What is Reserve Growth?
BP: In general, a portion of a field’s probable and possible reserves tend to get converted into proved reserves over time as operating history reduces the uncertainty around remaining recoverable reserves: an aspect of the phenomenon referred to as ‘reserves growth’.
Wiki: Experience shows that initial estimates of the size of newly discovered oil fields are usually too low. As years pass, successive estimates of the ultimate recovery of fields tend to increase. The term reserve growth refers to the typical increases in estimated ultimate recovery that occur as oil fields are developed and produced.
Basically the U.S. Security and Exchange Commission have stringent reserve booking requirements for oil companies. As a result early booked reserves of any given field is very conservative. Also, any company would much rather have reserves too low and increase them later than have them too high and have to decrease them later.
But would this not mean that fields of national oil companies, and especially fields that were discovered and developed in the Former Soviet Union have different reserve growth rates than fields developed by publically traded oil firms. The answer is yes and the USGS admits that is exactly the case.
In this publication, Reserve Growth in Oil Fields of West Siberian Basin, Russia, the USGS tells us all we need to know about Reserve growth in West Siberia.
ABSTRACT
Although reserve (or field) growth has proven to be an important factor contributing to new reserves in mature petroleum basins, it is still a poorly understood phenomenon. Although several papers have been published on the reserve growth in the U.S. fields, only limited studies are available on other petroleum provinces. This study explores the reserve growth in the 42 largest West Siberian oil fields that contain about 55 percent of the basin’s total oil reserves.
The West Siberian oil fields show a 13-fold reserve growth 20 years after the discovery year and only about a 2-fold growth after the first production year. This difference in growth is attributed to extensive exploration and field delineation activities between discovery and the first production year. Because of uncertainty in the length of evaluation time and in reported reserves during this initial period, reserve growth based on the first production year is more reliable for model development. However, reserve growth models based both on discovery year and first production year show rapid growth in the first few years and slower growth in the following years. In contrast, the reserve growth patterns for the conterminous United States and offshore Gulf of Mexico show a steady reserve increase throughout the productive lives of the fields. The different reserve booking requirements and the lack of capital investment for improved reservoir management and production technologies in West Siberian fields relative to U.S. fields are the probable causes for the difference in the growth patterns.
Four of the five largest fields in Russia are located here in West Siberia, Samotlor, Priob, Lyantor and Fedorov. 61% of Russian production currently comes from Western Siberia. Russia’s second largest field, Romashkino, discovered in 1948, is located in the Volga-Ural Basin and is also in serious decline.
An important point: Total reserve, which is the same as estimated ultimate recovery, is defined here as the sum of cumulative production and the remaining reserve of A+B+C1 categories as of the date of reporting.
That is, all reserves reported in this report are total reserves or URR, not just remaining reserves.
Figure 2. Field size distribution of 42 oil fields in the West Siberian Basin: The mode field size is 0.5-1.0 billion barrels. The distribution is skewed to the right, implying fewer fields with increasing field size.
Table 2. Summary of total reserves (in millions of barrels) for individual sets of fields based on discovery year or the first production year for the West Siberian oilfields. (Total reserve is the sum of cumulative production and A+B+C1 category of reserves.)
Figure 3. The number of fields in each of five sets ranges from 14 to 42, with the corresponding duration of the reserve record for fields in individual sets from 32 to 11 years since discovery (Table 2). The reserve growth ranges from 11- to 15-fold over a period of 11-32 years; most of the growth occurs in the first 9-10 years.
Figure 4. A set of 32 West Siberian fields, with each field having at least 20 years of reserve record since discovery shows overall growth of 13-fold, while its two subsets – one for 18 fields with sizes larger than one billion barrels and one for 14 fields with sizes smaller than one billion barrel – show different growths.
Figure 5. The cumulative growth curves for four sets of fields are plotted. All 42 fields with each field having at least 9 years of reserve record since the first production; 30 fields with at least 14 years; 23 fields with at least 19 years; and 9 fields with at least 25 years of record (Table 2). Reserve growth for individual sets varies from 1.6- to 2.3-fold.
Figure 6. The set of 23 West Siberian fields with 19 years of reserve record since the first production shows an overall growth of 1.9-fold, and the two subsets of the 23 fields – one for 16 fields with sizes larger than one billion barrels and one for 7 fields with sizes smaller than one billion barrels – show different growths, with large fields showing the most growth.
Small fields with less than one billion barrels have hardly any reserve growth at all.
Notice that most reserve growth happens in the first 9 to 10 years and after 17 or 18 years there is hardly any reserve growth at all.
Figure 9. Curves (models) for the West Siberian and Volga-Ural provinces are based on the first production year and for the U.S. fields based on the discovery year.
This is perhaps the most telling chart of all. Fields in Western Siberia have just about ceased all reserve growth.
CONCLUSIONS
1. West Siberian Basin reserve growth is similar to what has been reported for the North Sea fields; production start-up date is the basis for both the analyses.
2. All models show rapid reserve growth in the first five years, but the West Siberian models show much slower growth in the following years compared to the models for the U.S. fields. Slower growth in West Siberian fields is caused by different reserve booking requirements and probably by insufficient investment in improved production technologies.
3. The West Siberian model, using the year of first production, predicts potential reserve growth ranging from 270 to 330 million barrels, or 0.34-0.42 percent per year over a five-year (1998-2003) period, compared with 0.51-0.58 and 0.72-0.79 percent per year predicted by two models for U.S. onshore fields over a five-year (1996-2001) period.
My Conclusions
Had the Western Siberia oil fields had the tiny reserve growth this report predicted for 1998 to 2003 period it is lone gone now. All those fields are in decline now and have been in decline for a few years now. But Russian production has not yet started to decline. New fields have kept production up. Vankor, and three nearby fields now produce almost half a million barrels per day. However Vankor will likely start to decline next year.
So it is very likely that with the peaking of even Vankor, and with the declining of all those old fields in Western Siberia, Russia will start to decline in earnest. Russian oil production will not get any help from reserve growth in Western Siberia. Old dying fields, like old dying men… do not grow.
A report on US Reserve Growth
The two charts below are from a 2013 USGS publication: Reserve Growth of Oil and Gas Fields—Investigations and Applications. This report is all about reserve growth in the United States. I would suggest that all who are interested in reserve growth in general, and US reserve growth in particular, take a look at it.
The chart above is on a logarithmic scale so it is a little hard to figure actual reserve growth. But the most important thing to take away from it is that most of the reserve growth is in the very first few years. Also notice in the above chart that the more recently discovered fields are getting a lot smaller.
In the US, the top five fields have considerable reserve growth. The rest of the group, after the first five years, have almost none at all. It is obvious that companies have a tendency to ramp up small fields to their actual reserves far sooner than they do their larger reserves.
And be sure to take a look at Table 3 It gives conclusive proof that reserve growth is something that happens to young oil fields. Old fields, even those in the US, if they grow at all, grow very little. And sometimes they even shrink.
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Ron: The Russian fields have a unique exploration/appraisal/development sequence. I worked on a project meant to “prepare” one of those giant fields you list for development approval, so I´m fairly familiar with the way the Russians did it.
The Soviet system had a large disconnect between the exploration and early appraisal phase (carried out by a separate exploration organization), and the eventual set up for approval by what I´ll call “The Commission”. This means the reserves would grow slowly as the fields were appraised, but the final number introduced into the official books was the result of a development proposal, an official document which required the use of “accepted” development patterns and recovery factors.
Neither the reserves nor the development plan submitted for approval had much economics input. To make matters more complicated, the teams preparing the proposal were isolated from the field organizations (which had separate field facility construction, operations, and drilling structures). I don´t want to get into the details, some of which changed over the years (and which I learned by working with Russians who advised me on how to prepare documents for use by their commissions).
In conclusion, the Russian reserves, as booked when the field went on stream were established following diktats and rules which ignored economics to a large extent. What kept those reserves from being booked down was the tendency for oil prices to increase, as well as the technology we imperialists brought in during the 1990´s and 2000´s (a lot of the work we did was shamelessly copied, sometimes it was stolen, we wasted a huge amount of time and money trying to get in, and a lot of that involved a fairly stupid approach: we gave knowledge away for free).
Fernando,
Please correct me if I am wrong, but I understood one of the major reasons for reserve growth/production increase, once the Russian fields were opened up to western technology was the introduction of gravel packing and sand control. I understood the Russians had a hell of a time sand control, and would produce until the well sanded out then abandon.
I also heard a few funny stories where ESPs were suppose to have been installed into wells, and when the western companies went to work them over, they found no ESP on the end of the tubing Apparently it was easier to make quote with no pump on the end to slow you down, lol. Not sure if it affected production much or how wide spread, but it does illustrate some of the conflicting goals in the Soviet system?
For those who don’t understand oil field jargon, ESP is electrical submersible pump.
Tool push, we found all sorts of problems. Russians are really smart, but they had very little knowledge about economics, were tied up in knots by a surreal bureaucracy, and the culture rewarded very submissive behavior towards superior.
This seems to be a natural outcome of communist dictatorship. My dad was an MD in Cuba, and my mom ran a children’s hospital department. They reported the same problems and the imposition of this behavior by communist party apparatchiks.
I saw the same problem in Venezuela as the Cuban presence and way of thinking began to be imposed. The Chinese too suffer from this problem, but they have sent hundreds of thousands of management or senior personnel to study abroad, so at least they realize they have it, and they overcome it in part by being smart and using very structured logic.
The Russians suffered from huge problems all over the place. They had no idea of how to run oilfield operations to optimize downtime, they rewarded heavy oil production, vented a huge amount of rich gas, drilled like turkeys, killed and maimed the workforce, and had very little exposure to computers and commonly used software. Their down hole tools were shoddy, they didn’t know how to do a clean completion, and on and on and on.
But they learned pretty fast. Ten years after the fall of the Soviet Union they were performing much better. But I wouldn’t let a Russian company operate offshore anywhere in the world.
This seems to be a natural outcome of communist dictatorship.
This problem is 100s of years old. The authoritarian/submissive peasant culture is ancient, and very, very hard to change.
Yes. We could say communist autocracy enhances the atavistic and repressive aspects of human nature. But I don’t see college and high school professors advocating a return to medieval times. They do advocate communism quite openly and are very repetitive teaching this message in our local public schools. On the other hand we don’t see right wing or hyper religious brainwashing (which I also consider a serious threat).
They do advocate communism quite openly and are very repetitive teaching this message in our local public schools. On the other hand we don’t see right wing or hyper religious brainwashing (which I also consider a serious threat).
This sounds like stuff being put out by right wing media. While as a group educators then to be more liberal than conservative, they aren’t teaching communism unless it is the topic of the course or they are exploring various economic systems.
And there are definitely examples of right wing and religious teaching in classes. Stories come up regularly.
There’s no need for me to document all the examples, but your view of the American educational system is not based on fact.
But I keep coming back to this. The US has been “fighting” communism for a very long time. We’ve spent a lot of money to do so.
What exactly do you think the US is supposed to do that it hasn’t done for a very long time? Do you want the military to be stronger? Do you want to establish a police state so that we know even more about what everyone is doing? Do you want every citizen to take a pledge that they are not communists?
How much money do you want the US to spend and how many freedoms should we give up to fight communism to your satisfaction?
I believe Fernando is talking about Spain which is where he currently lives unless I am mistaken, rather than the USA, although he lives here part time , or used to, as best I can tell.
It is very common for teachers in any country to promote their own political agenda. I know, I used to be a teacher myself. There are a million ways to do it , some blatant , some subtle.
Okay. If he is talking about Spanish schools, I know nothing about those and can’t comment about them. And sure, I wouldn’t be surprised if there is more communist sentiment in some European locations than in the US.
I took a class in Madrid once, taught by the mayor. If I recall correctly, he was a communist.
Of course, that was soon after Franco, and Franco could radicalize anyone…
This place is a little weird. The Center Right controls the community, but schools are taken over by communists. I work with high school students helping them with electronics and programming projects, so I get to hear the incredible loads of bs and pure lies they get from their teachers. I give them counter arguments, so it’s getting pretty interesting.
“Russians are really smart, ….”
Have produced many world chess champions.
Cuba produced more chess world champions than Russia on a per capita basis. But I don’t think we are unusually smart.
Personally I think intellectual horsepower is about equally distributed among all people all over the world.
But some societies tend to push people into certain intellectual pursuits. If you have little or no money and few opportunities to spend that little bit, and limited access to books and libraries etc, then you are much more apt to take up a game such as chess than somebody living in a place with more and more varied intellectual and recreational opportunities.
Once the game is popular in a given neighborhood this popularity will be self reinforcing.
So while TALENT may be equally distributed, probably five or ten times as many Cuban kids percentage wise play chess compared to American kids.
We Yankees will probably always dominate a sport such as basketball at the olympic or professional level because it is so popular here and we are so numerous.
But if the game were to become as popular in China or India as it is here …. teams from those countries would probably dominate.
I don’t agree. Face it, West Africans dunk much better than white folk, Eskimos are shaped like medicine balls, and Finns are terrible at break dancing.
Hi Fernando,
In case you have not noticed American professional basketball players can pass for West African ninety five percent of the time on the basis of a quick photographic comparison.
Probably no less than four or five million young black guys in this country play basketball on the street and in organized leagues every day. Since basketball is very popular here but is not very popular in Africa we will continue to dominate in basketball.
Russia and Cuba will continue to dominate in chess so long as chess remains extremely popular in these countries as compared to other countries.
If the Chinese ever take up chess en masse forget about ever seeing a Russian or Cuban champion from that point forward beginning about ten or fifteen years later.
It’s just a numbers game.
If the Russians are as bad of operators as what you and toolpush say they are — as backward and incompetent — and there is a “lack of capital investment for improved reservoir management and production technologies” as the USGS says, then it seems like there is a lot of room for improvement here.
There could be a lot of upside potential in the West Siberian oil fields.
Glenn,
My comments up above refer to the pre 1991 times. Some 24 years ago. You may have noticed Russian oil production had increased a significant amount since then. So yes you were correct, there was a potential for large production increases. The trouble is most of those easy gains have been made, so either find more oil, or production has the potential to fall.
Toolpush says:
“My comments up above refer to the pre 1991 times. Some 24 years ago. You may have noticed Russian oil production had increased a significant amount since then”
You are wrong. Oil production was rising until late 1980s. It started to decline in Gorbachov’s times and plunged during the so called “liberal reforms” in the 1990s. It recovered over the past 15 years, but is still below the Soviet time record
Russian oil production (incl. NGLs)
Source: BP Statistical Review of World Energy
No kidding. The Soviet peak had a youthful Samotlor and other West Siberian fields. The climb to 10 mm bopd in recent years was due to western know how and higher oil prices. Or are you claiming soviet technology was equal to ours? Even today they remain behind us.
To “ours”?
What a touching testament from someone who is apparently oblivious to how the oil business works.
The transnational service companies who own and control this technology have no totems, taboos, crosses, steeples, mosques, races, armies, flags or nations. They will work for anyone who has a checkbook.
AlexS
OUCH!
Knockout punch!
It looks some folks in this neck of the woods allow politics to take factual reality and turn it on its head.
AlexS
I have taken your graph and indicated on it the changes of ruling regimes in Russia. As one can see, the correlation between politics and oil production is unmistakable.
Glen,
Thank you for making my point
Soviet period, found easy oil but could not produce for very long and were in steep decline before attempted coup.
Yeltson, chaos, no support from anywhere
Putin, Stabilization, access to western technology, increase in production!
Glenn Stehle,
thanks for that
toolpush,
The rapid growth of the Soviet oil production in the 1970-s – early 1980s was indeed due to the development of Samotlor and other fields in West Siberia discovered in the 1960s. In normal conditions, this growth would be followed by a long plateau, but in fact production dropped due to disastrous “reforms” and terrible mismanagement of the oil industry and the whole Russian economy during the 1990-s.
The rebound since 1999 was mainly due to improved management, although the use of Western technologies obviously played an important role. As regards the contribution of oil prices, I should note that the most rapid growth occurred between 1999 and 2005, when oil prices were not as high as more recently.
AlexS,
They say a picture is worth a thousand words, and I’d say that’s true of one coming out of Moscow this morning, included below.
On the left is Venezuela’s president Nicolás Maduro. Venezuela has the world’s largest oil reserves. In the center is Russia’s president, Vladimir Putin. If we combine oil and natural gas, Russia is the world’s largest oil and gas exporting power, surpassing even Saudi Arabia. On the right is Xi Jinping, China’s president. China is the world’s largest industrial power.
As the NY Times reports this morning, there are lots of new energy deals in the works:
China has also loaned Venezuela tens of billions of dollars, and says it will continue to do so in the future:
Oil, geopolitics and geofinance are all connected at the hip, and exploring the interplay between the three, and especially how peak oil affects the interworking of the three, is for me at least as interesting as all the colapsnik theorizing of the neo-apocalytists.
***Well as frequently happens, I couldn’t get the photo to post, so here is a link to it
http://i.imgur.com/WEQ5Es2.jpg
And this photo, when juxtaposed next to the one above, shows just how much things have changed since the 1990s:
Alex,
The drop in production started in 86/87, while the soviets were in full control and no hint of coups. So you are saying it was the Soviets that mismanaged the fields?
I believe my little stories up above about sand control and ESP would have me agreeing with you.
The lack of a long plateau for these super giant fields also fits my story of sand control issues.
The Yeltson years were just waste, and I think we will all agree on that, but the drop in production was well on it way before Yeltson turned up in Moscow on his tank at the White House.
As does this photo:
http://i.imgur.com/v5mTQHE.png
My comments refer to what we found in the 1990’s in the former Soviet Union. They’ve improved a lot, but it takes a couple of generations to change things like safety culture.
Fernando,
I think a few folks, are having a hard time splitting the difference between the soviet regime and the Russian government, and are unwilling to take the word of people that actually worked in these areas?
I think I’ll take AlexS’ empirical evidence over your and Fernando Leanme’s anecdotal evidence.
The proof, after all, is in the pudding.
And needless to say, anecdotal evidence is one of the most useful rhetological prescriptions in the spin doctor’s medicine bag.
Hi Glenn,
The Russians themselves believe that out put in Russia will peak soon. Ron has references expert reports that say as much. Do you note the change in slope on AlexS’s chart? Russian output may not have peaked yet (data is often revised, and different data sources often do not agree), do you believe that it will never peak? I think they may be able to maintain a plateau for a couple of years if oil prices are high an then there will be a slow decline. There is the possibility of an LTO surge at some point, but I doubt it will happen as quickly as the US ( and maybe not at all). Remember that an extra 30 Gb out of a total resource of 2800 Gb does not move the needle much.
Don’t put too much faith in EIA resource estimates(remember the Monterrey LTO estimates?), the USGS is much better.
Are you arguing that only geology determines when peak oil will occur?
I would argue it’s a little bit more complex than that. Here are four factors which I think are important when it comes to determining production rates, reserves and reserves growth:
And, while I’m pretty sure we’ve reached peak conventional (read “cheap” oil), I’m not touting that as sure truth.
For instance, what would have happened if the neocons would have pulled off the Iraq War as they had planned? Iraq ostensibly has massive untapped conventional oil reserves which could have been brought on line, completely changing the global oil supply picture:
For me, there’s a little bit more going on in the world than the “intellecutal snobbery” and “creeping expertism” of “the culture of technical control,” as Daniel Yankelovich put it.
Yankelovich laments that “The dominant mind-set of the culture stresses information, not judgment,” as if information, without judgment, is enough.
And then when you get the information wrong, as Fernando Leanme and toolpush do, then the situation is just hopeless.
Glenn, that Iraq has that much oil and will produce 8 million bpd is more than just a myth, it is the biggest crock of shit that mainstream media ever bought into.
Ron,
That very well may be true. But then it may not be true.
When the National Energy Policy Development Group (NEPDG), also known as the “Energy Task Force,” drafted the National Energy Policy (NEP), commonly known as the”Cheney Report,” back in 2001, it relied on studies conducted by the Department of Energy.
The Cheney Report included a map which shows oilfields, pipelines, tanker terminals, and refineries, and includes eight “blocks” for exploration near the border with Saudi Arabia. Iraq has been proven to have the second-highest amount of oil reserves of any nation in the world, next to Saudi Arabia. And, this is without exploration of the eight blocks near the Saudi border—a vast area that is at least one-third of the country—which could make Iraq number one in terms of proven reserves.
Here’s a link to the map included in the Cheney Report:
http://i.imgur.com/7JJt7uY.jpg
As far as I know, the political situation in Iraq still remains unstable and these blocks still remain unexplored.
Hi Glenn,
No I have never said that only geology will result in a peak, there are many factors, the primary ones are geology and the price of oil which is determined by the interaction of income, politics, and technology develoment and its application. Actually nobody that commonly posts here at peak oil barrel has ever argued that the peak will be determined solely by geology.
What you will not hear me arguing is that oil output can continually increase until 2040 and beyond and that that there are no geological or economic contraints. Resources are not unlimited.
Dennis Coyne,
I left out one very important factor: technology.
In the end though I do agree that geology will have the last say. (Geez! I’m beginning to sound like Bertrand Russell’s Free Man’s Worship now: “…omnipotent matter rolls on its relentless way. For man…it remains only to cherish ere yet the blow falls, the lofty thoughts that enoble his little day, proudly defiant of the irresistible forces which tolerate for a moment his knowledge and his condemnation…, the world that his own ideals have fashioned despite the trampling march of unconscious power.” In repentence I’ll have to do three Hail Marys tonight to Immanuel Kant to ask him for his intercession.)
But in the interregnum, which I don’t know how long will last, these other factors will come into play.
Hi Ron,
My takeaway from the second USGS paper in your post is very different. While it is true that for most fields the reserve growth occurs over the first few years after production, the more interesting point is that only a very small percentage of US oil and gas fields are responsible for most of the reserve growth.
From the paper(page 24):
Of all oil fields discovered prior to 1982, 256 (3.1
percent) accounted for 75 percent of gross oil reserve growth
between 1982 and 2006.
and (p. 27)
Reserve growth ultimately ceases when the
final field within any given group changes from having an
inventory profile to a PRR approaching 0.
The”inventory profile” is a situation where reserve growth is equal to output so the the remaining reserves remain stable, the point is that this cannot continue forever, eventually these high reserve growth fields will reach their geological limit. No estimate is offered for when this might occur, but the author seems to caution against the myth of infinite reserve growth.
Thanks Ron, a very interesting paper.
Reserve growth stops when we can’t find anything else we can do, and the field performance doesn’t justify any more increases (I’m referring to proved plus probable or P50).
There are some odd ball cases. For example, let’s say you have an offshore field producing a water drive reservoir, the estimate recovery factor to the economic limit is 56 %, and you can’t justify drilling nor sidetracking. If oil prices are more or less steady you may see reserves go up a teensy bit at the end as you keep producing the field below the economic limit just to avoid incurring the abandonment costs.
Hi Fernando,
When you suggested 25% reserve growth, was that 25% of total reserves or 25% of remaining reserves?
Dennis, remaining reserves. I think the figure is dropping for two reasons:
1. Fields are getting older. As you know, it’s hard to find reserves in older fields. I can go over the reasons why this happens but I suppose they are evident to most readers.
2. An increasing fraction is found in OPEC, former Soviet Union and other nations with a more aggressive approach than the SEC imposed definition.
For example, I know Venezuela’s reserves are in trouble (remember the bit I wrote showing reserves at changing prices?). I also believe Iraqi and possibly other Middle East reserves are already booked to the max.
Hi Fernando,
What is your take on OPEC reserves? From my perspective we don’t really know what has happened to OPEC reserves since 1980, when they were probably 1P reserves based on SEC regulations.
Perhaps you have access to databases that show something different.
How does the UK compare to the US regarding the approach to reserves? For the UK, since peak, the ratio of 2P to 1P has been about 1.75, an there has been significant reserve growth over the 1999 to 2013 period, based on remaining 2P reserves.
25% seems pretty low, given that the US (based on an estimate of 2P reserves using the UK 2P/1P ratio and excluding new discoveries) reserve growth from 1977 to 2006 was about 75% of remaining 2P reserves.
My takeaway from the second USGS paper in your post is very different.
Different from what? Everything you stated was exactly what I stated. Most reserve growth occurs in the first few years. Only a small number of fields is responsible for most of the reserve growth. (figure 20.) And reserve growth ceases in old fields.
You have just made my case. Thanks.
Hi Ron,
You said the following about the second paper, specifically:
And be sure to take a look at Table 3 It gives conclusive proof that reserve growth is something that happens to young oil fields. Old fields, even those in the US, if they grow at all, grow very little. And sometimes they even shrink.
If that seems like what I said, then we don’t speak the same language.
Yo said: While it is true that for most fields the reserve growth occurs over the first few years after production, the more interesting point is that only a very small percentage of US oil and gas fields are responsible for most of the reserve growth.
Which are two points that I made very clear in my post.
And everything in the paper points to the fact that reserve growth declines with age. That is the one point you seem to want to deny the most.
I think we speak the same language.
Hi Ron,
I think we are talking about different papers, you linked to two papers, I was referring to the second paper, which says that about the majority of fields (that reserve growth happens early), the important point is to look at that minority of fields which behaves differently and is the main point of the paper. Did you read the whole 2nd paper, it is actually much more interesting than the first as it covers ground I was not aware of, the first paper was pretty standard stuff and was not surprising or new to me.
Fernando says
as well as the technology we imperialists brought in during the 1990´s and 2000´s (a lot of the work we did was shamelessly copied, sometimes it was stolen, we wasted a huge amount of time and money trying to get in, and a lot of that involved a fairly stupid approach: we gave knowledge away for free).
In the U.S., we put billions of dollars into improving the technology of shale oil. But when shale oil is over, you will come to us with their technologies. Why should we reinvent the wheel a second time. 🙂
Exactly. I play chess. Most company managers play poker.
As previously noted, Russian net exports, after showing a strong increase, e.g., increasing from 5.0 mbpd* in 2002 to 7.2 mbpd in 2007, have been flat to down since 2007 (at or below 7.2 mbpd, through 2013, the 2014 data are not yet available).
Their ECI Ratio (ratio of production to consumption) fell from 3.7 in 2007 to 3.2 in 2013. At an ECI Ratio of 1.0, net exports = zero.
*Total petroleum liquids + other liquids, EIA
This is off topic but will throw some light on the way the CHINESE government functions. I am about as far from a commie or socialist as anybody but nevertheless I do recognize that a COMPETENT authoritarian government, one run by and advised by scientifically capable advisors, can in some cases get things done in a hurry that just don’t get done at all by a democracy – or at least , get delayed in a democracy until the point of crisis.
The Chinese government is obviously competent viewed from just about any point of view – internal stability, maintaining itself in power, economic growth , etc. It is true the country is very badly polluted and has gargantuan resource problems, but no other government would likely have done any more any faster to solve these problems.
Read this link from Fernando’s personal blog for insight.
I cannot vouch for the accuracy of any particular detail since I am only poorly acquainted with Chinese history but he obviously understands a great deal about the internal workings of the Chinese government.
And whatever the Chinese government does is going to have an enormous impact on the peak oil issue and the fossil fuel resource issue in general as well as the environmental issues.
http://21stcenturysocialcritic.blogspot.com/2015/05/sons-of-heaven.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+21stCenturySocialCritic+%2821st+Century+Social+Critic%29
For what it’s worth, I thought readers of this blog might find this interesting, found at Yahoo Finance via Oilprice.com:
The Return Of Peak Oil – Worrying Signs From U.S. And Russia
“Since around 2005 many countries have increased their oil production but more have decreased. But the combined production of the United States and Russia have kept the world on a slight uptrend since that time.”
Sound familiar? It should, since it is the opening sentence of Ron’s previous lead post. Yup, that lead post is reproduced in it’s entirety on the Yahoo Finance web site, which cites Oilprice.com as it’s source. Over at Oilprice.com the article can be found at the following link:
http://oilprice.com/Energy/Crude-Oil/The-Return-Of-Peak-Oil-Worrying-Signs-From-U.S.-And-Russia.html
At Oilprice.com they have a short bio on our esteemed host and the same page that hosts the bio also has a list of other articles by Ron and lists him as a “Contributor since: 24 Oct 2014”. So while Ron’s articles have been appearing over at Oilprice for a few months now, this is the first one I’ve seen picked up by Yahoo Finance, a web site I consider to be a fairly mainstream financial news source and my financial news site of choice.
Since I think we can all agree that this site is not a place for the “happy news” and the msm generally tends not to favour the “doom and gloom” found in these parts, I find this interesting. Is it that, since the overwhelming deluge of happy stories about abundance and American energy independence, has given way to the reality of falling rig counts, massive layoffs in the oil patch and boom towns going bust, there is now a search for the truth?
Island boy
No.
USGS said:
Ron Patterson said:
Let me play devil’s advocate here.
Don’t we need more information before we can conclude that “Old dying fields, like old dying men… do not grow”?
What sort of recovery methods have these fields in Western Siberia been subjected to? Only primary recovery? Secondary recovery? Tertiary recovery?
