Texas Petroleum Output – October 2016

The Railroad Commission of Texas (RRC) has recently reported new data for oil and natural gas output through August 2016. Dean Fantazzini has kindly shared his corrected data using the most recent data from the RRC. He uses a statistical procedure which adds up the changes in the RRC data from April 2014 to July 2016 to see how incomplete the data has been in the past and uses this to estimate the “missing barrels of oil and cubic feet of natural gas” that will be added to the current “incomplete data” over the following 24 months. In the past the RRC data has been about 99% complete when you look back 24 months from the most recently reported month. Dean estimates the “correction factors” which need to be added to the reported data to get a more reliable estimate of recent output levels.

The correction factors for the month of August looked very low compared to the historical correction factors so I asked Dean to check for a statistical break in the correction factors. Essentially in the past there has been no statistical trend in the correction factors based on Dean’s analysis, but I wondered if perhaps there was now a downward trend in the correction factors due to the digitization of reporting by the RRC.

I will quote Dean’s findings below (from an e-mail):

I checked the time series for each correcting factor -for crude oil only- using unit root tests with a breakpoint, and I found that the correcting factors for the latest 6 months are non-stationary (even at the 1% level), with a break in the constant which took place in February 2016. The previous months (older than 6 months) are instead stationary.

The effect of the ongoing digitalization process seems to (finally) appear in the data. However, many more data will be needed to confirm the break in the data structure: for example, the break in the constant is significant only at the 5% probability level, but not at the 1% level.

Given this evidence, reporting both the corrected data using all the vintage data and the corrected data using the last 3 months (to take the structural break into account) may be a wise thing.

I decided to show the correction based on the last 6 months rather than 3 months because that is where the break occurs, though the difference between 3 months and 6 months is not significant (a difference of 12 kb/d less on average each month.) I also show the previous method of using all the data (Jan 2014 to Aug 2016 for oil and April 2014 to Aug 2016 condensate), this is called all vintage in the chart that follows.

TXchart/

For July 2016 the 6 month estimate is 161 kb/d higher than the EIA estimate and the all vintage estimate is 235 kb/d higher than the EIA estimate.

Data for TX C+C below is from July 2015 to July 2016, first column is all vintage, then 6 month, then EIA all in kb/d

3452 3451 3452
3429 3427 3413
3436 3429 3415
3431 3421 3404
3436 3424 3409
3398 3383 3348
3443 3424 3361
3424 3401 3315
3408 3382 3295
3396 3363 3245
3375 3333 3193
3380 3321 3172
3396 3322 3161

Dean also provides data on how his estimates have changed over time. In the chart below I show Dean’s Texas C+C corrected estimates (using all vintage data) from June 2015 to August 2016, where the month is the final data point of the estimate. The recent estimate is lower than the previous 3 months, in the past the correction factors have bounced up and down by quite a bit, so potentially this could change, particularly if we focus on the 6 month corrected estimate, the estimate will be more volatile.

TXchart/

The chart below shows how the correction factors have changed over time. Statistically we see no trend in the correction factors from April 2014 to Feb 2016 (the correction factors are “stationary”), from Feb 2016 to August 2016 we see a downward trend significant at the 5% level.

TXchart/

The natural gas corrected estimate is compared with the EIA estimate below.

TXchart/

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248 Responses to Texas Petroleum Output – October 2016

    • The story is bogus. Pdvsa sells crude to third parties FOBVenezuelan ports. The oil is owned by the purchaser at that point. What may be at risk is internal Pdvsa trade from Venezuela to CITGO, its subsidiary.

      Venezuela is having a lot of turmoil, and production will likely drop a lot if the Maduro dictatorship moves lead to armed rebellion.

      If Pdv defaults the bonds and CITGO goes under vulture attacks the courts already have claims filed by companies which lost properties in Venezuela to attempt to block any moves to use CITGO as compensation for Pdv debt to others. Those decisions are up in the air.

      IF supply gets cut (and lately this amounts to heavy, high sulfur and high acid content crude) the refiners can buy heavy and medium grades in the Middle East, and also draw from USA stocks, which are lighter than desired. This means the refining margin will drop a bit. On the other hand the market may raise WTI a few bucks if there’s a significant drop from Venezuela, so the E&P sector should benefit.

      • Duncan Idaho says:

        So the analysts at Bloomberg are wrong?
        (Wouldn’t be the first time, but time will tell)

        Pdvsa sells crude to third parties FOBVenezuelan ports. The oil is owned by the purchaser at that point.

        Can they do that in default, or if chaos disrupts production?

      • Duncan, I worked in Venezuela for over a decade, and I’m very familiar with the purchase agreements, bid procedures, etc. The Bloomberg analyst who wrote this piece didn’t understand how the system works.

        Pdvsa always sells FOB to third parties. Even when they sell to CITGO they make sure it’s FOB to CITGO. When my company studied whether to accept the joint venture terms we had lawyers look at means we could use to recover our money if the government stole our properties. The lawyers concluded the oil loads couldn’t be taken with court orders, given the system used by Pdvsa.

        If these loads could be taken there would be a huge fleet waiting for those tankers, because Pdvsa has lost quite a few awards. Even CITGO is shielded to some extent, although I heard Conoco was going after it.

  1. Jodi data: China’s crude production in August 2016 down by 12% from peak in June 2015

    http://crudeoilpeak.info/global-peak/china

  2. Survivalist says:

    Thermodynamic oil collapse with Dr. Louis Arnoux and SRS featuring mention of the Hills Group eTP Report

    https://srsroccoreport.com/thermodynamic-oil-collapse-interview-why-the-global-economy-will-disintegrate-rapidly/

    http://www.thehillsgroup.org/petrohgv2.pdf

    It is also mentioned that a white paper is forth coming.

    • Survivalist says:

      Oh and the Doc mentions his revolutionary new product the nGeni! A ‘little green box’ that will cut your power bill AND at the same time suck CO2 out of the atmosphere. Oy vey!

      • SRSrocco says:

        Survivalist,

        I appreciate you sharing the link to the interview. Now, while you may think Dr. Louis Arnoux’s nGeni technology is new… it most certainly isn’t. He has been working on this for a few decades.

        Regardless, his technology is the only sustainable energy technology I have seen out there that reduces the grossly inefficient energy production systems we have today. What a complete insane disaster it was for mankind to produce centralized power stations that lose 80+% of the energy including the end user.

        The supposed renewables of Solar, Wind and Geothermal will never work because they are way too inefficient. However, this won’t stop the renewable industry from continuing to manufacture these wasteful energy technologies.

        steve

        • Watcher says:

          whatever happened to that Italian bozo with cold fusion?

        • Survivalist says:

          Hi Steve, hopefully soon he’ll patent it so we can all be told how it works without him having to worry about someone stealing his idea. Frankly Steve all I see is a problem defined by a report that uses thermodynamics as a red herring and that most folks can’t understand anyway and a solution, the little green box, that we can’t be told about how it works. If you have your head around this perhaps you’d care to clarify in simple terms. Oh, and what’s the difference between EROEI and Thermodynamic EROEI, and, Collapse and Thermodynamic Collapse? I’m kind of a pessimist about the future. I see a famine coming. Should I call it a Thermodynamic Famine?

    • Rune Likvern says:

      Steve,
      You would have been better off if you tried to sell unicorns. 😉
      (This for starters)

      Slide 1
      ”In 2012 the global oil industry began using more energy for exploration, extraction, transport refining & fuels delivery than what it delivers to end-users.”
      “By around 2022 oil will have ceased being a primary energy source.”
      The above is debunked several times and is neither based on Math, Science or what is observed in the real world.

      Slide 2
      It is used a term called “Unavoidable Waste Heat (2nd Principle of Thermodynamics)”
      For those who knows their thermodynamics, this is a well known feature of the Carnot process.
      Everyone who knows a little basic thermodynamics knows that the combustion processes comes with thermodynamic wastes [heat], there is a limit for how much of the potential energy in oil that can effectively be converted to useful energy.

      The thermodynamic efficiency for ICEs has been on an upward trend in decades.

      No documentation accompanying “estimates” of how much energy is used during exploration, extraction, transport, processing and distribution of end products.

      As the claim in the slide is greatly at odds with what, for instance Sankey diagrams from governments/energy agencies shows it would be expected that this was explained.
      (And NO it is not a conspiracy thing!)

      The Thermodynamic oil collapse is NOT based on Math and Science.
      Those who claim such have not provided any evidence of this or presented real life examples.
      “In 1900 61% of the energy in a barrel of oil was available for GDP (Economic) growth.”
      Can this be documented.

      • SRSrocco says:

        Rune,

        Before I respond to your comment in an “objective” manner, I would highly suggest to you that you start agreeing with me, or I will consider asking Dennis to moderate your comments. If we are on the same page here, I will continue…. (sarc).

        Rune, to be honest, I don’t understand the details or complex math in thermodynamics. So, it would be disingenuous of me to say that I totally understand the science and math behind their work.

        That being said, you are more than welcome to continue stating that their science or math has been debunked. However, I disagree. As Louis stated in the interview, the ETP Oil model is based on the “average barrel.”

        I gather the best thing to do here instead of wasting our time playing TIT for TAT, let’s see how things play out going forward. If things are quite ROSEY in say 5-10 years, you can come in here and gloat to your heart’s desire.

        However, one aspect of the present situation overlooked by the majority is the massive amount of debt, derivatives and leverage in the system. While I would imagine you are quite bright enough to understand there is one HELL OF A LOT OF IT floating out there, this seems to be taken for granted as part of doing business.

        In conclusion, the unwinding, implosion or collapse of the massive amount of debt, derivatives and leverage in the system will gut a large portion of the global oil industry.

        So, again… I enjoy your work at the Fractional Flow, but let’s see how things play out over the next 5-10 years as we rearrange the deck chairs on the Titanic.

        steve

        • Rune Likvern says:

          Steve,

          Going forward, there will be changes and I expect these to originate from the financial world and (too much) credit/debt will drive these. This apparently now gets the attention of the IMF, BIS and several others.

          As I have written earlier, EROEI is in a general decline (growth in costs for new energy supplies acts as a proxy for this), but this is a very slow process.
          Societies run on energy surpluses and in this respect and for the near term EROEI becomes secondary.

          Depletion induced declines (in oil supplies) IMVHO is the one to watch. That is why the financial health of the oil/energy industry matters for societies.

          • SRSrocco says:

            Rune,

            I see we are in agreement about the “PAPERING” of the system to cause unintended consequences going forward. However, do we really know what they will be?? And how they will impact the global oil industry?? I am not convinced. It seems to me things will unravel much differently than we expect.

            Furthermore, the ancient Roman Philosopher Lucius Seneca will be correct once again some 2,000 years later. According to his famous saying, “the increases of growth are sluggish, but the way to ruin is rapid.”

            steve

          • Rune Likvern says:

            ”However, do we really know what they will be?? And how they will impact the global oil industry?”

            The global oil industry will be affected from, let me call it emerging financial dislocations.
            Most of our oil consumption is to move goods and people around.
            TPTB is or will be made aware of oil’s role in this.

            There is nothing in the real world that now supports Arnoux claim:
            ”In 2012 the global oil industry began using more energy for exploration, extraction, transport refining & fuels delivery than what it delivers to end-users.”

            The concept of the “Thermodynamic Oil Collapse” builds on this and so far the documentation provided from other sources do not support this claim, and given a little more time the whole claim will continue to dissolve like a sugar cube in a Texan rainstorm.

            • Jeff says:

              Rune,
              Do you expect i) the price of oil to rise substantially in near term (3-5 years), ii) that financial problems/low growth will result in continued low price, iii) no clue, or iv) something else/do not want to tell/etc.?

              • Rune Likvern says:

                ii) Is what best describes my expectations for the near term (3-5 years) (that financial problems/low growth will result in continued low oil price).
                Low is a relative term, but I believe there will be some time before we again see $100/bo sustained.

              • Dennis Coyne says:

                Hi Jeff,

                Can you define “price of oil to rise substantially”, and “low price”?

                If low price is less than $80/b, we might see that for 3 years, but 5 is very doubtful. If rise substantially is more than $100/b, I expect that after 5 years this is a near certainty, unless there is a severe recession between now and 2021, by severe recession I mean something like the GFC or worse. I think the odds of this are low in the next 5 years, less than a 25% chance.

                • Jeff says:

                  There is always a tendency of recency bias when discussing what is a low oil price. A price that is too low to enable replacement of current production and result in supply destruction is perhaps a good definition? Your upper range ($80) is perhaps on the border? Not sure though.

                  I don´t know what to believe when it comes to the price of oil over the next couple of years.
                  I see two biggies that signal a low oil price i) a stronger US-dollar, ii) low growth/financial problems in many countries. I think that the probability of a major global recession is _much_ higher than 25%.

                  OTOH. I expect that global peak oil has or will occur sometime during the period between 2015-2017 which should put an upward pressure on the price. Also, a continued low oil price increase the likelihood that one or several exporting countries falls into domestic problems/social instability etc.

                  • Dennis Coyne says:

                    Hi Jeff,

                    I believe the oil price will rise because we will be on a undulating plateau from 2015 to 2020, but oil consumed will increase to the point of shortage at low prices. Most experts do not predict a recession in the near term, often the experts are wrong, but I doubt it is more than 75% of the time for the majority.

                    I think longer term (say in the next 15 years) the chance of a severe recession is more than 50%, with the chances increasing as we get closer to 2030. By that time high oil prices and declining oil production will be too much for the World economy to take.

                    All guess work on my part, recessions are very hard to predict. 6-10 years 33% chance, 11-15 years from 2016, 50% chance of recession, higher probability maybe 66% after 2031.

          • SRSrocco says:

            Rune,

            Actually you have no idea how things will unfold when the highly leveraged debt-based derivatives monster financial system disintegrates.

            However, it seems as if your “WIT” assumes you know better. We’ll see how things unfold.

            Possibly, there is a good chance I will come in here and gloat.

            steve

            • VK says:

              Steve, I listened to the entire interview and the theory behind it seems no different than the normal EROEI assessment. Net energy availability is in decline, this is well established, this is why so many OECD countries are struggling for growth and debt levels have hit the roof. We also know from Jeff Brown’s ELM model that net oil exports have been in gradual decline for years now. (PS to all readers, Any updates from Jeff Brown of late or has he retired from commenting here entirely?)

              The assumption by Dr Arnoux is that his sigmoidal energy cost curve is accurate with regards to energy costs per barrel extracted. A different set of parameters will lead to a very different timeline.

              What are the figures behind the assumptions that available net energy is only 10% or so as of today? What if it’s much higher? The timeframes would shift by a generation atleast.

