electrons on a ledger these days, which is ONE thing I agree with Watcher about, at least.

        If push comes to shove, and big boy’s fists ( rockets and bombers and artillery shells ) fly, then all the electrons the Chinese have accumulated that are supposed to be good to purchase Western assets, such as Canadian or American oil fields, or African farm land, or nice houses in London, etc, will be worth next to nothing.

        Is it any wonder the Easterners of the world still believe in stockpiling gold and silver?

        In the last analysis, somebody will sell the Chinese a tanker load of oil for gold bricks, or a load of wheat or soybeans or whatever, for gold, once electrons are worthless as a means of exchange, for a while at least.

        At some point, even gold won’t buy shiploads of such goods,except among the closest of allies, because various navies will be making sure they simply cannot reach an enemy port.

        Even more likely, various cops and soldiers will be making sure ships that MIGHT go to an enemy port don’t even get loaded, thus stopping delivery short of outright acts of war.

        ( Personally since I believe in the endless long term inflation of fiat currencies, I spend a few odd bucks here and there on stuff that is easily storable long term on the farm, and in my opinion sure to be hard to get and more expensive later.

        I don’t hug my big stack of ten ten ten , but I do go out and gaze upon it fondly, once in a while. LOL. )

        The day of ocean going shipping will go into pitch black night the next time there is a war between major powers, a world war. ONE aircraft carrier, or one wing of long range bombers equipped with cruise missiles, can sink a whole fleet of merchant ships in a matter of hours, and there aren’t nearly enough navy ships to escort commercial shipping the way it was done back in WWII. Within a few years, maybe already, land based missiles will be cheap enough to use them on ships thousands of miles away, without needing a nuclear payload.

      • Watcher says:

        You have to balance the desire to keep oil in the ground with the desire to destroy the enemy.

      • Chinese wells produce a lot of water. Shutting them in can lead to problems. In some cases the well comes back producing 100 % water. In other cases the pump won’t function after being shut down. Changing an electric submersible can be uneconomic if oil price is fairly low. I wouldn’t expect the sum of their shut in wells to be able to reach previous levels.

    • George Kaplan says:

      Rystad give China 2P developed reserves at 32 Gb, so a natural decline rate around 4.5% based on current production would be expected. However if EOR methods have become exhausted then they may see higher rates for a couple of years before flattening out. Rystad also have them with 10Gb discovered undeveloped, and 17 Gb undiscovered. China have found a fair amount of gas recently but not much oil since 2007 so I’m not sure where all that oil is. They have about 800 rigs operating so they must be looking hard. If it is better to develop EOR on old fields, and lose money at $50 per barrels, than develop what they have discovered it must be fairly poor quality.

      • Doug Leighton says:

        Hi George,

        I’m certainly no expert but did spend about seven years in the China/Russia oil patch (mostly assessing reserves for Western companies) and consider the following piece a pretty fair assessment. The Dejing oil field is hooped (in terminal decline).

        CHINA PEAK OIL: 2015 IS THE YEAR

        http://thediplomat.com/2015/07/china-peak-oil-2015-is-the-year/

        • Watcher says:

          Doug, buried in there is the only sentence that matters — the one about ductile shale layers that are too pliable to fracture — and we discussed this about the Bazhenov in the same context.

          This guy says you get bendable shale vs fracturable shale if the rock derives from ancient lakes instead of ancient ocean. Heard of this?

          The geology truly is the final arbiter.

          • Doug Leighton says:

            “Heard of this?” Yes and I agree. Just got tired of repeating it because nobody, apart from you, seemed to listen (or care).

            • Watcher says:

              I mean . . . is that the cause of bendable rock? The water was not salty so the rock is non frackable? That’s the mechanism for shale there being non frackable (and thus any oil or gas being inaccessible)?

              • Doug Leighton says:

                No, it’s mainly due to the fact many Chinese (and Russian) shale deposits are mixed with clay and clays are plastic owing to their water content (and the chemistry of that water). If you want to get serious check phyllosilicate minerals (closely related to clays) which are hydrated with water and/or attached hydroxyl groups.

            • Watcher says:

              Vaca Muerta is probably the poster child for any non Bakken and non Eagle Ford around the world as potential shale places.

              It’s marine deposited rock. Has a pretty darn good wiki.

              But it appears to be mostly gas. Optimistic plans for multi decades talk only about 40,000 bpd. Lots more gas, but only 40K bopd so it’s not going to save Argentina’s bacon.

          • Most of the rocks being fractured in USA “shale plays” aren’t really shales. They are rock layers with a fairly high carbonate content.