As the graph below of historical oil production from the Wasson San Andres Field shows, the oil production rate was greater during secondary recovery than it was under primary recovery.
Under primary recovery, it peaked at 50,000 bopd.
But under secondary recovery, it peaked at more than 3x this, at more than 150,000 bopd.
So it seems like more information about these fields in Western Siberia would be needed before any conclusions can be drawn as to what their future production potential, and reserve potential, is.
► Well, I couldn’t get the image to appear as part of the comment, either in jpeg or gif format, but here is the link to the graph:
http://image.slidesharecdn.com/gccsi-fundamentalsofeor-english-140710025222-phpapp02/95/webinar-fundamentals-of-co2-enhanced-oil-recovery-english-12-638.jpg?cb=1404994507
Glenn: when we look carefully at the plot you linked, we can see the primary peak took place when the U.S. was the world’s top oil producer, and Texas used production controls. The second peak took place in the 1970’s, when prices increased and OPEC implemented its boycott, etc etc.
I have spent years reviewing water flood and EOR projects. With very few exceptions, secondary recovery projects fail to take a field to an earlier peak. The exceptions are associated with badly mismanaged fields, or a major discontinuity such as a government change which introduces lower taxes or other reforms.
Regarding Russia, I suggest you read the comment I wrote above.
What you say might have a small grain of truth to it, but it is obvious from looking at the graph that peak primary production, under Texas Railroad Commission (TRRC) proration orders, occurred in 1946 at about 50,000 bopd.
Furthermore, it can also be seen by looking at the graph that primary production declined on a straight-line curve from 1946 until 1963, at which time secondary recovery was initiated. In 1963 primary production had declined to only about 10,000 bopd, or in other words, surely way below what was allowed by the TRRC.
If secondary and tertiary recovery had not been implemented, then primary production would have proceeded along that linear decline curve, and this field would have been out of business a long time ago.
But, thanks to secondary and tertiary recovery methods, the Denver Unit is still, even to this day, making almost 25,000 bopd. We’re talking more than 50 years after secondary recovery began, and from a starting point of only 10,000 bopd, with a 150,000 bopd peak in between.
There has been and will be far more oil recovered from this unit using secondary and tertiary methods than what would have ever been recovered using only primary methods.
And as far as your claim that the peak in primary production in 1946 was caused by a TRRC proration order, can you show me what the TRRC allowable was in 1946?
The Denver Unit was developed using fairly primitive techniques, when the state was under proration. This means it was never developed under primary as it would have been developed under 1970’s conditions.
I have 40 years engineering experience in the oil industry. Let me make a suggestion: grab the reservoir properties at initial conditions, introduce them into a nodal analysis program, and estimate initial well rates at 200 psi flowing tubing pressure (assume you have 7 inch casing and 3 1/2 inch tubing). Divide the ooip by area, multiply by 80, that’s your ooip per 80 acre unit. Assume 15 % recovery factor. Estimate the total number of 80 acre units. Multiply the number of 80 acre units by the IP per well at 200 psi back pressure. That’s your field potential under primary.
Fernando Leanme said:
And from what you, toolpush and the USGS are saying, so were the oil fields in Western Siberia.
If this is true, then there might be a great deal of potential to greatly increase production from those fields, just like there was in the Wasson Field.
It is true. If you wish I can explain why I used the term “primitive”. Russian fields are a bit different. It’s hard to generalize in such a vast nation.
One problem I see in Russia is the environment, which is much tougher than west Texas. The other problem is the lack of cheap CO2.
Dont embed pictures, post links. Life is easier.
The Wasson was developed on 40 acre spacing, not 80 acre. As Fernando stated, the reason for the low primary peak was the low production quotas from the RRC. The peak in the mid 70’s was the max economic rate the field could produce under secondary production. The peak of the Denver Unit plus the other 6 units in the field (there used to be 7 total, not sure how may there are now) was something like 250 mbopd. A rule of thumb I’ve always seen for San Andres fields in the Permian is 15% +/- 3% for each phase of production. The Wasson also has a >1BBO TZ/ROZ which is currently being CO2 flooded as well. The EUR that I have seen for the field as a whole is 2.1 BBO from the main pay or 52% or OOIP, with 14% of that being tertiary.
MBP, I suggested 80 acres to account for the well sequencing. My guess is that, if we had been planning the development with Woody Craig’s SPE monograph on Waterflooding the field would have been designed to produce 200,000 BOPD, and water injection would have started within the first five years of field life.
Hi Ron,
Great job!
One thing that is different in this analysis is the use of “total reserves” rather than remaining reserves.
If we use remaining reserves the growth is much more significant.
As a simple example, the USGS in 2000 published a World Petroleum Assessment where Technically Recoverable Resources of conventional oil (which excludes extra heavy oil from Canada and Venezuela) was estimated at roughly 3 trillion barrels, of this total about 600 billion barrels was expected to be reserve growth, 550 Gb was newly discovered oil (not yet discovered), 850 Gb was cumulative output, and about 1000 Gb was proved plus probable reserves.
In this case remaining reserves are 1000 Gb and total reserves are 1850 Gb, and if the 600 Gb estimated reserve growth was correct of we use remaining reserves, reserve growth would be 60% and if we use total reserves reserve growth is only 32%.
Also using Jean Laherrere’s 2013 estimate for World 2P C+C less extra heavy oil(XH) reserves of 850 Gb plus cumulative C+C-XH output of 1100 Gb, we have total reserves of 1950 Gb. Let’s bump up Jean Laherrere’s discovery estimate by 20% to 300 Gb, if we add this to 1950 Gb we get 2250 Gb for total expected oil reserves, my guess for eventual C+C-XH URR is 2800 Gb so there would need to be 550 Gb of reserve growth which is 24% of 2250 Gb.
For the USGS estimate a similar calculation would give 600 Gb/2400 Gb=25% reserve growth.
A more detailed analysis would take reserves added to producing reserves from the oil shock model and an equation similar to that derived in the poster (using Western Siberia as a conservative estimate for the World) to estimate future reserve growth. In that case I would reduce the shock model to the 2200 Gb estimate of Jean Laherrere to see how the reserve growth plays out.
Dennis, we do use remaining reserves. We use remain reserves + cumulative production. That is what total reserves are. Remain reserves began to decline when the first barrel was produced. And remaining reserves decline with every barrel produced.
My point of this post is: “Reserve Growth is something that happens in the first decade or so of newly producing oil fields. There is some growth after that but it is so little it can largely be ignored. Or at least that’s what the USGS data shows.
Hi Ron,
And my point is that even a small amount of growth can make a big difference over time.
In fact if you use the 5th through 19th year (flat) estimate for Western Siberia (all data) and apply it to 2000 Gb for 30 years you get 300 Gb of reserve growth, if the curve is extended to 70 years the total reserve growth is 500 Gb.
This does not mean there will not be a peak, the reserve growth will just help reduce the rate of decline in overall oil output.
This also makes me wonder if Fernando meant growth in total reserves when he suggested 25% reserve growth, if so I agree with that estimate. (A comment by Fernando in the last post concerning reserve growth.)
Hi Ron,
The EIA has fairly detailed reserve data. I estimated 2P reserves by multiplying proven reserves by 1.75 based on UK reserve data (which gives both 1P, 2P, and 3P reserves).
I deducted new discoveries from each year of data from 1977 to 2013 so that only reserve growth is shown in the reserves from 1977 to 2013. The cumulative average growth rate from 1977 to 2006 is about 1% per year, this period was used to eliminate the gain in reserves from the LTO plays from 2007 to 2013. Even though 1% per year does not sound like much it adds up to 61 Gb over 30 years.
Hi All,
In the table above and in the comment I mislabelled the Annual Growth Factor (AGF) as the cumulative annual growth rate. This right hand column is analogous to column 5 in table 3 at the end of Ron’s post. The 61 Gb of total reserve growth from 1977 to 2006 is on an initial total reserves of 170 Gb, so about 30% reserve growth over a 30 years period. On average the fields in the US are not very young, so even though old men don’t grow taller (they often gain a little mass), old oil fields do seem to grow.
Old oil fields don’t grow and young oil fields don’t grow. What grows are estimates of recoverable reserves. And those estimates are highly regulated by the U.S. Securities and Exchange Commission.
Guidelines for the Evaluation of Petroleum Reserves and Resources
U.S. Securities and Exchange Commission (SEC)
Historically, the agency that has had the most influence in setting standards for external reserves reporting has been the U.S. Securities and Exchange Commission (SEC). With the agency’s widespread influence, the SEC definition of proved reserves has become the standard used by most publicly held companies for external reporting purposes. The SEC definition for proved reserves is as follows:
At first there is a great deal of uncertainty as to how much oil can be recovered from any given field. But as time passes estimates as to recoverable reserves get more accurate. Most upgrades of reserve estimates are made in the first few years after a field is brought on line. As the years pass increase in proven reserves, known as “reserve growth” become less and less. After decades of production and after a field goes into decline, increases in proven reserves become so small they can largely be ignored.
This applies only to publically traded oil companies. Reserve growth has been shown to be far less pronounced in national oil companies. In fact, OPEC countries will likely have no reserve growth at all but will have “reserve shrinkage” instead.
Hi Ron,
There are databases which I do not have access to that give the proved plus probable reserves, which oil companies have but are not required to reveal on the 10-k (though they are now allowed to do so as long as the proven reserve data id provided and used in the balance sheet).
EIA has all the data you need.
You do not have access to these databases but you think I do?
Nothing in either of the papers suggests that there is no reserve growth for the national oil companies. In fact many of the largest fields in the World are produced by the national oil companies and they are likely to have considerable increases in the estimated total reserves over time.
In fact if the declared reserves of OPEC nations are 2P reserves since reserves increased in the 80s, then the reserve growth has been modest in OPEC relative to US reserve growth.
Dennis pleaseeeeee. Do not even insinuate that I even suggested that national oil companies have no reserve growth. Russian oil companies, for most of their existence were national oil companies. Some of them still are. Three fourth of my post was stressing the fact that their reserve growth was primarily in the first ten years.
I have never, ever, ever stated that national oil companies have no reserve growth.
Really Dennis????
Hi Ron
read the bold part of your comment above where you said opec reserves would not grow.
Dennis, OPEC reserves are grossly overinflated. Saudi claims 265.8 billion barrels of reserves, Iran claims 157.8 billion barrels of reserves, Iraq claims 144.2 billion barrels of reserves, Kuwait claims 101.5 billion barrels of reserves, the UAE claims 97.8 billion barrels and the combined claimed reserves of all OPEC are 1,206 billion barrels.
If you think these reserves are going to grow then I think you are delusional. So let me repeat what I said above with a slight alteration:
OPEC countries will have no reserve growth at all but will most definitely have “reserve shrinkage” instead.
Hi Ron
if some large old oil fields in opec nations behave like the few (3%) oil fields in the US that are responsible for most of the reserve growth in the US you may be incorrect.
Excluding Orinoco reserves OPEC reserves are about 950 Gb if we add nonOPEC reserves we get about 1300 Gb of 2P reserves. If Fernando’s reserve growth estimate is correct that would be 300 Gb of reserve growth for the world.
Dennis, if you really believe that OPEC “just might” actually have 1,206 GB of reserves then you know absolutely nothing about the history of OPEC, why their reserves are inflated, or the historic, “proven reserves battles” that have been going on within OPEC ever since the mid 80s. And they are still going on. Iran and Iraq are still trying to “one up each other” in the ongoing “OPEC proven reserves battle”.
But if you truly believe that OPEC just might have that over 1.2 Trillion barrels of reserves, then I am truly disappointed with your knowledge of OPEC history and how OPEC actually works.
I know mainstream media has an excuse for believing that OPEC proven reserves nonsense but you don’t. You should know better.
Dennis,
Remember that in the ’80’s OPEC reserves suddenly increased a lot, after the allowed oil production was coupled with their reserves. The more reserves they stated to have, the more oil they could export. That makes those suddenly increased claimed reserves very suspect of course.
Hi Han
If 1980 reported OPEC reserves were 1P reserves and OPEC nations switched to 2P reserves for their reports by 1990 this would have raised reserves by a factor of 1.75. The small increase in reserves since 1990 if extra heavy oil is excluded is lower than US reserve growth over the same period when we use 2P reserves for the US reserve growth estimate.
Also Han, those reserves have not decreased by a single barrel since they were suddenly increased. In fact they have usually increased by a little each year.
For every barrel pumped out of the ground another barrel suddenly appeared to replace it. So they have “magic oil”. A new barrel appears in the reserves every time one is pumped out.
Hi Ron,
Reserves have been pretty flat in the US as well, and we have been producing oil in the US for a much longer period.
Now you might argue that this is because proven reserves are what is reported in the US. We can estimate 2P reserves by multiplying proven reserves by 1.75. From 1988 to 2006 reserves decreased by 10 Gb, while 41 Gb of oil was produced over those years. So about 31 Gb of reserve growth occurred on initial 2P reserves of 46.6 Gb in 1988 or a 66% increase in reserves over 18 years. If OPEC 2P reserves were 755 Gb in 1988 and these reserves grew by a similar percentage(60%) and we subtract 1988-2006 OPEC output of 190 Gb we get 1000 Gb of OPEC reserves, reported OPEC reserves were about 930 Gb in 2006, so OPEC reserves grew by about 48% over this period, considerably slower than US reserve growth.
Apologies for being off topic:
Alberta conservative Govt wiped out in yesterday’s election. This would be akin to Rick Perry losing a Texas to Jennifer Warren. I simply cannot believe it and am very heartened by the result.
Those of us out west in BC used to joke that Albertans were taught that Earnest Manning (Social Credit….right wing) actually put the oil under the ground. The right wing coalition under Social Credit and PC has ruled Aberta for over 50 years, culminating in wasteful scandals at the same time the recent oil price decline set in. Some changes were implemented and a snap election called for a so-called mandate. However, I believe the electors were offended by being taken for granted. They spoke with their ballot and decided on change.
This has HUGE implications for the Oil Sands and how revenues unfold.
http://www.cbc.ca/news/elections/alberta-votes/alberta-election-2015-results-ndp-wave-sweeps-across-province-in-historic-win-1.3062605
That’s amazing!
Have you seen the series of posts published by the Canadian blog, The Progressive Economics Forum, which charges that Canada’s conservative governement was plunging the country headlong into a staples trap?
This passage from Gordon Laxter, author of one of the posts in the series, sums up the theme explored by the series quite succinctly:
Once I saw some aerial photos of the massive operations in the Canadian tar sands, I was shocked at what was being done. If this is what getting oil out of the ground has come to, the sooner we wean ourselves away from oil, the better.
Glad to see that Canadians, too, are deciding they’ve had enough.
If I am wrong about my interpretations of the tar sands and the election, please correct me. I am speaking as an American who doesn’t know all the details.
The oil sands will continue to be produced. Use google maps and locate Edmonton and Fort McMurry.
Use google maps and locate Edmonton and Fort McMurry.
What does that have to do with my comment? I don’t get your point.
I think Glen summed it up nicely with his comments. Well said.
Yes, that’s what I got. The election is a signal that some Canadians are rethinking their ties to oil.
The oil sands will continue to be produced. Use google maps and locate Edmonton and Fort McMurry.
I don’t get what Fernando is saying with the above comment.
Boomer
There are a couple of tiny outfits operating in Utah right now that claim to be – get this – ‘washing’ the hydrocarbons out of the oil sands there using D-Limonene based solvents (fast orange type stuff).
As preposterous as it may sound, they claim to actually be producing hundreds of barrels a day with a cost under $30 per.
Dunno bout that, but it sure is intriguing.
I doubt if Canadians are “rethinking their ties to oil”. It’s More likely, they are reeling from a loss of income, due to the declining oil price.
I’m pretty sure a Left Wing Government is not going to fix the problem, any more than the Left Wing Government in Greece fixed their debt problem.
It’s More likely, they are reeling from a loss of income, due to the declining oil price.
And what happens in the US when the price of a resource goes down and there is major environmental damage to obtain the resource, some citizens decide it isn’t worth the damage and it is time to rethink it. Perhaps that is what is happening in Canada. Why rape your country’s land if it isn’t helping you out anymore?
John B says:
But that’s what being caught up in a staples trap is all about, being completely vulnerable to the boom and bust cycles of primary materials production.
The area is huge. Sort of glide over it and locate the disturbed area. It’s actually tiny. Most of the oil will be produced using horizontal wells.
I think Alberta will benefit if they slow down development to allow for costs to come down. There are also technical needs to fine tune the steam injection. And they could use a couple of upgraders.
The area is huge. Sort of glide over it and locate the disturbed area. It’s actually tiny.
So the tar sands mining won’t be expanding? That’s good to know.
But the process itself is disturbing because of what it takes to squeeze petroleum out of the dirt. If that’s what the world needs in order to feed its oil appetite, it seems to me a sure sign that we’re scraping the bottom now. And if we don’t need tar sand oil, maybe it isn’t worth going to all the trouble to get it.
http://www.pembina.org/reports/oilsands-metrics.pdf
Yes, it does disturb the surface. But the in situ should never disturb about 7 to 8 % of the land surface. And it’s not all disturbed at the same time. My guess is that at peak it may take up 3 % of the total surface.
There are two types of Oil Sands operation. Mining and SAGD (Steam Assisted Gravity Drainage). Clearly the pictures you see are from mining. The majority of the oil sands are at depths that are not mineable.
Attached is a picture of a SAGD site (It will not post, says not found). Until I figure out how to make it post, the site looks similar to a ND LTO site and is very similar operationally since it has a small footprint. SAGD uses two horizontal holes, one on top of the other. The steam is used to liquefy the bitumen so that it drains into the lower hole. It is then pumped to the surface. All new oil sand projects use SAGD because there are no new surface mineable oil sands. The aboriginal people found this stuff on the surface and used it to waterproof their canoe’s made of birch bark.
What you don’t read in the press regarding the mining operation is that once the bitumen is separated from the sand, the cleaned sand is used to refill the hole. The companies are required to return the site to a habitable form for wild life.
These are the photos I saw.
Glad to hear that this doesn’t take up much land, isn’t typical of what is being done now, and will be cleaned up when finished.
Canadian Oil Sands Flyover – Business Insider
What OVI described is typical for in situ. I think there’s a lot of propaganda and distortion going on. I don’t think a SAGD pad can be said to be pretty. But it’s not a junkyard, and it’s definitely better than a stripper or biker bar.
Obviously coal mining has been an ugly process for a long time, first with underground mines and then with strip mines.
I suppose what bothers me about tar sands, aside from whatever environmental damage might be done, is that there is so much required to turn it into useable oil. In my mind, that’s a bad sign. If this is the future of oil, I think we’re in trouble now for us even to be needing to get oil this way.
In other words, tar sand shouldn’t be considered a way to preserve BAU. It should be considered a way to transition to alternatives as soon as possible.
As I mentioned, I think a SAGD site and an LTO site in ND and Texas are very similar. The one big difference is that there is tons of date on the carbon foot print of an oil sands site because they have to pay $15/ton of carbon they produce. Not much similar info on Texas or ND.
Interesting pics.
Though some of them – related to coking – have wrong/misleading captions.
“After it’s coked, the oil is ‘cracked’ to break the heavy parts down into lighter…”
Coking is a cracking process. Heating any oil to coking temps causes some of the carbon to agglomerate out of the molecules, causing molecular cleaving and leaving hydrogen to cover the dangling bonds on the (now smaller) oil molecules left over.
http://en.wikipedia.org/wiki/Petroleum_coke
“Cracked, coked and lighter, what’s left gets send to a tower like this,
where inside it’s hotter at the top than the bottom,
forcing dense material down and lighter petroleum products up”
Sigh – the caption is over a quad delayed coker.
Hidden in the lower part at 4 large tanks (“drums”) that the coke deposits in.
The lattice structures above hold the water jet rig used to cut the coke out after a coke drum is full. (it’s a batch process, thus delayed coking units always have 2 or more coke drums.)
http://en.wikipedia.org/wiki/Delayed_coker
Looks like they burn some of the pet coke (petroleum coke, as opposed to coke made from coal) in their power plant – a few pics before, a conveyor leads up into the green building by the big smokestack – pet coke usually has a lot of sulfur in it – stinks when burned.
More on coking:
College guy: lots of pretty drawings, some pictures:
http://inside.mines.edu/~jjechura/Refining/06_Delayed_Coking.pdf
Industry guy: two black and write drawings, rest is text:
http://coking.com/wp-content/uploads/sites/2/2013/11/DelayedCokingFundamentals.pdf
The “hotter at the top…” is backward from how distillation columns work, it’s hottest at the bottom, and things go up until they reach a level where they cool and condense, then that fraction is drawn off.
http://en.wikipedia.org/wiki/Oil_refinery#The_crude_oil_distillation_unit
Better drawing of the innards of a distillation column at:
http://en.wikipedia.org/wiki/Fractional_distillation#Industrial_distillation
But otherwise, neat pics.
I supervised a combo field development and upgrader engineering concept study, and I had them give me options to use the coke to generate steam and power. We had a gasifier option, captured the CO2, assumed we could sell it to older oil field operations. We also had a plant enriching the air feed and generating a nitrogen stream we assumed we could sell to inject in older gas/condensate fields. The coke gasifier was the weak spot for the whole complex. I don’t think that thing will ever be built, but it sure was nice to look at the drawings.
What Alberta’s shocking election results could mean for the oil sands – Vox
Russia’s oil production was 43,83 million tons in April 2015, or 10.67 mbd using 7.3 barrels per ton conversion rate. That was another monthly (post-Soviet) record. Production in January-April was 175,233 thousand tons, or 10.66 mbd, up 1.2% from the same period of 2014.
The joint study by the Energy Research Institute and The Analytical Center for the Government of the Russian Federation said last year that Russian oil production had reached a peak at 523 million tons in 2013 and would gradually decline to 522 million tonnes by 2015.
In fact, Russia’s production was 526,8 million tons in 2014 (10.56 mbd).
It is true that production is increasing at a very slow rate, but it is not declining.
On Vankor field:
“Rosneft’s Vankor Oil Output May Start Declining Next Year
http://www.rigzone.com/news/oil_gas/a/137901/Rosnefts_Vankor_Oil_Output_May_Start_Declining_Next_Year
VANKOR OIL FIELD, Russia, March 30 (Reuters) – Oil output at Rosneft’s Vankor deposit, a driver of Russia’s recent oil production growth, may start declining next year, a top company official said, underlining the challenges of production in far-flung regions.
Russia, one of the world’s top oil producers, is tapping oil at a pace of 10.65 million barrels per day, a post-Soviet record-high, thanks to a ramp-up at Vankor and other new fields.
“(Vankor’s) oil production will stay at the plateau of 22 million tonnes this year, while next year it may decline slightly,” said Alexander Cherepanov, the chief engineer of Vankorneft, a Rosneft subsidiary which is developing the field.
… Vankor …has initial recoverable reserves of 476 million tonnes of oil and gas condensate,
Total reserves at the Vankor cluster, including Vankor and nearby fields, are estimated at 876 million tonnes.
Rosneft had originally envisaged Vankor to reach peak output of 25 million tonnes a year (500,000 barrels per day) in 2013. It will now do so in 2019 – and only with the help of three other nearby fields acquired with the $55 billion takeover of TNK-BP two years ago.
The fields, Suzun, Tagul and Lodochnoye, will be launched within the next few years with Suzun seen starting production by the end of next year. ”
And there are other undeveloped fields in the Vankor cluster
More definitional stuff.
Now oil fields can define “further development” as being geographical expansion. Add some nearby fields and call it part of the central one, and the central one grows its output and punch your fist into the air in celebration at just what amazing things new technology can achieve.
Speaking of definitional stuff, Watcher, how do you like this one: “reserve impairment.” Can anyone graph reserve impairments, interest rates on rolling over indebtedness and shale oil CEO blood pressure?
http://247wallst.com/energy-business/2015/05/06/how-chesapeake-earnings-overcame-a-5-billion-charge/
Reserve Impairment. haha Like “Right Sizing” vs “Down sizing”.
That’s the first explicit description of the 1st day of month averaging required that I have seen in a quarterly. Should be even lower June 30.
And let’s have a look at what GAAP and non GAAP translates to:
The oil and gas exploration and production company posted adjusted diluted earnings per share (EPS) of $0.11 on revenues of $2.76 billion. In the same period a year ago, the company reported adjusted EPS of $0.54 on revenues of $5.05 billion.
and in the next para:
The company’s took a $4.976 billion impairment charge on its oil and gas properties, largely resulting from significant decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of March 31, 2015, compared to December 31, 2014. After offsetting items, the company’s total net loss amounted to $3.78 billion, or $5.72 per share.
11 cents a share earnings vs $5.72 per share loss.
In their defense this is better than almost all other non GAAP games. This is a non cash loss. It should define collateral, but even that may not happen. And that loss may not happen next quarter (or it might).
As opposed to companies that pay executives money and pretend that is a non recurring event.
Any new developments in Russian shale oil? The newest one at Google News is this item from February: Russia’s Gazprom Neft says drilling results at Bazhenov positive
KLR
I thought two directionals were successfully drilled and two more horizontals with 600′ laterals were going to be attempted by this summer, but I cannot find any source for those recollections (hallucinating?).
Along the way, though, came across an excellent, timely article (April 28, 2015) in Asian Oil and Gas magazine describing the current status of the Russian oil industry.
Nice counterpoint to the discussions in this thread.
In fact, Gazprom Neft has several tight oil projects, all at very early stages of development
“Gazprom Neft Advances Shale Oil Projects
THU, MAY 7, 2015
http://www.energyintel.com/pages/eig_article.aspx?DocId=885448
Russia’s fourth-largest crude oil producer Gazprom Neft is moving on with shale oil projects at home despite Western sanctions that ban shale oil technology and equipment exports to Russia.
The oil arm of state-run Gazprom said on May 6 that the first exploration well was drilled in the deeper Bazhenov formations of its Archinkoye field in the Tomsk region. The move is part of a federally funded project to establish a R&D base in the Tomsk region to test technologies needed to tap hard-to-recover and shale oil reserves.
…….
Gazprom Neft is actively moving ahead with unconventional projects in Russia despite Western sanctions. Earlier this year the company received first shale oil flows at the Yuzhno-Priobskoye field in West Siberia, while it is also developing the Palyanovskaya area of the Krasnoleninskoye field in the Khanty-Mansiysk region. Shale oil development is also carried out at fields licensed to Salym Petroleum Development (SPD), a 50-50 joint venture with Royal Dutch Shell.
Sources told Nefte Compass that Gazprom Neft is also proceeding alone with shale oil within the Khanty-Mansiysk Oil Alliance (KMOA) joint venture, also with Shell, in which the Anglo-Dutch major was forced to freeze its activities last year because of sanctions.
Gazprom Neft Deputy General Director Vadim Yakovlev said last month that KMOA — which holds three licenses in the Khanty-Mansiysk district of West Siberia — would now focus on conventional reserves, although sources say Gazprom Neft hopes that Shell, which is now a “dormant partner,” will finally find ways to revive the JV’s initial aim of exploring and developing shale oil reserves “
Alex
Good info, thanks for posting.
With all the politics involved, I wonder if Schlumberger’s offer to ‘frac for free’, with billing to be taken out of future production would make sense for Gazprom.
coffeeguyzz,
Did Schlumberger really made such an offer?
Alex
Yes, just a week or so back at their quarterly earnings report, or possibly at CERA week?
The CEO came on fairly strongly that Schlumberger now has a suite of tools, techniques, designs that they feel can significantly enhance returns for both fracturing and, especially, re-frac’ing. All they need are wells in which to show their stuff and, with all the confidence in the world, they won’t even charge upfront for much of the work.
It sounded kinda ‘salesmanship’ type approach to me, but, hey, what’s an operator got to lose?
If Schlumberger started doing this and was successful, could have big time ramifications. (Lottsa drilled, unfrac’d wells out there) …
coffeeguyzz,
It seems that oil companies are somewhat sceptical about refracking.
“U.S. shale oil firms say refracking not the best path in downturn
http://www.reuters.com/article/2015/05/05/usa-oil-fracking-idUSL1N0XW1UX20150505
Refracking, the practice of fracking an oil and gas well a second time, is still too unpredictable to rely on as a way to slash costs and increase output during the oil price slump, top U.S. shale oil executives said on Tuesday.
Oilfield service companies, including Schlumberger and Baker Hughes, have touted refracking as a cheap way to revive output from existing shale wells.
But executives from producers say the refracking technology, while promising, remains tricky. “We have not tried any refracks. Our outlook on that is that it is really technical,” said Bill Thomas, CEO of EOG Resources Inc. “We believe that just drilling a new well, and kind of starting fresh … is probably the preferred way to go.”
Output from a new well can be easier to forecast than output from refracking.
“Right now we see that (refracking) as a good forward option,” said Chuck Meloy, the outgoing head of U.S. onshore exploration and production for Anadarko Petroleum. “We’d like to see the technology improve and get enhanced some and make it more predictable.”