              So I think what he’s working on is that of the 29 Billion barrels of oil extracted last year, the oil industry used up 2.63 Bn Barrels, based on an EROEI of 10:1 while the remainder of that available to society is 26.3 Bn barrels. Now according to Dr Arnoux only 12% of that gross surplus figure is efficiently used, so about 3.16 Bn barrels worth?

              Also the nGeni plug at the end does a lot to detract from his thesis. A magical solar internet device that increases net energy supply, saves us from climate change and is cheaper than coal sounds too good to be true. If Dr Arnoux’s nGeni is as good as claimed, investors and governments should be lining up at his door for investment and licensing. He could literally save humanity – be a messiah figure.

              • Stilgar Wilcox says:

                Steve, I watched the video and am familiar with the Hills Group assertions and now the guest’s as well. And although world finances are in a world of hurt due to declining net energy, along with overzealous borrowing to build up everything faster, my concern is the idea that the net energy from oil can be asserted with any known confidence when there are so many sources from around the world. For example the energy to explore, locate, drill and have the infrastructure set up for extraction is already in place in many long term sources. So that part of the upfront energy required to bring that oil to the marketplace is already expended. Then the question becomes; how long will those sources continue to supply oil? If the answer is decades then it would seem the prediction of a 2022-2030 end date for the oil industry would seem premature.

              • Rune Likvern says:

                How thermodynamic efficient oil is used is dependent on where it is used.
                For generating heat, a good stove could use 90% of the potential energy. (Tiny amounts of oil are used for this).

                A modern aircraft engine (turbofan) 35+%. (Now close to 10% of US petroleum consumption is used for this).

                A big (marine) diesel about 40%.
                Power station, dependent on how it is set up, but above 40% is feasible.

                A car engine 25-30% (at ideal conditions) and this is very much dependent on driving cycles, percent of time idling etc, but to assume an average of about 20% should get us close.
                Then there are lawn mowers, chain saws etc.

                In other words, one needs to consider the weighted use of oil in all its power applications to get an average number, and now using an educated guess that this is at about 25% could be a good first pass approximation.

        • Survivalist says:

          I don’t think that the validity of the eTP model can be based on how rosey things are in 10 years. Collapse does not prove the model. If the world is not very rosey in 10 years it is irrelevant to the accuracy of the eTP report. I have a model that is based on the theory that all the pink unicorns are turning into blue unicorns and as a result the sun will rise tomorrow morning. When tomorrow morning comes will you believe my theory has been proven?

    • me says:

      >For real GDP or wealth to be created, it must parallel the value of oil and gold.

      The idea that gold is intrinsically a better measure of “real’ value than lead is pure bunk. It’s a cult.

      This article presents a circular argument.

      It claims that without oil there can be no economic growth, and proves it using the quasi-religious claim that growth without oil is, in some undefined sense of the word, nor “real”.

      The word “thermodynamic” as used here much the way a magician says abracadabra and hocus pocus.

      • Ulenspiegel says:

        It is obvious that in mature economies you can generate GDP with reducing energy. Therefore, the assumption that more GDP requires more energy is nonsense.

        • Dennis Coyne says:

          Hi Ulenspiegel

          Possibly that might be true in the future but for most of the past 50 years both primary energy use and GDP have grown. In fact they correlate very well.

          It is true that world real GDP has grown faster than primary energy use as energy efficiency improves, but so far growing GDP with flat or falling energy use is unusual.

    • Rune Likvern says:

      EROEI

      EROEI may be viewed as a metric of how efficient the oil/energy industry brings an energy surplus to societies.

      In a previous post on POB I showed (based on public data from NPD and NEA) that 2 fields (in 2016/2017) in Norway are shut down while their EROEI were in the range of 8 – 9 with the oil price at $50/bo.

      That document that the claim (or science and mathematics applied) that the global EROEI for oil dropped below 2 in 2012 is FALSE!.
      The fields with the lowest EROEI get normally first shut down and the cases from Norway suggests that the global weighted EROEI for oil now (2016) is above 10.

      The chart below shows how oil from the oil industry is split between the oil companies and what becomes available for societies as a function of EROEI with global gross C+C supplies at 80 Mb/d, like now in 2016.

      From the chart.
      With an EROEI of 11: 72.7 Mb/d is available for societies out of 80 Mb/d.
      With an EROEI of 9: 71.1 Mb/d is available for societies out of 80 Mb/d.

      Note that a drop of the EROEI from 11 to 9 reduces oil available for societies from 72.7 Mb/d to 71.1 Mb/d or a drop of just above 2%.

      • Caelan MacIntyre says:

        The implications of the declining energy return on investment of oil production

        Abstract:

        “Recently, there has been a surge in publications estimating the EROI of a number of different sources of oil, and others relating EROI to long-term economic growth, profitability and oil prices. The following points seem clear from a review of the literature: (i) the EROI of global oil production is roughly 17 and declining, while that for the USA is 11 and declining; (ii) the EROI of ultra-deep-water oil and oil sands is below 10; (iii) the relation between the EROI and the price of oil is inverse and exponential; (iv) as EROI declines below 10, a point is reached when the relation between EROI and price becomes highly nonlinear; and (v) the minimum oil price needed to increase the oil supply in the near term is at levels consistent with levels that have induced past economic recessions. From these points, I conclude that, as the EROI of the average barrel of oil declines, long-term economic growth will become harder to achieve and come at an increasingly higher financial, energetic and environmental cost.” ~ David J. Murphy

        This was apparently published 3 years ago.

        • Rune Likvern says:

          Compare the above with Arnoux claim (ref slide 1 in the interview):

          ”In 2012 the global oil industry began using more energy for exploration, extraction, transport refining & fuels delivery than what it delivers to end-users.”

          He claims EROEI dropped below 2 for the oil industry as of 2012.

          • Caelan MacIntyre says:

            Sure. Steve might want to contact him and let him know. Maybe there is a 1 or 2 missing?

            Lifelines

            “The subject of the short film was Børfjord, a semi-deserted fisherman’s village in Northern Norway.”

            Looks a little like Newfoundland…

    • Rune Likvern says:

      The average Barrel

      To be clear I am grateful that Steve took the time to both conduct the interview with Arnoux and to make it public.

      Steve wrote;
      ”As Louis stated in the interview, the ETP Oil model is based on the “average barrel.””
      What is meant by the “average barrel”?

      Slide 2 (at about 7.30 in the published interview) may give a hint as there is a chart showing a barrel and how much energy is made available from it for societies versus time.

      Let me stick to my EROEI chart above, what is made available for consumers with an EROEI of 10 is 72 Mb/d from a total of 80 Mb/d (8 Mb/d is in this example an energy investment to make 72 Mb/d available to societies).

      Each of these barrels made available to societies has a potential energy of about 6 GJ. That has not changed much through the decades and is not about to change much.

      At some point in time oil from the oil companies made available for societies may decline to 60 Mb/d, and each of these barrels will still contain potential energy of about 6 GJ.

      These 6 GJ in the barrel has the potential to produce about 1,600 – 1,700 kWh of work if conversion factors as proposed in BP Statistical Review 2016 is used.

      The work potential from each barrel of oil gives some idea about in what direction prices will move as less oil becomes available for societies.

      • SRSrocco says:

        Rune,

        I appreciate the continued debate here. It is always good to keep an open mind and to allow the flow of information to continue.

        That being said, I think I understand where you (and many others, including Gail Tverberg) are missing the boat on the falling “Net Energy” thermodynamic science.

        What you have stated in your comments above as it pertains to the Norwegian oil fields EROI is at “well-head.” This is only one part of the “Total Oil Industry & Support System.” The EROI from well-head is only the beginning base calculation that does not include all the other stages and support industries and peoples.

        For example, many in the precious metals industry do not understand when I say the overwhelming value of an ounce of gold comes from “ALL THE ENERGY” consumed in all the stages and in all forms. I wrote about this in detail in my article : https://srsroccoreport.com/unlocking-golds-true-value-the-economic-code-finally-revealed/

        What the Hills Group stated in their thermodynamic calculation is that 50% of the BTU’s in each barrel of oil is now being consumed by the entire Oil industry and support system. Just like the gold mining industry needs a Caterpillar 797F to haul the ore to produce the gold. Thus, a Caterpillar 797F shows up as a “Capital Expenditure” not energy on their balance sheet. However, I will guarantee you, if you went back to all the stages of the Caterpillar 797F construction, the overwhelming value of that machine was from all the energy (raw, electric and human labor) in all forms and in all stages in the production of the thousands of parts to make that unit. Even though the gold mining industry’s cost to produce gold may only include 20-25% raw energy, it also needs a lot of labor, supplies, parts and capital expenditures that all derive their value from energy in all forms and in all stages.

        This is what you fail to recognize in the Hills Group thermodynamic model of the increased consumption of energy to produce a barrel worth of energy to the Globalized World. According to Louis Arnoux, for every one person working directly in the oil industry, there are approximately 10 support people. Again, the same in my Gold mining example.

        Rune, this is why the Central Banks have printed so much damn money and why the debt has increased exponentially. They are trying to make up for the losses associated with the 50% of the barrel now being used by the entire Oil Industry and support systems…. not just the 10/1 EROI at the wellhead.

        This is also why Louis explained to me counting barrels or doing EROI work on limited aspects of the entire oil industry and massive support system is very imprecise.

        Lastly, Bedford, Louis and another gentlemen from Scotland are finishing up their thermodynamic oil limit paper to be submitted to U.K. Royal Society. If their math or science is not up to par… they will have the biggest critics on the planet going over their paper.

        steve

        • Rune Likvern says:

          Steve, for your convenience, I have linked what I wrote and had estimated for both Varg and Volve and published in an earlier POB post.

          And yes I believe readers are entitled to the truth.

          At the wellhead the estimates came out with an EROEI of about 15 and overall and to the consumer of about 9. You would benefit from reading the whole thread.
          http://peakoilbarrel.com/bakken-production-down-opec-production-up/#comment-583734

          Misrepresenting what I have written will just make it harder for you.

          The precious metal industry is not what this debate is about.
          And Steve, how do you explain that (according to BP Statistical Review 2016) Norway in 2015 produced about 1.95 Mb/d and used 0.23 Mb/d and all the consumption was not in the oil industry.
          That is a new one, linking CBs actions to EROEI of oil.

          • SRSrocco says:

            Rune,

            Did the Norwegian oil industry employ any people? Did they buy any pipe? Did they buy other supplies? Did they use any complex financial services? Did they use any large oil tankers? How many people built, service or run large tankers? I could go on and on.

            This increased cost of energy in the entire system you continue to ignore.

            Steve

            • Rune Likvern says:

              Steve, can you please point to where I am ignoring the increased cost in energy terms?

              I have consequently pointed out that EROEI is in a general decline and also shown that from some real life examples.

              Yes the oil industry does all that you mention and some more and both the oil industry and the country has enjoyed a financial surplus.

              • SRSrocco says:

                Rune,

                Simply, you fail to take into consideration the increased size and complexity of the total oil industry and support system and their energy consumption.

                Steve

                • Rune Likvern says:

                  Steve, I have worked all my life in or with the oil industry (primarily Statoil). This has also involved process design of production installations.

                  Again Steve you turn to unfounded allegations when cornered.

                  • SRSrocco says:

                    Rune,

                    You just can’t get past your own brain on this. Unfounded… lol, you just can’t comprehend the entire ENERGY MATRIX.

                    All the massive amount of pipe to drill oil today was made by companies and workers correct? Did that pipe just magically appear out of the plant or did some poor slob or slobs extract the iron ore and transport it to the pipe manufacturing plant??? Again, I could go on and on.

                    You are just blind to the huge increase in energy in all forms and in all stages in the increasingly complex ENERGY MATRIX.

                    It is not I that is making unfounded allegations… it’s that you can’t see entire complex ENERGY MATRIX.

                    Steve

                  • Rune Likvern says:

                    Steve, try me!

                    I am the one presenting evidence and hard data. So far you have not presented evidence that proves the sources I have linked to are wrong.

                    I am aware there are embodied energy in the pipes, platforms, helicopters, vessels etc.
                    Perhaps you could link to a source that describes how much energy this is.

                    Steve, you can try to explain the eTP report/model in your own words.

                  • Statoil has very nice offices. I loved getting invited by Statoil types for lunch because their cafeteria has such a nice view.

                  • Caelan MacIntyre says:

                    @Fernando
                    What was the view like? What were you overlooking?

                    Energy-Efficient Statoil Headquarters boasts an energy class B rating in Norway

                    The new Halifax library over here is reminiscent of that kind of design, what I might call ‘loosely-stacked office-building”.

            • Cracker says:

              Steve,

              Now you know why the Hills Group chooses not to make much noise about their work. Almost no one understands it, and the big picture seems too big for most to see.

              I have not looked at the math. I feel no need to. It’s complex, and not exactly accurate anyway. It doesn’t have to be. The important concept is that surplus energy is declining and the effects are continuing to work through the system.

              As the surplus energy available to the system declines, parts of the system have to reduce or go away, like the oil production facilities that Rune cites. One can argue about the math, but the big picture seems obvious, except maybe not to most people:-)

              Visionaries are usually called crazy early on. It’s a compliment.

              Rune, thanks for your part of the discussion. I really appreciate your contributions and have great respect for your work.

              Jim

      • Caelan MacIntyre says:

        Global primary energy in the form of fossil fuels (FF’s) accounted for ~85%.

        And of course, not all FF’s are created equally, nor can they necessarily be used interchangeably, to say nothing of nuclear, hydro, PV or wind, despite batteries.

        The ratio of alternative energy (and its own comparative EROEI) in the chart would be more laughable if the situation wasn’t as concerning.

