The U.S. Monthly Energy Review

The US Monthly Energy Review is now up with all the US Oil and Gas data for November. US (estimated) Crude + Condensate production was 8,002 kb/d for November. I think that will be revised later because the Bakken had a bad month in November.

Crude Oil Total

The average, so far this year, has been 7,438 kb/d and if December production is as much as November then the average for 2013 will be about 7,485 kb/d. AEO 2014 estimated 2013 production at 7,756 kb/d so it would appear that they are already a bit high with their prediction.

Natural gas liquids, along with natural gas is supposed to be a major player in our drive for “energy independence”, is up about 1 million barrels per day since 2006.

NGLs

 

In the chart below I have charted Net Imports along with Total Field Production, (NGLs + Crude) and Petroleum Products Supplied. The difference between Total Field Production and Petroleum Products Supplied is the distance we must go to reach energy independence.

Products Supplied

Although most of my charts are not zero based, because I like to amplify change, I have made this one zero based because I wanted to show how far we have come and how far we have to to attain energy independence.

Products Supplied increased by 614 kb/d in November and is up 1,864 kb/d since last December. And notice also that we are back to 20 million barrels per day of consumption.

Important Notice: The only reliable monthly world crude oil production numbers has come from the EIA. I find it extremely frustrating however that the EIA does not see world oil production as a priority. They seem to get later and later each month with their updates. When the old International Petroleum Monthly was published the data was only two months behind at most. Now we must rely on the International Energy Statistics page. Their last update was about 5 weeks ago with the July data. Now they are almost 5 months behind and I don’t expect anything before the first of the year. Friday I posted Patricia Smith, the EIA person who posts the data, though she does not compile it. Here is the exchange:

 To: Patricia Smith
 
Patricia, every day I check, several times, to see if the International Energy Statistics has been updated. And every time I am disappointed. Do you have any idea when it will be posted? And I am worried, is there a chance that this report will be cancelled?
 
Thanks and I am anxiously awaiting your reply,
 
Ron Patterson
Here is the reply I received Monday:
Hello Ron,

Due to a staff shortages, technical and database issues, and other priorities, some of the data are late getting posted to the web.  There have been so many changes, but hopefully the international program will not be cancelled.  Please be assured that we are working very hard to get the thousands of data records updated, I just can’t tell you an exact date.  What specifically are you looking for?

Pat

I replied and thanked her for her reply and told her I was looking for world crude oil production data from all oil producing nations. But from the tone of her post I am not hopeful.

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108 Responses to The U.S. Monthly Energy Review

  1. old farmer mac says:

    The feds are predicting that only one percent of cars will be electrics in 2040.
    http://www.wired.com/autopia/2013/12/electric-cars-2040/

    I think they will be as far off in this prediction as they have been on the price of oil historically speaking.
    It’s hard to believe they are doing anything except whistling past the grave yard if they actually are serious about believing gasoline will still be under four bucks adjusted for inflation.

    I find it a lot easier to believe they are following the unwritten but very real rulebook that details the rules for going along to get along and putting out predictions intended to keep their political masters happy and their paychecks and retirement secure.

    Gasoline and diesel engines are about as good as they will ever be after a century of development whereas battery technology is still in elementary school and it is reasonable to expect enormous progress in battery capacity , durability, and manufacturing cost over the next couple of decades.

    • Watcher says:

      Batteries pushed submarines around half a century ago. Haven’t improved all that much since. They are in subs still as reactor backups. Ask a guy who works on them. Not much improvement.

      • TechGuy says:

        “Batteries pushed submarines around half a century ago. Haven’t improved all that much since.”

        Not really. It was a pair of 10 to 16 cylinder diesels that moved Subs. The batteries were only used for very short periods when the sub was fully submerged and trying to evade surface warships.

        “They are in subs still as reactor backups.”
        For the reactor cooling system and to power the electronics when there is a problem with the reactor. The batteries are not used for propulsion.

        “Gasoline and diesel engines are about as good as they will ever be after a century of development whereas battery technology is still in elementary school and it is reasonable to expect enormous progress in battery capacity , durability, and manufacturing cost over the next couple of decades.”

        Batteries have been around well before Gasoline and Diesel engines. The Lead Acid battery was invented in 1859, well before the age of internal combustion engines. To believe Battery technology is in “elementary school” was be a false analysis. Battery Technology has nearly reached its limits, as there is little improvement left. Most the improvements left have trade-offs. Charging cycles can be increased, at a cost of less capacity, and capacity can be increased, but at a cost of few charging cycles.