Oilfield services companies, which have laid off thousands of employees and seen revenue plunge after a 50 percent collapse in crude prices since June, have talked up refracking because it would allow producers to save money on drilling, normally about 40 percent of the cost of a new well.
Pullbacks by producers will likely lead to a drop in U.S. crude production this quarter, according to government forecasts.
In Schlumberger’s first-quarter results report, Chairman and CEO Paal Kibsgaard said the company expected the refracking market to expand.
“This is quite a significant market opportunity,” he said on the company’s conference call. He added that Schlumberger was prepared to “foot the entire bill for the refracturing work, and then get paid back in production.”
Alex
The results have been mixed, but there have been at least several hundred wells re-frac’d in many different shale plays.
BHP and Marathon are doing many. In the Bakken, well results for Marathon increased almost ten fold to 10,000bbl/month on the few that I’ve seen.
Some of the early gas wells have achieved near original IP’s after refrac’ing.
Still lots to learn, I guess.
http://www.cnbc.com/id/102652027
US crude inventories fall by 3.9 million barrels
Oil prices extended gains and hit new 2015 highs as U.S. crude stocks fell last week for the first time since the week ending Jan. 2, while gasoline and distillate inventories rose, data from the Energy Information Administration showed on Wednesday.
Crude inventories fell by 3.9 million barrels in the last week, compared with analysts’ expectations for an increase of 1.5 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 12,000 barrels, EIA said.
Gasoline stocks rose by 401,000 barrels, compared with analysts’ expectations in a Reuters poll for a 867,000-barrel gain.
Oop! They forgot a little bit of what I would call valuable information.
http://ir.eia.gov/wpsr/wpsrsummary.pdf
U.S. crude oil imports averaged over 6.5 million barrels per day last week, down by
905,000 barrels per day from the previous week. Over the last four weeks, crude oil
imports averaged over 7.2 million barrels per day, 5.0% below the same four-week period
last year
So imports of crude were down 6.3 mmbo for the week with storage down 3.9 mmbo. If imports were kept the same we would have had an build in inventory, rather than a fall. The writers of the articles didn’t think this was a relevant bit of information to be included? Very strange, unless this information affected their story line of course.
The recent increases in US imports, seems to have been from the Saudis. The current drop may also mean the Saudi aggressive exporting, maybe coming to an end?
down by
905,000 barrels per day from the previous week
And thus, reduction in consumption. By . . . a lot.
Production still increasing, per the latest from Texas.
And yet price is rising. Maybe . . . just maybe the Euro going from 105 to 112 and the GBP doing similar things reversed the yardstick for a while and maybe . . . just maybe this is more important than anything else.
0.9% first look Q1 GDP does not bespeak consumption gain, and yesterday’s trade balance report says that number is too high and will revise down. Q2 estimates are being chopped daily as data arrives.
That reduces consumption. But a weak US economy also erodes the dollar.
Look at which effect was dominant. What a coincidence. When you measure something in dollars per barrel and the numerator isn’t constant, how can you think a dollar independent analysis will say anything.
Edit . . . make that 1.13 as of a few minutes ago. Somehow printing 1 trillion euros is anti dilutive, apparently.
In euro, oil is decreasing since the maximum of yesterday (maximum since December 5). I also think oil price variations are very correlated to euro/dollar exchange rate. This is a major contribution.
Watcher,
Euro movement is just a short squeeze. Profits are being booked as all those short Euro’s exit their trades in anticipation of a Greek deal. Profits are also being booked over in the bond market as there is no need to own German bunds yielding next to nothing if Greece gets a deal.
This shouldn’t last. Give it a few day or so after the deal is reached. The ECB still has negative interest rates and is actively printing. Where the Fed is still in positive interest rate territory and is not actively printing. Only way this turns into anything more than a short squeeze is if FED changes coarse an says no interest rate hikes and more QE is on the way. Which is a possibility given some of the recent data coming out the US.
With a Greek deal in place it will be a risk on atmosphere. That’s dollar positive as Yen weakness will continue. USD/JPY has the ability to move all markets. Some more so than others but other currency pairs in particular. If China throws in the towel an unleashes their own QE which is something thats probably going to happen. That will move USD/JPY to 150.00 and send EUR/USD below parity with the dollar. I look for oil to somewhat breakdown it’s correlation with the Euro in this scenario. I don’t see oil being pulled down by the same magnitude. FED would be forced to act in such a scenario so it wouldn’t last long.
Hi toolpush,
I think imports were down 0.9 Mb/d and inventories fell by 3.9 Mb/d, so the net is an increase in refinery input minus domestic output. It could be a fall in output or a rise in refinery utilization rates (refineries are often down for maintenence in the early spring). The 6.5 Mb/d is the level of imports for the week rather than the change in oil imports.
DC, toolpush, Ron,
The dance of the “m”s is getting confusing for me. I’m used to
MM = one million.
Push is using
mm = one million. The doubling makes the connection clear, but…
DC is using
M = one million. Don’t know if this is a typo or a usage, and I’m too lazy to check.
Anyway, Ron, do you have a preference, that all can use?
I understand the problem. I think the standard is the wrong standard but I am powerless to change it. M is Roman numeral for thousand but K is metric for thousand. I prefer K. Then MM or mm is supposed to be million, or thousand thousand. That is not metric and it is not roman numeral. MM is two thousand in roman numerals. If I had the power I would make everything metric, therefore there would be no confusion. I would make K or Kilo thousand, M or Mega million, G or Giga for billion and T or Tera for Trillion. Wouldn’t that make it so simple? Why can’t everyone just go metric?
But I am not king of the world and have no power to make everyone use the metric. I cannot make it so simple, so I will just have to leave it fucked up and let people use mm or MM for million.
Now you know know my opinion, but I have no power to make it simple.
Wish you did.
Jim
Synapsid
It gets even more challenging when oil is expressed in terms of metric tons … MT (usually).
Million metric tons is … MMT (usually).
Don’t know if KMT is a thou or not, but there seems to be no consistent designations.
Thanks Ron.
Time for a glass of port, I guess.
Dennis,
My point was, if imports had stayed the same as last week, at 7.4 million bpd, 7 x 905,000 =6,335,000 extra barrels would have been imported for the week. So instead of having drop of 3.9 million barrels, there would have been an increase of 2.4 million barrels. So even with increased refinery inputs, there would have been a build.
My point was, the fact that imports had dropped so much, was probably the main factor for a decrease in stock levels, yet the writer of the story didn’t even mention it. Just the same way as when stock levels were rising fast, the fact that imports were rising, and going against the longer term trend of a decline, was rarely mentioned in the articles by the “experts”.
Hi Toolpush,
You are correct. The fall in imports is the real story. I forgot to multiply 905 kb/d by 7 to get 6.3 MMb/d, you did it for me, but because it was similar to the 6.5 MMb/d number I thought it was a typo,and that you missed that 6.5 was the level of imports. Now I understand that you are exactly right, I need to read more carefully.
A discussion of reserves (international definitions/distinctions) is provided in the following. I believe this supports/compliments Ron’s information/conclusions: SOCIETY OF PETROLEUM ENGINEERS (SPE) OIL AND GAS RESERVES COMMITTEE; COMPARISON OF SELECTED RESERVES AND RESOURCE CLASSIFICATIONS AND ASSOCIATED DEFINITIONS FINAL REPORT, DEC. 2005 (About 125 pages in total.)
http://www.spe.org/industry/docs/OGR_Mapping.pdf
Which includes: US Security and Exchange Commission (SEC-1978); UK Statement of Recommended Practices (SORP-2001); Canadian Security Administrators (CSA -2002); Russian Ministry of Natural Resources (RF-2005); China Petroleum Reserves Office (PRO–2005); Norwegian Petroleum Directorate (NPD–2001); US Geological Survey (USGS-1980); United Nations Framework Classification (UNFC-2004)
The overall structure of reserves definitions within each system are compared to the 1997 SPE/WPC reserves definitions, the 2000 SPE/WPC/AAPG classification, the 2001 supplemental guidelines, and the 2004 glossary (referred to as the “SPE definitions”).
Re government and industry reporting: Norway, Russia, China, and USGS attempt to capture the full resource base in order to project future production potential for the country and are not primarily concerned to show recoverable volumes and values accruing to individual companies. Governments need this information to implement and modify legislation and policy (fiscal terms, licensing incentives, etc.) on resource development to manage supply. In the case of Norway, the government’s classification is also used internally by the Norwegian companies to manage their oil and gas portfolios (for those listed on U.S. stock exchanges, they must also estimate proved reserves under SEC guidelines). The USGS conducts “future potential of the world” studies based on geological-based assessment units that cut across political boundaries to support long-range global energy supply analyses.”
Nod, I am reminded in yesterday’s comment stream that Russian dood anted up “the Russian Academy of Science is always conservative in their reserves estimate”. That statement is not controversial given the history of just about everywhere . . . of reserves growth.
I wonder how old or new USGS data is for China’s oil reserves.
Hi Doug,
Fernando suggested 25% reserve growth the other day, if he meant 25% of total reserves (remaining reserves plus cumulative production) and if he was also talking about 2P reserves (usually about 70% higher than 1P reserves based on UK data), does that sound like a reasonable average reserve growth?
I think he was thinking over a long period such as 30 years.
If not could you make an educated guess at what you would expect for reserve growth or maybe a reasonable range? Thanks.
Hi Dennis,
Well, Prudhoe Bay oil recovery increased from initial estimates of 9.6 to 13 × 109 bbl oil, much of which is related to exploiting immiscible gas/oil gravity drainage and oil stripping mechanisms. So, if you consider this as reserve growth then it amounts to about 25%. Perhaps that is an average in the West? During the past 15 years, the gravity of the marketed Prudhoe Bay hydrocarbon liquids has increased by > 5°API, another factor. But, more likely, this is an apples and oranges example?
I think the key point, per Ron’s argument, is that owing to different methodologies employed in Russia (and China), reserve growth there will be less than here – almost zero in some cases. When I worked for a small Huston based Oil Company, about 10 years ago, I was supposed to identify reserves, write a report, and they were to waltz back to Texas, raise some cash, do a JV and live happily ever after. My problem was mainly to downgrade Chinese (or Russians) reserve numbers so they would conform to SEC rules. I suspect the final numbers between the Chinese (or Russians) reserves would have come about the same after reserve growth from the original SEC numbers. But I don’t know how to factor EOR, etc. into this so I guess the answer is, I have no bloody idea. Incidentally, the US companies that I worked for never did finalize any deals and if truth be known they probably never had a chance to do so.
Anyway, Fernando knows infinitely more than I do, so ignore me and go with him! If he says 25% go with that.
Somebody needs to inform Warren Buffett that he needs to fix the tracks after today’s derailment.
What Ron found about reserve growth is similar to what I reported in The Oil Conundrum. Russians report reserve data scientifically while Americans report it bureaucratically. Because of this, the USA has this creeping growth potential which is not real but only a result of the accounting practices for low-balling initial estimates.
Mr. Scope, on behalf of the entire US domestic oil and natural gas business, and reservoir engineers everywhere, you may kindly kiss my ass.
We spend billions of dollars each year in America developing oil and gas reserves based on the science of volumetric reserve calculations and recovery mechanisms, natural and induced. When we must report reserves to the SEC or to lending institutions we are bound by rigorous decline curve analysis standards that has served the people of this country well for over 85 years. I regret those standards don’t meet your modeling needs…but not really.
Having been to Russia on well control events I am not convinced much of their oilfield over there is rooted in a lot of science or professionalism. Certainly not with regard for the environment. For every 10 BO they get out the ground they put 2 ON the ground and in their rivers. Push’s ESP story is spot on; I have seen pipe rams upside down in BOP stacks, one ram missing, both rams missing, Hydrills not bolted down, accumulators rusted closed and choke mainfolds with no chokes. Stupid stuff that generaly arose from vodka induced stupors. I know you don’t understand a word of that, sorry.
Fun people though, friendly and always ready to party hardy. Scared to death, however, of farting without checking with their “bureaucracy” first. That part of your comment was a joke, right?
Mike
Mike, And your point is exactly what?
I spend time in the book going over the issues surrounding statistical censoring.
I don’t really care about your anecdotes. Anecdotes are not exactly science.
Funny, I was wondering what your point was other than taking an unlearned cheap shot at the manner in which Americans report their reserves and that Russia does it more “scientifically.” To suggest that Russia does not overstate it’s recoverable reserve base is incorrect; all countries do. I was sticking up for my country and my industry.
I don’t really care about your statistical censoring.
Mike, I don’t really care about your opinions. I prefer to work with data.
M & W, how old are you guys, seriously.
Mid 60’s, gainfully self employed in the oil and gas exploration business and impatient with internet educated reservoir engineers who don’t know which end of a workover rig to walk to. Creeping reserve growth in America seems a little better to me than plummeting reserve decline. Call it Texas pride, whatever.
I think I don’t belong here anymore, Enno.
Mike
Mike, you belong here. Please hang around. Guys that actually do the drilling are invaluable to this list.
Mike, I very much appreciate 95% of your posts, you surely belong here. I am sure many agree with me. I also much appreciate Webs posts, as long as they are not offensive. Many come here to understand the complexities of peak oil, and views from different experts are required to get a balanced view. The personal attacks are in the best case a distraction and a waste of time. Good advice from Charlie Munger: you can always call somebody a **** tomorrow.
Mike,
You definitely belong here, WHT just would prefer that the SEC rules required 2P reserve reporting in the US rather than 1P, because that is the most likely estimate, a 50/50 chance of “real” reserves being either higher or lower if done correctly.
My analysis showed how reserve growth can be a pure book-keeping artifact. Essentially, the reserve growth “creeps” because the initial guess was much too conservative. So if they had used a less conservative estimate for the reserve to begin with there would be much less reserve growth to speak of. In the book, I went through this analysis and deconstructed the somewhat misguided analysis of a couple of USGS geologists.
The reason that Russia has very little reserve growth is that they used the initial estimates for how much oil there was and they maintained this number all the way through.
And I do mention that there are exceptions, such as the secondary growth of places like Kern River.
That’s why I called it a book-keeping error and not real science. Real science would have used the mean value for estimated reserve and then placed error bars around that. And I agree that the reason that the USA had these rules in place was to prevent Wall Street from gaming investors too much.
If they low-ball the reserves, they can prevent naive investors from getting overly excited over false claims. But this also hurts the fields with huge reserves.
I agree with your assessment with the caveat that secondary EOR MAY allow an additional 25% to 30% of the oil in the reservoir to be extracted. Of course this comes with a cost and presumes that EOR hasn’t already been factored into the reserve determination.
Mike,
Gotta agree with Ron. Your insights are priceless, even /especially when somebody get under your skin:-)
WHT (Scope) belongs here, too. I doubt he meant to offend. I think he is a talented numbers and models guy, but I can’t describe him as tactful, more like dosing out blunt reality as he sees it, and he is very confident in his work, and somewhat contemptuous of folks who don’t appreciate it (an admirable trait I appreciate in you, as well).
Sometimes I wish he’d choose his words more carefully to make his point. I doubt he deals much with the kinds of realities and people you do (requires some tact and sensitivity to others feelings), but his work contributes here, too. My apologies to WHT if my blunt assessment offends.
Please, hang around, and have a thick skin regarding WHT’s comments. He can’t help being a bit abrasive. but I sense he means well.
We are all in this predicament together and I appreciate all your comments and anecdotes, and WHT’s inputs, too, although I mentally put on my bullet proof vest before I read his. Yours are more fun.
Jim
You mean that when I was giving kudos to Ron, I wasn’t being tactful? Usually, when I say that what I found agrees with what someone else says (in this case Ron), I am not trying to discredit what they have to say. That would only reflect badly on my own analysis.
And so it comes down to whether I was not being tactful in blaming Wall Street for the reserve growth issue. Mike stepped in he seemed to say I was being unpatriotic or something.
Web, I do appreciate your input. And I appreciate you agreeing with my analysis. This whole “Reserve Growth” thing comes down to just plain common sense in my opinion. I have laid out the facts that:
1. It is largely an artifact of SEC regulations.
2. It is most pronounced in new fields.
3. It is far less pronounced in oil fields of national oil companies and especially fields that were originally surveyed under the Former Soviet Union.
The above facts simply cannot be denied because surveys by the USGS prove them out.
I think Mike misunderstood your comment. You were not attacking oil company reporting procedures but rather SEC regulations. Or at least that’s the way I took it.
Hi Ron,
I missed the part on National oil companies, it seems you showed that West Siberia was different from the US and has lower reserve growth if an estimate of 2P reserves is not used. It may be that the National oil companies use 2P reserves, in fact if one looks at BP oil reserve data and assumes that the 1980 OPEC reserves were 1P reserves and that 2P reserves are about 1.75 times the 1P reserves (based on UK data), then the OPEC reserve appreciation in the 80s may have been a switch fro 1P to 2P reserves, some of the OPEC increase in reserves beyond that could be explained by a combination of discoveries plus reserve growth.
Dennis, yeah, that’s the ticket. 😉
Thank you, Jim.
I do not know the precise history of reserve accounting but essentially it was first developed as a means of self regulating the industry by the Society of Petroleum Engineers. Early accounting standards have been revised, upgraded, new definitions made and ultimately accepted and managed by the AAPG, SPEE and the WPC. The SEC embraced those accounting standards long ago, tweaked them more and those standards exist for good reasons. The industry does not intentionally low ball reserve estimates. How the industry reports reserves has nothing to do with Wall Street or bureaucracy. I am totally baffled by all the hubbub about reserve growth. Not long ago the discussion was how the shale oil industry overstated reserves, now the angst is understating reserves.
In the oil business even PE’s fresh out of school are “worms” of the lowest order. Everybody starts in the oilfield by getting their hands dirty, their ears ring from all the wound out engines, they hurt from the hard labor and they feel fear being around pressure, and big iron that will kill you in a heartbeat. You keep your mouth shut, watch and listen, and work your way up. Some people work themselves out of the field and into management, but you always start at the bottom. You earn the right to criticize others and that takes a long time. I don’t believe I misunderstood the gentleman. I took particular offense at the comparison as to how the American oil and gas industry reports reserves compared to Russia. Accordingly I told the gentleman to kiss my ass. It’s the Texas way.
My daughters say I am gruff, my wife, colorful. To do what I do for a living if you don’t have a sense of humor you are a walking heart attack looking for tarmac. I would like for people to understand all aspects of the oil business better and not mistrust it so much. The way the industry is perceived and the way it actually works is like night and day.
Mike
Mike,
I get a headache from the smell of petroleum. Like GWB, I wouldn’t last a day on the oil patch.
Tough nougies.
God loves you, deal with it.
I am, quite well, thank you.
Oil 101 (Downey) is a good book for those that don’t like the smell of oil but want to critique it from afar and Petroleum Evaluations for Financial Disclosures (Campbell) is a quick, easy read about reserve estimating and economics. These guys are pretty up to date on reserve matters, https://secure.spee.org/
Have a productive day, Mr. Scope.
Mike
yea, this stuff is so yesterday. In my spare time, I am now working on analysis to predict El Ninos. More of a challenge than the oil depletion analysis.
Check my home page and the Azimuth Forum:
http://forum.azimuthproject.org/discussion/1608/enso-revisit#latest
Mike I may be all wrong but anybody who selects a handle such as WHT is apt to be somewhat of a pompous stuffed shirt which seems to be pretty evident in this case.
Mr Telescope probably knows some stuff , no doubt he knows some stuff. At some point in time it may turn out that he has done some useful modeling work in respect to oil. So far I have not seen or heard that his model has been used to produce any better predictions than anybody else’s.
You and I and Fernando share some attitudes that tend to rub ivory tower types the wrong way. I sound just like Fernando when I try to discuss sustainable farming in a forum devoted to that subject.
I know it is something we must eventually learn how to do. But the so called sustainable farming operations that are talked to the sky are not, not really. And they are not going to scale to feed the developed world.
I realize there is a crisis in the making. The difference between me and the sustainable farming super optimistic guys is that I KNOW that what they are doing is not going to scale.
Fernando does not deny peak oil or peak resources just as I do not deny the eventual end of modern day industrial style farming..
He just says renewables don’t work very well or at all – which is true depending on circumstances and context.
Stick around and stick to your guns. I have learned far more from you than any academic when it comes to oil.
Now as far as Fernando is concerned , I am waiting to hear him say in so many words that we are EVENTUALLY going to have to go renewable or nuclear.
I am not sure why he never admits this.
How about it Fernando?
Webby, we can’t possibly teach you what we know about Russian oilfield practices in a blog. The Russian reserve estimates were bureaucratic. I don’t think we can say the individual Russians were dumb, but they were forced to work in a surreal environment.
Hi WHT,
If one takes reported US proven reserves and bumps them higher by a factor of 1.75 to get an estimate of 2P reserves, that eliminates the accounting problem. The US growth in reserves is very real, if the discoveries reported each year are deducted from each years total reserves (2P reserves plus cumulative output) from 1977 to 2006, there was 61 Gb of reserve growth on a base of about 170 Gb of total reserves at the end of 1976, that is a lot of reserve growth and has nothing to do with accounting.
You may be correct that it is different from Russia, I think Mike may be right that the higher growth in the US is because we (or I should say Mike and others in the US oil business) are very good at producing oil.
The growth rate over this 30 year period in the US was about 35%, in the rest of the World it will be somewhat lower, maybe 20 or 25%, but it will not be zero as some people seem to think.
In the UK from 2004 to 2013 growth in total reserves was 8% in the UK. Some of this was discoveries, but I do not have that data from 2004 to 2013 for the UK so I assumed an average of 27 million tonnes of oil per year were discovered over those 10 years. For a 30 year period the growth rate may be about 25% as Fernando has estimated. Table below with UK data.
Dennis,
The basic idea is that they didn’t use the mean value for initial estimated reserves. They used numbers that was low-balled because those were the rules for Wall Street investments. Other places in the world do not have these restrictions and therefore reservoirs dd not show the reserve growth. See the citations in the book on this finding.
The exceptions of course are secondary recovery, secondary sources (such as Bakken), and the opening of new locations such as Alaska and the Gulf. The latter two are actually classified as new discoveries and do not fit into the reserve growth paradigm. It is easy enough to account for new discoveries by using a probability model such as dispersive discovery. The long-tails are more than enough to account for future growth in this regard.
The reason I even got involved with this was that I had on-line battles with the cornucopian Michael Lynch, who was trying to convince everyone that the reserve growth was something that was going to put an end to Peak Oil theory. And there were others that said that reserve growth was caused by abiotic replenishment of oil in the reservoirs from deep within the earth. Bizarre stuff like that.
Getting arrows in the back over this, wow.
WHT,
Thanks for clarifying. I got your point in your first post, that different systems produce different rates of reserve growth numbers. Almost intuitive, isn’t it?
Ignore the arrows. Here they have foam rubber tips.
Jim
Hi Webhubbletelescope,
I agree that the reserve growth story can be overdone. I am trying to get people to not go too far in the other direction with the claim that there is no reserve growth or that it is negligible. In my calculation of US reserve growth I used an estimate of 2P reserves and I excluded new discoveries (these are explicit in the EIA reserve data so one can simply deduct them.)
I agree that reserve growth may be different in different regions, but it is unlikely to be zero. If a discovery curve is fit to Jean Laherrere’s backdated discovery data (through 2010) we get a URR of 2200 Gb for C+C less extra heavy(XH) oil, the problem with such a method is that it assumes no reserve growth only 250 Gb of new discoveries.
I know you have little patience for a Hubbert Linearization type of analysis, but such an analysis on C+C less XH suggests a URR of 2500 Gb, in general because we are fitting a straight line to a curved hyperbolic function, these HL estimates tend to err on the low side. I simply take the USGS 3100 Gb estimate and average it with the HL estimate and use 2800 Gb for the URR of C+C-XH.
In either case whether 2500 Gb or 2800 Gb we need either 300 Gb or 600 Gb of reserve growth, note that this could be over 200 years so the rates do not need to be very high.
Two models below using your dispersive discovery model with Jean Laherrere’s discovery data through 2010. The gap between the models is due to reserve growth and slightly more optimistic new discovery assumptions 300 Gb vs 250 Gb, reserve growth is 550 Gb from 1975 to 2100 (125 years) and we assume reserve growth is backdated to original discovery date.
Reserve estimates weren’t low balled. We used SEC guidelines. Most companies have usually kept proved plus probable numbers, but the probables weren’t published. I’ve seen companies with twelve reserve classifications, with every barrel tied to some sort of spending plan.
Webby, I don’t know about the other guys, but we try to use p50 for internal cases. But p50 may not meet sec guidelines, so we submit the proved reserves as per sec, and keep our numbers to ourselves.
In some countries we submit a figure to the sec and a different figure to country authorities to satisfy different rules.
Projects are usually sanctioned on p50. If the number of samples is large enough, they are more or less the same size, then p50 is fine, as long as they don’t share the same flawed probability distribution for a key parameter.
We devote a lot of time to this subject, much more than you can imagine. Sometimes p50 isn’t advisable. I’ve had pretty serious disagreements with some senior managers who wanted to gamble billions on a p50 call (this is one reason why large companies usually work in consortia for offshore and other expensive projects).
Hi Fernando,
All WHT is saying is that the SEC rules cause the published reserves that are easily accessible from the EIA and BP, etc to be 1P estimates, 2P would be better from an analytical perspective, otherwise it looks like reserves are growing, but in fact it is just probable reserves moving into the proven category when reserves may not have changed at all, Ron is also saying that.
BP figures seem to be a mix. I would say most of it is proved plus probable. It depends on how the world reacts as prices climb to say $150 per barrel in 2015 dollars.
As you know, I think some of the slack will be taken up by sugar cane ethanol. It seems to compete very well in the tropics (24 N to 24 S latitude). Every time I think about this problem I go back to the need to have renewables that work. Or something fancy like cheap fusion. The other option seems to be reducing population in a hurry.
Hi Fernando,
Using the 2014 BP Statistical Review of World Energy, it looks like OPEC and Former Soviet Union(FSU) nations reserves may be proved plus probable. If we assume this and that the increase in OPEC reserves from 1988 to 2013 was from reserve growth we can increases the reserves of the rest of the World (not OPEC or FSU) to 2P reserves by multiplying those reserves by 1.75. If we leave out the oil sands reserves from Canada and Venezuela this results in a 2P estimate of 1400 Gb for remaining reserves, if the URR of 2800 Gb for C+C less extra heavy oil is close then only 200 Gb of reserve growth would be needed, which is only about 14% reserve growth on remaining 2P reserves.
This estimate of remaining reserves can be scaled back to 1P reserves by dividing by 1.75, so 800 Gb of 1P reserves, but in that case we would expect 800 Gb of reserve growth(100%) or a doubling of reserves from 800 to 1600 Gb over time(say 100 years).
This sounds ridiculous, but for the US from 1986 to 2006,
proved reserves grew by 152% of remaining proved reserves in 1986. That was over only a twenty year period.
Reserve data at link below, click on download seies history for all data from 1977 to 2013.
http://www.eia.gov/dnav/pet/pet_crd_pres_dcu_NUS_a.htm
I quit posting to Gail Tverberg’s blog months ago when I realized that she and the active posters there have a specific viewpoint and there is no willingness to consider any others.
I happened to look at her latest post and read down it until I saw this. Is this how she sees the world? No wonder I can’t relate to her and her followers.
I didn’t realize humans were in a contest against other species which we were supposed to win.
Unfortunately, we live in a world where there are only two options–win or lose. We can win in our contest against other species (especially microbes), or we can lose.
Boomer II – Then you do not understand life. You are probably one of those that would not have spent a dime to cure AIDS.
She was talking species as in all species. Animals, plants. No just disease.
Besides, even our efforts to dominate microbes come back to bite us. We use too many unnecessary antibiotics and create superbugs in the process.
I agree. Gail’s intuition is that PO means the certain end of civilization, and she can’t even begin to discuss anything different.
I think it is a lead pipe cinch that civilization will collapse in this century, very likely within the next 50 years… or sooner. However I think peak oil will be only one of the causes.
However I seldom, if ever, discuss it. The reason is that the vast majority of people have absolutely no idea what a damn mess our environmental system is in. And I don’t have a month to explain it to them. So I just let it go. After all, there is not a goddamn thing I can do about it so why the hell should I try to convert anyone to my point of view. Just enjoy life until… until… well until the end.
The reason is that the vast majority of people have absolutely no idea what a damn mess our environmental system is in. And I don’t have a month to explain it to them. So I just let it go.
I agree! I’m tired of even trying anymore. I’ve decided to do something about it using what talents I have, together with whatever time I have left on this planet.
I’m planning on doing a little project mostly for my own benefit, which I will dedicate to my son.
I will do it for as long as I am able to, starting in about a month. I’m 62 y.o. and still in reasonably good physical shape. This project might turn out to be my last hurrah at the end of my long diving career, I have been a diver since 1975 and have more professional certifications than I can even remember.