        EROI of different fuels and the implications for society

        “In conclusion, the EROI for the world’s most important fuels, oil and gas, has declined over the past one to two decades for all nations examined. It remains possible that the relatively high EROI values for the natural gas extracted during, and often used for, the production of oil may mask a much steeper decline in the EROI of oil alone. Declining EROI is probably already having a large impact on the world economy… Coal, although abundant, is very unevenly distributed, has large environmental impacts and has an EROI that depends greatly on the region mined…

        The decline in EROI among major fossil fuels suggests that in the race between technological advances and depletion, depletion is winning…

        Most alternative renewable energy sources appear, at this time, to have considerably lower EROI values than any of the non-renewable fossil fuels. Wind and photovoltaic energy are touted as having substantial environmental benefits. These benefits, however, may have lower returns and larger initial carbon footprints than originally suggested… The energy costs pertaining to intermittency and factors such as the oil, natural gas and coal employed in the creation, transport and implementation of wind turbines and PV panels may not be adequately represented in some cost-benefit analyses.” ~ Charles A.S. Hall, , Jessica G. Lambert, Stephen B. Balogh

        EROI and the limits of conventional feasibility assessment—Part 3: Intermittency & seasonal variation (comment section)

        “I have dreamed of an experiment where RES manufacturer would produce their product using their own power as an input. Then we could see what the real cost is in the absence of support from fossil fuels. This would cost peanuts compared to current subsidies, but since 100% RES promoters can only lose if such experiment is conducted, I am not holding my breath. Their business is served by brushing these longer term problems aside. In fact, I have noticed quite a few lobbyist effectively promoting natural gas probably to hide these problems longer.” ~ Jani-Petri Martikainen

        “Thanks for your comment, Jani-Petri. My own view is that, in a sense, we may currently be engaged in just the experiment that you describe.” ~ Josh Floyd

        “On the solar problem in the winter, a north south HVDC grid in the Northern hemisphere can send excess summer generation to the south to help with AC loads, and send excess winter generation in the south during winter to the north. Not a perfect solution, but it might smooth out some of the winter summer variation. An east west HVDC grid could help with cloudy weather to some degree.
        Better building codes, passive solar, heat pumps, and ground source heat pumps will help reduce energy needs, rising fossil fuel prices will help make this a reality.” ~ Dennis Coyne

        “Yes, I agree that a lack of technical concepts for approaching seasonable variability is not the primary challenge here!” ~ Josh Lloyd

        “The proper price signals will help increase the investment in renewable energy.” ~ Dennis Coyne

    • Rune Likvern says:

      In the interview @32:00 Arnoux says;
      “Only a fraction of the light tight oils can be used to make gasoline, diesel, jet fuels….”

      The chart below is lifted from the paper “Working with tight oil” from the American Institute of Chemical Engineers (AIChE) and shows distillation cuts for several oils.
      http://www2.emersonprocess.com/siteadmincenter/PM%20Articles/Olsen_CEP_April2015.pdf
      AIChE is apparently at odds with Arnoux.

      • SRSrocco says:

        Rune,

        Yeah…. yeah, he may have misspoke there, but in reference to the ultimate brief lifespan of the Shale oil Ponzi scheme… it really won’t matter.

        Steve

      • Caelan MacIntyre says:

        Rune, just out of curiosity, I took a look at your linked PDF and a couple of passages seemed less-than-clear; for example:

        “Crude oil derived from shale plays is less expensive and more readily available than traditional crudes…”

        Should this read ‘more expensive’?

        …And here:

        “However, tight oils present numerous challenges, which is why these crudes typically cost less than crude oils such as Brent (global crude oil benchmark) or West Texas Intermediate (U.S. crude oil benchmark).”

        So ‘numerous challenges‘ are why they ‘typically cost less‘?

        • George Kaplan says:

          Tight oil is more difficult (or costly) to refine and/or produces a less valuable slate of products, therefore refiners will not pay as much for it because they still get the same price for the products no matter where they are sourced from (i.e. ND sweet price is a lot less than WTI, ND sour is less again). You can probably convert this to an EROI argument if you want to – but the numbers will be only slightly different for different grades.

          • AlexS says:

            “ND sweet price is a lot less than WTI” not because it “is more difficult (or costly) to refine and/or produces a less valuable slate of products”, but because of high transportation costs from ND to the refineries in the Gulf coast or in the east coast.

            The price of Eagle Ford and Permian crudes is roughly the same as WTI.

        • Rune Likvern says:

          Caelan,
          Now it is hard to tell and it varies (and by this I mean vs the average of a large population of LTO wells).

          New developments in the North Sea (much dependent on location and reserves) on average now needs $50/bo and upwards very much like good LTO wells.
          Individual LTO wells benefit from low CAPEX (as opposed to the development of bigger fields, which easily runs above $1B) and it takes only a few months before a decision to drill until the well flows, that is LTO developments are highly responsive,

          LTO wells have a competitive advantage of this.
          Bigger discoveries may take anything from 2 to 4 years from FID (Final Investment Decision) to flow.

          Look at the lower left column (head line”Challenges of tight oil”) where the author lists several challenges with LTO that affects its pricing.

      • Caelan MacIntyre says:

        Thanks for the elaboration, guys. Sure enough, the answer is more complicated that the question.

    • Rune Likvern says:

      For those interested,
      The link below is about exergy (available work).
      https://en.wikipedia.org/wiki/Exergy

      Those familiar with oil knows how much energy is available from 1 barrel.
      Now look at Arnoux’s slides 2 and 3.

      • Survivalist says:

        Thanks Mr Likvern. I appreciate you sharing your analysis and points of view. I learn a lot from you, as well as from many others on this fine blog.

        Thanks also to Steve for conducting and sharing the interview and for sharing your enthusiasm for the eTP model. I’m glad you brought the eTP model to the table so it could be discussed.

    • Rune Likvern says:

      And, Steve below follows data on Volve it should be easy with your access to experts in thermodynamics to verify the estimates. This again proves your allegations as unfounded.
      Data on Volve from NPD and NEA,

      Production per calendar day 2016YTD (May)
      Oil: 7,601 b/d
      Natural gas: 0.78 Mcm/d
      NGL: 67 b/d

      Energy consumables;
      Diesel: 13.46 ton/d
      Natural gas: 0.07 Mcm/d
      Helicopters, supply and standby vessels; 5 ton/d.

      Energy content of consumable and products;
      Diesel 43 GJ/ton
      Energy content crude oil and condensate 5,73 GJ/b (as proposed by BP)
      Energy content natural gas 39 MJ/Sm3 (sales gas)
      Energy content NGL (LPG) 4,13 GJ/b (Based on LPG, 26 MJ/liter)

      Energy consumption downstream Volve and until the products reach the consumer, 5 % of what leaves Volve.

      • SRSrocco says:

        Rune,

        How about the Energy to make the the helicopter? You just want to CONVENIENTLY leave that out? Helicopters made by elves??? Oil pipelines or tankers construction, maintenance and running not considered?? How about the engineers? They learn their trade by a software download to their brain… or did they drive to college for 4-8 years??

        The entire increasingly complex ENERGY MATRIX is devouring more energy… but you just can’t see it.

        Wake up Rune…. lol.

        Steve

        • Survivalist says:

          Steve, it seems to me that you disagree with Rune because you believe in the eTP Report which you have stated yourself is too complex in math for you to understand. It also seems to me that you feel anyone who doesn’t agree with the assertions of the eTP report must surely be a BAU cornucopian. These are not wise and logical positions to hold IMHO. You also stated that we can wait 10 years and see how ROSEY things turn out in order to see whether it is Rune or You who are correct in accepting the assertions of the eTP report. I can think of many many reasons why things will not be very rosey in 10 years and none of them have anything to do with the eTP report. Am I correct in concluding that you believe that if things aren’t very rosey in 10 years it must prove the validity of the eTP Report?

          • SRSrocco says:

            Survivalist,

            No, I don’t understand the complex math but understand how it is measuring the increasingly complex ENERGY MATRIX.

            I gather none of the comments I made above widened your understanding either.

            Gosh… it is so easy for me to see it. How is it that you can’t?

            Steve

            • Survivalist says:

              I understand it fine. It’s called diminishing EROEI. Thermodynamics in the way that the eTP report uses it is a red herring.

              • SRSrocco says:

                Survivalist,

                Let’s wait and see what happens after their paper is published. You are most certainly looking at this with blinders on…. lol.

                Steve

                • Survivalist says:

                  Sounds like a plan. I’m looking forward to the white paper and as soon as I see it I’m sending a copy to Mr Likvern 🙂

                  I’d like to suggest that I’m looking at this with a critical eye (and that you are not) as to the validity and accuracy of how thermodynamics is modelled in the eTP Report. I get decreasing production and I get diminishing EROEI on that production Steve. What I don’t get is the eTP report. And neither do you Steve. You said so yourself. But you’ve decided to take Mr Hills word for it and I’m not prepared to do that. I’m a hard collapse peak oil’er. I do not discount the possibility that I will die in a famine or secondary to famine related violence when I’m older. Just because the eTP Report predicts hard collapse doesn’t mean I believe that it is a report that accurately represents reality. No blinders at all. I wish Mr Hill would make an appearance and defend his thesis with as much enthusiasm as you have done. Because he has not is of curious circumstance to me. It’s a very civilized discussion here at POB from what I can tell. Much better anyway than over at PO.com where I believe he goes by the handle ‘shortonoil’, and where he does not seem at all shy about referencing the eTP report in his comments.

            • Rune Likvern says:

              Steve wrote,
              ”No, I don’t understand the complex math but understand how it is measuring the increasingly complex ENERGY MATRIX.”
              Nuff said!
              Steve are you willing to disclose what theoretical education you have and practical work you have done with thermodynamics?

        • Rune Likvern says:

          Steve,
          Again you are making a lot of unfounded claims and trying to derail the debate instead of bringing it forward.

          • SRSrocco says:

            Rune,,

            Forget it…. lol. For some silly reason, I thought of all people, you would get it.

            My apologies for wasting your time.

            Steve

            • Dennis Coyne says:

              Hi Steve,

              Maybe the fact that people that do understand the science and math and have actually studied thermodynamics think the eTp Model is not convincing should make you question whether the model is valid rather than accept it on faith.

              Saying “complex Energy Matrix”, without data to back up the claim is not very convincing.

              Rune has done an excellent job poking holes in the eTp model, in my opinion.

              Primary energy per unit of real GDP in 2010$ (market exchange rates) has been decreasing since 1970, so the “Energy matrix” is becoming more efficient. As fossil fuels peak and become more expensive this trend may accelerate as wind and solar with fewer thermal losses replace fossil fuels and energy in general is used more efficiently.

              In chart below primary energy from BP is used and GDP data from the World Bank.

              http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

              http://data.worldbank.org/

              • Dennis Coyne says:

                Whoops wrong chart. Ignore chart above.

              • Caelan MacIntyre says:

                All Steve has to do is place a ‘The author’s views do not necessarily represent, etc….’-type qualification under any article on his site/blog and sit back and relax. ‘u^

                With regard to the uneconomic-kludge-of-a-machine some call ‘the economy’, it appears that, yes, efficiencies will be forced upon it, but most likely hap-hazardly, myopically and relatively ineffectively, while it scans along the diminishing-energy continuum for the next best EROEI (lowest hanging fruit), and attempts to leverage one energy form in the processing of another that may mask/smoke-and-mirror some dynamics, including with regard to real depletion and finance/price/banking/money/etc..

                Incidentally, if the interest rates are very low in part because debt cannot be ‘serviced’ with higher ones, then continued ultra-low (or negative) interest rates in themselves may create/are creating other sorts of issues that many pundits appear to be talking about, such as with regard to saving money, to price discovery and to sub-prime lending schemes.

            • Have to agree with the unexplained use of thermodynamics.

              If it was somehow applied to a variational argument and then a specific measure maximized or minimized, I can kind of see how it might be practical. But you can’t tell because they don’t explain anything.

              I agree with someone that said upthread:
              “The theory behind it seems no different than the normal EROEI assessment.”

        • Rune Likvern says:

          Does the eTp report cover the whole energy matrix, which includes natural gas, coal, nuclear, hydroelectric and other renewables?

          Does the eTp report include energy for the manufacturing of helicopters?
          And how was this energy sourced?
          Does the eTp report include energy spent to educate petroleum engineers?

          After all, Steve you have read and understood the report so the above questions should be easy to answer.

          • Dennis Coyne says:

            Hi Rune,

            I also read the report, and the answer is negative on all questions (except how was the energy sourced, which was not covered in the report either).

      • Reno Hightower says:

        Rune

        You can’t win an argument vs crazy.

        • SRSrocco says:

          Reno,

          I happen to believe I am stating facts that most don’t see. If that is crazy, then fine with me.

          Steve

          • Survivalist says:

            Can you point to the references and bibliography section of the eTP report where the energy to manufacture helicopters and pipelines is factored into the equation. It seems to me Steve that you are defending somebody else’s thesis and that you don’t understand what it is you are defending. Mr Hill is strangely silent on the topic of defending his thesis. I have reviewed the opinions and points of view of both you and of Futilitist in defending the validity of the eTP report and I must say I find the report deeply flawed. Now perhaps in your eyes that makes me some sort of business as usual cornucopian but I can assure you that is not the case. I’m a hard collapse peak oiler. I just don’t happen to believe every word in my ear that supports that view.

          • Reno Hightower says:

            If you are trying to calculate the energy input for a person to obtain a degree in Pet Engineering and then add that to the energy cost for drilling and producing a well then yes. That is crazy. Can’t imagine what other energy inputs you are calculating with subjective numbers.

          • Caelan MacIntyre says:

            Steve, I wouldn’t sweat it in any case, since the entire economy is one giant pyramid scheme anyway. ‘Crazy’. We’re all practically traitorous to each other in some forms or others, prodded as we go by the dystem.
            The sooner EROEI can give this grandiose pyramid scheme a swift thermodynamic kick in its derriere, the better…

            You know where I’m hedging my bets? In real community. Wherever it can be found and/or re-created… among the ruins of the old.

    • Rune Likvern says:

      More on the Average Barrel

      Using the average barrel as a picture of producers and consumer getting energy from it is as presented by Arnoux is highly flawed for several reasons.

      Ref slide 2 (with the barrel) in the Arnoux interview with SRSroccoReport.
      Note how some numbers are left out.

      In 1900 Arnoux’s chart shows 61% energy available for society, that means 39% spent by the oil industry. This amounts to an EROEI of 2.56. (This massively contradicts his claim in the interview.)

      In 2015 Arnoux’s chart shows 8% energy available for society, that means 92% spent by the oil industry. This amounts to an EROEI of 1.09.

      If this was the case there would not have been anyone looking for and producing oil. Real world proves Arnoux wrong and he himself demonstrates he does not understand EROEI and thermodynamics.

      With an EROEI of 2 no oil companies would be able to stay in business. (that is they sell 2 barrels for $50/b and buys 1 barrel back of refined products at $100/b).

      How would they be able to pay for the other operations and their employees?
      Both the oil industry and consumers will have to deal with thermal efficiency, that is none would get to 100% on average.

      I will keep on hammering on this interview here on POB as long the moderators/owners of the blog and its fine readers endure it.
      I can guarantee I have lots of more stuff that shows that Arnoux is presenting nonsense.

      • Caelan MacIntyre says:

        Presumably, Steve, or someone else, has relayed this kind of information over to Louis Arnoux to get to the bottom of it, and Louis will address any questions as soon as he can at POB, right?

    • Rune Likvern says:

      Energy Value Chain

      I have earlier tried to draw attention to Sankey diagrams that shows the energy flows through society/societies.
      Sankey diagrams have been around for several decades as powerful visualizations of energy flows, either for a society or an industrial plant.