        The issue with all batteries is anode erosion as every time a battery recharges, it losses some of the anode mass. Eventually the anode looses to much mass and falls apart. Battery capacity is a function of how much surface area is exposed to the electro-chemistry. The more surface area, the more capacity a battery has. As the surface area is increased the thiner the anode is which subjects the anode to rapid failure since there is less mass available during recharging.

        Back in the 1980s and 1990s there was a big push for fuel cells that do not suffer the problems of batteries, but the technology was never price competitive because relies on precious metals or expensive alloys and expensive membranes that degrade over time. Its very improbable that any significant improvements to fuel cells will be made in the near future.

        Today, researchers are focusing on hybrid batteries using super-capacitors. SuperCaps have an unlimited number of charge cycles since there is no electro-chemical reactions. The problem with SuperCaps is that they can only provide about 1/20 to 1/50 of the capacity of a battery and have relatively high self-discharge rates. However, when they couple SuperCaps with batteries, they can extend the capacity and recharge cycles probably by 50% to 100%. Still this isn’t going to be sufficient to displace fossil fuels in transportation.

        If there is ever a breakthrough in power storage it will not be electo-chemical batteries, fuel cells, or SuperCaps. It will be something entirely different.

        My recommendation stands that everyone should have a “Plan A” to be self-reliant, and not bet the farm that technology will find a solution. Believing in a techno-solution is the same in believing in fire breathing dragons or other mythological creatures exist.

        • old farmer mac says:

          It’s true that batteries have been around for a very long time.I should have said that “modern” batteries, the sort of batteries made possible by twenty first century chemistry , electronics, and manufacturing technology, are still in elementary school.

          One more doubling of capacity and one more halving of cost will make modern batteries sufficiently powerful and affordable to compete quite well with gasoline and diesel engines in passenger cars and light trucks for the majority of people .

          Those of us- in my humble opinion- who don’t think batteries and electric vehicles are the future of personal transportation just don’t seem to get it- the vast majority of autos and light trucks are driven under a hundred miles a day the vast majority of the time.

          We live in a two and three car per household world in the rich countries, and one car out of of the two or three with a gasoline or diesel engine will suffice for the occasional longer trip.Most people who can afford only one car will buy an ice car if they think they really need long range of course , for decades to come.

          But otoh, we live in a world with improving mass transit,especially rail transit, and it gets easier to rent a car every year.There are car rental businesses even in towns too small to have more than one or two traffic lights.

          I’m a gear head of sorts, even a back yard amateur engineer, and I have spent years in an industrial environment working on all sorts of machinery including cars and trucks and farm machinery, and I know a few things after all this time about ice’s, multi speed transmissions, and electric motors.

          There are literally hundreds of intricately machined moving parts manufactured to very close tolerances in engines and transmissions and every last one of these parts is subject to wearing out from friction and to failure due to thermal cycling,high stress loads, corrosion, and failure of secondary systems such as the radiator.

          It may come as an utter surprise to believers in ice’s , but it is quite common for ice’s and the transmissions associated with them to fail at well under one hundred thousand miles and require repairs that cost well into the thousands of dollars.Four to six thousand dollar engine and transmission rebuilds are par for the course in a lot of popular vehicles these days and two and three thousand dollar repairs are absolutely commonplace, the bread and butter work of every engine and transmission shop.

          On the other hand , an electric motor has no more than a bare handful of parts parts subject to friction , no shock loads associated with reciprocating parts, no elaborate cooling system to fail, and only a few dozen parts in total.
          A high quality electric motor is a lifetime machine.

          And as far as Aamco goes- well, there generally aint no stinking transmission in an electric car.

          An electric car that is well cared for truly has a practical potential lifetime measured in generations if it doesn’t rust away, except for the battery.

          Put in a new battery, new wheel bearings, a few rubber bushings in the suspension, new struts and or shocks, and you are looking at a refurbished electric car that can be expected to last as long as the new battery with very very few repairs.

          The Toyota Pruis has already proven that a modern battery can last for hundreds of thousands of miles ; very few older Prius batteries have failed thus far.

          Tesla has shown us already how easy it can be to swap out a battery. I think it is very likely the battery in any mass produced car will be easily swapped in a matter of a three or four hours max if and when it must be replaced, and that the swap will not require the services of a highly paid mechanic- swapping a battery out will be low paid grunt work similar to swapping out tires.

          When the public figures out just how reliable and economical an electric car really is- once batteries are better developed of course- electric cars are going to be seen in a new light by current potential buyers.

          Now as far as cafe buyers in developing countries are concerned- well, this is a peak oil site, and the audience here can appreciate the export land model if any audience can.