I’m planning on doing a series of videos on one of the oldest Staghorn coral reefs in the US. It happens to be literally in my own back yard. I will be solo free diving, I’m done with bulky scuba gear! My equipment will be a GoPro camera, my Ocean kayak as a dive platform and I’ll be hydrotouring along the reefs with a Lunocet Pro, biomimetic dolphin tail fluke.
I will be posting some of the videos on Youtube with some commentary.
While I have a lot of technical computer graphics experience I’m going through a bit of a learning curve with video editing software at the moment so I’m not quite ready for primetime…
Once I start this project I will probably be spending a lot less time on this site. So if I disappear and stop posting hear that is the reason.
Cheers!
Good on ya mate. Stay clear of bad stuff (jelly fish, sharks, barracudas, pirates and props) and send us an update from time-to time: We’ll miss your elegant prose, etc.
Glad you are doing something you love. I took diving lessons back in 79. Got my certification but never dove again after that, to my deep regret. I took my deep water test off Key Largo. I wonder if the coral is still there. It was beautiful then. Looking forward to seeing your videos. Hope you keep posting as much as possible.
Tks, Ron,
Yes, there are still some live coral around here. I live within 8 miles of this reef. http://goo.gl/gE10A2
When I get rolling I’ll post a link to my Youtube videos! In case anyone is interested.
Cheers!
Fred
It is very common to get SCUBA certified and never dive again. It is largely a swagger credential. It takes hours to get a relatively few minutes underwater. You take a vacation to say Turks and Caicos and you have to do the computations for cabin altitude followed by whatever depth, and the boat ride to the site isn’t short. Then at the back end will be another plane ride following that day’s earlier depth and it is all a royal pain, to get photos probably inferior to the tourist brochure.
I took a one semester collage course during the 70’s that included considerable physiology, safety training and physical conditioning, It was a magical experience. Over the following years I found many occasions to snorkel while on vacation. Was usually too lazy to don scuba gear.
If so then I think I’m allowed to swagger more than a bit.
I got my Scuba instructor certification in the 70’s, I’m certified 500 ft. Sub Sea Oil in heliox saturation diving, I worked on oil rigs in the Campos basin off the coast of Brazil. I’m certified in about 25 different specialties and I have been kayak diving for pleasure for the last 15 years near my home in Florida. Now I’m going back to pure free diving. BTW I dive mostly alone. Don’t have to take care of people who got their certification as a swagger credential.
Fred
Congrats on your future plans and all that you’ve already accomplished.
I, also, worked the Campos field in the mid-seventies, working for Oceaneering and Subsea Int’l. There were not too many of us down there back then.
Who did you work for?
I worked for a Brazilian company called TechnoSub. They were affiliated with Subsea Oil out of Italy. I was trained in Fiumicino, Rome and Zingonia. We all worked as subcontractors for Petrobras
Fred,
Were you down there when they had that horrific incident with a two man dive team – Brazilian, I believe – losing communication with the surface, topside frantically recruiting a nearby rig’s dive team to attempt to rescue, some big time heroics involved to no avail, from what I was told. (I had left for the North Sea by then). Were you there then?
Hey coffeeguyzz , I left the Campos basin at the very end of the 70s late 1979 to be specific. I don’t remember the incident you mention. I was very fortunate to never have experienced any dive accidents on my watch. I did know of a dive team that was killed in a chopper accident. While I did work with some Brazilian divers most of my team members were Italians.
I got certified in a deep rock pit full of stolen cars. I remember spearing two snapper with one shot, watching my spear bounce back from a shark’s side, getting stuck in the Delray wreck when I was trying to recover my spear, and watching my girlfriend vomit orange pieces 20 meters below the surface, which seemed to attract lots of little fish.
Hi Nick G,
There are many that are certain that civilization will end. I am not clairvoyant and take the view that there will be very difficult times ahead, likely another Great Depression within 5 years of peak fossil fuels (peak in 2025+/-3 years), with the possibility that humans will wake up and do what needs to be done before civilization collapses.
The scenario that Old Farmer Mac often lays out seems as likely as any.
A few thoughts:
First, Peak Oil is unlikely to be synchronized with Peak Coal and Peak Gas. There’s no evidence that coal or gas will peak any time soon, except possibly in China.
I don’t think that even people like Rutledge think that Peak Coal will happen as quickly as PO, and Rutledge’s presentations are misleading, as they document declines in official economic reserves due to the cheapness of competitors and the pollution of coal, rather than real scarcity. I’m optimistic that coal consumption will continue to decline, but it won’t be due to geological limits.
In fact, as wind and solar expand, we’ll be leaving behind vast amounts of coal, kerogen, bitumen, peat, etc.
2nd, I’m just baffled by they idea that PO will cause anything beyond a *relatively* modest decline in growth rates. There is an enormous buffer of marginal consumption by SUVs and inefficient cars, and price increases would bring greater efficiency, lower consumption and very likely stabilize production levels.
The idea that PO will cause collapse seems to be based on the fact that oil shocks have contributed to past recessions. The idea that PO would cause collapse is what one PO blogger might call “ruthless extrapolation” – it doesn’t follow.
What’s the causal link between Peak Oil and recession/depression, and how strong is it?
One possibility: rising oil prices cause inflation, and that causes recession. This is a plausible argument: that PO would cause inflation, inflation would cause central banks to tighten credit, and tightened credit would cause recession.
But, that wasn’t the case from 2004-08. Inflation never rose about 4%, and core inflation rose much less. Interest rates rose at a modest rate on a historical basis, but not because of oil prices – the Federal Reserve made an explicit decision to not worry about the impact of oil prices on the general price level, assuming that they’d come back down eventually (as they partly have). The Fed plans to continue this policy.
So, what’s the causal link between PO and recession/depression?
James Hamilton showed one: that oil shocks caused fear, uncertainty and doubt among car buyers, who put off purchases, thus reducing overall capital investment, thus reducing aggregate demand, causing recession.
“…, the technological costs associated with trying to reallocate specialized labor or capital could result in a temporary period of unemployment as laid-off workers wait for demand for their sector to resume. Bresnahan and Ramey (1993), Hamilton (2009b), and Ramey and Vine (2010) demonstrated the economic importance of shifts in motor vehicle demand in the recessions that followed several historical oil shocks.”
page 26 http://econweb.ucsd.edu/~jhamilton/handbook_climate.pdf
The problem: this is a short term effect. If oil prices stay high, they’ll switch to buying more fuel efficient vehicles and car sales will rise again. Again, this is what we say from 2011 to 2014: oil prices stayed high, and yet car sales recovered to historically very high levels.
Other research at the St. Louis Fed, which I can show you if you want, shows that oil shocks only cause short term recessions.
So, what’s the causal link between PO and recession/depression?
Hamilton ascribes more importance to it than most, and he thinks that the 2004-08 oil shock (in which prices rose roughly 5x) shaved roughly 2% off of US GDP, cumulatively. That’s not TEOTWAWKI.
I’m just baffled by they idea that PO will cause anything beyond a *relatively* modest decline in growth rates.
Nick, peak oil will not cause anything, not one damn thing. Just look around you, we are, I believe, at peak oil right now. It is causing nothing. What will cause all hell to break loose is a long and steady decline in the oil supply after peak oil. And if that decline is relatively steep, the more chaos it will cause.
You must understand that the decline after peak oil is not something that will happen then it will be over. When it starts happening it will continue to happen until there is no affordable oil to be had anywhere.
I know people like yourself believe we will learn to do without with only a little hardship on the part of the world’s population. But I simply cannot accept that. Nothing is as cheap or as portable as oil. And the products made from oil are everywhere. Plastics are everywhere. Rubber is everywhere. Asphalt pave roads all over the world. And I could go on and on.
Even some transportation can never be converted to something else. Jet fuel for instance, or bunker fuel for the ships at sea.
Without oil it will be a totally different world, a world much poorer than it is now. I don’t believe there is any way possible that 7.3 billion people can be reasonably clothed, fed or housed without cheap liquid fuel and petroleum by products.
As much as you are baffled by people believing the consequences of the aftermath of peak oil, it baffles me how some people can imagine business as usual, or almost business as usual, with an ever diminishing supply of oil.
You must understand that the decline after peak oil is not something that will happen then it will be over.
Sure. Though I suspect the decline will be relatively slow, as high prices will bring back LTO and other production.
When it starts happening it will continue to happen until there is no affordable oil to be had anywhere.
What’s “unaffordable”? Europeans pay twice as much as Americans. That works fine because they use 18% as much, per person. And, they use 18% as much because….they pay twice as much per liter.
Nothing is as cheap or as portable as oil.
Whoa! How are you still saying this?? EVs are cheaper than ICEs, right now.
Let me say it again: EVs are cheaper!
Plastics are everywhere
Yeah, but they don’t use a large volume of oil. Plastic can be recycled, and it can be made out of any hydrocarbon. It’s not a big deal.
Asphalt pave roads all over the world..
Because it was cheap. Concrete works just fine, and can be made carbon-neutral, if we can get the industry interested in doing something slighly new…
some transportation can never be converted to something else. Jet fuel for instance, or bunker fuel for the ships at sea.
Yeah, liquid fuel is pretty convenient for that, as well as seasonal agriculture. But, planes and ships can be made much more efficient (three times as efficient), and synthetic liquid fuel can be made from cheap surplus electricity. It’s maybe twice as expensive, but it will be affordable with either vehicles that are more efficient, or if they use cheap power. Not especially more expensive, if both happen.
But, each of those is a long discussion. So, let’s start with just one, EVs.
EVs are cheaper than ICEs, right now!
Nick, we don’t have to wait for peak oil. If EVs are that much to make and operate they will replace ICs long before any serious decline in oil production.
That don’t really seem to be happening right now however.
It is happening. Look at Tesla: they’re selling all they can make, and doubling about every two years. EV sales are growing quickly in general.
On the other hand, hybrid sales have stopped growing at the moment, with low gas prices. One of the reasons: most hybrids are marketed as economy cars, so when cost pressures ease up, they’re going to be a harder sell. Cost efficiency just isn’t the primary driver of car sales!
But, if oil prices spike again, then hybrids will be (pardon the pun) off to the races again.
OK but you keep saying that EVs are cheaper than ICEs. Clearly not the case with the Tesla. So why aren’t EVs selling better than ICEs again?
The Tesla is much cheaper than it’s *comparable competition*. It’s the best, fastest four door sedan in production.
It’s the physics: electric motors get more efficient as they get bigger, and big electric motors are relatively cheap to make. Few moving parts, etc. It’s no coincidence that Rolls Royce makes big jet engines.
But, most car buyers aren’t focused on price. Why do SUVs outsell cars?? Their more expensive, they get miserable fuel efficiency, they’re annoying to drive, they were less safe when they first came out.
The average car on the road gets 22MPG, but a Prius gets 50.
If fuel efficiency or low total cost of ownership was the primary “driver” of car sales, no one would buy anything but a Leaf, Volt or Prius…
For what it is worth I am somewhat agnostic about peak oil being the primary future cause of economic collapse. If the supply declines slowly and steadily we can adapt.
But if there is a sharp fast decline in oil supply this could trigger all sorts of troubles all the way up to a nuclear WWIII.
I think Ron is basically right about collapse but hopefully too pessimistic. Collapse is going to happen because the Mighty Mighty Market and the Invincible Invisible Hand are most likely not going to work fast enough to compensate for declining resources in the face of growing population.
The result will be widespread war and widespread but partial collapse.
Some societies will probably manage to conserve enough existing domestic resources and hog some more from other societies to pull thru and successfully transition to a low energy per capita renewables based economy.
As far as ships are concerned there is no reason ocean going freighters cannot run on coal again. Modern boilers and steam engines are substantially more compact, efficient , and powerful than the ones built a century ago.
And the ships are so much bigger too. The bigger a ship gets the less power it needs per ton of cargo.
A few more thoughts:
Hubbert didn’t think PO would make things collapse. He assumed nuclear would be the energy source, and nuclear would indeed work, though it wouldn’t be my preferred source.
The first PO enthusiasts just assumed that other energy sources wouldn’t work. I don’t know why they dismissed nuclear, but it was kind’ve understandable that they didn’t give much credence to the immature wind and solar industries.
That has changed – wind and solar are clearly workable.
Finally: free markets (that invisible hand) aren’t perfect, but they do work pretty well when combined with just a little planning, which has indeed been done. EVs and hybrids are ready, and available when incentivized.
High prices would reduce silly consumption (EVs, etc) and push industrial/commercial users to move to alternatives, while increasing production. Prices are unlikely to rise above $150 for an extended time, barring major disruption of Russian or Saudi production.
Really what it all comes down to is whether or not the decline in net energy that peak oil represents can be accommodated by a combination of efficiency and renewables.
It’s obviously much more complex than that, but that is the broad macro reality that we’re all debating here.
If the decline in net energy post peak cannot be stabilized by renewable capacity and efficiency gains, then growth is over (with ups and downs of course). Our entire global financial, monetary, and economic system is predicated on permanent growth due to debt and interest. New growth pays off old debt.
No growth=Collapse
7 years ago I was 100% positive that’s where we were headed. I am now cautiously confident that we can make it through this transition. Even in the worst case scenario I still have my PV, my Volt, and my permaculture food forest (formerly known as a yard).
I sense that 2017-2020 will be a rough patch. Things could go wrong; collapse could happen depending on severity and timing of peak as well as political implications if we experience a 2008 financial crisis sequel. If political wrangling prevents passage of legislation meant to hold the financial system together in a crisis – in the U.S. or Europe most likely – then we could yet experience what COULD have happened in 2008.
That is why this whole subject is so fascinating right now. It is truly impossible to tell what will happen after the peak. We don’t need very much more time before EVs, PV, wind, and battery storage all become cheap enough to make rapid transition not only possible, but natural.
Only problem is that transitions happen on a consumer and business level DURING GOOD TIMES. Can’t sell EVs if an oil crisis just caused 12% unemployment, no banks are lending, and companies have cut capital investment.
That is the scenario that scares me. That we could get so damn close, yet lose momentum right when we’re about to take off. It wouldn’t be like 2008 since a genuine peak and permanent decline would see any fledgling economic recovery (and ensuing transition) quickly knocked down by another oil price spike.
Technically, we’ll transition regardless, but I much prefer a transition where everyone is driving EVs instead a transition where everyone is just too poor to drive.
Hi Nick,
All fossil fuels will not peak simultaneously, but the energy provided in tonnes of oil equivalent of all three added together will peak at some point in time. Steve Mohr’s PhD thesis suggests that coal will peak by 2030 at the latest and natural gas will peak last by at least 2035, his estimate for the peak in oil proved somewhat pessimistic, so perhaps his dates are too early. His best guess for Coal URR was about 1000 billion tonnes, oil about 3000 Gb, and natural gas about 16,500 TCF.
The peak in oil and other fossil fuels will lead to higher prices and would likely lead to recession because the economy is unlikely to adjust as easily to rapidly rising fossil fuel prices as you believe.
You are correct that there is a lot of waste and fossil fuels can be used more efficiently and higher prices will lead to more public transportation, and maybe more use of EVs, but such a transition will only begin in earnest when fossil fuel prices rise and your assessment of how quickly and easily this can occur strikes this optimist as too optimistic.
Well, there’s a contradiction here.
Right now there are lots of EVs and hybrids available to buy, and EVs and hybrids are cheaper, but hybrid sales aren’t particularly growing because oil is cheap. The savings aren’t dramatic, people are feeling flush, there’s not much incentive to try a new thing (except for the Tesla, which is clearly a *lot* better).
Now, if oil prices are high enough to threaten to cause a recession, wouldn’t that goose EV and hybrid sales immediately? I just can’t see this scenario: the economy is in a tailspin, drivers are pinched by fuel prices, but…no one does anything about it, even though they have easy alternatives staring them in the face, being advertised like mad by car makers??
“Now, if oil prices are high enough to threaten to cause a recession, wouldn’t that goose EV and hybrid sales immediately?”
Yes, but probably not enough. During very high oilprices almost everything is much more expensive; people have to spend more on basic necessities, so less money is available for luxury goods, like cars. I doubt if oilprices of $90-100 are enough to make a lot of people buy EV’s, but maybe yes.
Moreover, oilprices above $110-120 feel uncomfortable about the prospects of the economy or is even frightening, so that makes people wanting to save money and to wait until ‘the good old (oil) time’ comes back. Low oilprices WILL come back several more times, making most people buy ICE’s cars again. If these cycles go on for many more years, we could be going into an ‘ever’ lasting recession/depression.
I don’t believe in the EIA scenario of a slow, steady rising oilprice this and the next decades.
Maybe you are right Nick, but humans don’t learn too much from past events.
During very high oilprices almost everything is much more expensive
That didn’t happen at all when oil rose above $100 for three years in a row.
oilprices above $110-120 feel uncomfortable about the prospects of the economy or is even frightening, so that makes people wanting to save money and to wait until ‘the good old (oil) time’ comes back.
The basic argument here is that people will panic.
Could be, but people kept investing in things like this during the Great Depression.
“That didn’t happen at all when oil rose above $100 for three years in a row.”
Food and transportation was more expensive in a lot of countries.
“The basic argument here is that people will panic.”
Panic isn’t the word I used. Panic is stronger. Anyhow, people will be more reluctant in spending, also because they expect the high oilprices to be a temporary situation.
Food was more expensive because of a deliberate change in policy by the US government, away from food subsidies, which artificially suppressed prices, towards ethanol blending requirements, which raised prices and raised farmer income.
The previously low food prices were a very mixed blessing for developing countries, because their farmers were badly hurt by artificially low food prices.
“people will be more reluctant in spending, also because they expect the high oilprices to be a temporary situation.”
That’s not what happened in the last four years. As fuel prices rose, SUV sales dropped, and higher efficiency vehicles sold better.
Prices matter- people really do respond to price signals.
People may not be as farsighted as we like, but if they’re hurting financially, and they see a really easy way to save a buck, they’ll do it.
“That’s not what happened in the last four years. As fuel prices rose, SUV sales dropped, and higher efficiency vehicles sold better.”
Again, not in all countries and parts of the world. Many countries sold much less cars. Moreover, people have to buy EV’s, more fuel efficient cars won’t do the trick.
During very high oilprices almost everything is much more expensive; people have to spend more on basic necessities, so less money is available for luxury goods, like cars.
But some point used EVs hit the market and they may be cheap enough for people who need to replace their current cars.
There is likely going to be a point where there are going to be enough EVs, cheap enough, that they make sense for a growing number of people.
Not suggesting high prices won’t cause some shifts in preferences, I just think it won’t happen fast enough to prevent a depression. The transition is unlikely to be quick or easy.
The transition is unlikely to be quick or easy.
I think the transition will be hard. A lot of people are having trouble grasping the changes that are happening in the US and the world now, let alone what will come in the future.
What concerns me, since I see it happening right now, is that rather than dealing with economics of what they are facing, people are lashing out at issues that have little or nothing to do with the problems in their lives.
If gas gets more expensive, it isn’t that oil is running out. It’s a liberal conspiracy. If we eliminate liberals, then we’ll have cheap gas again.
Look at the anti-science bent that is getting more evident. If we don’t like the message, we’ll find ways to censor it.
We have people in this world who simply can’t react to change willingly or easily. But the folks who refuse to give up their big trucks and cars are likely to be replaced by people who feel no attachment to big trucks and cars and have never and will never buy them.
Dennis,
Ask yourself: what will cause the depression? What’s the mechanism? Higher interest rates? Lower car sales? Higher trade deficit? Then, look for analysis of the magnitude and duration of these effects, using either the existing literature or historical examples.
I think you’ll be surprised.
Hi Nick,
As geological limits are reached and high oil prices cause very little rise in output, then oil prices will rise to the point that causes a recession, this might bring down prices a little depending on the severity of the recession.
The cause of the recessiom will be economic disruption as the economy attempts to adapt to an unprecedented situation. For the past 100 years, a rise in oil prices was always able to increase the oil supply, we are approaching the point where this may no longer be the case, where only very high prices will bring forth enough supply to meet the demand for oil.
The closest historical precedent for this is 1979-1981. The diffrence is that there is no Prudhoe Bay, North Sea, and Gulf of Mexico waiting in the wings to increase the oil supply when needed.
In time the economy will make the adjustment, your belief that it will be quick and easy is a fantasy in my opinion.
For the past 100 years, a rise in oil prices was always able to increase the oil supply, we are approaching the point where this may no longer be the case, where only very high prices will bring forth enough supply to meet the demand for oil.
The closest historical precedent for this is 1979-1981. The diffrence is that there is no Prudhoe Bay, North Sea, and Gulf of Mexico waiting in the wings to increase the oil supply when needed.
But we also don’t know what an economy based on not wasting oil will bring.
Cheap oil has allowed us to use it with abandon. That has resulted in economic boosts by traditional definitions. We can make more stuff. We can do stuff that is oil-intensive.
But since we haven’t yet had to live with peak oil, we don’t know what we are capable of.
The lifestyle changes that will likely result from less oil consumption are not necessarily bad changes.
Hi Boomer,
It it very hard to predict what will happen.
I don’t think it is a good idea to paint a picture of sunshine and lollipops, when there is tough work ahead. Eventually we might transition to a more sustainable low growth economy (in per capita terms) as population begins to fall late in the century.
No growth may be good for the environment, but it will not be good for those that cannot find a job and do not have enough to eat during another Great Depression.
Such a crisis might lead to some needed social changes, but that is by no means certain.
I don’t think it is a good idea to paint a picture of sunshine and lollipops, when there is tough work ahead. Eventually we might transition to a more sustainable low growth economy (in per capita terms) as population begins to fall late in the century.
I’ve never said that I think it will be easy. There are stresses now, and we’re not even in the middle of the worst of it.
However, I think some of the changes that will come will be positive. Downsizing is not a bad thing. Some of us are doing it now and find that having less stuff, living in smaller spaces, and driving less gives us a better existence than what we had before.
Hi Boomer,
You seem to be more realistic, the sunshine and lollipops is directed more at Nick G.
I agree that potentially there could be some positive changes in the long run.
Choosing to drive less, consume less, live in a smaller home, riding the bus, or installing solar panels are all very nice and if enough people choose to do so may begin to have a positive impact both for individuals and for society in general.
The issue is the potential for economic disruption and inadequate aggregate demand leading to a Great Depression, it will be difficult for people to make positive changes when attempting to simply survive may be difficult in a World with 25% unemployment.
Remember that Keynes has been forgotten and governments are likely to respond with austerity measures because people will think that debt is the problem and that we must tighten our belts and get the government budget in balance.
Monetary stimulus will accomplish little when real interest rates are negative, a fiscal stimulus will be needed, but dysfunctional governments are unlikely to follow the proper policy.
So until those in positions of power re-learn the lessons that Keynes taught us in 1936, things may be pretty bleak after the Depression that follows peak oil begins, sometime around 2029 (a nice 100 year cycle).
I don’t think it’s a good idea to exaggerate the potential problems. That’s really an oil-industry point of view, that we face disaster unless we Drill, Baby, Drill.
We agree that if we have good government and planning that we don’t face limits to energy supply, right?
I’m just baffled by the idea that personal austerity (“Choosing to drive less, consume less, live in a smaller home”) is a good idea. Simply consuming less oil and fossil fuel is the essential thing: buy an EV or plug-in hybrid, PV, a heat-pump, and insulate your dwelling.
Okay, here’s an example of successful and reasonably fast transition:
The growth of LEDs has opened the lighting industry up to new competitors, particularly those with expertise in semiconductors such as North Carolina-based Cree Inc. and Samsung Electronics.
Wolfgang Dehen, the CEO of Osram, the world’s second-biggest lighting company, resigned last year after admitting he had underestimated the pace at which sales of traditional lightbulbs would decline.
http://www.bloomberg.com/news/articles/2015-05-07/light-gives-us-life-but-is-actually-a-terrible-business
With energy savings driving acceptance, LEDs are forecast to power half of all residential lights by 2016 and more than 70 percent by 2020.
LED prices dropped about 20 percent in 2014, though they still cost almost 10 times as much as incandescent and halogen lamps. The higher cost can now be recouped through lower energy bills in two to three years — a payback period acceptable to most consumers in a McKinsey survey — putting LEDs at a tipping point…the steep dropoff in sales of traditional lamps has taken the industry by surprise.
Lighting accounts for 20 percent to 30 percent of global electricity consumption and about 6 percent of greenhouse gas emissions. Replacing all lighting with LEDs would cut that energy use by about 40 percent, Philips predicted in 2013, saving more than $100 billion a year. That could reduce annual carbon dioxide emissions by about the same amount as that produced by three-quarters of the cars in the U.S. That’s potentially a bigger impact than wind power (expected to contribute about 6.5 percent of electricity by 2020) or solar power (about 2.5 percent).
http://www.bloombergview.com/quicktake/led-lights
I’m just baffled by the idea that personal austerity (“Choosing to drive less, consume less, live in a smaller home”) is a good idea.
Because the less stuff you have, the less you have to take care of. It’s freedom to have a minimalist lifestyle. It isn’t a sacrifice. It’s getting rid of clutter, junk, and waste.
Owning more than you need can become a burden. It can tie you down.
I agree.
I wasn’t clear: I meant I was baffled by personal austerity as a necessary response to Peak Oil.
I think that simplifying one’s life is a great idea.
I think that looking beyond material consumption as a way to happiness is a great idea.
I just don’t think these are particularly relevant responses to PO.
This is beyond hilarious:
http://www.bloomberg.com/news/articles/2015-05-06/tesla-s-new-battery-doesn-t-work-that-well-with-solar
For customers of SolarCity, the biggest U.S. rooftop installer, the lack of a 7kWh option means that installing a Tesla battery to extend solar power after sunset won’t be possible. Want to use Tesla batteries to move completely off the grid? You’ll just to have to wait. “Our residential offering is battery backup,” Bass said in an e-mail.
Hard to see how that guy keeps his job long.
It doesn’t really matter right now if Tesla’s batteries work for most people as long as they achieve whatever goal it is for Tesla.
If there are corporate goals that are to be achieved by Tesla expanding its battery production, then I guess we’ll see soon enough if this makes financial sense for the company.
Tesla products are pacifiers for rich greens. Toys.
Tesla products are pacifiers for rich greens. Toys.
Yes, they are. But if something is learned by the experiment, whether from success or from failure, it advances what we know.
Not to mention they’re using the capital received from these rich greenies to build an EV affordable for the masses.
Fernando is a brilliant, informed person, but that does not exclude him from having prejudices that blind him from seeing the world as it is.
Elon Musk has always said that the plan from the beginning was to build an expensive niche product (the Tesla Roadster), then a luxury vehicle (Model S/ Model X), and then a mass market vehicle. It’s not even brilliant or unique; it is simply how new technologies are introduced to market.
Tesla was never guaranteed to succeed. In fact, Tesla was constantly on the verge of bankruptcy. We are truly lucky that it survived the financial crisis, and even its issues after the Model S was first released (revealed in the new biographical book just released).
Point being, Tesla should not have survived. Elon Musk himself says this. Just like SpaceX he saw it as what NEEDED to be done regardless of possibility of success or failure. It was just as likely (more likely actually) that today we would be talking about the failed grandeous visions Elon Musk had attempted with SpaceX and Tesla. It was the more likely scenario, and would have reaffirmed the perspective that these ventures are simply not yet feasible. Yet here we are.
If you watch the “Bloomberg Business: Risk Takers” documentary on Elon Musk you’ll see that it really is unfathomable that his ventures have succeeded.
Fernando is a brilliant, informed person, but that does not exclude him from having prejudices that blind him from seeing the world as it is.
He has complained that solar advocates in Europe are communists posing as green.
He has said that Tesla is designing products for the rich.
He has said that in Africa solar won’t work because it won’t power refrigerators.
So solar advocates appear to be rich communists who don’t care about Africans.
The last two lines are an example of faulty logic.
Musk is a marketer. His batteries don’t deliver anything new. Henry Ford and Volkswagen showed its possible to sell a car for the masses without having to design and sell an obscenely wasteful vehicle like the Tesla.
The overwhelming majority of the African urban population can’t afford a solar panel to power THEIR energy needs. Nor is solar going to work very well in countries like Congo, which also lack wind.
The German drive for renewables is failing. The majority of extremist German greens are also in the extreme left. In the USA party affiliations can be correlated to support for solar power.
There’s nothing I can write here to make those who follow solar religion to be realistic about what it can do at this time. It does pretty much nothing. Which means there’s a need to increase efforts in multiple directions to find something that works.
Fernando,
I get the feeling you’re having fun filling your retirement with silly comments. But, why not spend your time doing a little research, exercising your engineering skills a little, and adding value to the discussion? Or…find cat pictures that are entertaining….
Musk is a marketer. His batteries don’t deliver anything new.
If you read some of the articles, you’ll see that’s not true. These batteries are well designed, and at a much lower price point than the competition.
Henry Ford and Volkswagen showed its possible to sell a car for the masses without having to design and sell an obscenely wasteful vehicle like the Tesla.
No, they didn’t: they came along well after much more expensive vehicles started the ICE market, and their cars were junk. The only thing that saved them was the much lower price.