      The one linked below is from UK Department for Business, Energy &Industrial Strategy and is for 2015.
      https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/539637/Energy_Flow_Chart.pdf

      In 2015 UK produced gross 49.5 Mtoe and if one follows the flow one will see a branch headed down of 4.4 Mtoe which is Energy industry use and distribution losses. If all these losses were assigned to UK oil production it would result in an EROEI of 11.3 (some of the losses come from net imported crude/petroleum products used to balance total UK demand, which suggests that losses that can be attributed to UK crude oil production is somewhat less than 4.4 Mtoe and thus the EROEI for UK crude oil production somewhat higher than 11.3).

      (UK is now a net importer of oil and some Norwegian crude is landed in UK and exported from there.)

      Again, there is nothing in the works by other public and private institutions that lends support to Arnoux claim that EROEI for oil dropped below 2 in 2012.
      And Arnoux builds his claims on the works of the Hill Group.

      • Caelan MacIntyre says:

        Nice diagram, Rune. I will look it over when I have a chance.

        The Hill’s Group seems already to have a couple of threads (The Etp Model, Q & A and Economics vs. ETP) about their paper over at Peak Oil and BW Hill (nickname, ‘shortonoil’, I think) appears to be participating.

        I wanted to post some of your points there, but can’t find my password and am still waiting for a password-reset email from them.

    • Juergen Heil says:

      SRSrocco and Rune Likvern both of you are right with the EROI. But you Talking about different things. Rune you don’t include the privately used energy (or in our case only Oil) while SRSrocco talks about the hole energy used by the producer and its employees. Why is this important? Let’s imagine an oil company produced 1 Barrel of oil to so they consumed 0.5 barrels for processing into a finished product. This translate into an EROI of 2:1. So a half barrel could be sold to the market. But what happens when the employees of the company use a 0.25 barrel for their own private consumption. Only 0.25 barrel cold be sold to the outside customers this translates to an EROI of 1.3333:1.
      If you include the employee’s direct energy consumption than EROI is falling dramatically but if you include all the energy the employee’s equipment (cars and all other stuff )used at production EROI is falling even more.
      If for all the stuff produced the needed 0.125 barrel than the amount of oil sold to outsiders falls also to 0.125 barrel this translates into overall EROI of 1.1429.
      With this kind of calculating the EROI would reach the 1 to 1 limit much faster. If you think long enough about it, you come to the conclusion all energy even the employee’s private used energy must be taken into account.

      • Rune Likvern says:

        So by applying the boundaries you propose, what do you estimate the global EROEI for oil is at as of 2016?

        • Cracker says:

          Rune,

          I highly doubt anyone knows, and defining the parameters is really tough, and no one will agree with how you do it.

          One thing for sure, the global EROEI for oil in 2016 is less than it was in 2005. And it is not increasing, which impairs global growth, and it doesn’t seem likely to ever increase again, and that is the predicament for a Ponzi economy that must grow to service its debt.

          Quibbling about the numbers just takes attention away from the issue. It isn’t going to get better, and parts of the system will change and go away. Less surplus energy means less activity. It will hurt a lot and it won’t be a short term process.

          I can’t get excited about the numbers, but the rest is a bummer.

          Thanks again for your excellent work and for taking time to comment. Most of us are enriched by your contributions.

          Jim

          • Fred Magyar says:

            Jim, you make some good points!

            One thing for sure, the global EROEI for oil in 2016 is less than it was in 2005.

            What I wonder about is whether or not it is possible that the EROEI of alternative sources of energy such as wind, solar, hydro etc… can get better over time due to technological advances. Is the fact that the price of producing PV panels or wind turbines are on a definitive downward trend a reflection of this?

            Why are we seeing more and more headlines such as this in the MSM?

            http://www.bloomberg.com/news/articles/2016-04-06/wind-and-solar-are-crushing-fossil-fuels

            Wind and Solar Are Crushing Fossil Fuels

            Record clean energy investment outpaces gas and coal 2 to 1.

            Wind and solar have grown seemingly unstoppable.
            While two years of crashing prices for oil, natural gas, and coal triggered dramatic downsizing in those industries, renewables have been thriving. Clean energy investment broke new records in 2015 and is now seeing twice as much global funding as fossil fuels.
            One reason is that renewable energy is becoming ever cheaper to produce. Recent solar and wind auctions in Mexico and Morocco ended with winning bids from companies that promised to produce electricity at the cheapest rate, from any source, anywhere in the world, said Michael Liebreich, chairman of the advisory board for Bloomberg New Energy Finance (BNEF).

      • Caelan MacIntyre says:

        This feels like a kind of application of Jeffrey Brown’s Export Land Model, if understood correctly, only applied in a different context and on a different scale.

        Blood On Your Hands

        “Five corporations earn more than forty-six nations…”

    • Rune Likvern says:

      I have earlier described the boundaries and the data used for the presented estimates for Volve.

      Looking at full cycle EROEI for Volve with cut off end 2015 the following estimates comes out;
      Gross energy extracted from Volve as from start up in 2008 to end 2015: 401.7 PJ (Peta Joules, Peta: 10 Exp15)

      Energy used in operations (including estimates of embedded in vessels, helicopters) same period: 13.2 PJ.

      Assuming the construction of the production installation to operational status takes about the same amount of energy as used during operations, that is 13.2 PJ, the estimate for full life cycle (at end 2015 and the installation is planned shut down in 2017) results in a life cycle EROEI of 15.

      EROEI of 15 is ex the installation (not at the wellhead!) that is natural gas and NGL in the pipeline and oil in storage at separate vessel.

      Now before anyone comments on the 13.2 PJ (for construction of the installation to operational status) number consider this;
      According to the source linked below
      http://energyskeptic.com/2015/how-much-energy-does-it-take-to-make-a-car-by-david-fridley-lbl/
      it takes about 120 GJ to manufacture one American car of 1,342 kgs.
      13.2 PJ could thus manufacture 108,000 such cars.
      That is 145,000 tons of cars.

      Maersk Inspirer with a gross tonnage of 25,000 ton is used on Volve and was used for drilling before that and is now considered used for other field developments.

      The above suggests the energy embedded in the production installation for Volve is lower than 13.2 PJ.

      Something else to ponder;
      What oil price would it require to develop a discovery with a full cycle EROEI of only 2?

      • Juergen Heil says:

        Using the EROI of 2 was just to illustrate the difference between accounting only directly involved Energy, with overall involved Energy accounting. With this example number its easy to get.
        A calculation with all involved energy would have to be recurring all over again. Example: The energy of the staffs equipment must include the process of making it and the energy needs of this staff producing the equipment. This staff need energy and equipment again. So you end up in a never ending recursion. In my opinon the limes of n -> infinity recusions could very well come to an overall EROI what is discribed by Dr. Louis Arnoux in his interview. I don’t have the ability and the time make such a calculation but that is the way i understand his EROI. It has not much to do with your classical calculation of EROI.What you are doing ist in is Definition correct but not as useful as Dr. Louis Arnoux approach.
        The reaching of The EROI of 1 means the system collapses while a system with EROI of 3 is doing very fine.

        • Rune Likvern says:

          Dear Juergen,
          Further up, this
          http://peakoilbarrel.com/texas-petroleum-output-october-2016/#comment-584228
          Slide 1
          ”In 2012 the global oil industry began using more energy for exploration, extraction, transport refining & fuels delivery than what it delivers to end-users.”
          “By around 2022 oil will have ceased being a primary energy source.”

          The above are quotes from Arnoux’s slide.
          And I repeat there is nothing in the real world that supports those claims. Some studies (2013) come out with an average EROEI of global oil production at about 17.
          Perhaps you would be kind enough to point to other credible sources that gives support to Arnoux’ claims?

          As you understand Arnoux’s EROEI, perhaps you also can describe how he sets the boundaries for his calculations?

          This starts to look very much what Steve started out with earlier, when a claim from Arnoux was proven to be at odds with other credible sources, it was story time where Steve tried to explain what Arnoux really meant. Hint, it had nothing to do with EROEI.

          There is a wide difference between blind faith and science!

          • Juergen Heil says:

            I follow Steves work as an investor not as a scientist. If i make my investment decisions on the fact that i have accurate equations than i mabe a little late. Let’s just see what comes out when Dr. Louis Arnoux releases is work to the public.

    • Rune Likvern says:

      I have visualized the differences between several sources and Arnoux.

      If the discussion was about where between 13 and 17 global EROEI for oil was now, only those most interested would have paid attention.
      However, this is about some sources that come out with an EROEI for oil (to use a middle figure) about 15 for 2015 while Arnoux (apparently with the same boundaries as others) comes out with an EROEI of 1.09.

      That means others show a surplus of 14 barrels of oil for each barrel spent in the value chain.
      Arnoux estimates come out with 0.09 barrels surplus oil for each spent by the oil companies.

      The difference is a whopping factor of 150!!!!
      Arnoux (and Steve) has not tried to explain this difference.

      But wait it gets better, according to Arnoux this factor will grow to infinity by 2030!

  3. Watcher says:

    US Imports 10.5 mbpd as of July

    Around 1/2 consumption.

    Safe sources Canada, Mexico, Ven, Columbia = 5.5 mbd

    About 5 comes from a long distance away. KSA 1 mbpd, Angola/Nigeria/Iraq 1.5 mbpd, Russia 500K, 2mbpd from assorted.

    It’s that last 5 that will get interdicted. Life in the US won’t collapse with a 25% unavailability, and of course price won’t rise because the govt will decree it lower, or subsidize it.

    So if you’re looking for societal collapse from oil, you have to look at 25% and decide if that crosses the nuclear threshold or if it needs to be 30 or 40 or 50% before the nukes fly. Because fly they will. No one is going to sit and pretend he’ll accept the consequences of inadequate oil or wait for some bizarre CB choice to address it when he knows lines at the gas station will guarantee a lost next election.

    • Fred Magyar says:

      Don’t worry Watcher!
      None other than the Rex Tillerson says Shale will save the day!

      http://www.fool.com/investing/2016/10/22/exxonmobils-ceo-thinks-saudi-arabias-oil-market-ou.aspx

      Saudi Arabia’s energy minister recently warned that there could be a global oil supply shortfall in the coming years, which could push crude prices much higher. Driving this view is the expectation that production from legacy wells will decline by a significant amount over the next few years and that there is not enough production in the pipeline from megaprojects to offset these declines. It is a view shared by others in OPEC, with its former secretary general also warning about a potential future crude shortage and price spike.

      That said, ExxonMobil (NYSE:XOM) CEO Rex Tillerson thinks this view is incorrect. In his opinion, the Saudis are missing the fact that shale drilling has dramatically changed the landscape. Drillers have gotten very adept at getting more oil out of tight rocks at ever lower prices. Because of that, he believes that shale producers can quickly ramp up output to fill any gap between supply and demand. In effect, North America can become the new swing producer in the oil market, which is a role that the Saudis used to occupy.

      Of course I’m not holding my breath.

      • Watcher says:

        Substantial amounts can and will come out of the ground if you nationalize the industry. But there will be an end to that, too.

    • me says:

      >US Imports 10.5 mbpd as of July

      True, but is is almost all wasted. I often travel with European businessmen in the US and the absurd wastefulness of American living arrangements is always worth a good laugh when you see it as an outsider.

      • clueless says:

        Me says: “almost all wasted”

        Guess what? Most Americans do not want to live in 30 story high rises; carry their groceries home daily; get on a train, bus, etc. to get to work; have a 20 square foot bathroom; have no storage space; have no place for the kids to play outside; have no parking places for cars; etc., etc. Laugh all you want!! [then please go back from where you came, and laugh your way to happiness]

        • SatansBestFriend says:

          I am a red white and blue American living in Australia.

          In the USA I couldn’t imagine not driving 3 or 4 times a day every day.

          In australia, I drive 4 times a month. It wasn’t a conscious decision it just worked out that way.

          Australians are wasteful with cars, Americans are off the f****ing charts.

        • Fred Magyar says:

          Guess what? Most Americans do not want to live in 30 story high rises; carry their groceries home daily; get on a train, bus, etc.

          OMG what a horrible way to live! It sounds like NYC or Chicago or Boston or Miami! People who live in such conditions must be truly miserable!

          Then again maybe it ain’t all that bad…

          http://www.census.gov/newsroom/press-releases/2015/cb15-33.html
          U.S. Cities are Home to 62.7 Percent of the U.S. Population, but Comprise Just 3.5 Percent of Land Area

        • Greenbub says:

          I’m with you, clueless. Europe is charming but there is no need to live like that (for myself).

          ~if wimbi were still here, he would disapprove of us.

    • Venezuela isn’t a safe source. It’s definitely trying to shift oil sales to India and China even though the transport cost is higher than shipping to the USA. It has declining production. And it’s ruled by an odd combination of Marxists, narcos, plus gangsters, and influenced by the Castro family Mafia. Angola is a safer source.

      I voted for Obama, but I see him as a real bozo. The way to increase energy security is to make sure Canadian crude can move to the USA gulf coast as smoothly as possible, to avoid Venezuelan imports (which are blended to be a bit heavier and nastier than Canadian crude blends). But I’ve learned US presidents tend to be stupid when it comes to foreign and energy policy.

  4. Doc Rich says:

    Does anyone know as to why Jeff Brown is not commenting at this website or anywhere else for that matter? I sure miss his both intelligent and wise commentary.

    • Suyog says:

      A lot of old time peak-oilers from TOD (The OilDrum) are demoralized and have given up. Almost everyone from that crowd – including me – thought oil peaked in 2005. By now we were supposed to be dealing with chronic shortages and civilization was supposed to collapse in many parts of the world. There were discussions regarding descending into the “Olduvai Gorge” and “permanent blackouts”. Instead we had the shale gas and shale oil revolutions and gasoline is abundant at $2.10/gallon. To add insult to injury renewable energy is getting cheaper by the day and even the cost of storage is declining. We are maybe 2 or 3 years away from mass produced affordable electric cars. With each passing day peak oil looks less relevant and most former believers have lost interest.

      • Suyog says:

        I remember over 10 years ago when Stuart Staniford wrote an article on TOD titled “Nosedive in the desert”. He predicted an immediate, steep and terminal decline in Saudi oil production. Around that time Simmons wrote his famous book “Twilight in the desert”. Obviously they were both wrong. I now have very little confidence that anyone can predict future oil production or how rapidly technology can advance. Just 10 years ago electric cars didn’t exist. Now we are a few months away from being able to buy an electric car with 240 mile range at a price a lot of people can afford. It will only get better as the cost of batteries comes down. In another 10 years it will be fairly common to see solar panels on the roof with battery backup at least for newly constructed homes.

      • Strummer says:

        That’s only true from an US-centric perspective. Elsewhere around the world, there are whole countries whose high-EROEI-dependent economies are never going to recover again (like Ukraine or Greece or Spain). The crash is in full swing, it’s just that it’s not that visible at the center fo the global capitalist empire. The collapse always starts at the periphery.