          Governments in oil importing countries are going to have an ever increasing trouble paying for imported oil , but there is plenty of free wind and sun in most developing countries.Coal is still cheap and is likely to stay cheap for quite some time.

          A person who has never had a car before will be satisfied with an electric car even if it has only a fifty mile range- thats easily ten times the practical time limited range of a horse drawn wagon and at least five times the range of a bicycle unless the rider is a rather athletic individual.

          Plain old ordinary incremental improvements in design and manufacturing processes plus economies of scale will bring us batteries that cost us half as much with twice the capacity as current day batteries within a decade.

          Any technical breakthroughs in battery design will simply be more gravy on the meat and potatoes.There will be some breakthroughs – maybe not paradigm changers, but welcome nevertheless.

          • Techsan says:

            All true. The one thing OFM left out is that the electric cars are 7 X as energy-efficient; we get 4.2 miles per KWH (140 MPG equivalent).

            For less than the cost of 3 years’ gasoline for an average gasoline car, you can buy solar panels to power an electric car for the same number of miles per year for the rest of your life.

            We have had a Nissan Leaf and Chevy Volt for two years now; they work great. No issues. No repairs.

  2. Jeffrey J. Brown says:

    Good AP article on the global retirement crisis:

    http://hosted.ap.org/dynamic/stories/U/US_GREAT_RESET_RETIREMENT?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT

    It’s interesting to read this article, and then plug in assumptions about constrained global net exports of oil.

    • Mike says:

      Given peak oil, peak food production, climate change impact on farming, peak other resources, difficult to see anything other thann a decline in age expectancy in the developed world, rising death rates and declining population. Combine all this with youth unemployment and shortage of affordable housing for young first time buyers and a falling fertility/birth rate. As for the less developed world…….

      Can’t see this 10 billion by 2050 ever being achieved like the “experts” keep talking about .

    • clifman says:

      From your link:

      We’re the same age, but I never earned close to what she did. Only had salaried position for two 3yr stints at 1/3 & 2/3rds her level. Yet my 401k sav’gs were almost as much. Different priorities, I guess. Cashed them out several years ago and paid off the house. Now consider my ‘retirement’ nest egg to be this house that we continue to ‘solarize’ as my step-daughter puts it, the wood stove & lot, the garden, well w/manual back-up pump, our community, hand tools, knowledge, awareness, and willingness to face reality. Since I work on these things mostly now, and not for other people for pay, I guess I am technically ‘retired’, ‘though it doesn’t really feel like it. The only ‘travel’ I count on is between the house and the garden…

      • clifman says:

        Here’s the excerpt I attempted to block quote:”Leslie Lynch, 52, of Glastonbury, Conn., had $30,000 in her 401(k) retirement account when she lost her $65,000-a-year job last year at an insurance company. She’d worked there 28 years. She has depleted her retirement savings trying to stay afloat.”

        The rest of my comment above is my reaction to that.

    • aws. says:

      Many of those interviewed in that article point out how vacations to distant lands are essential to their lifestyle. It is odd how hopping on a plane has become essential in just a generation, or two.

      The way I see it tourism and civil aviation as we know it are the first industries to whither…

    • marmico says:

      It’s interesting to read this article, and then plug in assumptions about constrained global net exports of oil.

      Ya, right. Constrained global net exports of oil, my ass. Where is the 6 mb/d decline in U.S net imports of crude oil and petroleum products in your grossexport land model?

      And to squash all the high price, “easy oil is gone” anecdotal bullshit, U.S. domestic consumption of energy goods and services and gasoline is not historically out of whack relative to after-tax income.

      • clifman says:

        Interesting graphs, Marmico. I believe you will find the net imports of crude shown in Ron’s final graph above. Not news here. And re: the ratio of US income spent on energy products graph – yeah, it’s the lack of awareness of the approaching storm that’s troubling, here. Pretty much everyone – apparently including you – is going to be caught by surprise as tight oil peaks and there isn’t anything to pick up the slack. As Patrick Reynolds points out above, the US is not going to be able to import those prior levels again, ever, at any price. Most folks have no clue because they aren’t reading sites like this. You apparently have some other reason for lacking said clue. Oh, and you could stand to clean up your language a bit. This is a civil discussion.

        Cheers,
        Clifman

      • Jeffrey J. Brown says:

        While (currently) rising US crude oil production and a post-2005 decline in consumption (with an apparent rebound in 2013) have affected our demand for oil imports, I fail to see how a decline in demand in a net oil importing country affects the global supply of net oil exports (other than having an effect on prices of course).