The overwhelming majority of the African urban population can’t afford a solar panel to power THEIR energy needs.
What the heck are you talking about? PV, li-ion and LED light is much cheaper and cleaner than kerosene: tens of millions of Africans are replacing their expensive, dirty, asthma-causing kerosene lamps with much better solar systems.
Nor is solar going to work very well in countries like Congo, which also lack wind.
Central Africa’s solar insolation only looks bad on a map because the rest of Africa has such good light. And….how much oil does Congo have??
The German drive for renewables is failing. The majority of extremist German greens are also in the extreme left.
This is just silly. You’ve really got to get out of your local “echo chamber” of ideas.
In the USA party affiliations can be correlated to support for solar power.
Yes, because the oil and fossil fuel industry has captured the Republican party. The Republican “base” also believes that the world is only 6,000 years old…
Probably ninety nine percent of all the money that has ever been spent on research and development in any field has been wasted in the sense that it did not result in an immediate and permanently lasting return on investment.
All the money GM has put into the Volt will be gone forever in one sense of the word when the Volt is inevitably discontinued a few years down the road.
All the drawings of all the parts and all the dedicated tooling used to make them will be trash and scrap.
But the new core knowledge, the permanently useful one percent of all R and D, will remain and be available to everybody sooner or later. Technical secrets do not last.
That last one percent of R and D has provided us with the modern world. I realize it is not sustainable but to be honest I sure do like it. I turned on the AC to take a nap a while ago.
Fifty years ago it would have been a fan and fifty years before that I would have had to retreat to the root cellar to cool off .
Oddly enough, that’s much more accurate about their cars than the batteries.
Tesla’s business strategy is to let the wealthy pay for developing economies of scale, but the batteries are going to be very practical for business.
There was a recent study that found that batteries were more cost efficient than natural gas peakers when battery costs fell below $350 per kWh.
The Tesla utility/business battery is prices at $250/kWh – this is half the price of the competition.
The batteries are still early 90’s Japanese Lithium Ion technology.
We really ned to get beyond that, and soon.
Yes, and engines still operate the same as they did in 1960. It’s the systems built around them and the ability to manufacture them cheaper that makes it a completely different product.
Please, enlighten me on how we might as well have just bought these in 1995 for the same price, reliability, efficiency, and lifecycle. You honestly, truly believe these batteries are identical to Li-ion batteries from “early 90’s Japan”?
You may very well be right, so again, please, I beg you, prove your case.
Dave,
This is also my opinion. The weak point for Li-batteries is the short loading cycles, which is far below lead acid batteries. This is why we have still lead acid batteries in normal cars. As is it fine for mobile phones, where energy and battery costs do not matter, it is an issue for home energy, which has to compete with energy from the grid. There is the hope that economies of scale will bring down initial costs, yet the weak loading cycles still remain as disadvantage.
In my view the big driving force for the advance of communication and computing over the last fifty years has not been economies of scale, but the dramatic advance of integrated chips. We need the same for batteries. Instead of 100 loading cycles we need 10000 and more for batteries. And we need this also for loading capacity. 10 kWh is just the energy equivalent of 1 liter oil.
So the future will tell us if economies of scale is enough to implement batteries into the utility market. In my view we need also scientific progress. This very often overlooked.
Hi Heinrich,
You need to be careful comparing liquid fuel energy with electrical energy. If 100% of the energy content of a liter of fuel is converted to mechanical work, then 10 kW-hour would be equivalent to 1 liter of fuel. I have never heard of a diesel engine that is 90% efficient, have you? A typical diesel engine might be 25% efficient at best so a proper comparison would be 9 kWh of electricity is equivalent to 4 liters of diesel fuel.
Dennis,
I agree with you. I just wanted to show the dimensions we are comparing here. The 10 kWh unit of Tesla for 3500 USD compares with a 1 l tank for oil. Yes the Tesla unit can be filled for free, yet just for around 100 cycles. So the Tesla package sells for 3500 USD and the value is 100 USD (maximum 350 USD if you take into account the conversion of oil into electricity) . Who in earth would do such a deal if not for the ego to be environmentally clever?
Hi Heinrich,
Are you sure that these batteries only last for 100 cycles? It seems the batteries in my laptops and cellphones last for considerably more cycles than that. Can you give me a source for the 100 cycle estimate?
Even if we use the 100 cycle estimate (which I think is far too low) at 100 cycles and 4 liters of diesel per cycle the cost per liter is $8.75/ per liter, quite expensive by US standards, but only a little more expensive than Europe.
We would also need a backup generator to use the fuel in, which is not free and requires maintenance. In fact it would make more sense to run the backup generator on propane in rural areas (which might not have access to natural gas) or natural gas in cities or suburbs.
Currently these would be the cheapest option if externalities are ignored. At some point prices of fossil fuels will rise and the batteries will be the cheaper option. Also the price of the batteries will decrease with economies of scale in production.
Dennis,
Now we could undergo many philosophical discussions about how many cycles are realistic under practical conditions. Some Li-S batteries have 1500 cycles and even more when the temperature is increased in the laboratory. In many cases (for islands and remote cottages in the Alps) this solution exists already and there is plenty of practical experience. However I have never heard of economic advantages for these systems. For instance in the Alps, there is always the danger that bad weather requires significant overcapacity, which makes these systems expensive etc… Time will tell if batteries can conquer the market. I hope they can do, yet in my view we did not make enough scientific progress.
The 10 kWh unit of Tesla for 3500 USD compares with a 1 l tank for oil.
Let’s be clear: that’s not accurate. It’s just not.
One liter of liquid fuel can propel a vehicle only about 20-25% as far as 10 kWhs in an EV.
ICE vehicles are particularly inefficient, but electricity is always about 3x as valuable as liquid fuel, joule to joule.
There are plenty of Li-ion batteries that will outlast lead acid. Until very recently, lead acid was much cheaper.
Nick G,
If you would start the mass production of home systems with lead acid batteries, the economies of scale would make lead acid batteries cheaper in the same way as Li batteries. This is my point I want to make: we need scientific progress, not economies of scale alone. Tesla did not make any scientific progress.
No, lead-acid has been around for a very long time, and is pretty mature.
In fact, there is an *enormous* amount of research going on with battery chemistries. There are lead-acid variations that are 3x as good. There are dozens of variations on lithium-ion, and dozens of others using aluminum, sulfur, vanadium, etc., etc.
The problem: manufacturers have to make a choice, a commitment, along with an ecosystem of suppliers. That’s a big deal, and industries don’t do it lightly.
As it happens, lithium-ion appears to be the consensus choice, and it’s still progressing quickly, with relatively rapid improvements in capacity, cycle-life, and cost.
Tesla decided to go with the form of battery that had the largest market share, and the lowest cost, rather than developing new form-factors and chemistries. This appears to have been an inspired decision.
Have you ever spent any time maintaining a lead acid battery bank?
No, I understand it’s a big pain.
So, you’re voting for li-ion?
n.b. non-sealed batteries like lead-acid cause all sorts of fire-code hassles, due to hydrogen evolution.
You need ventilation per code, explosion proof lights and fan,
trays to catch any spilled acid, etc. etc. etc.
Sealed batteries (truly sealed, not valve regulated…) don’t have those code requirements.
Nick G
Yes there is a lot of battery research, yet very little progress. If there would be much of progress a 10 kWh battery would not cost 3500 USD.
This is also my opinion. The weak point for Li-batteries is the short loading cycles, which is far below lead acid batteries. This is why we have still lead acid batteries in normal cars. As is it fine for mobile phones, where energy and battery costs do not matter, it is an issue for home energy, which has to compete with energy from the grid. There is the hope that economies of scale will bring down initial costs, yet the weak loading cycles still remain as disadvantage.
From the Tesla Powerwall home page:
http://www.teslamotors.com/powerwall
Unless they are blatantly misleading their future customers…
Powerwall comes in 10 kWh weekly cycle and 7 kWh daily cycle models. Both are guaranteed for ten years and are sufficient to power most homes during peak evening hours. Multiple batteries may be installed together for homes with greater energy need, up to 90 kWh total for the 10 kWh battery and 63 kWh total for the 7 kWh battery.
Fred,
Powerwall has 50 cycles per year so for nine years 450 cycles. However the guarantee comes only if there are just 50 cycles per year. If you do more cycles you are of the guarantee.
10kWh per week is very little energy. You can do a washing machine per day. no cooking, waterheating, ironing,… So you would need a second or third battery. In addition you would need back up capacity for periods of bad weather. So basically an investment of at least USD 10000 is necessary for a normal household with 1000kWh energy consumption or 300 USD per year.
10kWh per week is very little energy. You can do a washing machine per day. no cooking, waterheating, ironing,… So you would need a second or third battery.
Why? Wouldn’t you do those things when the sun was shining? Assuming you are completely off grid, you probably only need to use the battery from some LED lights at night. Even at night your water stays warm in an insulated tank. Do you take long showers a 3:00 AM? Refrigerator stays cold too. You are not usually going to be living off your batteries for days at a time. When the sun comes up in the morning you run the appliances that use the most energy.
I really don’t understand the way most people seem to think about these things.
I really don’t understand the way most people seems to think about these things.
That’s why there are entrepreneurs in Silicon Valley seeing an opportunity.
They’ll pitch to the first adopters, work out the kinks, build up that market, and then sneak up behind the old industries and take over before the old industries can make the necessary changes.
What has worked so well for Silicon Valley entrepreneurs is the inability of established industries to see change.
Home computers. Internet. Cellphones. Photography. Music.
Now, energy generation and distribution.
You have entirely missed the point of the battery in a RES. Usually the sun feeds your inverter. The battery is just a buffer and you can keep it topped off with a generator.
Yes, and, the battery is quiet, seamless, and cheaper than the generator diesel.
Hi Heinrich,
At 450 cycles, the equivalent cost per liter is $1.94, so actually less than US prices for diesel, close to the cost of propane, and a little more expensive than natural gas. This ignores the discounting of money to its present value, but also ignores the likely future price increases of fossil fuels. The previous two factors may be a wash, so the $3500 cost may not be that bad a deal.
“At 450 cycles, the equivalent cost per liter is $1.94, so actually less than US prices for diesel”
Your math is a “bit” off. Diesel GenSet operates at about 0.8 gallons for 10Kwh for a residential 20K GenSet. much less fuel if its a smaller 10 Kw GenSet.
450 cycles @ 10 Kwh is about 360 Gallons. Assume $3 per gallon, or a total of about $1080 USD in fuel costs, or less than 1/3 the cost of Powerwall. Break even would be if the cost of diesel is about $9.70/gallon.
If diesel costs $9.70 you have to worry about if food gets transported to your local supermarket.
You never get 10Kwh for all 450 cycles as the battery will lose about 20% to 25% of its capacity over the course of those 450 cycles.
It’s a whole-house Uninterruptible Power Supply (UPS). It’s value doesn’t come from load-shifting it comes from seamless backup power.
No one buys a UPS based on saving electricity costs.
Scientific progress is my point also.
We have been stuck.
Here are a couple of articles to add to the discussion.
Did Tesla Just Kill Nuclear Power? – Forbes
Why Tesla Batteries Are Cheap Enough To Prevent New Power Plants – Forbes
The second Forbes article quotes Arnie Gundersen, who runs this outfit:
http://www.fairewinds.org/#sthash.56iOLpBy.dpbs
The internet sure liberates expression and lets lots of people express their ideas. But we should be careful when weighing what we read.
Mr Gundersen lost all credibility with me, when he said the Tesla battery would kill the nuclear power industry. It’s an outstanding piece of self promotion and nonsense.
Read the whole article. The US is not the world. The biggest customers are going to be businesses and utilities, as well as residential customers outside the continental US.
“…demand for the batteries has been “crazy off the hook,” with 38,000 reservations for the Powerwall. While storing residential power with the Powerwall is still more expensive than grid power, he said, “that doesn’t mean people won’t buy it.” Demand for the new batteries, including those for businesses and utilities, has been so strong that the company may need to considerably expand its $5 billion battery factory that’s under construction in Nevada. ”
” SolarCity said in its earnings call on Monday that it plans to offer an off-grid package next year in Hawaii, where electricity prices are almost triple the U.S. average. ”
Think of the tens of millions of business owners and upper-middle class homeowners in India, China, Pakistan, Iraq, Afghanistan etc., who use their generators for 1-20 hours per day, paying 30 cents or more per kWh. They can buy a solar system that provides power for about 15 cents per hour for direct power about 8 hours a day, and use the Tesla battery as a substitute for *most* of the rest of the diesel generation: much quieter, much more reliable, and a bit cheaper at about 25-30 cents for the timeshifted power (15 cents for the PV, 10-15 cents for the amortized cost of the battery per charge-discharge cycle). Really, a no-brainer.
Tesla’s EV business plan is built around developing economies of scale, to make EVs cheaper at every price point, including the very cheapest (e.g., the GM Spark and Nissan Leaf, the very cheapest cars on the road to buy and own). This battery pack accelerates that process.
dude has close to $200 million of preordered Powerwalls and the main factory hasn’t been built yet.
now that’s pretty funny
Yes. I remember when people went nuts for little stuffed dolls and Emu eggs. I need to go dust off my solar powered brain stimulator and sell it on YouTube.
If I recall correctly the so called “problem” of the larger battery being for backup only was stated clearly on their website. So if you need more storage for solar use conventional battery systems, much cheaper. Who says you have to buy every Tesla product that might be offered?
Since when does new technology not have a growing stage? This article is hilarious, from the point of view of narrow slanted writing to make a big deal about nothing.
As far as I am concerned, a back-up generator and back up heating is a must. Systems fail. Air conditioning might be a must for the elderly and the ill, but the over-paid executives and yuppies can sweat . Heck, they pay big money for gyms and trainers to help them sweat. Way too pampered. Let them spend their money on getting five or six Tesla batteries, or maybe driving their Tesla over to the next town and shacking up in a hotel or resort where they can be pampered.
You know, I lived in 12 countries and I never had a backup generator. I had kerosene lamps, a small kerosene stove, a few flashlights, and good quality winter gear. But that stuff served a dual purpose, we used it when we went camping. I did get to use it at home in Argentina just before the Falklands war.
This is beyond hilarious:
Yeah, especially in lieu of what Elon Musk himself said at the launch of his Powerwall. He specifically said his product was intended for people who wanted to be off grid and also that this product was specifically designed to work well with solar right out of the box.
Methinks the WSJreporter just misunderstood what Bass was really saying
Another crude oil train accident leaving the Bakken.
Small town evacuated after oil train derails in North Dakota
A BNSF train carrying crude oil derailed and caught fire in North Dakota on Wednesday, forcing the evacuation of a nearby small town just days after the United States and Canada announced reforms to improve the safety of such shipments.
About 40 residents from the tiny Wells County town of Heimdal were evacuated after 10 tank cars left the rails, fire officials and the state’s emergency management agency said.
There were no injuries, officials said.
Black smoke was visible for miles as more than 300,000 gallons of crude oil burned. Emergency responders from five communities set up a command center near scorched wheat fields adjacent to the train tracks as a steady rain fell, a Reuters photographer said.
Heimdal is located along one of the main rail lines heading east out of the state’s giant Bakken oil patch. About two-thirds of all North Dakota oil production is shipped by rail, three-quarters of that to refiners on the U.S. East Coast.
Just last Friday, the U.S. Department of Transportation and Canada’s Transport Ministry announced new rules for oil trains, including phasing out older tank cars, adding electronic braking systems and imposing speed limits. The measures were all meant to reduce the frequency and severity of oil train crashes.
Trains derail all the time, mostly it is a non-event as far as the public is concerned. The LTO has a low flash point so is very susceptible to fires and explosions. The new mandate for oil tankers includes using thicker steel, especially the tank ends and a thermal blanket to help prevent explosions.
Trains carry highly hazardous materials every day, yet not much happens. However the potential for disaster is high. Especially since they go through populated areas. Best to live quite a distance from any major railroad line.
Sometimes it only takes one tank car of hazardous material, spilled just so, to wipe out all life a huge stretch of a river. This wasn’t a human disaster, but it was an aquatic one. It impacted for quite a few years a portion of far northern California’s sport-fishing economy that the city of Dunsmuir relies on.
http://www.redding.com/news/legacy-of-a-disaster
They really need to put in pipelines and/or increase safety.
http://www.reuters.com/article/2015/05/08/us-northdakota-derailment-vaporpressure-idUSKBN0NS1Z420150508
“Exclusive: Oil on fiery North Dakota train less volatile than limit”
“…The oil, transported in tank cars owned by Hess Corp, had a vapor pressure of 10.83 psi, according to test results. This pressure is less than the new threshold of 13.7 psi. ”
So I use the Mac calculator to turn 10.83 psi (pounds per square inch) into mm of Mercury (560).
Then I go to
http://www.csgnetwork.com/pressurealtcalc.html
plug in 560, set units to mm of mercury and find that the equivalent altitude is 8206 feet (2501 meters).
Right, 8 thousand feet altitude. Like that’s not going to be reached in a tank car sloshing around or spewing contents in a derailment.
But maybe it made some difference to how big the fire was:
http://bakken.com/news/id/238419/heimdal-oil-train-crash-appears-not-as-severe-as-casseltons/
BTW, the 13.7 psi vapor pressure standard is 1947 feet elevation.
Care to guess what the _average_ elevation of North Dakota is?
http://simple.wikipedia.org/wiki/List_of_U.S._states_by_elevation
CLR numbers out. Similar to whiting, pretty awful IMO on first quick read. Looks like they tacked on around $800 million more of Long Term Debt in one quarter.
Have been pretty busy, will look at closer later.
Einhorn getting panned by industry. Don’t see how given the awful numbers that came out. He did give a goofy presentation, I guess entertainment gets him noticed?
Plug in $80 WTI and $4 gas, I still think many keep burning cash.
If they stick to guidance, many will spend less on CAPEX in 2,3, 4 of 2015 than in quarter 1. Should result in Q4 big oil production drop in US.
Einhorn has finally picked up on what some experienced hands on this site have been saying for a while. The financials of these companies disprove all of the pie in the sky claims they make. Unfortunately, Wall Street brokers and analysts have vested interests in touting these shalies. It’s quite clear from the well data and from the company financial statements that the wells will not produce anywhere near what they claim. CLR is valued at an enterprise value of about $135,000/flowing barrel. This is ridiculous for shale production especially at $45 in North Dakota. Yet, you will still see Wall Street analysts with buy recommendations.
John Keller. I agree.
All, if you are interested, some tidbits gleaned from CLR Q1 2015 10Q:
My view of cash burn for the quarter is $726,214,000 or $1.97 per share. This is the difference between net operating activities and net investing activities.
Borrowed $790,000,000 on line of credit in quarter 1, or $263,000,000 per month. Remarkably, they borrowed another $250,000,000 in the 30 days from 4/1 to 4/30 on the line. So $1.04 billion borrowed in 4 months. I do note CFO says they are working to balance cash flow (cash flow neutral?) by mid-year (June 30?). Wonder how that will happen with roughly the same number of rigs running in May and June as in April, where they borrowed a quarter BILLION $$?
As I typed a few days ago about XOM, which produces 20 TIMES the BOE, plus owns refineries, chemical division, etc., total debt of about $11 billion. So CLR borrowed 1/11 of XOM total debt to operate for FOUR MONTHS.
For some more perspective, this would be like a small operator, who has around 200 bbl per day borrowing $1 million dollars off an operating line in FOUR months, and adding that to $6 million of debt and having $47,000 in the bank (CLR had $47 million as of 3/31/15).
CLR oil to gas ratio is 69.4% oil 30.6% gas. Realized BOE $31.65.
Also, really not much asset impairment taken. Am I correct, that if reserves get written down, say 10 billion this year, would show a loss of 10 billion/369,385,000 shares outstanding, or $27.07 per share? Is that how it works?
Reason I ask is bank consortium agreed to amend loan covenants re reserve write down issues. Assume this is why?
I know we all saw this coming, but to see it in black and white is still interesting to me. Surprisingly, the equity is trading as it was when WTI was $90. I calculate current BOE for CLR to be in $40-45 range, so recent rally won’t make huge difference.
Will be interesting to see what happens if WTI trades in $50-$75 range from now thru end of 2016. Also wonder where the OCC is with the banks on this? Up LOC by a billion, waive covenants, even after hedges were cashed in and none of proceeds used to pay down loan principal. Borrowing to pay interest too.
Would a small local bank get written up for doing theses things for a producer customer 1/100 or 1/1000 the size of CLR. Surprised Ms. Warren has not been hammering on this stuff?
Oil and Gas Reserves Study
Scroll to page 104.
Hi Ronald,
Great report thanks. Shallow sands should take a look because it has a wealth of data.
An interesting bit of information from the report is that as of 2012 World Gas reserves were decreasing, this especially the case in the US, but is true in the World as a whole.
This is at odds with EIA data, but perhaps the reserves have increased for the National oil companies. Perhaps natural gas will peak sooner than I think, the data for World natural gas production from the EIA is not very timely, currently they only have production data through 2012 for the World. The BP statistical review is the best source of data that I have access to for international natural gas output.
Another strange thing is that for the US EIA has reserves at 2 times the level of this report, which makes me wonder about EIA natural gas data.
BP Statistical review also has World Natural Gas reserves relatively flat for 2011 to 2013, reserves fell a little in 2012 and then recovered to slightly higher than 2011 levels in 2013, growth in output also slowed in 2013 to 1.1% from the 1970 to 2013 trend of about 2.7%, but this might be temporary, the new 2015 report will be interesting.
Yes. Thanks for the link. Just skimmed first few pages but plan to read fully when have time.
Good link Ronald.
Dennis. If you or anyone else gets their hands on a link to lease operating statements for Bakken or EFS wells that have been producing 3 or more years, could you share it please?
I do acknowledge that CLR and others OPEX per BOE dropped in the first quarter. Will be interested to see how that progresses.
This is the really important bit of news-but hardly news. MIT says solar can, will and has got to expand hugely, and to do so needs a true pricing on carbon, preferably by carbon tax.
http://mitei.mit.edu/system/files/Executive%20Summary_compressed.pdf
Relevance- anybody doing fossil fuels has got to realize the essentially certain near future carbon tax, when the world awakes to the need, and the promise, of solar.
So, all the nitpick going on here re costs of this and that will be drowned in the flood of new costs having nothing to do with competence at digging rock.
-Coming for sure.
Don’t worry wimbi, your precious fossil fuels will not be taxed very much. I can almost guarantee that a carbon tax will be merely a token tax and not be enough to get anything really changed. The fossil fuel business has a lot more to worry about than a minor tax on use of carbon. Let’s face it, in the long run it’s the consumer that really pays all the taxes since they buy the products produced by those people producing the products. The cost gets passed on and we end up paying taxes on taxes because they are buried in the price.
I can also bet that the fossil fuel industry will pay huge amounts of money lobbying against the carbon tax, taking it to court and huge amounts in media propaganda. It’s not that they pay the tax, it is that they believe sales will drop a little.
Don’t tell them, but I am steadily cutting them out of my life as much as possible.
I am with Nick when it comes to Tverberg. I used to defend her occasionally back in the old TOD days but she has a one track mind and is in my estimation trapped in a box consisting of her own expertise.
People like her cannot get their heads around the concept of throwing out an old rule book or the possibility of fundamental changes in the way things are done.
Of all the asinine people in the world the ones who are financial experts generally impress me as the biggest nincompoops. They simply cannot conceive of any financial system except central banks run by bankers who are more or less at one and the same time both the masters and puppets of their respective governments.
They say totally stupid things such as ” There is no way the government can get stimulus money into the hands of consumers” when as a matter of fact the government is disbursing money by the trainload into the hands of citizens/ consumers on a daily basis in the form of food stamps social security checks unemployment compensation pensions health care bennies etc etc etc.
There are people getting checks made payable to them in order simply to increase their incomes..
There is NOTHING FUNDAMENTAL stopping the government from decreeing a minimum income for everybody. Paying for it might be a problem of course.
IDIOTS.
Peak oil in combination with other peak resources and environmental degradation almost certainly does mean lights out for most of the human race – but only because we are too stupid in the collective sense to change our ways.
But the world is a big place, diverse in geography, resources, human capital, and military power. Some countries that are well endowed and rich and powerful are most likely going to hog enough resources to continue on the business as usual path for quite a while – barring a global environmental collapse.
My personal estimate is that a collapsing environment will wipe most of us out before we wipe out so much of the environment that the remainder of us cannot continue life as usual – minus the huge per capita energy consumption we have become accustomed to over the last century or two.
A kid born this year in the USA has at least a fair shot at living a long life with electricity running water plenty of decent food decent medical care etc etc . He may have to drive an electric go cart if he has personal car at all, and wear a lot of warm clothes in the winter and get used to a fan instead of ac in the summer.
This scenario is based on no really bad luck of course , such a getting vaporized in a nuclear exchange or dieing of an engineered contagious disease.
I unfortunately have no relatives who are interested in my little farm but I hope meet some young folks who would like to come live on it and eventually buy out my estate when I am no longer in need of it.
I think perhaps a “minimum income for everybody” is probably no far off. As more and more workers are replaced by automation.
http://www.businessinsider.com/experts-predict-that-one-third-of-jobs-will-be-replaced-by-robots-2015-5
I think perhaps a “minimum income for everybody” is probably no far off. As more and more workers are replaced by automation.
The idea of work being linked to livelihood and survival is falling apart as fewer people are needed to keep the world functioning.
It would be a great idea to have everyone keep working but much shorter work days and shorter work weeks, but we haven’t done a very good job with that. True, we are now moving into a contractor society, but if those contract jobs don’t pay enough to live on, it doesn’t work well for many people.
What people will little money coming in are doing is reducing expenses as much as possible, which reduces consumption, which reduces the need for more workers.
Plus the jobs we really need filled (e.g., child care workers, elder care workers) are low-paying, so while we could use more people to do them, we don’t want to pay them much for doing those jobs.
The entire economic system needs to be fine-tuned. Of course, if peak oil ends up collapsing everything, that will change many things anyway.
Just remember, all George Jetson had to mostly do was push one button occasionally (and kiss the boss’s feet). No knows if that button was really connected to anything.
The Economics of the Jetsons
http://thinkprogress.org/yglesias/2011/04/22/200703/the-economics-of-the-jetsons/
I have heard it said by a technocopian engineer that the factory of the future will have only two employees – a human to keep an eye on the instrumentation and call for maintenance if needed- and a guard dog to make sure the human does not actually touch anything.
check this out….
http://www.theleadenhallbuilding.com/
“Building the Future (Premiered February 12, 2014)
Commonly known as “the cheese grater,” the Leadenhall Building is the pinnacle of London’s avant-garde architecture. Designed as a tapered tower with a steel exoskeleton, it’s the tallest skyscraper in the City of London and the most innovative. The teams behind the Leadenhall project had to radically rethink every aspect of the traditional building model. This program follows the monumental challenges that come with erecting this super skyscraper: it will be constructed off-site, delivered to location, and stacked and bolted together like a giant Lego set.”
http://www.pbs.org/program/super-skyscrapers/
And what about a rock star like Jet Screamer?
Jet Screamer will be replaced by robots:
https://www.youtube.com/watch?v=pAjzZ1-PSHg
Techo Narcism at its finest.
Kinda like the Austrians in 1913 arguing who their next Habsburg Ruler is going to be.
Sure, they will fight with all the money they have, since a carbon tax/rise of solar is the threat to their existence. What the MIT study says, and what I have been saying for decades, is that they have no hope in the long run for two immovable reasons
. 1) The planet cannot stand more carbon in the air, and this is becoming more screamingly obvious as every day passes- and that means- a carbon tax for sure.
. 2) Solar is getting less expensive, and carbon more, even not counting the biggest cost- the biosphere, so, ff’s are doomed anyhow.
The dropping cost of solar is coming from every angle, as people start to really think about it.
Personal example- pyrolyzer energy, ie, solar power- once removed. Turns out to be EASY, and carbon NEGATIVE. Cook any local, cheap biomass, it outgases and you use that to generate electricity, the remaining carbon you put into the ground. Since it came from the air, and is now in the ground, you have made a small step toward reversed the effects of ff’s. You can use whatever heat is most easily available to provide for the cooking- solar, some of the gas produced, other burnables.
I am doing this right here and right now, and I did not use anybody’s money but my own, and dam little of that. Anybody, anywhere, can do the same. And I am promoting the idea and the methods, and people here are jumping at the opportunity.
Adds up to byby grid, electricity from my own back yard. And in my case, plenty of it. Any time.
And a lot of them, all over the world, are doing it. Many small acts add to a big act.
when are you gonna sell me a pyrolizer?
Never. I’m just the background R&D guy. I toss out free ideas and prototypes for the business people to do with as they desire.which is most often nothing.
I’m doing it for fun. Cheaper than golf or fishing- by far.
Once upon a time, long ago, I tossed out some ideas that made others very rich indeed. In a moment of inattention, they dribbled a few crumbs of it off to me, and so I have enough to play around with in my junk kicker sort of way.