        • Suyog says:

          The problem with Ukraine, Greece, etc is corruption, lack of business friendly environment, too much debt, etc and not expensive oil. Even when oil was $10/barrel there were plenty of poor countries in the world. I see no evidence of collapse anywhere that can be blamed on lack of availability of oil. Even poor countries have traffic jams, and there are no shortages anywhere.

        • Spain is recovering slowly. The problem arose when the leftist Socialists created what they call “The Welfare Society”, the country became very uncompetitive with a large and corrupt bureaucracy, a Byzantine labor law, plus the EU bureaucratic demands. Because Spain is in the eurozone it can’t devalue, so it has to drop wages and other costs. And this is quite controversial.

          To make matters even worse they have banking laws which encouraged a real estate bubble, which began to pop in 2006. And when the crisis hit in 2009 the socialist government failed to react, so corrective measures weren’t taken until they lost the elections.

          Problems in Spain are quite manageable with a good pragmatic government. The question in my mind is whether they’ll have one. This country is full of communists, the schools are taken over by red nuts, and the smart professional class barely thinks ahead, they seem to take politics as a distasteful side issue.

          • John S says:

            Fernando,

            I just got back from Spain. I walked almost half of the Camino de Santiago beGinning in St. Jean before I had to return to the USA. Spain is a beautiful country and the people are wonderful.

            One observation is that it looks like the entire country is for sale in all of the little towns I walked through. Also I saw very few children in these towns.

            I can see why you chose to retire in Spain.

      • Caelan MacIntyre says:

        I’m tempted to agree with Strummer.

        And the resolution is life-size, so things are likely unraveling at the speed of anthropogenic global warming for some, so just below the JND radar.

        Only Javier can stop it now.

        The Resolution Is Life-Size

    • Suyog says:

      I remember over 10 years ago when Stuart Staniford wrote an article on TOD titled “A Nosedive Into the Desert”. He predicted an immediate, steep and terminal decline in Saudi oil production. Around that time Simmons wrote his famous book “Twilight in the desert”. Obviously they were both wrong. I now have very little confidence that anyone can predict future oil production or how rapidly technology can advance. Just 10 years ago electric cars didn’t exist. Now we are a few months away from being able to buy an electric car with a 240 mile range at a price a lot of people can afford. It will only get better as the cost of batteries comes down. In another 10 years it will be fairly common to see solar panels on the roof with battery backup at least for newly constructed homes.

      • clueless says:

        If I remember correctly, Stuart did more work, withdrew his opinion, and pretty much stopped posting on TOD.

        In my opinion, it is easier to visualize oil as coming from bathtubs in the sky. We were able to drain oil from the bathtubs [I know that oil is in solid rock] slowly with small holes. Then along came the shale oil revolution – with a 3 for 1 benefit. (1) We found more bathtubs: and, (2) at the same time, we figured out how to poke a huge hole and drain them instantly [compared to the extensive time it use to take]: and, (3) investors got so excited they threw uneconomic amounts of money at them. Probably, a one off.

        So, some of us, like Ron, are still hanging in there. Kind of like waiting for the next big San Andreas quake that probably the majority of people think is coming – at some point.

        • Suyog says:

          Yes but those additional bathtubs were found because the rising price of oil created an economic incentive. If the price of oil rises again we will find more bathtubs and find a cheaper way to drain the ones we already found. Technology constantly improves and the cost of producing unconventional oil will fall with time. In another 10 years or so you will be able to buy an electric version of Camry or Accord for $25,000 and after that peak oil becomes pretty much demand driven.

          • Watcher says:

            Another believer.

            No one is going to buy a Camry that needs a multihour recharge every even 100 miles enroute Grandma’s. You refill the tank in 2-3 mins or it is just a toy.

            • me says:

              Average trip length is more like 10 miles.

              http://nhts.ornl.gov/2009/pub/stt.pdf

              Electric cars already run more than twice as far are you are claiming.

              So your anecdote is off twentyfold. If the best argument you have is a wild exaggeration, you probably don’t have any good arguments.

              Most important, when you say “nobody”, you actually mean “I”. Not everyone thinks the sam way that you do. Some people like their mother and would be happy to live near her, for example.

              My son, for example, is 21 and is happy to live at home. He has a car available, but can’t be bothered to get a driver’s license. He gets anywhere he wants to go by train or bike.

              The same is true in America. Millions of households simply do not own cars.

              http://www.nycedc.com/blog-entry/new-yorkers-and-cars

              • Survivalist says:

                “My son, for example, is 21 and is happy to live at home. He has a car available, but can’t be bothered to get a driver’s license.”

                I bet he’s a real hit with the ladies haha just kidding.

            • Suyog says:

              Watcher, you can already buy a Chevy Bolt with a 240 mile range for $35000. The cost per KWhr for the battery drops by 50% every 5 years. In another 10 years they will be able to sell the Chevy Bolt for $15000 and still make a profit. What I had in mind was a Camry or Accord with a 300 mile range that can be charged in 30 minutes. That is good enough for a vast majority of population.

              • Watcher says:

                It’s not cost per kilowatt hour. It’s not claims of range from Tesla that require the heater to be off. It’s not average trip.

                It’s trips to grandma’s house in the cold of late November.

                Nobody is going to own two cars because one can’t behave like a normal, proper gasoline car. I was posting the disaster that is electric car sales each month, but it became so absurd that there was no more point.

                The F150 is the most popular vehicle in the US. You can haul nothing in a Chevrolet Bolt.

                Oh and I just checked Sept Chevrolet Bolt sales.
                Here: http://insideevs.com/monthly-plug-in-sales-scorecard/

                Most sold properly audited car: Chevrolet VOLT, not Bolt, Volt. And guess what. IT’S NOT AN EV. It has a gasoline engine. Didn’t see any Bolt sales. Must be a typo, eh?

                Ford F series pickups sales Sept — 67809. The Bolt has only 67809 sales to do in a single month to catch up, selling to all those guys who want to haul stuff now and then.

                The EV wackos are all about what’s going to happen. They’ve been about what’s going to happen the last 5 yrs or so. It didn’t happen. But that’s not their projection’s fault, that’s reality’s fault. Someone else was stupid. It’s always someone else.

                • Suyog says:

                  Watcher, are you serious? The Bolt production has barely started. It was not even available in September. Of course EV sales are terrible. The only 200 mile EV available today in large quantities is the Tesla and it is not affordable for most people. The Bolt will be available in significant quantities in another 6 months. A couple of years from now the affordable Tesla 3 will be selling like hot cakes. 400,000 people have put down a deposit for it even without seeing it. The Volt is not a EV but a PHEV that significantly cuts gasoline consumption. So you can drive it to grandma’s and still consume negligible gasoline most of the year when you use it for daily commute. Win, win!!

                • Suyog says:

                  In a few years every car could contain a 18 KWhr battery like the Volt. This will allow you to visit grandma 400 miles away and still use virtually no gasoline in daily commute. As the battery technology improves the battery could get bigger. Such a vehicle will practically eliminate gasoline as a personal transportation fuel.

                  • Eulenspiegel says:

                    If electric infrastructure gets better, a pure electric car is enough.

                    How often do you drive to your grandmom? So just make a coffee break at a station with a power charger, grab a burger while recharging 50% capacity in 20 minutes for the remaining 100 miles and continue. It’s perhaps 6 times a year.

                    And charging times are not that problem in normal mode. Just connect it every evening to the power line and start every morning with a full car, not that 20% nearly on reserve lamp car I normaly drive (I tend to have a nearly empty car and a fully loaded pedelec – crazy).

                  • Longtimber says:

                    Manufacturing Capacity is non existent .. MUST increase many fold. The current generation of cells is sufficient for much of the Market.
                    Always exciting to see progress:
                    http://www.bmwblog.com/2016/05/03/another-take-updated-2017-bmw-i3/

              • Roger Blanchard says:

                Suyog,

                At a 50% drop every 5 years, in 30 years the vehicle will cost just a little over $500. I’m going to wait until then. I’m sure the Bolt will get well over 1000 miles/charge by then.

                I have a 8 snowmobile trailer that I pull up to the central U.P. from the Detroit area on weekends in the winter, ~450 miles. In the summer, it’s the bass boat and trailer. What should I buy, a Tesla Model X, a Tesla Model S or a Bolt?

                • Bob Nickson says:

                  How is a special case need an argument against broad utility?

                  Those of us who need trucks will have trucks.

                  That doesn’t mean that electric vehicles won’t make a huge contribution extending the tail of declining oil resources.

                • Suyog says:

                  Roger,
                  The 50% drop every 5 years is for battery cost per KWhr, not the retail price of the car. In a few years there will be pickup trucks with batteries and motors that will provide a lot of torque at low speeds. These trucks will also have diesel or gasoline engine backups so you don’t have to worry about range.

          • Survivalist says:

            I find figure 16 from this article very interesting.

            http://crudeoilpeak.info/incremental-crude-production-update-august-2016

            Regarding the bathtubs that were found; what bathtubs were found because of the high price of oil? The shale oil was found a long time ago and was recently exploited because of higher prices making higher cost to extract resources profitable. I’m not aware of any oil being discovered that was discovered because the price of oil was high. As well your argument that Mr J.J. Brown no longer comments on this blog because peak oilers have given up is a logical fallacy. Your analysis and thinking doesn’t stand up to much scrutiny. Nor does your belief (faith) in the electric car somehow saving humanity from the implications of peak oil and diminishing EROEI/EROI.

            • Nick G says:

              The shale oil was found a long time ago and was recently exploited because of higher prices making higher cost to extract resources profitable.

              That would be more believable if we could find *any* predictions from 2008 or before that LTO could or would be exploited at higher prices.

              No one predicted shale oil/LTO. Only a very few “cornucopians” said that somehow higher prices would unleash more supply, but…they didn’t give any specifics.

              Again…no one predicted LTO. No one in N. Dakota, no one in Texas. No one.

              • robert wilson says:

                Many did predict that the energy market would clear, one way or another. To the best of my knowledge no one predicted that pixels would replace grains of silver in photography and radiography. http://www.ajronline.org/doi/pdf/10.2214/ajr.131.5.926

              • Survivalist says:

                Nonetheless Nick, the tight shale oil was found a long time ago and was exploited when the price of oil became high enough to render the enterprise profitable. What does a prediction prior to 2008 of that extraction event have to do with what I’m saying, which is; a question to Suyob- what bathtubs of oil were discovered because the price of oil was high i.e. the ones that would not have been discovered if the price remained low? What oil that was discovered is this? Suyog seems to be saying US LTO was found (i.e. discovered/located) because of the high price of oil. That is not true from what I understand. It was found quite some time ago is my understanding. Now I can see you and Suyog are both EV enthusiasts, and I’m sure there’s a bee in your bonnet because I’m asking Suyog to clarify a statement, but what I’m asking is irrelevant to whether or not US LTO extraction was predicted prior to 2008. It’s got nothing to do with anything I’m saying.

                • Nick G says:

                  It’s a question of predictions, of the meaning of forecasts.

                  I believe you’re suggesting that a lack of current discoveries tell us something about future production.

                  I’m suggesting maybe not: an analysis of discoveries requires both a date and an estimate of recoverable oil, and the estimates of recoverable oil aren’t as meaningful as we might like: US production is looking very different due to changes in LTO recovery, and those changes weren’t predicted by anyone.

                  • HuntingtonBeach says:

                    “US production is looking very different due to changes in LTO recovery, and those changes weren’t predicted by anyone.”

                    Except Economist who believe higher prices stimulate innovation and opportunity.

        • It’s just a question of timing. I used to read TOD but I didn’t think the oil was about to run out. I thought prices would go up and we would go nuts producing new oil from EOR, deep water, extra heavy sands, and what we called “tight reservoirs” in those days.

          I overvalued our ability to increase heavy oil production, and missed the nutty way mid size companies would go after LTO. But right now I can’t be as optimistic because I simply don’t see a huge oil resource coming over the horizon.

          I’m also scratching my head over the NGL rates. A while back I speculated: maybe some of what’s tagged as NGL is oil type molecules which get relabeled to allow paying a lower royalty? I didn’t get a response.

          • VK says:

            Well they aren’t coming online. Last year of the 29 Billion barrels of fossil fuels used, only 2.9 Bn barrels were replaced according to Bloomberg. This year it’s been under a billion found so far. Replacement rate of under 10%. Yeah, we’re really swimming in oil…

            • GoneFishing says:

              With a decline rate of 6 percent, 10 percent replacement is a gain. Three percent replacement would be a loss. If the discovery values actually represent potential production.

              • That’s not exactly the way it works. Let me show you:

                Let’s say you have a reservoir you produce at capacity, the rate is 100 units per year, the decline rate R is 0,06, decline is exponential.

                The rate at the end of one year is 100 X e^(-0,06), or 94.2 units.

                The yearly production is (100-94,2)/.06 or 96.7 units.

                The reserves, to the point when production is zero, are

                100/0,06 = 1667 units

                The reserves at the end of that year are thus 1667-96.7 or 1570 units.

                If production replacement is 10 %, the added reserves are 9.7 units. Thus we start year two with reserves

                1570 + 9.7 or 1580 units.

                If the new reservoirs behave exactly like the old ones, the rate the old plus new reservoirs can produce will be 1580/1667 or 0.948 of the starting rate, which means even if you develop and add these new reserves to the producing pool, the total rate will be 94.8 % of the initial rate (100 units per year).

                I kept this super simple by ignoring economic limits and assuming a very uniform 6 % decline. But if we complicate the model and add bells and whistles the answer is pretty much the same.

                The inverse happens when you want to increase production. If everything is homogeneous and you wish to increase production by say 1% you have to replace more than 100 % of the reserves you have produced.

                This assumes you are producing at full capacity, which isn’t always true.

      • George Kaplan says:

        The biggest impact of technology was probably a switch to horizontal drilling. Vertical wells water out gradually and you can see it coming in the numbers. With Horizontal wells it can be more sudden and even with good reservoir models not so predictable. All the big producers with mature fields that were watering out switched to new horizontal producers and shut off the old, watered out wells (especially Russia, Saudi, China and Kuwait, but for smaller producers India, Oman too). A coming problem, possibly quite soon, may be an unawareness of how fast production can fall over a whole field, or even a collection of fields if they have been switched to IOR over a similar time period to each other, as previous experience gave slow declines on vertical wells. China, Colombia and Mexico (which was gas breakthrough rather than water) are recent examples and have all seen in excess of 10% y-o-y decline rates.