        In any case, following are the net export supply data:

        Global Net Exports of oil (GNE*), 2002 to 2012:

        http://i1095.photobucket.com/albums/i475/westexas/Slide1_zps3161a25b.jpg

        Available Net Exports of oil (GNE less CNI), 2002 to 2012:

        http://i1095.photobucket.com/albums/i475/westexas/Slide04_zpsd68833b7.jpg

        GNE/CNI Ratio, 2002 to 2012 (Showing extrapolated decline to 2030):

        http://i1095.photobucket.com/albums/i475/westexas/Slide1_zps9ff3e76d.jpg

        What I define as Available Net Exports (or ANE, i.e., GNE less CNI) fell from 41 mbpd (million barrels per day) in 2005 to 35 mbpd in 2012. While there has been a rebound in US consumption, there is some question about how accurately the EIA is accounting for product exports in the short term, but in any case I would argue that the dominant post-2005 pattern, at least through 2012, was that developed net oil importing countries like the US were gradually being forced out of the global market for exported oil, via price rationing.

        I think that most countries fundamentally misunderstand what is going on in the global oil market, or probably more accurately, we are seeing denial on a global scale, what one writer called “The Age of Denial.”

        To the extent that we have seen a rebound in the US economy and in US oil consumption, it’s important to remember how many trillions of dollars in deficit spending we have seen in recent years (largely financed by the Fed).

        I think that the fundamental reality we are facing is that we are in the middle of a relentless transformation from an economy focused on “Wants,” to one focused on “Needs.” But governments in developed net oil importing countries refuse to acknowledge, or are incapable of acknowledging, this transformation, and they are desperately trying to keep their “Wants” based economies going via increased deficit spending, despite the post-2005 decline in the volume of Global Net Exports of oil available to importers other than China & India.

        As shown in the third slide, at the 2005 to 2012 rate of decline in the GNE/CNI ratio, in 17 years China & India alone would theoretically consume 100% of Global Net Exports of oil.

        I suppose that one way to look at the data is that a lot of developed net oil importing countries might not have to worry about how to pay for their oil imports in future years.

        *GNE = Combined net exports from (2005) Top 33 net oil exporters, total petroleum liquids + other liquids, EIA
CNI = Chindia’s Net Imports of oil

      • Jeffrey J. Brown says:

        It’s instructive to review what has happened, from 2002 to 2012 for key net export and consumption ratios, versus annual Brent crude oil prices, which rose at an average rate of 15%/year from 2002 to 2012 (with one year over year decline, in 2009).

        Normalized Liquids Consumption (2002 = 100%) for China, India, (2005) Top 33 Net Oil Exporters and the US, Vs. Annual Brent Crude Oil Prices:
        http://i1095.photobucket.com/albums/i475/westexas/Slide14_zpsb2fe0f1a.jpg

        GNE/CNI Ratio* Vs. Annual Brent Crude Oil Prices:
        http://i1095.photobucket.com/albums/i475/westexas/Slide1_zps5f00c6e5.jpg

        GNE/CNI Ratio* Vs. Total Global Public Debt:
        http://i1095.photobucket.com/albums/i475/westexas/Slide2_zps01758231.jpg

        *GNE = Combined net oil exports from top 33 net oil exporters in 2005, EIA data, total petroleum liquids + other liquids
        CNI = Chindia’s net oil imports

  3. old farmer mac says:

    Here’s a link worth a minute or two:

    http://peakoil.com/production/daniel-yergin-the-global-impact-of-us-shale/comment-page-1#comment-64627

    Personally I think this article just more of the same sort of “happy motoring forever” poorly founded optimism that will eventually result in anybody and everybody having to deal with a supply crunch that will bring the world economy to it’s knees . Nevertheless it pays to keep up with what people like Yergin are saying.

    I will say this for him. He’s an extraordinarily capable writer, and anybody who reads his older book “The Prize” is in for a highly enjoyable and heaping helping of energy history.It may be the best single book ever written dealing with the history of the oil industry, up until it’s publication, but of course it’s outdated now in respect to more recent history.

    When time permits I intend to read his new book.

  4. Cave Bio says:

    Hello everyone,

    I teach ecology and conservation biology and one of my old students sent me the following link:

    http://www.footprintnetwork.org/en/index.php/GFN/page/calculators/

    I have not done any research on the site and so I do not know how accurate the footprint calculator is. But I thought many of you would find it interesting. For what it is worth, I am a vegetarian (not vegan) one child, drive a Smart car and my score was a “4″. My biggest points likely came from my single family home that is powered largely by fossil fuels.