Yes, I do have a video in process.
Mmmm, no. “Anybody, anywhere” fails when there is readily available grid power, or when the location is unsuitable, for reasons of latitude, geography, or foilage, or if regulations prohibit or render the installation too expensive, or if the landlord is uninterested or opposed to such, or the residents too poor to afford the panels, the dubious claims of negative energy costs aside; one need only consider previous claims of “freeways” and energy “too cheap to meter” to remain highly skeptical of any new claims of infinite energy for everyone.
Now, if everyone moved out to the unregulated boonies of suitable latitute and geography and such and if everyone was rich enough, then maybe, yes, but there’s at least seven non-starters there for me.
Yep, yep, yep. And if, and if and if and if, ad infinite— Gawd!
All true, now what to do, cry, or go do something?
Would somebody please point me to to some place that talks about doing and not weeping? Don’t bother with hell, I have already been informed about that.
And speaking of hell, who the hell ever said anything about “infinite energy”?
Pardon, Ron, I know best thing is to ignore.
Ah, yes. Running about “doing things” doubtless involves no small amount of Carbon burnt consuming all the various new Tesla trickle-down toys that perforce must be consumed (greenly, of course). Have you tried not doing things? For example, one may limit car sittings, say, to just twice per year, and obtain all necessary food and such by foot. Mind, this does involve sinus headaches on account of the noise and stench coming off of I-5, but so these things go. (Michigan voters soundly reject a gas tax hike.) At least there are sidewalks, mostly, and those that are are mostly not covered with glass and other debris. A cost of doing nothing, I suppose. Other quite uneconomic uses of time may be had by digging for dandelion roots (solar is, alas, nearly useless for their subsequent processing), or cooking beet roots without power (hint: sourdough starter and water).
As for infinity, there have been not a few words posted, here, by Tom Giesen, and others, on that very topic as it pertains to sunshine. This mania for the infinite can be rendered sensible by working through Spengler, as it turns out to be quite the thing for this culture.
http://thehill.com/policy/transportation/241311-michigan-voters-reject-gas-tax-hike
… wait, why is there $50 billion in federal tranportation spending given only $34 billion in tax receipts? Better do something!
Carbon taxes are a pretty good idea. If you think global warming is a serious problem then you should back a CO2 emissions tax set to increase as a function of real global surface temperature rise. For example, we could set the tax at $30 per ton of CO2, then set average temperature from 2001 to 2015 as a baseline. If in 2016 the temperature increases 0,01 degrees C the tax for 2017 must increase by 1% plus the inflation rate. But if the temperature drops then the tax drops. Seem fair?
Hi Fernando,
No your idea sounds silly. If we used the 25 trailing temperature average, it might work as there are plently of natural temperature fluctuations due to ENSO and volcanic eruptions (mostly ENSO and other ocean effects are important along with CO2 levels). The better measure would be trailing 12 month atmospheric CO2 levels rather than temperature.
For all the people with field experience, I read an interesting article online in the May, 2014 issue of World Oil, by Liberty Resources CEO, about the use of jet pumps for artificial lift. Does anyone have experience with jet pumps? There is a link on Liberty Resources website.
Some interesting things I jotted down from the article.
In the Bakken, down hole temps as high as 250 ° F. Highly brackish formation water with a density of 10 lvm per gallon. Chloride content of 120,000 ppm.
These conditions place a great deal of stress on rod pump systems which are challenged trying to lift high density fluid up a 10,000′ vertical hole to the surface. This leads to fatigue failure scenarios compounded by heavy brine formation water which deposits substantial salt and scale on tubular and sucker rods. This can result in up to four well workovers per year at a cost of $100,000 per workover.
The article indicates use of jet pumps was found to be more efficient than rod lift. I assume jet pumps use a lot of electricity and are not cheap?
I will say if we pulled every well once per year, let alone four times, we would be in deep do do. I wonder how these conditions will work economically in 5-10 years on wells producing 10-40 bbl of oil per day.
May be worth while to link the article. Would note Liberty has big hedge fund backing and has ceased drilling operations at this time. Read on other site an article about them tying wells in a 9000 acre area to a single system which includes piped SWD wells rather than truck hauling. Story says one SWD well is $3.7 million and have spent $16.2 million on lines. The dollars spent up there never cease to amaze me.
I wonder if a rotoflex could operate w/ lower stress in those deeper low fluid volume wells? I have no experience with jet pumps though.
“lvm per gallon…” ???
http://news.weatherford.com/download/2014+May+World+Oil-+Kosmicki.pdf
Oh, lbm per gallon…
Hah – Firefox tried to auto-correct lbm (pounds-mass) to “lvm”, is that what happened to you?
“Like many shale operators in the Bakken … high IP rates from these wells … 1,500 to 4,500 barrels of fluid per day. … these rates are not sustainable … , within the span of three to nine months, a well’s production rate may drop off quickly to one-sixth of its initial rate.”
Not sustainable – indeed.
“… problem is further compounds by the heavy-brine formation water, which deposits substantial quantities of salt and scale on the tubulars and sucker rods, … . Up to four work overs per year can be required, … cost of $100,000 per workover.”
“… [jet pumps] allow for more effective and efficient addition of freshwater and production chemical treatments into the wellbore.”
AH HAH! Wash away the salt while pumping, instead of doing a workover.
(Damned auto correct – I hate this shirt! It thinks “workover” is two words.)
“Liberty records a first-year incremental cash flow improvement of approximately $850,000 per well, by implementing jet pumps …”
Very interesting article – looks like Weatherford paid to bring this advertorial out from behind the paywall, good on them.
I have experience using jet pumps. We ran them down to about 12,000 feet and 250 degrees. The key was to have a really experienced wireline operator. We used Wood Group and spelled out the chief wireline operator who was tied to the contract. We also had a field operations engineer on site 100 % of the time. The power fluid was filtered and inhibited water, this avoids the hassle if there’s a line break in the power fluid system.
The only issue I would worry about is corrosion, because it’s customary to pump down the tubing and take returns up the annulus.
sunnnv
“Damned auto correct … I hate this shirt!”
Won’t even let a guy cuss … technology.
Apologies for being off-topic once agian, but can somebody give a brief explanation of the frack-log. The financial community seems to believe that all of those thousands of wells can be brought online within days/weeks; since they don’t seem to know their a..se from their ellbow I would be grateful to get some decent answers:
1. In what state are those wells left behind, i.e. with completion installed and full downstream setup hooked-up?
2. How many days/crews does it require to bring those online? I.e. do you “just” need a fracking crew, or is there wirelineing and rig work required?
3. I guess fracking crews are being laid off like everybody else at the moment. So even if all operators wanted to go full ahead with bringing those wells online, is this a likely scenario? Or how many wells/month do you believe are achievable.
As mentioned before this is very off-topic, but I find the whole situation quite fascinating and this seems to be one of the only places where you can get decent answers.
Dan
NoDak has a monthly publication in which the number of wells awaiting “completion” is quoted. We don’t know how accurate that is, but it’s about 800 now as I recall.
NoDak is mostly trucks carrying oil and water where it has to go, so it’s not really a question of downstream infrastructure.
As for how long to complete, you will get lots of BS quotes on that based on twisted definitions. Like so:
We can frack a well in a day or two.
Well, yes you probably can, if several million pounds of sand and millions of gallons of water are already on the site in tanks/containers. That stuff gets there by truck, too. That material is the big cost so if you’re holding off fracking because the bank doesn’t want you to squander that money, you don’t buy those truck trips to bring it all to the site and let it sit there waiting until you then pay for the big pumps to come in.
And thus the time to complete is well over a month. It takes that long to make the truck trips.
If the trucks aren’t hauling proppant and water to the site, those truckers aren’t being paid. The proppant vendor isn’t selling, either.
It’s going to take a while to re-hire a lot of laid off workers (many of whom have gone on to other jobs), and they have to be tested for drugs, retrained in many cases, new hires have to be trained, and in many cases the equipments will need to be repaired and serviced.
And who is willing to make those investments?( after what happened the last months). I can see some people getting an interesting awakening, when they plan to complete their wells, just to be put on waiting list. Thanks for your asnwers
Personally I believe the loss of qualified personal in down turns like the one we are going thru now is a very serious problem for the oil and gas industry. In 2003 the average age of middle to upper management with the knowledge and experience to drill and complete wells, and fix problems, was 56 years old. That same year, I believe, 30,000 kids took the bar exam in the US and 23 new petroleum engineers entered the work force.
Over the past 12 years a lot of brilliant young kids have educated themselves with the idea of long term careers in oil and gas exploration and production. They have now gotten a big dose of the reality of price volatility and are out of work, in all likelihood re-thinking their career plans. To be a good drilling engineer, or a landman, takes many years of hands on experience.
I am very concerned about how the industry will be able to put itself together again when prices rise. Iron rusts but that’s fixable. Finding qualified and skilled workers to roughneck, etc. will be a problem but finding older, experienced personal to train them, or retrain them, and engineer the wells will become increasingly problematic. Re-supplying the work force is one of the fallacy’s in how quickly the shale industry can “ramp” itself back up when prices recover.
Mike
The same concern also applies to agriculture in the United States. The cost of entry is tremendous, therefore it is extremely rare to see a young person start farming without parents or some other relative who is already established. Add to that the commodity cycles and weather issues, one can see a lack of farmers becoming an issue.
I live in a rural area and have witnessed the number of farmers continue to shrink, with the remaining operators farming more and more acres.
Farm employees are becoming more prevalent, so maybe that will help. However, like with oil and gas, finding people to trust to operate large, expensive equipment safely and effectively, in an area losing population, is not easy.
The positive is that it gets easier every year with automation. Tractors can drive themselves very easily day and night, and do not mostly for safety reasons. Add in a more robust field map every year, easily done as you roll across or with drones, and the skill of the labor needed to sit in a tractor goes from highly skilled to sentient
Tractors are amenable to being robotically driven but I personally think this technology will not spread very fast.
There are simply too many tractors already out there that will cannot or will not be converted and they last a very long time.
A tractor is typically driven very hard during plowing and planting season and again during harvest season but sits around most of the time. The driver is usually a regular employee or family member with many other responsibilities in addition to operating the tractor. The farmer is not going to be able to get rid of an employee in most cases by buying a self driving tractor.
Finally a lot of jobs involving the use of the tractor may not be easily managed by the self driving software. Plowing and seeding is one thing out in an open field. Working in tight quarters loading trucks etc is a different job.
And Sky Daddy alone knows how much it will cost to get the dealer out in the middle of the night during the busy season to fix a problem – maybe enough to pay an operator for a month.
The soft ware is going to be proprietary and fixing this sort of thing is neither fast nor cheap.
Human beings are actually pretty dependable if they are long term employees.
Tractors are going to be operated by naked apes for the most part for a long time to come.
Actually Mike, I have been quite surprised about half those oil jobs are not robotic now.
Anything, repeat, anything that pays well calls out to robot makers to come pitch cost savings to management.
Which, btw, is why not a lot of robotic tractors. Those guys aren’t paid well so there’s no cost savings.
And btw, you need oil for tractors. Plan on your kids walking behind oxen.
OFM over the years has made the point over and over about how much he can get done with diesel on a farm. Perhaps he will do so again.
There will be a tremendous contraction in other end markets before we touch diesel for farmers or mining, where there are limited to no substitutes.
My kids can carpool for the next 10 or something years with no real pain
Assuming no collapse before then. And after gets very unclear
Much mining, especially underground coal mining (where ICEs can cause explosions), has been electric for some time – here’s a source of electrical mining equipment. Caterpillar manufactures 200-ton and above mining trucks with both drives. Caterpillar will produce mining trucks for every application—uphill, downhill, flat or extreme conditions — with electric as well as mechanical drive. Here’s an electric earth moving truck. Here’s an electric mobile strip mining machine, the largest tracked vehicle in the world at 13,500 tons.
All true, but except for underground coal not all that easy.
Electric drive trucks are very common, but trolley systems providing electricity are not. They are inflexible and expensive, though they could be done
There is also the issue of where the mines sit. In the US there is ample infrastructure, and some electrfication proceeded in line with mine development.
In indonesia and africa, and generally where new mines are found, less infrastructure.
You can build powerplants to power the equipment, but then you may well just be using petoleum in slightly larger engines with electrical losses to boot.
Yeah, there will be some niches where liquid fuel is convenient.
Chilean copper mines are installing solar power – it’s almost always cheaper than diesel.
Nick,
You need to be careful when you are talking bout electric trucks. The Cat electric trucks you linked are the same a diesel locomotive set up. Diesel engine/ alternator/ electric motor. These are very common these days, as they give much better control. We use the same concept on drilling rigs, diesel power/ electric drive.
Now your truck with overhead wires, is a different kettle of fish. Extremely rare if not experimental, but to get to your ideal world, you will need to see what is fueling the generator, rather than what is driving the wheels.
Farming:
http://energyfaq.blogspot.com/2010/08/will-farm-equipment-especially-large.html
My personal opinion is that just about all farm machinery will continue to run on diesel or maybe cng or propane for a long time yet.
I don’t see batteries becoming competitive with diesel engines anytime soon. Beyond that there simply isn’t any grid out in real farm country capable of supplying the juice to recharge lots of very large batteries one after another on farm after farm- and building such a grid is not imo going to happen because the farmer would need all that juice for only a few weeks out of the whole year. Farming is highly seasonal work and will continue to be seasonal work for the foreseeable future.
This is not to say that a great many jobs on the farm cannot be handled by battery powered machinery if it gets cheap enough. Lots of farmers who raise cattle for instance use a small tractor several hours a day year around to move feed etc.
Now as far as going back to farming with animals is concerned, it just ain’t gonna happen except under two possible sets of circumstances.
One set is that existing tractors and other machinery simply cannot be replaced or repaired because the economy has declined to the point there is no heavy industry anymore, no spares, no local machine shops etc.
The other set of circumstances is that animal power is mandated or adopted by choice for political or cultural reasons. This could happen in some places.
And some people WANT to farm with draft animals. If they are able to sell their output at high enough prices it can work but this means bypassing wholesale markets and selling directly to consumers or restaurants etc.
Most people simply never grasp the basic fact that farm work is seasonal in the extreme in most cases.You run the hell out of your equipment spring and fall and it just sits around most days the rest of the year. If a farmer owns his own combine it is apt to be used less than six weeks out of the entire year. It is not unusual to see used tractors for ten years old with only three thousand hours on the meter. More than five thousand hours is unusual unless the tractor came off a year round operation such as a dairy farm or a farm located way down south where there is no winter and crops are grown in sequence year around. Land is so expensive that it is usually MUCH cheaper to own machinery that sits around a lot than it is to have enough land to run the equipment hard all the time.
So-I used my forty horse power utility tractor today for three hours and burned about five gallons of diesel. This was light duty work but using a team of horses it would probably take me two or three days to accomplish the same job.
I probably will not start the tractor again for a week even though it is spring, since I am now retired. It will not consume even a teaspoon of diesel but that much probably evaporates out of the fuel tank in a week anyway. It will not require any attention at all. That team would have to be fed and looked after all week long.
Home grown bio fuels – if petrol diesel or coal to liquid diesel is not available -will always be cheaper than feeding draft animals. PERIOD. MUCH CHEAPER. MUCH MUCH CHEAPER.
I didn’t use that tractor at all in January and maybe only a day or two in February. Couple of days in March etc.
Four husky horny handed men and eight big mules cannot plow as much in a day as I can with that tractor with twenty gallons of fuel. After two days working them hard both men and mules need a rest day of light duty or no work.
And incidentally it was manufactured in nineteen seventy two and still going strong. It has not yet had an engine or drive line overhaul. It is on probably its eighth set of tires though. Probably on the fifteenth battery.
Of course it is true that no farmer yet has ever found a brand new baby tractor in his barn on a frosty morning.
One small step farther. Take any otherwise unused biomass, run it thru a pyrolyzer, take the outgas and store it in a flabby sack. Pump that gas into tractor tank, use diesel set on idle with boost to desired power from gas into air inlet.
Put the biochar into ground, or sell it to people who will pay big for their biochar mania.
All of above already demonstrated.
Watcher,
The new rigs being built have a lot of robotic on board. Even the land rigs use similar technology. The funny thing is, they take the same size rig crew, but a larger maintenance crew. So no labour saving there at all.
Most of the robotics have been introduced to improve safety or better control of drilling parameters, but as a drill floor is a multifunction work area, and the back up system, revert to manual, you still need all the bodies.
https://www.challengergray.com/press/press-releases
Hauling water into the oil field certainly seems to be a waste of trucking money.. It should be possible to lay a water line coming in from wherever they get the water to the far side of the fields with a few smallish storage ponds strung out along the route so as to cut the haul off fairly short.
I suppose the bureaucrats insist that a clean water line be built to nuclear power plant standards .
In actuality such a pipeline could be unrolled on the ground and rolled up again. A four inch line will flow a hell of a lot of water on a continuous basis. Even farmers can manage to move water this way. I do it myself using an inch and a half line consisting of salvaged cable conduit – the sort plowed in along side roads and used to protect fiber optic cable.
My proudest moment ever as a scrounger was getting about eight MILES of this super tough conduit FREE for the hauling when THAT bubble popped. It took me over a month to load it up and haul it home. I suspect it would withstand four hundred psi ok. I run it at up to two hundred with never a single failure yet.
Now here is a question for the pros.
How is the frack water stored until it is needed? Is ALL of it just held in tanker trucks or do the Fracking crews have on site storage tanks at each well site sufficient to hold a significant part of the needed water ?
Since there is produced water tanks are needed anyway and would be perfectly clean at first use.
Hauling away produced water would be another ball game since this is a long term proposition and the pipe would have to be both corrosion resistant and frost proofed by burying it probably three feet or deeper. A pipe that can withstand water full of H2S and salt etc for twenty years would be expensive sure enough.
There is a youtube vid of an onsite open air water tank. Quite big. Tanks are possible but we are talking multi million gallons. And chlorine has to be added to the water. And it has to be heated in winter.
Oh and re qualified people and drug testing, these guys hauling water away from a producing well are not generic truck drivers with a CDL and hoping the employer doesn’t find out about DUIs. These guys have to have extra training in the nature of the water, and how to follow procedure in hooking up the hoses both at the well site and also at the disposal well site. There is a lot of gunk in that water, some of it radioactive, oddly.
Shales are naturally radioactive. If you produce from a zone with some shale then the shale bits will come up with the water. The radioactivity level is pretty low. You can sleep on top of shale for several years and never feel the difference.
You might not sleep well?
OFM wrote:
‘How is the frack water stored until it is needed? Is ALL of it just held in tanker trucks or do the Fracking crews have on site storage tanks at each well site sufficient to hold a significant part of the needed water ?”
Super giant above ground swimming pools, or man made ponds.
I strongly suspected ponds or pools of some sort – a pool being a variation of a tank.
Six or seven thousand gallons per truck means an unmanageable number of trucks and a traffic jam at the well site if millions of gallons of water are needed over the course of a few hours.
Hence the water could be delivered with a pipeline that should prove to be dirt cheap given the size of it could be relatively small. Of course there could be right of way issues.
But that sort of conduit comes in huge rolls such that each roll has a mile or so on it, and the spool is made to fit right on the back or front of a dozer.
It should be a piece of cake to build the spools extra heavy and add a gear drive and fairlead to allow the pipe to be rolled right back up.
I bet I could put down five or ten miles a day with a crew of four or five men.Of course there are always realities that daydreamers fail to take into account.
The pipe would have to be buried at any point that trucks must drive across it. But it should still be possible to run it along side a lot of privately owned roads and perhaps some public roads.
Pic of “Giant Pool”
https://barnettshalehell.files.wordpress.com/2013/10/img_1309.jpg?w=640&h=480
Infant oil field translates to more reserve growth. If a field is 100 kilometers by 200 kilometers, 20000 square kilometers, a known area of lithosphere at a certain depth, length and width, depocenter, a fair assessment of the reserve would yield a result that would be satisfactory for a value to be determined.
Week 17 BNSF carload report
Petroleum cars at 10,290
Coal at 45,289 carloads
East of the Urals you are in Asia, west of the Urals, you’re in Europe. A continental divide.
The Russians use some
heavy duty all terrain vehicles to drive through the back roads of the Urals.
West Siberia
Ronald,
Are these the car loads that were loaded? Or the one that arrived at there destination?
You do realize that some have a habit of falling off the tracks, and never arrive!
smiles
Okay, I wuz wrong. It’s not supply and demand that sets the price of oil, It’s Allah who sets the price of oil!
The oil cartel OPEC has lost control over the price of oil.
Saudi Arabian oil minister Ali Al-Naimi, however, does not seem to think Saudi Arabia or OPEC can really control oil prices anyway.
“No one can set the price of oil — it’s up to Allah,” he said Tuesday in an interview with CNBC.
No atheists in foxholes.
Watcher, I don’t get the point of your comment but “There are no atheist in foxholes” is the biggest goddamn lie ever told by religious nuts. But of course they did not know it was a lie. They actually believed it to be true. It is not true and was never true.
Philosophical question: Is a lie still a lie when it is believed to be true?
Well no, it is a mistake then but a lie when repeated by those who have seen clear evidence of atheist still being atheist on their deathbed.
It’s hard to take dispassionate philosophical samples when RPGs are bursting about.
Unless you want to count the number of “Jesus Christ! Get your fucking head down, you idiot!” coming from atheists.
A moment for a derisive note about the purity of post 2008 capitalism.
http://www.zerohedge.com/news/2015-05-07/guess-who-owns-11-billion-apple-stock
That’s 1.1 billion dollars of Apple stock, owned by the SNB. Central banks buying equities, because being able to print money from thin air is not enough.
Our infinite money is better than your infinite money.
Here is a comment on that SNB owning Apple and other stocks.
Yes, we all know the US Stock market is over-priced. But if the TPTB can use spoofing, futures manipulation, and other shenanigans to keep stock prices rising as well as prevent it from crashing, as they have been doing, what will be the catalyst to send it crashing? Bad fundamentals? Nope, doesn’t matter. Low volume? Nope, that doesn’t appear to be doing the trick either, in fact, that likely aids the spoofing shit. So why can’t they do this forever, short of a nuclear bomb hitting Wall Street? What is going to stop the money-printers from jacking this market up til we are all long dead and gone????? Really. Somebody tell me. I wanna know.
I’ve been wondering the same thing. People talk about the next crash, but what is going to trigger it?
I’m worried enough about a big decline in the stock market that I haven’t put in any money since the dotcom crash. I’ve pulled some out in recent years and have missed the run-up that has been happening. But I’ve seen the losses before and don’t want to take my chances now.
On the other hand, I don’t really know what is going to cause a massive stock sell-off. It should have happened by now if it is going to happen. Money isn’t going into the market based on any rational valuation. It’s just going into the market because there is so much money around and not many good alternatives.
Only oil can stop it.
And will.
Maybe worth elaborating. There doesn’t have to be a selloff. A day may arrive, likely a Monday, when it doesn’t open anymore. Have to go back and see what went on in the Iraqi stock market. Or France in the 1940s. My recall is France still had a stock market in the 1940s and its prices were specified by the occupation commander. What possible meaning could those prices have had even if there was no dictation? The companies essentially didn’t exist and the French franc was meaningless. French banks gave money to the German garrison so they could buy food at marketplaces, and prostitutes of course. Germany took all the French wealth and essentially could use some of it to buy French stocks. It was all meaningless. http://www.keynes.dk/fresh/3/le_bris.pdf I think page 9ish.
You have to know a great deal about this stuff before you can get to the point of declaring that it means nothing and may be changed by decree.
For the moment, best to simply see the line item in the article. The SNB buys international equities, and they can print all the money they want. The BOJ does the same thing.
None of this has to mean anything other than a mechanism for keeping the wheels turning. Anything else ended in 2008.
Only oil can stop it.
And will.
But oil probably won’t fall off a cliff. It won’t be an overnight event.
So as oil becomes more scarce and/or more expensive, society will likely continue to adjust. And if people/companies are going to keep pumping more money into the market, they likely will.
There could be some event that shocks the world and leads to some sort of panic with the market, but even if there is a short-term panic, wouldn’t people keep pumping money into the market like they are now?
Seems like the only thing that would pull people out for an extended period of time would be a better investment. Gold has been that in the past, but the people/companies putting money into the market right now aren’t the gold bug types, are they?
We keep having bubbles, and even if people know better, they put their money into the current bubble. Seems like as long as governments find a way to protect the money people, there will be little reason for them not to keep investing in the investment of the moment. It’s all reward and no risk for them.
No, as oil becomes more scarce, price means nothing. How can you outbid another central bank that can print just as much money as you can?
As oil becomes scarce, somebody isn’t going to get what he needs. Nobody starves quietly.
I re-iterate and re-encourage people to look it up . . . the 1930s was a global Depression, but somehow, amid a global Depression, Germany . . . closely monitored, still managed to build prohibited weapons in huge quantities. They did it with a shadow central bank who just created money from thin air and paid the arms workers to . . . work. Do not get into a mode of thinking any of this has to have physical meaning or that the power of “market forces” mean anything. They built all those weapons and they were a basketcase economy in a basketcase global economic situation.
But the weapons still got built.
As oil becomes scarce, somebody isn’t going to get what he needs.
Yes, I understand.
But oil scarcity isn’t going to crash the market. It will happen too slowly to become an event.
By the time oil becomes so scarce that the globe is feeling the pain significantly, the stock market isn’t going to matter that much. But that’s not an overnight thing.
What the person making the comment I shared was asking is if there is anything that will crash the market? The market seems to keep going even though it is over-priced. But as long as investors don’t care about that, or feel they have no where else to park their money, there shouldn’t be any reason for the market to decline significantly and stay there.
The point is there doesn’t have to be a crash. It may simply not open.
There’s no credible mechanism for gradualism. Someone can’t feed their people — they will demand help. Appeals to the UN, or whatever. And again, keep in mind China has to greatly increase their oil consumption to catch up with the US per capita.
Oh and this evening China announced a 6.1% car sales increase Y/Y over April ’14. They have to do this or accept inferior lifestyle forever.
China will not and should not accept a configuration of perpetual inferiority for its citizens. They are hugely increasing their car fleet. It’s hundreds of thousands of barrels / day increase every single year.
This will have to be stopped. Or they will have to act to stop US consumption. Or elsewhere. It’s not really even debatable.
Someone can’t feed their people — they will demand help.
People not getting enough to eat has been happening for a very long time. It hasn’t yet shut down the world.
The stock market hasn’t stopped because there are starving people in Africa, Asia, or even in the US.
As oil becomes scarce, somebody isn’t going to get what he needs.
Well, if driving an SUV is a”need”, then perhaps that’s true. But, an EV will get them to work and the grocery store.
And giving up the SUV will free up more than enough fuel to allow the groceries to be harvested, processed and shipped to the grocery store.
Watcher Wrote:
“re-iterate and re-encourage people to look it up . . . the 1930s was a global Depression, but somehow, amid a global Depression, Germany . . . closely monitored, still managed to build prohibited weapons in huge quantities.”
Watcher, Your theory doesn’t hold up. Germany displaced much of its economy to build weapons. Rationing was widespread, and Unions were essentially banned through strick regulation. labor controls were also inacted to force workers to remain the in the same jobs (ie they could not quit and find a different employer).
http://en.wikipedia.org/wiki/Economy_of_Nazi_Germany
“while more Germans had jobs, a focus on rearmament meant rationing in food, clothing, metal, and wood [32] for most citizens. Rationing eventually extended to use of fuel and production of cars, leaving many Germans unable to drive.”
Some how I don’t think that will fare well in today’s narcissistic society.
“while Germany was successful at rearmament, production of agriculture and consumer goods stagnated, and standards of living fell. Production of agriculture, particularly, rarely exceeded 1913 levels”
Bottom line: The Nazi plan was to build armaments and use them to take resources from the rest of Europe, before its economy came apart:
“Hitler hesitated before siding with the latter, and in August issued the “Four-Year Plan Memorandum” ordering Hermann Göring to have the German economy ready for war within four years”
Boomer wrote:
“But oil scarcity isn’t going to crash the market. It will happen too slowly to become an event.”
The economy is limping along on QE and ZIRP, and we haven’t breach peak liquids yet. NIRP is just starting, and you think the market won’t crash when there are oil shortages?
Technically the crash already happened. Conventional Oil Peaked in 2005, and that’s when the financial gimmicks really took off, which led to the 2008 crisis.
Boomer Wrote:
“But as long as investors don’t care about that, or feel they have no where else to park their money, there shouldn’t be any reason for the market to decline significantly and stay there.”
Your statement reminds me of Neville Chamberlain, when after returing from his meeting with Hilter in 1938, he told the press “There will be peace in our time”
The US Market is held up by a corporate borrowing binge to finance stock buybacks. However, debt loads are beginning to bite as corporations now risk credit downgrades, Stock buy-backs are beginning to tapper and probably will end within the next 6 to 12 months. Perhaps direct Central Bank purchases of stocks (aka SNB caught buying equities this week) will continue the levitation further. That said, its nothing more than a balloon in search of a pin. A dramatic crash and crisis is inevitable.