        • Doug Leighton says:

          Hi George,

          I suspect if you were going to add to your comment you would have included EOR. Originally, Prudhoe Bay was expected to produce 9.6 BBO, or 40 percent of the oil-in-place. Employing every EOR process known to mankind the ultimate production will be about 14 BBO or roughly 60 percent of the estimated oil-in-place. This comes with additional costs and is not generally viable with low oil prices, all of which you know (but some others won’t) much better than I.

          • George Kaplan says:

            Doug, thanks. EOR and IOR can get confusing. I tend to think of EOR as tertiary recovery that can increase recovery factors whereas IOR is more modifications to secondary recovery (e.g. water injection optimisation, well design changes) that tends to accelerate production rather than increasing capture. Other people sometimes use the terms differently. Accelerated production always leads to steeper declines later on, that was the main point I was trying to make. EOR tends to do the same but you end up with more oil overall as well.

        • Dude, I think they know. Or they ought to. My personal record is a 38 % per year decline rate in a field with partial water drive we managed to keep pressure steady.

          You know, the answer isn’t always horizontal wells. They stink in layered reservoirs. I’m still scratching my head trying to figure out something efficient we can use with multiwell pads.

      • Suyog says:
        10/22/2016 AT 7:59 PM
        I remember over 10 years ago when Stuart Staniford wrote an article on TOD titled “A Nosedive Into the Desert”. He predicted an immediate, steep and terminal decline in Saudi oil production. Around that time Simmons wrote his famous book “Twilight in the desert”. Obviously they were both wrong. I now have very little confidence that anyone can predict future oil production or how rapidly technology can advance. Just 10 years ago electric cars didn’t exist. Now we are a few months away from being able to buy an electric car with a 240 mile range at a price a lot of people can afford. It will only get better as the cost of batteries comes down. In another 10 years it will be fairly common to see solar panels on the roof with battery backup at least for newly constructed homes.

        And your point is what exactly?

        • GoneFishing says:

          Maybe he is trying to say that due to the unpredictable nature of the oil industry in price, production and discovery, electricity and EV’s are a better bet.
          Or maybe he is saying don’t be the last one on you block to switch away from oil.

          My calculations show ICE cars are cheaper now than EV’s, mostly because of the cost of battery replacement. Due to the volatile nature of oil and gasoline prices that could change quickly and will change in the long run. . On the other hand electric power prices are rising, so pick your devil.
          Batteries of the future will probably be cheaper per kwh and last longer.

        • Suyog says:

          WHT,
          My point is that we have to take predictions of collapse by peak oil crowd with a large pinch of salt. My other point is that in another 10 years 200+ mile range EVs will be cheaper than gasoline cars. At that time peak oil will be demand driven.

          • Suyog says:
            10/25/2016 at 2:49 pm

            “WHT,
            My point is that we have to take predictions of collapse by peak oil crowd with a large pinch of salt. My other point is that in another 10 years 200+ mile range EVs will be cheaper than gasoline cars. At that time peak oil will be demand driven.”

            What “peak oil crowd” was predicting collapse?

            Peak Oil is an analysis that estimates how fast a FINITE and NON-RENEWABLE resource will decline over time.

            And so what was your point again?

            • HuntingtonBeach says:

              “What “peak oil crowd” was predicting collapse?”

              Well Web, I guess you have never visited the Tverberg site. She has been predicting it for over 5 years. I think it’s fair to say she is the leader of the crowd(of deplorables) too.

              The point is the sky isn’t falling because of peak oil. But, burning fossil fuel can kill you.

              • I remember her from TOD. Was never very interesting because she didn’t do the really detailed technical analysis that we see here from Rune, Dennis and others.

                The “peak oil crowd” that I am familiar with are the data junkies and people with an interest in earth sciences.

                • Caelan MacIntyre says:

                  If HuntingtonBeach is ChiefEngineer (and they may have already hinted at that on here), I suspect that, after using multiple nicknames, they’re still sore from getting the boot from Gail’s site, as she informed me on email.

                  In any case, it might be insightful for HuntingtonBeach to point out where Gail has been predicting collapse.

                  Nevertheless, collapse, or decline if you will, seems to be already occuring, but it’s a complex ‘fractal’ process that’s sometimes masked and/or very slow and/or just below the JND threshold in a myriad of ways.

                  Lastly, many people’s mental constructs and notions of reality can overlap as much as diverge, so many of us can find ourselves with strange bedfellows.

              • Cracker says:

                HB,

                I doubt Tverberg considers herself a peak oiler, based on how she consistently points out how wrong the peak oil crowd is.

                You are wrong about the sky falling, it’s just that the pieces falling near you are small, so far. Be patient, it will come to you, too.

                You are right about burning fossil fuels killing things. We are trashing our nest, the planet and its ecosystem benefits that humans require to survive. It can’t last very long, in terms of geological time.

                Jim

    • Synapsid says:

      Doc Rich,

      Jeffrey Brown posts at OilPro though not very often.

      It impresses me that most of the time his posts are taken seriously. That said, there are about as many blockheads and bigots there as at other sites; it’s just that there is a great deal of oil-patch expertise and experience available as well. On balance, I’d say that he’s, as I said, taken seriously.

      Ask Mike what he thinks.

    • Ulenspiegel says:

      “Does anyone know as to why Jeff Brown is not commenting at this website or anywhere else for that matter? I sure miss his both intelligent and wise commentary.”

      On the Econbrowser he still contributes in threads on oil/peak oil.

  5. Pete Mason says:

    Well, conventional oil did peak in 2005 and shale probably peaked in late 2015 and with it all oil production (the stuff that can be refined for vehicles). The charts are on this site, as we all know.

    It’s not certain – the existing 2015 peak might be superseded, that’s why it’s interesting to watch.

    But few peak oil people on the oil drum were there because of predictions of theimminent collapse of society.

    They were engaged because oil is very important to society and it was peaking and this self evident truth was being hotly denied.

    The shale oil development will be seen as an epiphenomenon of absurd proportions – the red queen effect – when the genuine measure of energy in verses energy out is made with the inclusion of infrastructure provided and maintained by the state etc.

    But we wait with baited breathe to see if they really can crank it up to replace the shortfall from the falling world investment.

    But I was only posting to say I miss the original uncorrected Texas data charts.

    • Dennis Coyne says:

      Hi Pete Mason,

      Sorry I forgot that chart.

      For Texas C+C the chart is below. Data is in barrels per day.

      • Pete mason says:

        Thanks Dennis. Before very roughly Oct 15, if you work back through four months data points, you get to an upward trend. After Oct 15, the progressive revisions each month show more data points on an downward trend, a corrected trend that is still downward, suggesting a peak not long after, even without the mathematical corrections provided by our friend Dean.

        • Dennis Coyne says:

          Hi Pete,

          It does give a rough indication, if one assumes the correction factor does not change over time. There is some indication that may have changed. I will try to remember to post this in the future, even though Dean’s corrected estimates seem better to me.

  6. R Walter says:

    http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production

    367,413,859 barrels of oil produced in all of 2010.

    1,072,691,460 barrels of oil, total production in 2015.

    An increase of 700 million barrels in 2015 over 2010 production.

    Crude only. About 1.1 million bpd in 2010 all the way to approximately 2.8 million bpd in 2015.

    2.8×365=1022, 1022×1,000,000=1,022,000,000 barrels of oil, close to 1,072,691,460 barrels of oil for 2015.

    The numbers tell the story.

    Just slow production to 2010 levels and there will be a price increase.

  7. FreddyW says:

    Hi,

    Looks like the oil glut is over:

    http://www.thenational.ae/business/energy/in-good-sign-for-market-oil-in-floating-storage-has-plummeted

    “In a clear sign that the glut is abating, the amount of oil in floating storage has plummeted in the past few months.”
    “Still, the virtual disappearance of non-Iranian floating oil storage – from an estimated 75 million to 80 million barrels to about 10 million barrels – is supported by data from the largest consuming countries.”

    70 million barrels would translate to close to 0,8 million barrels per day if its over 3 months.

    If you look at US Weekly Petroleum Status Report (https://www.eia.gov/petroleum/supply/weekly/) then you can see that in crude oil and inventories declined by about 0,4 million barrels per day in September (Four-week averages) and even more so far in October. But that is for US alone. The same thing appears to happen elsewhere in OECD:

    “Commercial inventories in the wealthy OECD countries fell in August for the first time since March, and early September data for Japan and the US showed the trend continuing, according to last week’s report from the OECD energy think tank, the International Energy Agency.”

    Above data suggests that the deficit could be suprisingly high. Perhaps more than 1 million barrels per day. But I don´t have the whole picture. Are they still building up the strategic oil reserves in China for example?

    • FreddyW says:

      Found it. It was China:

      http://www.reuters.com/article/us-china-economy-trade-crude-idUSKCN12D0A9

      “September’s crude imports rose 18 percent from a year earlier to 33.06 million tonnes or 8.04 million barrels per day (bpd) on daily basis, customs data showed.”

      “”The increase was mainly driven by stocking activities at some reserve sites,” said Harry Liu, associate director of oil markets with IHS Energy, who said August and September volumes were higher than he expected.”

  8. Oldfarmermac says:

    I am not a numbers cruncher, having neither the inclination nor the expertise to sort thru them for hours and days on end.

    But if most of the oil coming to market is still being produced at a profit with prices in the forties and fifties, just how much profit should the independent oil companies have been reporting back when oil was eighty bucks or more ?

    Something smells.

    • George Kaplan says:

      They’ve cut 45% of their budget over the last two years, and in some cases are still having to borrow to pay dividends. The reckoning comes in the future when prices are increasing but production decline is accelerating and they have to pay the debts back – their balance still doesn’t change much.

      • clueless says:

        I, and others, have previously pointed out that when accounting rules forced the oil companies to write down their reserve values [in some cases by billions of $’s], the future production is then profitable.

        Let’s say that you build a rent house for $300,000 that you plan on renting out for $$2100/month. But, you cannot rent it out for that amount, so accounting rules make your record a writedown [loss] of $150,000. Thereafter, you rent it out for $1200 per month and you tell everyone that you are making money at $1200. Not really!

    • clueless says:

      I, and others, have previously pointed out that when accounting rules forced the oil companies to write down their reserve values [in some cases by billions of $’s], the future production is then profitable.

      Let’s say that you build a rent house for $300,000 that you plan on renting out for $$2100/month. But, you cannot rent it out for that amount, so accounting rules make your record a writedown [loss] of $150,000. Thereafter, you rent it out for $1200 per month and you tell everyone that you are making money at $1200. Not really!

      • shallow sand says:

        This is why we talk about well payout around here, and why US E & P’s talk about every financial metric imaginable but payout.

        Just think of all the wells completed since 12/14 that have sold oil for well head prices between $18 and $40 per barrel for all but three months in 2015 and this month. Ouch!

        Not to mention gas and NGLs at $3 – $20 per BOE.

  9. Oldfarmermac says:

    More on the Venezuelan oil situation, this from the WSJ.

    http://www.wsj.com/articles/venezuelan-oil-is-largely-staying-in-ground-or-going-up-in-smoke-1477238401

    I can’t see it being much longer before the situation there turns REALLY nasty, with lots of people burning things, maybe including oil infrastructure.

    • Venezuela sure looks like it’s going to turn nastier. I sure hope the pope and the international community try to calm things down before Wednesday.

      Regarding the Wall Street Journal, the author, Anatoly K, writes about all sorts of subjects, so he didn’t capture what’s really going on. What they are burning is rich natural gas which needs to be treated and reinjected at high pressure. Punta de Mata is a small city located in eastern Venezuela, smack on top of the Furrial trend. Here’s a map from an old blog I used to write:

      http://dieta-politica-religion.blogspot.com.es/2014/03/pdvsa-no-le-puede-enviar-petroleo-cuba.html

      The Furrial trend produces light crude and condensates, the gas is very rich, has a lot of NGL. The facilities are fairly sophisticated, and the reservoirs are prolific but delicate. Evidently the things are going to hell. I coauthored an SPE paper about one of those fields, but it was a bit technical. Let’s just say they are a bitch to work with.

      • Read this on modeling ENSO and El Nino:

        http://contextEarth.com/2016/10/24/solver-vs-multiple-linear-regression-for-enso/

        Has at least as much to do with Texas petroleum output …

        • Dennis Coyne says:

          Hi WHT,

          Probably more people that read the non-Petroleum thread would find that interesting.

          • sorry, have to give Nando a hard time .. such a blowhard.

            btw, responded to your comment on the blog.

            • Dennis Coyne says:

              Hi Webhubbletelescope,

              I have to disagree. Although I don’t agree with Fernando’s point of view that Cuba is the source of most of the evil in the World, he has a lot to offer on the real workings of the oil patch, his views on other non-petroleum issues are also different from mine, but variety of opinion is nice imo.

              I do agree that things are very bad in Venezuela and the sooner Maduro allows free and fair elections (with outside monitoring), the better. He knows the country and may be in touch with people who live there so he has an interesting perspective on what is happening.

              • I have never stated Cuba is the source of most evil in the world. I have explained Cuba is ruled by a despicable hereditary dictatorship, and that its ruler, Raul Castro, has a lot of influence over what happens in Venezuela. Venezuela in turn has very large oil reserves, the Maduro dictatorship is known to use petrodollars to buy governments and politicians, has a close relationship with terrorist organizations such as ETA and FARC, works hard to undermine USA interests, etc.

                I’ve also just heard from a reliable source that Obama’s friendly attitude towards the Castro Mafia is a result of blackmail. Castro is using his hold over, and ability to destroy Venezuela, to push Obama and the USA congress to remove economic sanctions. This is being opposed by Senators who despise having the USA bow down to such blackmail. Meanwhile Venezuela’s oil production keeps dropping, its bonds are junk, the Chinese refuse to help Maduro, Venezuelans are starting to starve, and a refugee exodus is ongoing. But nobody really cares.

                • Dennis Coyne says:

                  Hi Fernando,

                  Well I suppose the US could make Cuba stop interfering in Venezuelan affairs as a condition of removing sanctions.

                  How about “Castro is the source of most evil in the Western hemisphere”? 🙂

                  That would seem to roughly be your position.

                  I think it is up to the Venezuelans to take care of their nation, they are not interested in help from the US as historically the US has supported right wing dictators that are just as bad as Castro (or close).

                • Take it somewhere else Nando. You tend to poison whatever forum you participate in with your obvious political agenda.

                  • Reno Hightower says:

                    Don’t like it, don’t read it. “Nando” is one of the few on here with real Oil and Gas experience. I think most would like him to stay.

                  • Mike says:

                    I have met many kind and gracious people from Minnesota over the years; you, Mr. Scope, are not one of them. Many of us share Mr. Leanme’s concerns for the people of Venezuela and for the role Venezuela plays in our energy future. He contributes to oily matters here, you don’t; his “political agenda” is far more palatable for many of us than yours is.