    Best,
    Tom

    • mikeb says:

      Interesting, but it’s perfectly meaningless for those of us who grow a good portion of our own foods.

  5. Inglorious says:

    http://www.bbc.co.uk/news/business-25546725

    A short interview with the Shell UK chairman. Towards the end he makes the statement ‘the easy oil in the world is gone’. Not really a shocker but the interview is running hourly on the BBC. Unfortunately I doubt many people are paying attention to it, Schumacher being in a coma is far more interesting.

  6. Tim E. says:

    I live in South East Wisconsin, specifically Racine, which has been hit hard financially and whose manufacturing base has been decimated. The jobs only leave and empty factories and homes are increasing. The former Chrysler Plant in Kenosha was recently torn down and the loss of those jobs and that factory has impacted the region hard. As I began seeing all the boarded up houses, stores and factories, I began using government databases and information to begin researching some of these closings. I use on-line Property Records, WI. Department of Revenue Databases such as Delinquent Taxpayers and IPAS (Integrated Property Assessment System, CCAP (Circuit Court Access), along with local government budgets and their audited financial reports, to get a clearer view of what Peak Oil has meant locally.

    What I find is shocking – and leads me to conclude that South East Wisconsin, Racine in particular, is heading for Bankruptcy/Default and it’s irreversible. Property assessments have decoupled from sale prices by tens of thousands – large numbers of properties are in arrears and underwater. Downtown businesses which have political connections have not paid their property taxes in 5+ years and are allowed to continue operation. Assessed values have to remain high because Wisconsin law limits municipal borrowings based upon a percent of total assessed value. Forgive my political messages, but I publish the data in a blog from time to time – and those interested can take a look here:

    http://racinesales.wordpress.com/

    AWS says: The way I see it tourism and civil aviation as we know it are the first industries to whither…

    Racine’s future, according to the politicians is based upon those 2 things. Racine has invested in DeltaHawk, which promises to revolutionize airplane small engines, but has so far failed to deliver, and Peak Oil almost guarantees it’s failure:

    RACINE — DeltaHawk officials have said it before and they’re saying it again: They will start making aviation engines — soon!

    http://journaltimes.com/business/local/deltahawk-struggling-before-takeoff/article_5e999cbe-702f-11e3-a7fa-001a4bcf887a.html

    The other business venture is Reef Point Marina, which Racine County took over in 2013 and says will revitalize the City. The Boaters will save Racine is the mantra! Looking at the County Budget I found that the occupancy rate was only 42% and the new Bar and Restaurant that replaced the former failing Bar and Restaurant is being given a pass on making rent payments – because it is unprofitable like the last venture. Further, there are problems with the infrastructure that will require tens of millions of $$$ in the future.

    The end of growth is here, and locally, this may be the beginning of a trend:

    SILVER LAKE — Dissolving or un-incorporating the village of Silver Lake is an idea that has gotten some lip service over the last couple of months.Officials there are struggling to balance the annual budget, maintain services, attract a commercial tax base and keep taxes in check.

    “I think it is something we may have to consider given that we have no growth and no potential for growth in the near future,” trustee Patrick Dunn said.

    http://www.kenoshanews.com/news/village_of_silver_lake_may_dissolve_474942789.html

    The ending of extended unemployment benefits and the rise in natural gas prices will only exacerbate the situation. That is my local view.

    • Jeffrey J. Brown says:

      Re: Tim. E.

      The GELM (Government Export Land Model)

      Let’s think of local and state (provincial), and for that matter, national governments as being similar to oil exporting countries, in that they consume a percentage of tax revenues and net debt infusions, in order to pay current benefits to employees and operating expenses and to pay current and future retirement/health benefits.

      And let’s just really focus on current and future retirement benefits.

      As Michael Lewis noted in his recent book, “Boomerang,” a lot of local governments, especially in California, are on track to consist of little more than a small staff that collects taxes and forwards virtually all tax revenue to retirees. And of course, most public pension systems are assuming a (highly unrealistic) estimate of 7% to 8% on future annual returns. Of course, the lower the actual investment return, the larger the unfunded pension obligation.