The economy is limping along on QE and ZIRP, and we haven’t breach peak liquids yet. NIRP is just starting, and you think the market won’t crash when there are oil shortages?
My definition of a crash is a dramatic event where the market comes down suddenly. An oil shortage will more likely be a creeping decline than an event that triggers a panic in the market.
The US Market is held up by a corporate borrowing binge to finance stock buybacks. However, debt loads are beginning to bite as corporations now risk credit downgrades, Stock buy-backs are beginning to tapper and probably will end within the next 6 to 12 months. Perhaps direct Central Bank purchases of stocks (aka SNB caught buying equities this week) will continue the levitation further. That said, its nothing more than a balloon in search of a pin. A dramatic crash and crisis is inevitable.
I have been out of the market in anticipation of this. I don’t plan to go back in. Something like this would confirm my caution. However, I have wondered if I have been too cautious.
In my mind, the market should have gone back down to 2008 levels again. It hasn’t and I have wondered when/if it will.
If you go back and do a search thru that quoted wiki on Nazi Germany’s economy, you will find no occurrence of the word “monetary”.
This is typical of non monetary economists. It’s just very much better in their analyses not to address where money came from. Rather, they think in terms of revenue and expenses, and if expenses exceed revenue, regardless of how it is spent, they’d rather not note that the central bank loaned that money.
None of which is the point. The point is that rich nations outbidding poor nations for oil in a scarce scenario doesn’t hold up when central banks collude to ensure no country’s currency can collapse (robbing the uncollapsed currencies of exports) and thus anyone’s central bank can create all the currency required to compete in the bidding process.
And thus, the big powers not getting the oil they need for their current lifestyle will result in a requirement that they confiscate it.
Watcher sometimes I am just flat out unable restrain myself from calling SOMEBODY a fool.
In your case today I am getting close to the breaking point.
Surely you are NOT so stupid as to believe that when the shit hits the fan that countries that still produce stuff that is exportable and salable – stuff that is the basis of all trade – will allow some two bit bunch of counterfeiters to buy essential goods right out from under them.
Tolerance only goes so far. Stupidity only extends so far. Stupidity is a self limiting condition. There is such a thing as Darwinian selection in this world.
When the people in the USA or some other country that is still (relatively) economically productive start seeing the people in a country that produces nothing consuming extremely scarce oil (as well as other fast depleting resources) they will put a stop to THEIR central bank supporting the ones in ” moocher” countries.
The problem with people who know a bit about banking and finance is that they are unable to conceive of anybody telling the bankers what is going to be done.
Bankers may be little tin quasi gods as things stand right now but when the shit hits the fan the countries that can and do manage their affairs more or less effectively will give the extended middle finger to the countries that do not.
Maybe I can put it in simpler terms. If I have a starving neighbor I will share my food – but not to the point of starving myself and my own dependents.
http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1aCG
http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1aCK
http://www.advisorperspectives.com/dshort/updates/Market-Cap-to-GDP.php
Boomer II, it’s another bubble and it’s likely rolling over as in 2001 and 2008.
The likely cause of the next financial market meltdown is one or more precipitants associated with the hopelessly levered carry trade for emerging market corporate and sovereign debt and equity index futures using US Treasuries as collateral by TBTE banks’ offshore shadow banks’ pass-through entities in Caribbean banking centers, Channel Islands, Isle of Man, and Singapore, levered 50-80:1 vs. 25-30:1 in 2005-08 prior to the real estate junk and equity index futures implosion via Bear Sterns, Lehman, and AIG.
But at this point, there is no place left to hide. The top 0.001-1% own everything by extension and want it all back, and they have bought the White House, the federal legislature and courts, and the mass media to secure their wealth, income, status, privilege, and power.
Nothing changes until the rentier top 0.001-1% are challenged, identified, called out, made fully accountable, and overthrown, the next 9% forced to self-identify with the conditions of the bottom 90%, the guillotines are rolled out, the wealth of the top 1% is confiscated, they lose their heads or are expelled, and the reset button is pressed. That is what they prescribe for the rest of us during the coming existential crisis, so anticipatory turnabout is fair play for the survival of the bottom 90-99%.
Warren Buffett and Charlie Munger can be allowed to be under house arrest with three meals catered from Dairy Queen each day until death.
You’ve got it spot on.
Unfortunately, revolutionary terror is not likely. People are happy with their local freedom of choice. As long as they can have sex with whom they want, buy Coke or Pepsi, and Apple or Google devices, and drive cars, they’ll be happy.
A political revolution and the end of capitalism and a shift to a more sustainable, local, poorer lifestyle will NOT come about as a result of free choice. It will only be when the people are desperate enough that things will change.
“A political revolution and the end of capitalism and a shift to a more sustainable, local, poorer lifestyle will NOT come about as a result of free choice. It will only be when the people are desperate enough that things will change.”
Yes, and historically r-evolutions are rarely bottom- up phenomena but rather stem from the increasingly insecure buffer caste of intellectuals, merchants, or warriors between the masses and the top 0.001-1% elites. This caste in the West is generally well paid, well situated socioeconomically, self-satisfied, and generally self-identify with the extractive, rentier mindset of the top 0.001-1%; and the latter are keen to keep it that way, as are the former mostly self-aware of the situation and not inclined to disrupt the arrangement.
What did the Bank of America just announce yesterday?
Is this a premonition of things to come wrt fossil fuel financing?
Or is this some kind of corporate green washing?
“Bank of America Corp. is getting out of the business of financing of coal-mining companies.
Andrew Plepler, head of corporate social responsibility at the Charlotte-based bank (NYSE:BAC), outlined the new policy at the company’s annual meeting Wednesday in Charlotte.
“Our new policy reflects our decision to continue to reduce our credit exposure over time to the coal-mining sector globally,” he told the crowd of about 180 attending the meeting at the Marriott SouthPark.”
http://www.bizjournals.com/charlotte/blog/bank_notes/2015/05/bofa-moves-away-from-financing-coal-companies.html
http://about.bankofamerica.com/assets/pdf/COAL_POLICY.pdf
It probably means a bit of opportunistic greenwashing but the real underlying cause is more likely to be that the bank managers have decided that the coal industry is a poor credit risk for various reasons including a temporary supply glut resulting in depressed coal prices , substitution of wind and solar power over the longer run, etc.
Personally I think coal prices will remain depressed for four or five years or maybe longer. That is probably long enough to scare a banker into wanting better security TODAY.
FWIIW
What causes the revisions to the estimates of recoverable reserves?
Price is likely the primary driver for revisions of estimated ultimate recoverable (EUR) reserves. Several oil companies developed their strategies late in the previous decade based on a sustained oil price at $100/Bbl.
The Norwegian Petroleum Directorate (NPD) has a very elaborate resource classification system for oil and gas.
Contingent resources, that is resources in planning phase, likely but not clarified and possible increased recovery measures (EOR). As these are sanctioned, the reserves are added. (This is the so-called “reserves growth”.)
A sustained lower oil price is likely to reduce the amount of oil that are economic to recover.
The chart at the bottom shows how total estimated recoverable crude oil reserves has developed for discoveries/fields that was in extraction (production) phase in 2004 and how these developed as of end 2014.
In the NPD’s resource accounting at end 2005 condensates from Kristin, Mikkel and Åsgard were reclassified to Halten blend (a crude oil).
Looking at the distribution of relative reserves changes (in both directions!) these appear to increase as the size of the discoveries decreases. For the discoveries presented, this is very pronounced with less than 500 Mb of recoverable. …and there are likely not that many “elephants” remaining waiting to see a drill bit.
Hi Rune,
Are the estimated recoverable reserves reported in your chart similar to what the UK calls proven plus probable(2P) reserves? I do not have a good handle on the Norwegian reserve classification system.
These numbers are quite a bit different than the numbers in the 2014 BP Statistical review (which they call proven reserves), roughly a factor of 2.4 to 2.8 higher (it varies year to year), are these maybe 3P reserves?
Perhaps there is not a similar classification in Norway to the proved, proved plus probable (2P), and proved plus probable plus possible (3P) reserve classification system used by the United Kingdom.
Rune,
Ignore my question, these are remaining reserves plus cumulative production, for fields that had started producing in 2004, so it shows reserve growth very clearly.
Using BP data one cannot sort out the new discoveries, so your chart is much more informative than anything that could be produced by using the BP data. Thank you.
Looks like roughly 8% reserve growth over the 10 years from 2004 to 2014.
A link to a ny article about theft and corruption in Venezuela.
http://www.nytimes.com/2015/05/06/world/americas/venezuelas-economy-suffers-as-import-schemes-siphon-billions.html
Things are getting really bad. Inflation is headed to over 100 %, poverty is at over 50 %, extreme poverty is over 20 %, there’s total chaos in the provinces, with army units reported to be kidnapping people and holding them for ransom, oil production keeps dropping, and there’s a very large cohort of educated people desperately trying to get out.
LatAm, India, two-thirds or more of China, much of SE Asia, Central Asia, and Africa cannot maintain their current GDP per capita nor succeed in their aspiration to achieve a western-like standard of material consumption given Peak Oil and LTG. They are 40-80+ years too late.
http://carnegieendowment.org/files/Tellis_Blackwill.pdf
What is occurring around the world is a direct effect of Peak Oil, population overshoot, LTG, and what is now emerging as the last-man-standing contest between the US and China for the remaining exploitable resources of the planet.
LTG or AGW ? LTG = long term growth ?
Let’s not confuse things…Venezuela is counted on by many industry wonks to contribute a significant amount of oil production in the future. But the chavista regime is taking the country to hell. This is similar to what the Castro dictatorship did to Cuba, and reflects the fact that Cuba’s dictatorship has its tentacles inside Venezuela.
The chavista regime and its ability to continue stealing, torturing and murdering are enabled by leftist regimes and so called progressives with outstanding moral and ethical flexibility.
Where does this take me? I think there’s a possibility we will see Venezuela become a failed state, with a mix of civil war, crime, riots, and periodic looting. All of this compounded by the flight of Venezuelans trying to escape chavista communist hell.
Not too long ago, Venezuelan officials toured financial capitals discussing their plans to increase production. Increase production my behind. Most capable professionals are desperately seeking a way out. I got Venezuelan friends hiding in apartments in the USA, in Europe, in Latin America, you name it, trying to get visas, which thus far are pretty hard to come by.
The international community must be close to declaring Venezuela a failed democracy with serious human rights abuses, and this should intensify the flight. And the flight of people with brains and training will gut Venezuela’s oil industry. Forget those wonderful super heavy oil resources. Most of that will never be produced.
Hi Fernando,
Personally I tend to agree with your political analysis to a substantial extent. But one thing would help your case in dealing with THIS audience. That would be to qualify your comments with a time frame.
My guess is that the Venezuelan government will be overthrown within a decade or maybe a lot sooner. So maybe you should qualify your statement by saying most of the heavy oil in Venezuela will not be produced anytime SOON.
Now it could be that they will manage to damage the reservoir so most of it CAN’T be produced – not being an oil man that is a question I can’t comment on.
But I find it hard to imagine the idiots in charge there will be able to damage the entire deposit given the size of it and the rate at which they are working.
You should also qualify your comments to the effect that wind and solar power are not practical TODAY in the dollars or euro economic sense when you say they don’t work.
You absolutely must know and admit to yourself at least that fossil fuels are not going to last forever.
I tend to qualify my comments about fossil fuels and agriculture by admitting that people WILL and MUST go back to horses and oxen IF diesel or new tractors eventually become totally unavailable. Note that I do not believe this scenario will come to pass anytime soon, if ever, in a place such as the USA. Biofuels are much cheaper than draft animals and tractors will be one of the very last machines built if the industrial economy suffers a catastrophic crash.
Oil , coal and gas will eventually become so scarce as to be unaffordable or unattainable due to nationalistic hoarding and at that time we WILL use such renewables as we can.
The only other likely possibility is a nuclear economy and my guess on that front is that there will be at least a couple more accidents of the Fukushima sort that kill a lot of people and thus totally sour the public on nukes until it is too late to build them wholesale..
Oil , coal and gas will eventually become so scarce as to be unaffordable or unattainable due to nationalistic hoarding and at that time we WILL use such renewables as we can.
Yes, that is my view. I’m not talking about using renewables today as a nice option. I’m talking about using renewables today to fine-tune the system so that they work better when we really do need them.
I see renewables as part of an energy package that we will use. We will look at all of our options to keep going.
Do I care if renewables can’t support BAU? Of course not. BAU won’t be supported anyway when fossil fuels decline.
All the “problems” being tossed out about renewables not supporting life as we know it are not “problems” to me. Renewables will support what they support. What they don’t support we’ll eliminate.
The real problem is a lifestyle we have developed based on plentiful, cheap fossil fuels. Whatever we do to adjust our lifestyle to our available fuel becomes a “solution.”
Mac, the reservoirs ARE being damaged. The damage can’t be reversed. And it happens to be worse in the best reservoirs.
From Peakoil.com ‘ Why We Have an Oversupply of Almost Everything ‘
“What happens is that economic growth eventually runs into limits. Many people have assumed that these limits would be marked by high prices and excessive demand for goods. In my view, the issue is precisely the opposite one: Limits to growth are instead marked by low prices and inadequate demand. Common workers can no longer afford to buy the goods and services that the economy produces, because of inadequate wage growth. The price of all commodities drops, because of lower demand by workers. Furthermore, investors can no longer find investments that provide an adequate return on capital, because prices for finished goods are pulled down by the low demand of workers with inadequate wages.”
A very good theory and it is probably correct.
I think such a line of reasoning may apply in the short run but that it is one hundred percent bullshit in the longer run.
I think quite a few economists would agree that low wages have hurt the economy: businesses have managed to suppress wages, increasing profits which flow to the wealthy, who save their money and don’t spend it, thus causing inadequate aggregate demand.
But what does that have to do with peak oil and limits to growth?
It’s worth adding that this imbalance between the income going to labor and the income going to capital explains the excess liquidity sloshing around the globe: there’s too much money chasing too few opportunities for investment.
“But what does that have to do with peak oil and limits to growth?”
Declining EROEI. Remember, money is just a representation of real wealth, capital, resources, etc… To make profits, which are the financial ROI (return on investment), you need to make more real goods, products, services, more cheaply. But when the cost of your primary inputs rises (oil at $110), your real EROEI (the ability to create outputs from inputs) declines, and you financial ROI declines accordingly. That’s why there is an excess of free money right now, because the real physical economic processes don’t generate enough real output to make the financial investments profitable. To have financial profit, you need to have “physical profit” first, i.e. the ability to create high added value from cheap, easily available inputs.
Strummer,
IIRC that is what is in the book ‘the next economy’ from Paul Hawken. He describes this effect of declining ROI because of declining EROEI. Seems an air-tight reasoning. Gail Tverberg wrote something similar about it several times.
when the cost of your primary inputs rises (oil at $110), your real EROEI (the ability to create outputs from inputs) declines, and you financial ROI declines accordingly.
That’s very general and vague. Oil isn’t a primary input for anything but oil refining, and maybe aviation. Oil is a very small percentage of cost for manufacturing in general.
The primary use of oil is for personal transportation: commuting, vacations, shopping, etc. Freight is a distant second, and that form oil consumption can be reduced if and when oil prices rise. Truckers are just waiting for prices to be high enough, long enough, to justify investing in the early, more expensive models of aerodynamic, hybrid trucks.
Depending on what you mean by ” primary” oil could be considered a primary input in agriculture along with natural gas which is used to manufacture nitrate fertilizers.
But we could at some considerable increase in expense grow enough stuff to convert on farm operations to biofuels. I do not however see any good evidence that we will have cheap nitrates anytime soon except by manufacturing them using natural gas.
“But what does that have to do with peak oil and limits to growth?”
LTG in the US began in the 1970s when US Peak Oil I occurred coincident with the onset of deindustrialization, financialization, and feminization of the economy and labor force. Since 1970, US oil production has fallen 40% per capita and debt to wages and GDP has risen to a record to make up for the loss of real wage growth after taxes since then.
Now the rest of the world is where the US was at Peak Oil I and the peak of US industrialization and the decline that was characterized by increasing indebtedness of households, firms, and gov’ts along with Gilded Age- and Roaring Twenties-like wealth and income inequality.
The problem today is that the rest of the world cannot replicate what the US did from the 1970s to 2005-08 because the world is already at record debt to wages and GDP and the constant-dollar price of oil is much higher with a larger share of GDP consisting of low- or no-productivity sectors, such as gov’t, health care, education, and financial services, which are now a net cost in the US and UK.
So, Peak Oil I and LTG began 40-45 years ago in the US and has now culminated with Peak Oil II and the peak of global industrialization and urbanization. The world can no longer afford to grow profitable extraction of costlier, lower-quality crude oil substitutes per capita AND grow the world economy and trade in real terms per capita AND built out renewables to necessary scale AND maintain indefinitely the fossil fuel infrastructure.
Something has to give, and it will be the end of growth of debt and real GDP per capita growth, oil production and consumption per capita, and further build out of renewables.
Oil doesn’t have that kind of mystical value. It just does stuff: moves people and freight around.
EVs and trains can do the same thing.
Thank-you; lotsa oil religion here.
We are transitioning away from such high reliance on the stuff, have been for decades, esp measured per capita. This will continue and accelerate. It is not going to disappear overnight, and new energy sources and systems are building to replace it. Will this future be different? yes, that is inevitable, all life is, is change. Does that mean collapse? Only if you believe the current order is the only possible one, which is a failure of the imagination and a misreading of history.
Love the heavy math here, very instructive, it is an important part of the transition story.
That sounds like a quasi Marxist analysis. I want to expand on it because I don’t think Marx understood system dynamics, and was fixated on a flawed idea because he didn’t understand the feedbacks we could see in democracies.
Marx believed the capitalist elite would corner all capital, and do so relentlessly until the proletariate exploded and overthrew the government to create a communist worker’s paradise.
What happened was slightly different. Democracy, imperfect as it is, allowed the working class to gain sufficient power to form labour unions, political parties, and other organizations which led to more equitable income distribution. The problem arose in those nations which lacked the democracy safety valve. There, the communists did take over, but they created monstrous dictatorships which have gradually transformed (or aim to transform) into quasi fascist regimes.
Thus the future isn’t set in stone. Countries which evolve into dysfunctional democracy will probably fall into the hands of communists or become outright dictatorships. Those with a functioning democratic safety valve will move to distribute the wealth to enable consumption by the masses.
However, there are exceptions, the ability to enable consumption isn’t limited to democratic regimes. Take the Chinese. That’s a dictatorship, has clear neofascist tendencies, extreme inequality, and also a very cold blooded computer like ability to run numbers. They will probably react to enable consumption, but the devil is in the details.
I think that, as a non renewable material begins to become scarce, the price will drop due to overproduction (indeed, people won’t consume if they can’t afford to buy it). But there will be a countermove, something will emerge to replace it, some governments will enforce rationing, and efficiency in the use of such a material will increase.
But eventually, after a few ups and downs within a broader downward slope, either replacements work or hell breaks loose. I think hell breaks loose leads to lower population, a lot of conflict, and a much lower standard of living. Not every country or group will go through the same experience, but I’m afraid Haiti, Somalia, Afghanistan, Micronesia, and Israel/Palestine will be quite common.
“What happened was slightly different. Democracy, imperfect as it is, allowed the working class to gain sufficient power to form labour unions, political parties, and other organizations which led to more equitable income distribution. The problem arose in those nations which lacked the democracy safety valve. There, the communists did take over, but they created monstrous dictatorships which have gradually transformed (or aim to transform) into quasi fascist regimes.”
This was true of post WWII western democracies. It is no longer true. As wealth/capital gains the upper hand it strangles the political system. Its first priority to is curtail the that very safety valve of which you speak. It is ultimately a self destructive impulse but one that they simply can’t seem to deny themselves. To weaken labor law, reduce the power of labor and strangle the safety net. The game of monopoly is instructive. After a time a few players own all the property have them loaded with hotels and everyone else gets to pay every time they roll the dice.
Indeed. But an imperfect democracy does provide a safety valve. For example, we just saw communists take over in Greece. These particular communists seem to be somewhat ineffective, but they are scaring the heck out of other governments. My concern is that governments don’t understand the effect of free trade with a fascist ex communist dictatorship like China’s, which exploits its second class proletariate mercilessly.
And it sure beats the theory of everything going to hell in a hand basket because the Marxists are taking over everywhere. Jeepers Creepers! This is a peak oil site and I’d expect that of all places, people here would have a clue about the fact that hitting physical limits would cause a lot of turmoil. For example, Is what is happening in Egypt caused by Marxists? Maybe ELM stands for Egyptians Love Marxists… Maybe ISIS is just another name for the Communist Party of the Middle East.
My theory is that if the ‘Communists’ do rise to political power in places such as Venezuela, that is a symptom of what is going on in the world and not an underlying cause. Furthermore if Marx had never existed those people would be doing pretty much what they are doing now and they might just call themselves the Watermelon Party. It really sounds to me that Fernando has a single tool in his tool kit and it happens to be a Hammer, so everything to him looks like a nail. I think he is hopelessly stuck in a single note Samba. I’m a lot more worried about the consequences of Limits to Growth than I am about Marxists over throwing the world.
Hi Fred,
You ought to cut Fernando a little slack. He has been hammered himself by commies and that sort of experience tends to make a lasting impression on you. 😉
For what it is worth I have read everything I could find about communism WRITTEN BY communists themselves. He does know what he is talking about.
Of course you are right that things might not be much different in Venezuela if some other ISM prevailed there.
The thing about communism is that the theory of spreading it is organized around a principle somewhat analogous to the way the AIDS virus works. Slow and hidden away from view , from the inside. A commie believes in one real election – one time – if he thinks he can win it.
I don’t know if the relatively few real communists left in the world today would turn into dictators if the opportunity arises but I suspect they would.
But so would the Koch brothers and the republican party.
And Sky Daddy help us all if Hillary were to find herself a teakettle with a genie in it. Her wish would be to become GOD.
Hey OFM, you are probably right >;-)
However I know a thing or two about the commies myself. After all I’m Hungarian and Hungary was under Soviet rule for a while. Half my family left Hungary after the revolution in 1956. A large part of my family were landowners and many of them were business men, doctors, lawyers, and were heavily involved in politics, so most of them did not fare very well under the Soviet regime. I visited Budapest and walked around what has only recently be renamed as Széll Kálmán Square, formerly between 1951 and 2011 known as Moszkva tér, while it was under Soviet rule. In case anyone misses my point, Moskva is Hungarian for Moscow…
I got to walk across the border between Austria and Hungary past barbed wire and towers with Soviet soldiers pointing AK47s at me. I’m not exactly a huge fan of the Russians.
However I also lived under a military dictatorship in Brazil that was anti communist. To me it was all the same shit just different flies.
So frankly I really don’t see the problems happening in many different countries as being caused by Communists, heck in Hungary right now there is an ultra right wing neo nazi party that is vehemently anti communist and I don’t see them as the root cause of any problem either. All of these are symptoms of the same disease. Namely, limits to growth, over population, ecosystem destruction etc… etc… none of which I see being addressed by anyone in any meaningful way. Right wing, Left wing, Neo-Nazis, Communists, Bolsheviks, ISIS, Al-Qaeda, all of them are just reacting to what is going on around them. None of them will be able to govern or keep their followers happy for any meaningful length of time. They are all just little festering pimples on the really big ass problems that all of us are facing.
However I also lived under a military dictatorship in Brazil that was anti communist. To me it was all the same shit just different flies.
Yes, that’s why I discount Fernando’s belief that communists are everywhere and causing all the problems.
If we focus all of our efforts in fighting communism (which the US has done for decades) we waste a lot of resources and don’t get at real problems.
Fred Magyar wins the internet today.
I don’t know if the relatively few real communists left in the world today would turn into dictators if the opportunity arises but I suspect they would.
But so would the Koch brothers and the republican party.
Yes, that’s the point those of us who aren’t rapid anti-communists have been trying to make.
Rather than focusing solely on what communists might do, we should focus on power grabs by anyone, no matter what political or economic system they claim to represent.
It’s not good to enable other dictators or potential dictators by claiming it is being done to fight communism.
“Society is like a stew, if not stirred frequently, the scum rises to the top.”
-Abbey
No slack..Fernando is stuck in a rut, a one-trick pony, a broken record.
Communists…blah blah blah…Marxists…blah blah blah…Castro Brothers…rant…rant…rage….
Missing the LTG forest due to focusing on a few ancient, withering trees
My theory is that if the ‘Communists’ do rise to political power in places such as Venezuela, that is a symptom of what is going on in the world and not an underlying cause.
That’s my theory, too. If economies can provide happy, healthy citizens, they have less reason to turn to communist governments.
If people’s lives are crap and their current governments aren’t working, they are going to consider other options.
There’s growing talk about re-examining capitalism in some economic circles. Not to replace it with communism, but because capitalism is falling short in today’s world.
Capitalism produces excess goods at lower and lower costs until almost everyone can afford them. Henry Ford with the car. TV sets – keep getting bigger and bigger, better and better at lower and lower prices. Computers. Cell phones. Clothing. Food – fewer and fewer farmers produce more and more food [and now, as a group, are the wealthiest group in the US – a far cry from the 20’s and 30’s/(hopefully OFM is doing okay with his land valuation)].
Incidentally, wage income is vastly understated due to people forming corporations. Look at Zuckerberg, Jobs, Gates, Brin, etc. What if they had never incorporated? Well they would all have had “wage” income of billions of dollars per year. They would just have had sole proprietorships that made them money. But, by capitalizing into a corporation, the income ends up as increased valuation of their “stock.” Which they do not have reportable income from until they sell it. And, when they do sell, it is capital gains. There are millions of incorporated small businesses that do the same thing, only on a smaller scale, so virtually nobody knows the owners on a national basis. For example, someone owns a small sheet metal business in Rapid City, SD that is incorporated. Probably most of the owners’ wealth is from owning stock in the business, which is just a storehouse of his deferred wages.
Why are the following all increasing in price?
1) rent and housing
2) energy
3) food
4) healthcare
5) education
Moreover, what are the actual costs of all of the stuff you mention, over the entire life cycle of the product? Few people do the calculation, but if you do you will realize that tv’s, cell phones, cars, and computers are considerably expensive.
We don’t live in a capitalist world if bad debts are allowed to accumulate and central banks can generate inflation at a whim. It’s a centrally planned world.
We are suffering gentrification in my little corner of paradise and pretty soon property taxes are going to be so high that all the local farms will be subdivided or sold to rich sob’s from out of the community. Most of them treat local people like servants if they speak to us at all.
If and when collapse comes it is going to be hilarious seeing all their ( stolen ) stuff sold at yard sales. They won’t be living here in their hideaways. Nobody is going to help them out and in a collapse situation money will be worthless.
Interstate highways nearby and a federal park within walking distance in combination with easy travel and great scenic beauty have proven to be a sure fire recipe for the loss of our way of life.
I am (not by choice but as a matter of necessity ) setting up a mobile home , well landscaped , with a heat pump , well and septic system, etc, so as to use the rent money to offset property taxes. I hope I get away with it since I intend to lease the entire farm to the tenant.. in the technical sense – meaning on paper.
Since I am a hands on guy with everything I need to do this except the well drillers rig I can spend fifteen thousand and six months doing it and get back five thousand a year in net rent.
Any body interested living on a small farm in the mountains ? This would be a superb opportunity to write a book or just take it easy for a year or two at low cost. Free lessons in operating tractors and welding in exchange for great conversation.
Plowed and irrigated and fenced garden spot provided etc. Access to artisanal whiskey, great hunting and fishing, and within driving distance of a couple of university towns for the occasional evening out.
Pretty soon it will be against the law for poor people to live around here.
There are no farmers in this neighborhood making enough money to buy a farm that comes up for sale – unless they happen to be married to a doctor or lawyer.
HOUSES on small tracts, too small to farm, are still quite affordable.
OFM wrote:
“We are suffering gentrification in my little corner of paradise and pretty soon property taxes are going to be so high”
How much are property taxes rising in your area? I though that as long has you keep the farm operating, that the property taxes are kept very low (ie Agricultural Exemption). Odd that property taxes are rising, unless your area is become an ex-burb. Usually rural areas don’t need the same level of local gov’t (ie no or very small schools, fewer gov’t employees, less infrastructure to support, etc), thus less taxes. I suppose taxes are like rust, and rust never sleeps.
OFM wrote:
“There are no farmers in this neighborhood making enough money to buy a farm that comes up for sale – unless they happen to be married to a doctor or lawyer.”
Well, the doctors are getting shafted by ACA, and well most lawyers never make much. I know a couple mid-age (late 30s/early 40s) doctors that are giving up and seeking other professions. So don’t count on them. I guess its just up to the investment bankers that marry Zsa Zsa Gabor! : ) –Green-acres TV show reference.