                  • Dave Hillemann (Texan) says:

                    Why lob a mindless insult like that, WebHubTelescope, when anyone here could easily say the same thing about you? Last I knew, this place wasn’t a forum for you to personally decide who can or cannot participate or who “has to” be subjected to a “hard time” by you.

                  • Caelan MacIntyre says:

                    Dave Hillemann (Texan), are you among those who periodically drive by to question anthropogenic climate change and little else?

                    If so, and knowing Scope’s (Paul’s) concerns (and my own) about it, I wouldn’t be surprised if your little snipe here has more to do with that than anything.

                    Likewise, Nando and Scope seem to have ‘countervailing’ considerations with regard to Anthro Global Warming/Climate Change, or at least C02 roles in it, hence maybe the feel-good interpersonal love vibes.

                • I briefly spoke with someone in the other prison, Venezuela (on one of their main islands), and among the last things they told me is that they are starving, and then I lost contact with them.

                  And then there are the refugees in the MENA regions, etc….

                  But what can we do? (Well, in my case, Permaea, but so far, it’s too slow-going, even laughable.)

                  But these examples are precisely part of why I subscribe to an anarchist/permaculturist standpoint:

                  Large-scale centralized coercive so-called governments, upheld with their glorified thugs as the military, police and security, are poison, but they will be what we will get as long as we keep supporting them. That is until the whole shit declines and/or collapses or we come to our senses and take back control. But it has to be intelligent, organized and en masse.

                  Fernando, expressing your discontentions about it on POB– which is completely understandable– will nevertheless only go so far. Why don’t you join me and help Permaea along?

          • Fred Magyar says:

            Dunno, most of us do read this thread as well 🙂

            • Dennis Coyne says:

              Hi Fred,

              Well I like to try to keep the non-petroleum stuff separate, and not everyone can be bothered with both threads.

              The oil pros (or some of them) are not interested in discussions about climate.

              • I wonder if the two threads could be merged into a third, like in real-time, as the two originals formed– even on a mirror site.

                Or, better still, perhaps, have a(n experimental) third thread that offers a choice of unity. It might be interesting to see, over time, what people chose and how it might develop and compare and contrast with the other two threads.

                In any event, I question whether the convenience of the ‘oil pros’ and other possible advantages outweighs the holistic/systems/multidisciplinary dynamics and insights that a unified context can bring, and if dividing POB into two like this is a bit of a shot in the foot.

  10. Survivalist says:

    Can anyone recommend/post a good link that clearly states global C+C production per year for the last several decades? I find it interesting that in all of history humanity has extracted about 1.2 trillion barrels of oil and that 25% of that 1.2 trillion was extracted in the last 10 years.

    As well I’d like to post a link to an interview with Dr Geotge Mobus but since it’s not directly related to oil I’ll post it on the non petroleum thread. Please see there if interested in the musings of Dr George Mobus.

  11. Watcher says:

    Since Jeffrey has been scarce, his chart:

    http://peakoilbarrel.com/wp-content/uploads/2016/01/557388-1.png

    Distillates (kerosene (jet fuel) and diesel) constituent falls sharply above API 40. New oil is higher and higher API. That stuff in Alaska was estimated API 40-450 or something.

  12. Enno Peters says:

    Thanks for this Dean & Dennis. Statistics-driven views are the best.

    I’ve a new post on shale gas production in Pennsylvania, here.

  13. Tom says:

    Thanks Dennis / Dean
    Do you see any clear trends for the Texas oil production?

    • Dennis Coyne says:

      Hi Tom,

      Texas C+C output seems to be declining at about 3.55% per year over the past 12 months based on the 6 month corrected estimate. If oil prices rise to $80/b over the next 9 months I expect output will be on a plateau slightly below August levels, maybe 100 kb/d lower, once prices reach $85/b I expect a slow rise in output and if oil prices get to $100/b by 2018 as I expect and remain there, Texas C+C may approach the March 2015 peak by 2020.

      • Tom says:

        Thanks! Do you know if oil prod. In Permian is still growing?

        • AlexS says:

          According to the EIA-Drillinginfo and EIA Drilling Productivity reports, both LTO and total oil production in the Permian peaked in April 2016.
          But September numbers were higher than August.
          The EIA projects total oil production in the Permian to exceed April peak in November

          • Tom says:

            Thanks! So Permian LTO production in magnitude is actually comparable to Bakken (or at least when Bakken was at its peak). But Permian LTO is not falling as fast as Bakken or Eagle Ford. Is this due to a higher drilling activity or lower natural depletion in Permian?

          • AlexS says:

            LTO production in the Permian, Bakken and Eagle Ford (million b/d)
            Source: EIA-DrillingInfo report, October 2016

          • AlexS says:

            Oil rig count in 5 key U.S. LTO basins

          • AlexS says:

            Oil rig count in 5 key U.S. LTO basins, rebased (June 2016 = 100)

        • Dennis Coyne says:

          Hi Tom,

          I think the EIA underestimates TX output in general, Permian output is up, the EIA will revise its numbers next in August 2017 to reflect this, the Drilling info data is more complete than the RRC data (because it includes the pending file while the RRC does not include this data).

          As Dean showed earlier, in August 2016 the EIA updated its estimates so that they were nearly identical to Dean’s estimates through April 2015, we will have to wait another 10 months for the EIA to correct data through April 2016 and 22 months for them to get the August 2016 data corrected.

          Note that I do not know what New Mexico Permian output has done, I am not sure how accurate the New Mexico data is. For Texas Permian output I have the estimate in the chart below. Note that for June Enno Peters has New Mexico Permian output at 242 kb/d and TX Permian output at 695 kb/d for a total of 948 kb/d. This includes only horizontal well LTO output. My estimate is for all Texas Permian basin output and is 1712 kb/d in June 2016. Chart below. Estimate uses the % of Permian output of the Texas total using districts 7C, 8, and 8A to define TX Permian and this % is multiplied by Dean’s 6 month correction factor estimate.

          • AlexS says:

            Dennis,
            I am sure that Dean and you are correct that the EIA underestimates oil production numbers for Texas.
            But I’m not sure that the correction factor is equal for all part of Texas.

            • Tom says:

              I don’t know how much the Permian oil is underestimated by EIA, but in case they are extrapolating they may suddenly overestimate if the curve slope changes downwards. Anyhow it seems unlikely that Permian can offset the losses in Eagle Ford and Bakken. EF is really going downhill now. A loss of 400/200 mboe/d in EF / Bakken during the next year seems likely unless the oil price climbs a lot. Even then it will take some time to power up the Red Queen.

            • Dennis Coyne says:

              Hi AlexS,

              I don’t know either. In the past using this method has worked pretty well for Eagle Ford output, not perfect, it is only an estimate and may well be incorrect. Interestingly, if we add Enno’s NM Permian estimate to my TX Permian estimate in June we get 1954 kb/d for all Permian Basin output minus vertical well NM Permian output (Enno only includes horizontal wells that he thinks are LTO). This is fairly close to the DPR.

  14. Tom says:

    Question:
    Does anyone have some knowledge about the global LNG trade? I have read some articles that claim that LNG trade may grow dramatically the next years, partly because (they claim) that the us shale gas will continue to grow. I dont believe it. First of all, US shale gas seems to have peaked and US seems to be in balance wrt LNG, ie. Not much imports, not much exports. So that will Actually reduce trade from us. Second, it seems like a costy investment for both the importer and the exporter as both need to build a large LNG terminal. Thus any importer/exporter will only commit if they can do so for 10-20 years. Third , it seems that the market has been very stable the last few years, possibly because the us imports has declined. So my claim is that a large and soon global growTh in LNG is unlikely. Would be great if some of you clever guys in here could comment.

    • Watcher says:

      LNG got on the radar screen when the South Stream bypassing Ukraine appeared likely. The EU put the kibosh on the first iteration of it and this suggested that LNG from the US would replace GAZPROM when Ukraine didn’t pay their bill and got cut off.

      But recently the accord between Russia and Turkey will provide a route of gas into the EU without the EU having all that much of a way to stop it.

      Bottom line, LNG is much much more expensive than piped gas. If a pipeline gets into Austria carrying GAZPROM gas from Turkey (and Greece), forget LNG in the EU.

    • Dont forget the LNG trade is mostly out of Qatar, Australia, West África, Trinidad, etc. They ship to Europe, China, Japan and other minor importers. Growth can come from countries such as Mozambique and the USA.

      Longer term the Russians will probably ship from the Kara Sea and Yamal, as global warming reduces ice the LNG tanker traffic becomes more feasible.

      Regarding tanker versus pipeline, the LNG system is only used if distance is over say 3000 km or the pipelines have to cross a lot of deep water.

      • Tom says:

        Thanks Watcher and Fernando L. I noticed that Lithuania hired an FSRU (a regasification vessel) in order to use a different gas supplier than Russia. But it is much more expensive than Rus. Gas and has created controversies due to the high price.

  15. Watcher says:

    The US is wasteful crowd was up in the scroll. Ain’t going up there.

    Sashay over to mazamascience.com/oilexport and select China, and then India.

    No reason for an American to change one iota of lifestyle so a Chinese or Indian can burn what he didn’t. That black line says unilateral conservation is silly.

  16. George Kaplan says:

    Mexico production dropped 1.9% in September from August (6.8% y-o-y). Not really surprising, Pemex has already predicted 10% drop expected over the next year, and the rig numbers would also show what to expect. Note first three points in chart are yearly averages others are monthly C&C.

    • Jeff says:

      Is it production of medium, heavy or all gravities (API) that drop?

      If I understand it correct, Mexico use their medium gravity oil in their own refineries and export the heavy stuff to the US. If it is mainly production of medium stuff that decline than they will need to increase imports a lot (crude or products). OTOH. if it is heavy then US may need to import more from Canada.

      • George Kaplan says:

        Heavy was down 1.45%, light and superlight about 1.3%. The biggest fall was in condensate at 5.6%.

        Crude exports actually went up by 13% overall, but there are storage delayschanges and the imports versus exports of products that need to be looked at for a true picture there.

        http://www.pemex.com/ri/Publicaciones/Paginas/IndicadoresPetroleros.aspx

        • Jeff says:

          Thank you,

          The reason why I asked is because the “wisdom of the crowd” used to be that we were running out of medium oil and it (or some of it) was going to be replaced with heavy oil (Orinoco, Alberta, Wafra, etc.). Then came fracking and suddenly there was a flood of very light oil (uncertain how the production will develop though). Now it seems to me that heavy oil may not be as abundant in the short term as was expected, since Venezuela have their social and economic problems, Mexico is declining due to depletion and Canada will probably not increase that much due to the low oil price.

          • George Kaplan says:

            I think the issue with oil API density for crude tends to be overblown. Refineries are to some extent flexible in their feedstocks and can crack heavier oil to lighter products and the chemical industry can switch between say gas versus naphtha as feedstock to reformers. In recent years exporter countries have been developing local refineries to specifically handle the type of crude produced nearby. Also over a few months, which can be buffered with storage, there is more flexibility in demand as to what type of oil can be used based on cost than there is between most other energy choices.

    • Dennis Coyne says:

      Hi George,

      Nice chart, what’s the decline rate over the last 12 months if you do a least squares on the natural log of output vs time in years?

      • George Kaplan says:

        6.75% (I assume the Excel trend line uses least squares fit) possibly showing overall acceleration through the year.

        • Dennis Coyne says:

          Thanks. Yes the trend lines use least squares in Excel. When you say acceleration, I assume you mean the natural log of output vs time is convex down.

          Would a polynomial (2nd degree) trendline result in a much different R square than the linear trendline?

  17. Oldfarmermac says:

    Please bear with me for a minute, while I describe the background to a question.

    The electric car optimists believe they have the solution to oil depletion, and that electrified cars will mean more or less permanent low oil prices. Maybe so.

    I am personally not optimistic about batteries getting to be both good enough and cheap enough to run big trucks, farm equipment, and heavy construction equipment, so in my opinion there is reason to believe that there will be a robust market for such oil as can be produced for the easily foreseeable future, considering that depletion is going to be forcing down production even as it forces prices up, thus allowing producers to go after ever smaller and lesser quality new fields .

    Lots of other people contend that oil prices at or above a hundred bucks did and will strangle the world economy, later if not sooner.

    I have not run across much in the line of articles that go into modeling these contrary contentions. Personally I believe that given time, the world wide economy can easily accommodate higher oil prices, even as high as two hundred bucks, if the price increases gradually to that level over say ten or fifteen years or longer.

    Any links to articles going into some detail examining this question will be greatly appreciated.

    The one industry as I see it that will really take high oil prices on the chin is aviation, but most of the aviation industry is apparently more about discretionary spending than about essential travel. A good bit of what is considered essential is more about convenience and somewhat lower costs than it is about necessity. For example , putting replacement parts on planes for overnight delivery means fewer parts need to be stocked regionally and locally , but stocking more parts at dealers isn’t going to break the economy.

    Farmers, truckers, and construction equipment operators use a hell of a lot of fuel, but fuel is nevertheless not that big a part of total operating costs. If diesel goes to six or eight bucks, the cost of delivering a bushel of apples from Virginia to Florida by truck will go up about a buck, maybe a little more. Ditto a return load of oranges. That’s trivial in relation to the retail price , a penny or two per pound. Six dollar diesel will raise the price of the three bucks and up loaf of bread that was never supposed to be as high as a dollar ( I remember Tricky Dick quite well, and find it highly amusing how hard core Dems get so huffy when R’s talk about HRC the same way.) maybe another nickel or a dime at the most. Improving energy efficiency and modest changes in lifestyle will likely offset the increased cost of essentials such as bread for every body but the very poorest people.

    So what I am looking for is EVIDENCE rather than mere hand waving contention that the economy CAN’T stand very high oil prices, assuming the price goes up gradually. It’s obvious that sudden sharp price increases (or decreases) play hell with personal, business, and government budgets.

    Thanks in advance, any and all.

    • Dennis Coyne says:

      Hi OFM,

      There is the possibility that some equipment might be electrified see link below (on mining equipment, but the ideas might be applied elsewhere.)

      http://www.oemoffhighway.com/article/11224086/electrification-of-underground-mining-equipment

      In 2014 World GDP was about 79 trillion US $. If we assume only 5% of GDP can be spent on C+C (without causing a recession) that would be about 4 trillion on about 29 billion barrels per year, which is about $138/b in 2014 dollars. If we assume the World economy grows at a real rate of growth of 2% per year for the 2015 to 2024 period, then oil prices could rise to $168/b by 2024 without causing problems.