      In any case, if we assume flat to declining tax revenue, combined with rising retirement obligations (especially as investment returns continue to disappoint), it seems to me that the net result would be an accelerating rate of decline in services provided to the taxpayers, perhaps even as governments try (probably) unsuccessfully to materially raise tax revenue, by raising tax rates

      Excerpt from an Amazon review of “Boomerang”

      Quoting Lewis quote UCLA neuroscientist Peter Whybrow in the book’s last chapter (on California’s financial problems, not European countries), Lewis writes, “‘Human beings are wandering around with brains that are fabulously limited. We’ve got the core of the average lizard.’ Wrapped around this reptilian core is a mammalian layer (associated with maternal concern and social interaction), and around that is wrapped a third layer, which enables feats of memory and the capacity for abstract thought. ‘The only problem is our passions are still driven by the lizard core.’ Even a person on a diet who sensibly avoids coming face-to-face with a piece of chocolate cake will find it hard to control himself if the chocolate cake somehow finds him. Every pastry chef in America understands this, and now nueroscience does, too. ‘In that moment the value of eating the chocolate cake exceeds the value of the diet. We cannot think down the road when we are faced with the chocolate cake.’ … Everywhere you turn you see Americans sacrifice their long-term interests for a short-term reward.”

      • Mike says:

        Peak chocolate cake – 2007?

      • old farmer mac says:

        The go to book for anybody interested in learning something on the layman’s level about the three level brain is ” The Dragons of Eden” by Carl Sagan if memory serves.

        It’s fairly short, highly enjoyable and available from any large library.

        And small town librarians can borrow a copy for you from another library, although the one I use has found it necessary to charge a couple of bucks to cover the postage.

        • clifman says:

          The longer I live, the more I come to appreciate some of my professors, like the one who had us read The Dragons of Eden in a freshman seminar those many years ago…

      • Woody says:

        Bankruptcy is the only way to get back the increased pensions that were retroactively granted in the mid 2000s by a lot of agencies in California based on false information from PERS about future returns from the pension fund. The only thing that made 8% returns possible was continually reduced interest rates, which had pumped up bond yields since the 80s. It doesn’t require a financial hotshot to figure out that once interest rates go to 0 that the process of increased returns from falling bond yields will end. PERS knew this but presented the increased retirement benefits as a no cost perk to local agencies. Bottom line is they lied and are now trying to stick the public with the tab. Many local agencies owe PERS tens of millions to pay off the retroactive pension increases.

    • aws. says:

      Peak Oil will be local!

  7. TechGuy says:

    Bakken Production Profit

    I started work on trying to estimate how much money a typical Bakken well makes over its lifetime. Originally I used a simple decline curve of about 38% about a week ago. Ron posted a better production curve since my original estimate was not accurate. So I took the graph and created a table with about 50 data points so I could create a curve fit equation. From the data set I generated a ten order curve fit equation that I believe matches the decline curve fairly accurately. Below is a link to a graph using the curve fit equation:
    http://s1361.photobucket.com/user/TechGuyFive/media/BakkenWellProductionCurveFitPlot_12-24-2013_zpsfdcc6193.png.html
     photo BakkenWellProductionCurveFitPlot_12-24-2013_zpsfdcc6193.png

    Using the curve fit equation, the estimated total recovery of oil is about 200K (199,871) barrels over a six year period. If we assume that the total cost of drilling and operation of the well is $15 Million USD, and the average price per barrel of LTO is $65 bbl, the average bakken well loses about $2 Million USD. 200K*65 is about $13 Million. My guess is that the drilling and production costs are less than $15M and the average prices for LTO is probably higher than $65/bbl. Regardless, the profit margins on Bakken production are likely to be razer thin.

    If anyone has Mathematica or Matlab here is the plot equation you can use for your own purposes:
    Plot[2.718281828^(6.289439107718543` - 0.011543315289183781` x +
    0.00006035241819860633` x^2 - 1.9952239638304292`*^-7 x^3 +
    3.962939760372318`*^-10 x^4 - 4.923012495812217`*^-13 x^5 +
    3.860008680236791`*^-16 x^6 - 1.85110898087435`*^-19 x^7 +
    4.939129575330045`*^-23 x^8 - 5.5985240664919645`*^-27 x^9), {x,
    0, 365*6}, PlotStyle -> {Red, Thick}, PlotRange -> Full,
    GridLines -> {{30, 60, 90, 120, 150, 180, 365, 365*2, 669, 365*3,
    365*4, 1429, 365*5}, {500, 450, 400, 350, 300, 250, 200, 150, 100,
    50, 32}}]

    • Dennis Coyne says:

      Hi Tech Guy,

      Very nice. Let’s try the calculation as follows. We will assume the Bakken crude is shipped to the East Coast at a cost of $12/barrel and the refinery is willing to pay $100/barrel (essentially we will assume Brent prices remain at $100 or above and that this determines the refinery gate price on the East coast). So at the wellhead the price is 100-12=88 per barrel. Royalties and taxes are 24.5% of the well head price or $21.56/barrel and operating costs are $4/barrel so the net revenue is $62.44 per barrel. The capital cost of the well (for drilling and fracking) is $9 million. The net revenue is 12.49 million if we assume a zero discount rate. Profit is 3.49 million dollars with no discounting, when done properly, we determine the net present value (NPV) of future cash flows. If the NPV is greater than or equal to the capital cost of the well, then the well has a positive profit over its life. In this zero discount rate scenario, if the Brent oil price drops to $82.56 the well barely breaks even, this is equivalent to $45/barrel net revenue at the well head after operating costs, royalties and taxes are paid.