Re: Oversupply of Almost Everything
On the other hand, the supply of Global Net Exports of oil (GNE*) available to importers other than China & India (what I call Available Net Exports, or ANE) fell from 41 MMBPD (using different abbreviation) in 2005 to 34 MMBPD in 2013 (2014 data not yet available).
Given an ongoing, and inevitable, decline in GNE, unless Chindia’s Net Imports (CNI) fall at the same rate as the rate of decline in GNE, or at a faster rate, the resulting rate of decline in ANE will exceed the rate of decline in GNE, and the rate of decline in ANE will accelerate with time.
This is what we have seen from 2005 to 2013, as the rate of decline in ANE (2.3%/year) significantly exceeded the rate of decline in GNE (0.8%/year).
Meanwhile, Chinese oil imports hit record high in April, 2015:
http://www.marketpulse.com/20150508/china-crude-imports-rise-to-record-high-in-april/
*Combined net exports from (2005) Top 33 net exporters, total petroleum liquids + other liquids, EIA
http://www.foxnews.com/politics/2015/05/09/defense-department-warns-chinas-extensive-expanding-island-building/
I have returned from chaos…
Sorry faux news….don’t throw any tomatoes!!!!!
China is building islands in the South China Sea which is an obvious attempt to claim the energy, fishing and whatever else of value is in that area for themselves.
This is not a move you would make if you thought the oil export market had a great future!!
They are risking being attacked by the US Navy and/or Japan. It must be important!!!
NOTE: The article describes this behavior as “mysterious”. If you are in complete denial (like idiot news) then this behavior is quite “mysterious”.
thanks!
I noticed Apache took a reserve impairment which cause earnings per share to be a loss of over $12.
Why would they take such a large hit and the other companies did not? Shouldn’t all be in relatively the same boat?
I think Chesapeake did too. But most took fairly small impairments.
It’s the difference between GAAP and non GAAP.
Impairment is a non cash loss. The inclination would be to declare it a non recurring event and thus “merely” GAAP. It’s the non GAAP number that gets hyped.
I guess while I am at it, I would like some comments on then the phenomena of losing money year after year became a good thing.
Did that start with the dot com era?
I really know very little about Tesla and know I will get stomped on for this, but will they ever make money? What will happen when the borrowing stops?
Shallow,
They made a profit in 2012. Don’t be too hard on them. The profit came from selling pollution credits to car companies that did not comply to the California mandate for EVs? smiles
The Tesla analysts, when confronted with numbers, eventually retreat to their global warming bunker and demand that numbers be ignored to support their higher morality claims.
As I laid out days ago, the EIA’s page on average home consumption quotes 909 KW-Hrs per month for the US of A. Louisiana is highest and substantially higher. That’s 30.3 KW-Hrs per day.
Their scam battery weighs in at 7 KW Hrs capacity. That’s 5.5 hrs of off the grid living. Hallelujah.
Their scam battery weighs in at 7 KW Hrs capacity. That’s 5.5 hrs of off the grid living. Hallelujah.
You still don’t get it, do you? First of all, it is possible to live quite well with much much less than 30.3 KW-Hrs per day! However much more importantly…
The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day! The sun shines during the day!
That’s also when you run most of your energy intensive appliances and top off your batteries. Is that clear now?
If you want to get an idea of how this works in real time you can monitor the battery management of the Solar Impulse 2 during their upcoming 5 day flight from Nanjing China to Hawaii. Hint, they don’t fly for five days straight on just their batteries.
You still don’t get it, do you? First of all, it is possible to live quite well with much much less than 30.3 KW-Hrs per day!
And invariably the solar wackos retreat to the bunker of imposing their demands on people that they live as instructed, when there are such superior alternatives like just plugging into the grid.
Oh and btw, last time I looked the night was longer than 5 hours in New England winters, and add a snowstorm to that and it would be plenty of time to freeze the pipes and generate a few 10s of thousands in water damage THAT YOU CAUSE the lives of rational people who were living just fine plugged into the grid until scam hype demanded they change.
And invariably the solar wackos retreat to the bunker of demanding to force people to live as they want to demand, when there are such superior alternatives like just plugging into the grid.
Solar is being advocated for those who don’t have access to the grid or want off of it.
How hard is that to understand?
And if electricity prices rise to the point where solar is more attractive to those who can afford it, it will change the economics of the grid.
The fact is that the grid was designed long ago and isn’t the best concept for the future of energy generation and distribution. Entrepreneurs are starting to see opportunities because of this.
And invariably the solar wackos retreat to the bunker of imposing their demands on people that they live as instructed, when there are such superior alternatives like just plugging into the grid.
Tesla is actually the opposite of what you fear.
They make expensive cars that the masses can’t afford, so that’s not a problem of anyone forcing a lifestyle on you.
And they are making batteries for people to go off-grid. So that isn’t forcing anything on people, either.
I’m not sure why Tesla seems to be a problem for anyone other than those who might lose money on the company.
Boomer Wrote:
“They make expensive cars that the masses can’t afford, so that’s not a problem of anyone forcing a lifestyle on you. And they are making batteries for people to go off-grid. So that isn’t forcing anything on people, either.”
Not sure if this is 100% correctm but here it is:
http://www.frontpagemag.com/2013/dgreenfield/how-tesla-motors-really-makes-money-from-taxpayers/
“Tesla didn’t generate a profit by selling sexy cars, but rather by selling sleazy emissions “credits,” mandated by the state of California’s electric vehicle requirements. The competition, like Honda, doesn’t have a mass market plug-in to meet the mandate and therefore must buy the credits from Tesla, the only company that does. The bill for last quarter was $68 million.”
FWIW: I don’t trust Musk, and I just see him as a modern era sleazy carpet bagger. He made his fortune on Paypal which in turn made its money by screwing over a bunch of small-business owners and their customers, as well as making it easy for cyber crimes. PayPal is often referred as FraudPal.
http://www.theverge.com/2012/10/17/3511792/paypal-class-action-suit-ban
As far as batteries for off-grid consumers, they already exist and their are several companies selling Li-ion and LiFePO4 batteries for Off-grid systems. I believe that Tesla will end up a failure and isn’t doing anything revolutionary with off-grid storage, except perhaps mass marketing its products to people that can’t afford them. I would not be surprise if Musk gets indicted for fraud.
$68M isn’t much.
All of the car companies should be developing EVs and plug-ins, and most of them are. The ones that aren’t should pay those that are. That’s a good incentive to start development and a good payment to those who are doing the necessary work to prepare for PO and Climate Change.
Oh and btw, last time I looked the night was longer than 5 hours in New England winters, and add a snowstorm to that and it would be plenty of time to freeze the pipes and generate a few 10s of thousands in water damage THAT YOU CAUSE the lives of rational people who were living just fine plugged into the grid until scam hype demanded they change.
My, my, my! Are you serious? First no one is demanding you or anyone else do anything, certainly not me! LOL! are you saying I am somehow causing thousands of dollars of water damage in New England?
For a pipe not to freeze all you have to do is keep the water in it slightly above 32 degrees F. Not all that difficult or terribly energy intensive. Even if you happen to be completely off grid a well insulated passive solar house with some kind of back up heating can easily accomplish that even during the worst blizzard.
The last time you looked the night was longer than 5 hrs, eh?
No kidding? I dunno, maybe you are the rare exception but most people I know do not stay up all night, every night, for days on end running their most energy intensive appliances at full power or spending all night taking hot showers… Maybe a few people should actually try taking a cold shower once in a while!
So . . . part of the life definition to be forced onto people is they take cold showers.
Now, for a pure sales experience, be sure you include that in the literature.
If Solar Power didn’t work, the installed capacity wouldn’t be doubling every 2 years.
Hi Watcher,
In NewEngland, if you are worried about power outages, you get a backup generator, I have a fireplace insert and wood in the woodshed so have no need for a backup generator, it takes quite a few days for a house to drop from 70 F to freezing, frozen pipes due to a power utage is pretty uncommon, not everyone owns a backup generator.
The battery is designed to absorb excess power during the day and return it at night. I only use 10 kW-hr per day on average, so I would make it through the night on Dec 21 just fine and would save using the clothes dryer (electric and a big electricity hog) for sunny days.
For those in high use states that need to waste power, they would buy more backup batteries, they need 4 times as much as me, so buy 40 kW-hr of backup, up to 9 units can be installed.
Dennis,
When it comes to emergency back up systems nobody builds them for maximum power use. You size an emergency system to keep the essentials running and as you say clothes dries and the like can be delayed use, or alternative use.
Wathcher is a little hung on no compromises to the American way of life. There will always be compromises, but they seem a little easier to accept if they come slowly rather than a disruptive, all at once.
People need to be honest with themselves why are they buying this battery. Is it emergency back up? To get off grid? or the Jones’s have one, so we need one too?
Emergency back up in my eyes, is lighting, and electronics, and neither of them take much power, especially with the new LEDs these days.
One can argue whether Tesla is a good investment, but for many of us, we’re just curious how the cars and batteries will advance our knowledge of the economics, usefulness, and marketing of solar energy and EVs.
I am a slow technology adopter and tend not to buy anything until it has become mass marketed. (The exception is camping attire. I buy that as soon as the companies that make it put it on sale.) But that doesn’t mean I don’t benefit from new technology. By the time I get around to buying something, it was been tested, improved, and gotten cheaper.
Tesla will benefit me, in one way or another.
Telling me Tesla won’t work means nothing to me. I don’t own the stock. I don’t plan to own the stock. I don’t have any immediate plans to buy its products. But I believe what they are doing is useful enough to the world that I am glad the company exists.
I understand the point, of “I do not own the stock so I do not care.”. I read the same from people who do not care that shale drillers are burning cash as long as they can buy much cheaper gasoline.
The fact that the polar ends of the energy spectrum are both burning through cash at alarming rates should be troubling.
I just read the CLR conference call transcript. Only one question about cash flow burn, and was answered with we will be cash flow neutral mid year, less than two months from now. And no follow up asking for an explanation how.
I just do not get the world of high finance, I guess. Apparently if you are big and have hype on your side you can borrow despite losing money for multiple years??
I am sorry I do not understand how this all works.
The fact that the polar ends of the energy spectrum are both burning through cash at alarming rates should be troubling.
Much of Silicon Valley burns through cash. That’s the nature of that place. And they get that cash from rich people.
Rich people are funding a lot of the R&D happening in the US today. Much of it will be a waste. But that is how it is done.
The problem with fracking isn’t that they are burning through cash. It is that they are encouraging the burning of a resource (oil) that can’t come back.
I don’t think Tesla is doing anything similar. It may be using some resources for its batteries, but those can be recycled, yes?
Tesla’s use of resources is a drop in the buck compared to the burning of oil from fracking.
If Tesla fails, it will not bring down the stock market.
We’ll have to see what fracking bankruptcies bring.
If you want to complain about how Tesla is being financed, then expand your complaints to Silicon Valley.
Yes, it’s boom times there again, and probably not wise.
But Tesla is not big piece of that.
You can get cash flow neutral pretty fast by firing people with no severance contracts.
You can predict cash flow neutral even easier, by just saying so.
Tesla will earn PILES of money if the company succeeds in selling enough cars to make the initial investment profitable. I believe they will succeed in doing so. Breaking into an industry as capital and technology intensive that operates on such a large scale as the auto industry has never been done from scratch in modern times except by niche players that build cars by the dozens instead of the tens of thousands.
Tesla is Tesla. There is no other company in the world like it.
Having said all this I doubt I would buy one even if I could afford it. The place for an individuals money is in a constructive investment. A Chevy Volt might not be nearly as impressive but the fifty to eighty thousand bucks difference in the price , well invested, could grow well into enough money to keep you in new Volts forever.
A good place to invest that difference might be in TESLA STOCK lol.
Lots of money losing companies in the world. Not unique at all.
Lots of money losing companies in the world. Not unique at all.
Which is why the financial status of Tesla isn’t a concern for most of us. It’s one of many companies that has an idea, sells stock, and hopes to turn a profit someday. Maybe it will and maybe it won’t.
oldfarmermac, it’s not that I’m against technology, it’s that I’ve been burned over and over again, and I’m quite simply tired. I don’t believe anything by anyone. It’s sad, but it’s the consequence of living in a world of so many exponentially increasing lies.
I trust only those who deliver real physical gold into my hands. That’s it. I’m not interested in anything else at this point. I want gold and only gold. I won’t touch any stock of any company ever again in my life.
Hi Dolph,
I have nothing in the stock market myself,excepting a few bucks in a retirement account contributed years ago by a former employer. Not enough to even pay the electric bill long term.
You might give some thought to diversifying your investment in gold. There are plenty of things worth owning long term, such as a tight little house with a metal roof on it on a couple of acres far away from any major city. It should have its own well and septic system etc. Make friends with your neighbors. especially one that knows how to farm and owns the machinery. He will plow your garden for you for little or nothing and give you priceless advice free of charge.
It’s looking like the Generation 2 Chevy Volt hitting the show rooms this fall will average about 1,100-1,500 miles per 9 gallon fill-up on a US fleet-wide basis. Improved acceleration, lower weight, quieter, comfort up, battery range up. Base MSRP will drop to $33,000 +/- . With $7,500 fed tax credit + various state rebates or tax incentives, it becomes less expensive than a Prius. You can drive it anywhere, any time, as far as you want. It doesn’t require any charge stations other than a 115 volt residential home outlet for a nightly charge and makes gasoline consumption almost a non-issue. Frankly, this is an early 21st century automotive home-run. The best of an EV, the best of an ICE, quality and comfort that rivals the higher-end Euro and Asian vehicles, and affordable by the every-man.
Full disclosure – I own a 2013 Volt. Best car I’ve ever owned.
I can’t comment about Tesla’s financial future, but there is an evolving market for relatively-small stationary energy storage systems that are grid-connected but not necessarily feeding power back to the grid. Peak summer afternoon electrical demand is a huge deal here in California. Even with PV, there is the power-time “duck curve” phenomenon evolving where the afternoon peak hits just as PV is starting to wane. Locally, Redding Electric Utility invests large $ to retrofit small-tonnage thermal energy storage systems called Ice Bears on local buildings (at no cost to the building owner). Each Ice Bear shifts about 7 kW and 32 kWh of afternoon load to late at night when the utility and their distribution system can better support the load. I think they cost about $15K-$20K each installed, including the new HVAC unit (also free to the building owner). This is essentially a thermal cooling battery system. I know from inside sources that REU wishes there was a system even smaller and easier to install than the Ice Bear so they could retrofit residential AC systems, too. The owner benefits
Demand-shifting (without actually losing kWh retail sales revenue) is hugely valuable to some capacity-limited utilities – up to $3K/peak kW. So with a little more power and a little lower cost, battery-based stationary power backup systems, perhaps an up-sized Powerwall type system, could be used to power various basic building loads (like AC units) during peak afternoon demand periods and assist REU (and many other western US utility’s) to manage their peak summer power loads.
http://reupower.com/tes.asp
Is there any sign of time of use pricing that recognizes the new reality of the morning and evening peaks?
Program your Volt to charge at noon and 3 AM, and provide power to the grid at 8 AM and 7 PM!
The Baker Hughes Rig Count is Out is out. Oil rigs down 11, gas rigs down 1. Looks like the drop in rigs is slowing down.
Again according to the lower box, the only drilling taking place in ND is the Williston Basin. What is the average initial flow rate from Williston?
Ovi – The average initial flow rate [one day? one week?] is a meaningless number. Think of a basketball game. Who scored the first basket? Meaningless.
Rather, what is the average initial total production for a well during the first year of production? Then historical decline rates can estimate each of the next 5 years of production, as well as the total production expected.
Forgot to mention one month or possibly month 2 for a more accurate number. As Enno shows, month 2 is the peak month.
Hi Ovi,
Due to the great work of Enno Peters gathering NDIC data I can answer your question. Thank you Enno!
The average first month well only produces for about 15 days (it can start producing on the first to the last day of the month, the average will tend to be 14 or 15 days. So if we apply a hyperbolic function to the actual data we get about 390 b/d for the average first month output for the average 2008 to 2014 Bakken/Three Forks well in North Dakota. Chart with well profile below.
Thanks Dennis. Your numbers are for ND. I thought Williston was a smaller area within ND. My question related to Williston and was raised because I wondered how much higher its average was over the overall ND avge. Maybe I have it wrong, but the drilling data implied only one area, Williston, is being drilled in ND.
Ovi, all North Dakota wells are in the Williston Basin.
Hi Ovi,
Ron is correct. The well profile is for wells drilled in the Bakken or Three Forks formation of the Williston basin in North Dakota. These formations (layers beneath the surface) and the Williston Basin extend into Montana and Canada.
The Williston basin rig numbers in the Baker Hughes report refer to both North Dakota and Montana, I think there may be a few wells outside the Williston basin in North Dakota, but 99% of the current oil drilling in North Dakota targets the Bakken/Three Forks.
Dennis, wells not drilled in the Bakken-Three Forks strata are all still in the Williston Basin.
When Helms talks about 95% of wells are drilled in the Bakken – Three Forks he does not mean the other 5% or so is outside the Williston Basin. He simply means they are not drilled in either the Bakken or Three Forks strata, they are conventional wells drilled in the anticlines found in that area.
Thanks Ron, Dennis. My confusion. I thought Williston was a county like Madison. Now I am confused between the difference between the Bakken, Three Forks and Williston.
Ovi,
Williston, is a basin
Bakken and Three Forks are formations within the Williston basin. Just like a suburb in a city, so to speak.
Ovi, the Bakken is a layer of shale, a layer of source rock. It is basically a layer of sediment buried deep under the surface. Three Forks is basically the same thing except it is three layers, none of them, apparently, as prolific as the Bakken.
Williston basin is just a geographical area, a basin that runs into Montana and Canada. It has Williston, North Dakota, near its center. The Bakken and Three Forks lie in, or rather under, the Williston Basin. The Three Forks strata was laid down between 300 and 200 million years ago. The Bakken deposit was laid down about 80 million years ago. Of course the area was a shallow sea during those periods.
Got it. Thanks
I wanted to post this comparison yesterday but could not get the picture accepted. Attached is the weekly and monthly EIA C + C production numbers. I was surprised to see November below the weekly number and December above. Note the subtle difference between the US total and the lower 48. It will become more noticeable as Alaska does maintenance on the cross Alaska pipeline this summer.
Hi Ovi,
If you have trouble posting a chart save it in gif format which will be a smaller file size.
It seems anything over 60 kB gets the file not found error.
The drop in rig count appears to be slowing, but I see the Eagle Ford is down another 5 rigs this week or approx 5%. We know Chesapeake is planning to cut their Eagle Ford drilling down to a token amount of rigs. I wonder is any other companies are doing the same?
These rigs counts must start taking effect in the Eagles Ford shortly, and with such high decline rates, faster than the Bakken, it will be swift when it comes.
Imagine, Push, you have just lost full returns and the hole won’t even support 8.4 water anymore. You break the top drive off and the DP is on such a screaming vacuum it sucks the hard hat off your head. That’s how bad the EF is going to fall in 2-3 months, IMO.
I drove right down the EF pike last week; there is no way there are a hundred rigs still running. There are yards so full of frac spreads and rigs they are having to build new yards just to stack the stuff, no kidding. Its bleak in the shale patch.
M.
Hi Mike,
According to the RRC only 130 wells were completed in March in the Eagle Ford,
they need about 150 wells completed per month to keep output from crashing too hard, are there a bunch of wells waiting to be fracked there, what do you hear from others in the know?
Dennis, remember, please, not all shale wells are born equal, nor do they all live the same, predictable lives. If you have derived some mean average production rate for a certain period of time based on 4000 wells per year, that average will NOT be the same for 1800 wells per year, I assure you. I cringe when I hear you say it will categorically take precisely 150 wells to keep output from crashing.
The shale oil industry is in serious trouble, make NO mistake about it. It is coming up with all kinds of crap to say, and write, to keep the herd from stampeding. I don’t believe in the number of wells waiting to be frac’ed being tossed around. I don’t see that and it makes no sense to me given the shale industry’s appetite for cash and its need to keep booking reserves. Even hedges often require minimum production volumes. Fraklog, or whatever the hell it is, was not created for the benefit of the peak oil community, I assure you. That’s a shale industry thing and if you want to believe what the shale industry says you do so at your peril. I know there are some wells by the biggest of the big getting held back, but not thousands.
The rig count in Texas is going to keep coming down. Shale production is going down like a rock in a few months. $70.00 oil is not going to save 70% of those guys now. What’s left of shale business will be all about money, and where it is going to come from.
Mike
Thanks Mike,
I know production will have to catch up with the rig count sooner or later. I suspect, if the price rises to the point where the shale feel comfortable enough to think about activating any of those rigs, the oil price will drop again.
It was interesting reading that Chesapeake presentation a while ago, where they said they would be terminating early, drilling contracts. Those boys must have signed up some quite long contracts. What is the normal for land based US drilling contracts? At a guess I would have thought 12 months? But I am most likely wrong.
Normal 12 months, but remember these shale wankers thought they were bulletproof. Some of the contracts I’ve heard of are 3 years. I think I recall Devon spending 45 million terminating rig contracts in the Haynesville, or Barnett years ago, now they are doing the same thing again in the EF.
Be safe!
Mike
Just looked at oilprice.com and there was a drop of $2 per barrel in the price of crude. What could have caused that big of a change in one day?
Strange. CNBC shows WTI is up a little and Brent down a little, much less than 1%. It says: ‘Brent falls after rig count data’.
There could come a correction many analysts think, because prices have risen much the last months. More than the fundamentals justify: there is still more supply than demand. That could (probably will) change in a few months.
I have read many of the “US Shale driller” 10Q for the first quarter.
It looks like many plan on spending about 2/3 of CAPEX in the first half of the year.
Also, if you read closely, although many are predicting growth from 2014 to 2015, peak production occurs in the first half of 2015 and drops in the second half.
Assuming oil prices stay 55/75 range through year end, I think the big drop in US production will occur at the end of 2015 and into 2016.
I plugged in current oil, nat gas and liquids prices into first quarter financials for a few. Still ugly.
I question borrowing more $ to drill and complete wells at $65-70 WTI as PXD and CLR have stated. I think the hole just gets deeper. The fact that gas and liquids prices remain terrible does not help. The improvement in oil prices translates from low 30s per BOE to low 40s is better, but still does not justify debt fueled drilling.
This is what I am seeing at Oil Price. Looks right.
Forgot Picture
Thanks OVI. My error, info was from oilprice.net. They currently show $58.94 for WTI, must be a number from earlier in the day even though they claim it is current. oilprice.com graph shows it fell almost two dollars yesterday but seems to have recovered part of that.
Speaking of pure experiences, the EIA says the avg US house consumes 909 KW Hrs/month.
Here are a few states specifics:
Wisconsin 703 KWHrs/mo sub average, and it does get cold in winter. Not so hot in summer.
Louisiana 1254 KWHrs/mo the max of all states, and it don’t get cold in winter, but feel free to instruct people, or better, have legislation proposed, to outlaw air con. That will get rid of some congress critters.
That’s a delightful 42 KW Hrs/day btw so that 7 KW Hr scam battery is a glorious 3.5 hours of sweatless sleep. Half a night!!!!
Texas 1168 KwHrs/mo 39/day 7/39 = .14 X 24 = 4.3 hrs of sweatless sleep for the Exxon Mobil execs in big D. Go explain to them that all this is handled by cold showers.
Florida — home to displaced NYers, 1081 KWHrs.
Hawaii 544, to the surprise of no one they don’t aircon or heat
Oklahoma, home of CLR, 1132 KW Hrs. Imagine that.
Utah, 793. It gets both cold and hot there, but not for long. Good luck getting your forceful legislation passed there, tho. Those Mormons don’t cotton to being told how to live.
The Peoples Republic of Maryland — 1005, populated by congressional staffers who you will be telling to turn off their air con in humid summers and take cold showers. I don’t see them drafting this legislation for you.
Watcher I suppose you must have grown up somewhat culturally deprived in a place where the old classic books and stories were not part of the school curriculum .
Have you ever heard the expression ” FROM LITTLE ACORNS GROW MIGHTY OAKS” ?
What matters is the trend. Change at the margin. Backward looking extrapolaters miss discontinuities. We live in an age of discontinuity from the paradigms set up at the last one after the Second World War.
Watcher, when not making childish and obscene predictions of industrial scale genocide by the U.S. and others, is constantly looking for confirmation of his continuity bias.
He is missing the big change. Meh, it’s a common problem, status quo bias. So it goes.
After looking at the EIA residential power use and bills by state, there is a fairly good correlation between price of power and use of power. Louisiana, the highest residential use state at 1254 kwh/month at 8.3 cents/kwh while Maine is using about 530 kwh/month/residence and pays 14.7 cents/kwh. Mush of the northeast is only using about 600 kwh/month/residence (all high prices except Pennsylvania). Of course they do not heat with electric (usually) and have a much shorter air conditioning season.
Hi Marblezepplin,
In Maine the air conditioning season is about 2 weeks. Most homes do not have air conditioning, though many businesses do.
If you turn off your air con a cold shower might be pretty welcome.
Proven oil reserve estimates for the U.S. and Russia by BP and EIA
Sources: BP Statistical Review of World Energy, http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=57&aid=6&cid=regions&syid=1998&eyid=2015&unit=BB
Hi AlexS,
BP “oil” reserves are C+C+NGL, EIA oil reserves are crude oil only as of Jan 1 of the reported year, typically I would report the EIA reserves as of Dec 31 of the previous year.
Dennis,
Thanks for clarification
Yes, BP reports C+C+NGL reserves and production.
Risky new technology means the next Gulf of Mexico oil spill could be much, much worse
“The study also noted that Macondo was only the 43rd complex deep-sea well in the Gulf when it blew out. In that context — one blowout out of 43 similar wells — the industry cannot say it has a good safety record when it comes to complex deep wells, said David Pritchard, a Texas petroleum engineer who did the study.”
“It’s not rocket science,” said Matthew Franchek, director of the University of Houston’s subsea engineering graduate program. “Oh, no, it’s much, much more complicated.”
http://www.businessinsider.com/the-next-oil-spill-in-the-gulf-of-mexico-could-be-much-much-worse-2015-4
Fascinating video series by the NY Times Iran correspondent Thomas Erdbrink called Our Man in Tehran.
This video on the 13 year drought in Iran is an eye opener.
The Empty River of Life
By THOMAS ERDBRINK, MAY 5, 2015, NY Times
There is something strange going on in Isfahan, where the water under the famous Bridge of 33 Arches has disappeared.
“If nothing changes in the coming years more than half of Iran’s provinces will have to be evacuated, they will simply become unlivable.”
Hey Ron,
It appears your new international rig count post has comments closed?
Sorry about that. I just fixed it. I had to check a box “Allow Comments”. Never had to do that before however. Must be something new. I will make sure it is checked from now on however.
This link indicates that the new Tesla daily cycle battery is economic to own on the basis of saving money in some places already.
In California the afternoon peak rate is so high , compared to the night time rate, that you can save enough on the bill to make owning the battery worthwhile.
http://seekingalpha.com/article/3154706-how-teslas-new-powerwall-battery-will-save-consumers-money-on-electricity?auth_param=11i34n:1akn9fi:1936397d0903a1d8d2e34ca974319429&uprof=45&dr=1
Mac:
The analysis is flawed. It assumes the battery can cycle 3650 times without any capacity degradation, full use of the battery’s energy during peak hours, and zero discount factor. A more professional analysis should use a discount factor, reduce battery capacity, account for the round trip power loss, and use a customer daily use energy and power profile (or use a residential power demand curve). If you wish I can do the detailed analysis, but I need the residential and commercial energy use curves you wish to use.
The Internet is full of very low quality work like this. But I spent 40 years doing this type of work or reviewing the work done by others.
I also left you a message reference the Venezuelan heavy oil fields. The reserve loss is a technical problem, the damage is taking place right now, but pdvsa isn’t responding. It could be their personnel is unable to grasp the seriousness of the mess they are making. I know the current PDVSA president, he’s fairly smart, but he’s not a trained petroleum engineer, and he’s surrounded by very low quality people.
I think you are confusing Lithium batteries with Lead-Acid batteries.
The number of charge cycles is the difference. Note that the Powerwall battery does come with a 10 year warranty.
Also, there’s likely a large number of Lithium battery powered cell phones out in the field that have charge cycled over 3,650 times, and still work just fine.
Prove the 3650 full charge cycle is realistic and I´ll change the number when I perform my analysis.
Its about 700 to 1000 cycles before they fail if they the Dept of Discharge is kept above about 50%. If they are fully discharged they will fail a bit before 500 cycles. They also degrade with use and time. They lose a bit capacity after each recharge and as well as the internal resistance increases.
Tesla Batteries do not include charging system and inverter. I believe the Powerwall has an output voltage of about 400 volts which isn’t common with residential inverter/battery charging systems, which are usually low voltage systems (usually 48V).
If they are fully discharged they will fail a bit before 500 cycles.
Where did that come from?
More Lead-Acid specs.