      • FreddyW says:

        Rystad recently said that US has more than 130 billion barrels of shale oil reserves (http://www.bloomberg.com/news/articles/2016-07-05/u-s-holds-more-oil-than-saudi-arabia-or-russia-rystad-energy-says). So how seriously can you take their estimates really?

  42. George Kaplan says:

    Colombia oil production dropped 1.79% for June to 888,000 bpd, continuing a yearly trend with a total drop y-o-y of 12%. Gas down 0.75%. Their rig count was 5 May, 7 June, 6 July – all oil. I can’t understand how Ecuador is maintaing plateau production so well, their rig count dropped similarly to Colombia’s, in fact starting about 3 months earlier in August / September.

    • Watcher says:

      Ecuador has two types of oil, both of them heavy and sulphur sour.

      Napo and Oriente. API 19 and 24.1 degs, sulphur over 1% for both (2% for Napo). WTI API 39 and Sulphur 0.24%

      FYI as of now over 1/2 of the world’s oil supply per day is “heavy and sour”. This goes back to Jeffrey’s chart showing how middle distillates sharply collapse as API rises. The supply is getting less heavy and less sour as LTO increases its % of total, but this is a very bad thing, not a good thing.

      All oil isn’t created equal and scarcity will be eventually measured by absence of diesel and jet fuel more than absence of “crude”, since just about anything can be defined as crude nowadays.

      • George Kaplan says:

        Does what you said address how Ecuador are managing to maintain production, or why Colombia is falling so fast? If so please explain as I’m afraid I missed it. Ecuador has a third type of oil – ultra heavy, their biggest resource probably at 2 to 12 Gb. It is API 6, some may be lighter. None of it has so far been produced, the technology to crack it to useable grades is not proven and the cost of production too high, but probably at some time it will be. The issue of barbell oil mixtures is a problem of cost and history – the vehicle fleet has been developed for the type of oil we have had in the past. Heavier oils can be cracked to lighter ones and lighter ones can be reformed to syngas and then some form of gas to liquids process if needed (although I doubt we’d go that route). Diesel vehicles can be converted to run on LPG. The issue becomes matching quality and quantity of upgrader and refinery capacities with the mix required for (a possible changing) transport fleet demand. But this is going to be less of an issue than confronting a falling total liquid fuel energy supply as we move post peak.

        • Ecuador’s state oil company runs on correista economic principles. I’ve noticed they are working hard to sustain the country’s oil production rate. A similar approach is used in Argentina, where the oil is being subsidized. The oil industry creates a lot of jobs, they expect prices to rise, and thus keeping everybody working makes sense for them.

  43. Verwimp says:

    10 days without a new post, and only 229 comments on the last one. I hope the reported death of POB is greatly exaggerated…

    • Javier says:

      You mean Ron and Dennis don’t have a right to vacation? What are you a slave master? Are we paying them to demand anything?
      Two posts were made at the same time, so comments for the period should be added.

      It is hard to think that POB would disappear for lack of interest right at the time Peak Oil is taking place and there is renewed interest in the issue.

      Instead of criticizing perhaps some people with enough knowledge about oil could contribute with articles.

      • Nick G says:

        right at the time Peak Oil is taking place

        I hope you’re right. That would be a good thing for everyone (except the oil industry).

        But…it’s not likely. We can’t declare PO until production is declining AND oil prices are high.

      • John S says:

        I just hope Ron and his family are ok. Best wishes to them.

    • I’m watching more tv. It’s the Olympics. I’m even watching the North Korean weightlifters and the horses prancing around with riders wearing funny hats.

  44. Longtimber says:

    Lucky situations like Delta Airlines disruption hasn’t happen at a Refinery. During instability, power transformers can be an issue, hammering electronic devices as much as lighting with inductive dumps. In the past resistive loads such as incondensent lighting absorbed much of these Energy spikes.
    http://oilprice.com/Energy/Energy-General/What-Will-You-Do-when-the-Lights-Go-Out-The-Inevitable-Failure-of-the-US-Grid.html

    • It’s not that bad. I’ve lived in third world countries where the grid was a joke. They simply shut everything down when the transformers start exploding. In three days we are back to normal. In those countries we run facilities with our own generators, have fast start diesels, battery banks to stabilize power feed to the servers, etc. I also like to specify redundancy, individual units can self protect.

      Around 2005 I saw a really bad event in Venezuela, it really screwed up a large Conoco upgrader at Jose. But everything we had survived pretty good. I guess each company ought to figure out how to protect itself.

    • clueless says:

      Test

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