      DC

  8. Kam says:

    Interesting that Texas crude production rises exactly 50 kbpd since March: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPTX2&f=M

    • I think you meant exactly 50 kb/d per month since March.

      Jan-13	Feb-13	Mar-13	Apr-13	May-13	Jun-13	Jul-13	Aug-13	Sep-13	Oct-13
      2,289	2,355	2,402	2,452	2,502	2,552	2,602	2,652	2,702	2,752
      Diff. from Previus Month   50	   50      50	   50	   50	   50      50
      

      Yes, that is very strange. One would would think they are just plugging in numbers. I know that is what I think. Thanks Kam for pointing this out. The odds that Texas crude oil would rise by exactly 50 thousand barrels per day ever month for seven straight months is astronomical. They are just making up stuff. How much oil has really been produced in Texas since March? I have no idea and I doubt that the EIA has either.

      • Watcher says:

        Bingo.

        In this past year we have caught several items like this.

        ZeroHedge seems to gravitate its reader base to a similar reality, which would go something like:

        Things are getting great according to the numbers — that no one should believe.

      • Jeffrey J. Brown says:

        The data that the EIA is showing for Texas + Louisiana (marketed) gas production are pretty interesting.

        January, 2012: 881 BCF (28.4 BCF/day)
        January, 2013: 850 BCF (27.4 BCF/day)

        Difference: -31 BCF (-1.0 BCF/day)

        September, 2012: 850 BCF (28.3 BCF/day)
        September, 2013: 792 BCF (26.4 BCF/day)

        Difference: -58 BCF (-1.9 BCF/day)

        Note that Texas hit 21.3 BCF/day in December, 2012, versus 20.4 BCF/day in September, 2013.

        LA Gas Production:

        http://www.eia.gov/dnav/ng/hist/n9050la2m.htm

      • Dennis Coyne says:

        It seems likely that budget cuts are making it impossible for the eia to do it’s job.
        DC

  9. old farmer mac says:

    There’s been another oil train wreck.

    Fortunately this one did’t hurt anybody, according to early reports.

    I saw an early report that seems to have vanished that said the oil train hit another train that had
    itself derailed, presumably blocking there oil train’s track.
    http://edition.cnn.com/2013/12/30/us/north-dakota-train-fire/index.html

    • Ert says:

      The big German newspaper Frankfurter Allgemeine (FAZ) stated the same as you. The following link contains a longer Video with voice comments in German that restate exactly what you have read elsewhere: http://www.faz.net/aktuell/gesellschaft/ungluecke/vereinigte-staaten-gueterzug-mit-oel-explodiert-12732767.html

      • Toolpush says:

        Looking at these explosions, I believe shows how light this oil is. These explosions look very much like a BLEVE rather than an oil fire. BLEVEs are normally associated with liquidized gasses, eg LPG and LNG.

        • aws. says:

          LTO is “barely crude”. : )

          • Toolpush says:

            Correct, that was my point.

            I can see some disruption in rail oil transport as regulations are tightened up, especially as there is a massive back log in rail tanker cars already in progress, and it will be very difficult to up grade the tanker already in service in a short time period.

            • aws. says:

              From G&M, some good background on the volatility of Bakken LTO…

              VIDEO: How oil from the U.S. Bakken formation decimated Lac-Mégantic

              … and the latest article on their investigative reporting on Bakken LTO rail transport.

              North Dakota’s explosive Bakken oil: The story behind a troubling crude

              Grant Robertson, The Globe and Mail

              Published Tuesday, Dec. 31 2013, 11:36 PM EST

            • old farmer mac says:

              IS this stuff so light it will always sell at a discount to the more easily processed somewhat heavier crudes?

              It’s been my impression so far that it has sold at a discount because of transportation bottlenecks.

              We’ve all heard about the guy with his foot freezing water hand his head in a fire being , according to a statistician, comfortable on the average.

              But it does occur to me that this super extra light crude might be used advantageously- without very much chemical restructuring- by blending it into a very heavy crude during the refining process .