      Keep in mind that trucks and other equipment might use less fuel than you think. Only about 2% of total motor fuel use in non-highway in the US. Table VM-1 at link below gives truck and bus fuel use
      http://www.fhwa.dot.gov/policyinformation/statistics/2014/

      In the US in 2014 about 28% of motor fuel use was trucks (heavy duty or more than 10,000 lb GVW), buses, or non-highway use of gasoline and diesel. In 2014 about 78% of refinery inputs were converted to gasoline and diesel, 11% into jet fuel and residual fuel, the rest was other products (lubricants, waxes, petrochemicals, asphalt, etc). So of all the refinery inputs, about 55% is used by light duty vehicles, 11% is non-fuel use and the remaining 44% is used by trucks, buses, off road equipment, jets, ships, and large heating systems (this is for US only).

      The point is that as the world vehicle fleet converts to EVs, plugin hybrids and hybrid vehicles and the motor fuel used for personal transportation decreases, crude use may be cut by half. In addition long haul trucking can be switched to rail which can be electrified, short haul trucks can be plugin hybrids and busses and even trucks could potentially cover parts of their routes using overhead wires like buses in many cities.

      Depending on how fast the switch to EVs and plug in hybrids occurs, it might be that oil prices never break $150/b for any length of time (maybe a couple of years from 2020-2024). It is hard to now how quickly sales of EVs will take off, we will know by 2020 as we should have at least 2 reasonably priced models available by then (Chevy Bolt and Tesla Model 3). It will be interesting to watch.
      http://www.eia.gov/dnav/pet/pet_pnp_refp_dc_nus_mbblpd_a.htm
      refinery output at link above
      http://www.eia.gov/dnav/pet/pet_pnp_inpt_dc_nus_mbblpd_a.htm
      refinery inputs at link above

      Not a very thorough analysis (US data only for much of it), but its a start.

      • Eulenspiegel says:

        It’s even funny than ultra heavy mining equipment runs on electricity, for example this:
        https://en.wikipedia.org/wiki/Overburden_Conveyor_Bridge_F60
        together with all other ultra heavy equip like excavators in this mine. Input power is 27.000 KW for this one.

        I visited one of these things in an industrial open air museum, others are still working.

        But cars can go first for alternative concepts, and planes will go last.
        And electric bikes are now, you can ride to work on one of these without problems. Done this today.

      • Survivalist says:

        I’ve seen lots of electrified mining equipment in open pit mines but non was battery powered. Diesel powered tractors where used to move the power cord around as the equipment moved throughout the mine. In my experience it was diesel that was burned on site to create electricity.

        http://uee.com/products/shovel-motivator

      • You are better off thinking of it as improvements in fuel efficiency. This way you can avoid bogging down into what is done to increase fuel efficiency (I drive a very efficient diesel and get over 40 miles per gallon, I think it’s closer to 50, if the average American vehicle got the same mileage fuel use would go down, right?).

        • Dennis Coyne says:

          Hi Fernando,

          If your comment is addressed to me, say “Dennis” at the start, so I know.

          Thanks.

          It is not clear what you mean by “it”?

          If your point is that fuel efficiency will increase as fuel prices increase, I agree.
          Which diesel do you drive? My Prius gets over 50 MPG and when I really work at it (mostly around town driving in temperate weather), my best MPG (only one tank of gas) was over 80 MPG for 450 miles. But on the highway at moderate speeds 65 MPH or less 50 MPG is pretty typical.

          Plugin hybrids and EVs will use much less fuel especially if the electricity is from combined cycle natural gas, nuclear, wind, solar, hydro, or geothermal power. Coal is gradually being phased out in the US and probably in most OECD nations.

  18. VK says:

    Climate change continues unabated.” All coastal cities are going to become an example of unintended consequences and many trillions of dollars worth of losses.

    http://www.bloomberg.com/news/articles/2016-10-25/west-antarctica-begins-to-destabilize-with-intense-unbalanced-melting

    “The bottom of the world has drawn increased scrutiny from scientists over the last few years, as West Antarctic ice loss in some places shows signs of becoming “unstoppable.” There’s enough water locked up in West Antarctica’s Amundsen Sea region alone to raise the global average sea level by four feet, and it’s the fastest-melting spot on the continent…

    …Everyone has heard of global warming, and most understand that letting ice melt will eventually flood coastal cities. But many may not understand how these critical parts of the globe function. In West Antarctica, for example, glaciers flow (yes, they move, albeit slowly) off the continent, toward the sea, terminating at a final “grounding line”— the extent of the ice that’s lying on bedrock. From there, a frozen sheet called an ice shelf extends into the sea. The problem, increasingly, is the sea encircling West Antarctica has warmed up and is flowing beneath those ice shelves, washing grounding lines back toward the continent. It’s as if the foundation of your house were slowly being chipped away from below. It may be only a matter of time before the structure collapses.”

    • GoneFishing says:

      It’s the ice version of New Orleans, both of their bases are below sea level.

    • Dennis Coyne says:

      VK,

      Comments like this belong on non-petroleum thread. Please don’t put these kinds of comments in the petroleum thread.

  19. John S says:

    “The Big Cracks in Shales’s Resilience” from Bloomberg

    https://www.bloomberg.com/gadfly/articles/2016-10-05/shale-e-p-industry-s-resilience-has-big-cracks

    This was just sent to me. It focuses on PXD’s Sale Ranch project in the Permian Basin.

    It’s is a pretty thoughtful article, Although Shallow Sand’s and Mike said it better at least a year ago.

    • shallow sand says:

      JohnS.

      Yes, as I have said since I came on board here, if all we had were the top 10% of our wells, we would be making money even at $20 per barrel WTI.

      I just looked it up recently, over 11,000 hz wells completed in the Permian Basin since 1/1/2010. So far slightly more than 2% have hit 250K BO cumulative. However, almost 50% are now below 50 BOPD in the most recently reported month (7/16).

      As I have said over, and over, and over and over, a large percentage of wells in all shale basins are now below 50 BOPD gross and are still at least $1 million from payout. This is very, very bad.

      I am again looking at quarterly earnings and am again seeing big losses, Hess just released this morning, for example, lost big again.

      I guess the losses can go on forever, eh Watcher?

      • Mike says:

        234 million dollars isn’t too bad, Shallow, and, this is important…”losses were less than expected.” That’s one for the ‘ol chalk board. I am going to count this quarter how many times that phrase is used. Tell you what, I’ll buy you a box of underwear rags from your nearest supply store to check your wells with for every 10Q that starts off…”losses were MORE than expected;” can’t beat that!

        • shallow sand says:

          Mike, how about some stuffing box rubbers and rod guides while we are at it?

          We will take all the charity we can, and I suspect the “losses less than expected” slogan will be very common this quarter! LOL!

          $254 million in 92 days. Just chicken feed to these guys, doesn’t keep anyone from paying $60,000 per acre for term leases with 1/4 royalties.

          And to think the best black dirt in the Midwest is overpriced at $10K per acre.

          Maybe we should start a new reality show, “Flip this lease!”. That office those guys have in Dallas looks pretty slick!

        • shallow sand says:

          Murphy Oil and QEP both post losses less than expected.

      • Watcher says:

        Well, as it were, you can’t keep a secret if too many people are in on it, unless all their paychecks depend on it. That is an even more powerful inducement to closed mouths than prosecution for revealing national security information — especially when some aspiring whistleblower knows fully that if he talks, the rebuttal will be such a murky array of this and that, supported by whatever independent experts are found who hope for a new consulting contract, that his or her ripping the cover off things will achieve nothing but a drawing of the razor across his own throat.

        Oh, sorry, misunderstanding. I wasn’t talking about shale finances. I was talking about the Dallas Fed instructing banks not to foreclose on shale loans.

  20. shallow sand says:

    Per the Interstate Oil & Gas Compact Commission, in 2015, 408,490 stripper wells in the US produced 292,529,299 barrels of oil, or 12.0% of total US oil production in 2015.

    Note, the IOGCC defines a marginal oil well as one producing 10 BOPD or less, while IRS defines same as those producing 15 BOPD or less.

    Texas has the largest number of marginal oil wells in 2015, with over 152,000. California is in second place with over 37,000, followed by Illinois (29,386), Oklahoma (28,351) and Kentucky (26,192).

    Since 2012, the count of marginal wells in the US has increased by over 29,000 and marginal oil well production increased from 276.3 million to 292.5 million BO annually.

    This information is set forth in the October, 2016 edition of The American Oil & Gas Reporter.

  21. shallow sand says:

    Also in the article, a quote from Darlene Wallace, National Stripper Well Association chairwoman and owner/operator of Columbus Oil Company, Seminole, OK, “Stripper wells are the small business sector of the nation’s oil and gas industry. They are frequently family owned, predominately in rural areas, and are passed down through generations.”

    Finally, the NSWA states that eliminating marginal wells in the US would eliminate 57,560 direct industry jobs and $4.4 billion annually in direct earnings.

    • Mike says:

      Thank you for this, Shallow; it means a lot to me.

      Americans that have become fascinated with the oil business and more or less live it vicariously thru the internet are fixated on the mighty shale industry. It uses big pretty rigs and those people are mesmerized by the old technology that we used 50 years ago, that they did not know existed until the internet. They tend to overlook 160 years of oil business that occurred before the shale oil and shale gas business even began. Stripper wells, in fact most other conventional oil production in America, has been decimated by the recent collapse in oil prices. For the past 8-9 years my finding costs doubled because of the demand that the shale business put on services and supplies. Then because of overleveraged oversupply of shale oil, the price collapsed 70%. For those that think this is free enterprise and the American way, that only the strong should survive, please remember the entire shale oil industry has been built on borrowed capital, at low rates, and at the great expense of shareholder equity. Hundreds of billions of dollars of that borrowed money will now never be paid back. Its not an issue of energy security or anything else…its just plain ‘ol American greed.

      There is a whole other facet of the domestic oil and gas industry that folks overlook in their passion for all things shaley. It involves good, hard working people, entire families, that pay their bills, are mindful of the environment and provide a steady, reliable source of energy and employment for America.

      American Needs America’s Stripper Wells ! https://vimeo.com/188436842

      PS: For the record, the well being worked on in this video will ultimately be six to eight times more profitable by ROI standards than any shale oil well drilled in America, anywhere. All those smiles are people proud of what they do.

      • shallow sand says:

        Mike. Really cool video!

        Your produced water there is really interesting. You have a tremendous advantage in that regard.

        I wonder how the industry use of drones will develop over time?

        • Mike says:

          Thank you, Shallow. I appreciate that. Yes, it meets drinking water standards in Texas. We use drones to monitor flowline’s, locations, lease roads for security, etc.. etc. And they’re fun to play with. Thank you again; my extended family and I are very proud of what we do to make a living.

          • John S says:

            Mike,

            This is a nice video. For the benefit of all, would you mind explaining the operation to the POB audience and what the different service contractors are doing on location (I have a soft spot in my heart for hot oilers).

            Apology in advance, if you have done this in your other videos but I have not watched those.

            • Mike says:

              This is a cased hole gravel pack being performed whereby the producing formation is packed with gravel (in this case 20/40 sand), a screen and liner assembly is then run inside casing and more gravel is pumped to pack the screen in place. The entire screen assembly is then isolated with a packer. Clastic Gulf Coast reservoirs (sandstones) often produce formation sand that is mechanically difficult to produce and potentially harmful to the reservoir and ultimate UR. Gravel packs keep formation sand from entering the well bore. The hot oil truck has a HP tri-plex pump on it capable of pumping at much higher rates and reaching much higher pressures than our normal rig pump.

              Once the formation is pre-packed it has an elasticity factor to it, like blowing up a balloon, and the fresh water used to pump the gravel down hole flows back, the balloon deflates, when making tubing trips, etc.

              Thank you for your comments on the video; I simply thought people would enjoy seeing some real oilfield work and was joining with Shallow sand in paying tribute to small stripper well operators and the men that service those hundreds of thousands of wells throughout America.

              • Enno says:

                I enjoyed watching it Mike, thanks!

              • clueless says:

                As a retired accountant [oil industry], I have always admired the technical expertise; the hard work; the dedication to doing a good job; that the vast majority of oil industry employees have. America and most Americans have no idea of how lucky they are.

                They just bitch that gasoline prices are higher on July 4th. No mater that Disneyland hotel prices are double or triple on July 4th; that beach houses in Maine on July 4th are 100 times what they are in December; that Super Bowl tickets cost more than 10 times a regular game. Whatever! And the media eggs them on.

  22. George Kaplan says:

    EIA TWIP gives another fall for USA stocks, total 6 mmbbls (0.6 crude, 2.0 gasoline, 3.4 distillate). As for the last couple of weeks this was considered a ‘surprise’ as most analysts expected a rise.

    http://www.eia.gov/petroleum/weekly/

    Also IEA OMR for October new publicly accessible for those interested:

    https://www.iea.org/oilmarketreport/omrpublic/currentreport/

  23. Enno Peters says:

    I’ve a new post up on the Niobrara, here.

  24. Oldfarmermac says:

    Unintended consequences of well meant ( by environmental folks who donated a lot of sex to farmers and bueracrats who did not still respect them the morning after, lol) environmental regs that have done next to nothing to solve any real problem, while creating new ones.

    The big oil companies are making out like bandits, according to this link, at the expense of smaller ones, selling ethanol credits.

    http://www.wsj.com/articles/big-oil-companies-reap-windfall-from-ethanol-rules-1477564201

  25. Oldfarmermac says:

    This article has a number of links to additional articles that go into some depth about the political outlook concerning fossil fuels and renewable energy, and the hands on oil guys and business types may find it worth the time to read them for insight into future business conditions.

    https://theconversation.com/will-us-energy-policy-push-fossil-fuels-or-renewable-energy-six-essential-reads-67752

    Discussion of the politicians and parties should probably be in the open topic section.

    I am going to post the link there too.

  26. Watcher says:

    http://www.wsj.com/articles/exxon-mobil-profit-revenue-slide-again-1477657202

    Exxon Mobil Corp., under investigation for how it values its oil and gas wells, on Friday said it may be forced to recognize that nearly one fifth of its reserves are no longer profitable to produce, a sign of the toll that low prices are taking on the giants of the energy industry.

    . . .

    The vast majority of the holdings under scrutiny are in Canada’s oil sands, an area that has been devastated by low prices and environmental concerns as countries around the world seek to reduce high-emitting forms of energy—and where Exxon is believed to be among the lowest-cost producers. The company also said it plans to examine its assets to test whether their value should be written down.

    Buried inside is this:

    “For the oil sands, this is a tipping point,” said Andrew Logan, director of the oil and gas program at Ceres, a Boston-based nonprofit that has pushed Exxon and other companies for better disclosure on the potential impact of climate change on the energy business.

    “Why would any company invest billions of dollars in a new oil-sands project now, given the near certainty that the world will be transitioning away from fossil fuels during the decades it will take for that project to pay back?” he added.

    What wishful thinking crap.

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