              Any given “too light” molecular fraction of the light tight oil would have to be either “fattened up” chemically speaking or else used for some other purpose than gasoline, diesel, or lubricating oil. But the heavier fractions of lto might be easily blended into gasoline or diesel being made from an extra heavy crude.

              I’m in over my head but I’m sure somebody in the forum knows how the economics of processing a super light crude play out at the refinery and therefore the implications for the price of it once the transportation infrastructure catches up.

              • TechGuy says:

                “But it does occur to me that this super extra light crude might be used advantageously- without very much chemical restructuring- by blending it into a very heavy crude during the refining process .”

                While I am not a Petro-chemist, I don’t think it works that way. When Crude is refined its typically passed through a fractional distillation column to separate the various hydrocarbons by molecular weight. In order for LTO to be used to produce heavier hydrocarbon fuels they would need to use a chemical process similar to fischer-tropsch which is expensive and time consuming. I believe its much cheaper to use a hydrocarbon cracker to reduce heavy crudes into lighter hydrocarbons.

                Adding LTO to heavier crudes does not result it chemical reactions that alter the molecular weight of the heavy hydrocarbons. There needs to be a chemical process to alter them. Adding LTO to crude would be like adding water to alcohol and distilling it. You still have the same quantity of alcohol in the batch, and when the process is done you just separated the water from the alcohol.

                Perhaps LTO may be added to very heavy crudes as a solvent so that the heavy crudes don’t gum up the processing equipment. Another way may be to crack LTO into hydrogen gas use for cracking heavier crudes, but I believe hydrogen gas is usually produced using NatGas and there probably is a added cost to using LTO instead.

                Found this:
                http://www.econbrowser.com/archives/2012/07/shale_oil_and_t.html

                “We’re still learning about tight oil. Here is an interesting anecdote. At my refinery, we started getting some kind of North Dakota sweet crude that evidently had amines in it at maybe 250 ppm levels. They concentrated in the overheads from our atmospheric distillation tower, and completely fouled our overhead coolers, forcing us to cut rates and eventually replace exchanger bundles at great expense and lost production.

                While amines are common in refineries, they’re part of downstream processes that get sulfur out of fuels. They are generally not seen by themselves in crude oil.

                Our best guess is that the frackers use amines in their fracking fluids. They’re probably benign until they get concentrated at the top of a atmospheric distillation tower.”

                So it looks like LTO causes problems with fractional distillation.

                • DrTskoul says:

                  Ha.. Many additives in upstream operations can cause problems in distillation towers. I remember a particular corrosion inhibitor containing phosphorus used in crude pipelines that was causing a particular tray in an atmospheric distillation unit getting fouled up with phosphorus deposits.

                  Also to add to the above, in adding LTO to heavy fractions does nothing to those fractions other than reducing viscosity, altering pour points and other physical properties, but heat it up and those fractions will flash off.

                • old farmer mac says:

                  So- Light tight oil is not worth much if anything to use in the in the refining of heavy oil; this does not bode well for the price of it.

                  Might it be possible for a refinery to profitably refine lot by causing the small molecules to join together in pairs and make them of a size suitable for gasoline and diesel?

                  If the stuff can’t be used easily and economically to make a liquid fuel it will probably always sell at a substantial discount to other crudes such as Brent.

                  • DrTskoul says:

                    LTO has the right molecules for gasoline, and lighter fractions. Gasoline is comprised from 5 carbon molecules all the way to C10+ molecules. Deisel is much heavier. LTO molecules also find their way to chemicals through the fractionators.

                • toolpush says:

                  http://www.rbnenergy.com/It-Aint-Heavy-Its-the-Bakken-light-heavy-crude

                  “Exception #4. I want my diesel back. Since we are talking about Oops, there is one last point to consider that was also illuminated by Jim Jones. The new crudes are light in another way. They are light on diesel yield. Bonny Light, one of the Nigerian crudes getting backed out of the Gulf Coast has kerosene (360-500 °F cut) and diesel (500-650 °F) yields at 20.8% and 24.8% respectively. For Bakken, the numbers are much lower at 14.7% and 14.3%. Condensates, which make up more than half of Eagle Ford production have even lower kero/diesel yields– well south of 5%. These numbers mean that refiners will be getting significantly less diesel out of the new crudes. Today refiners are making most of their money on diesel – so much so that the U.S. has become a net exporter of diesel, to Latin America and Europe. Declining distillate yields can’t be good news for the refiners who see this material coming. For this reason and others, it is entirely possible that distillate yields could become a primary determinant of future price differentials for different grades of crude oil.”

                  Hope explains a little, to see the link you will have to open an account, it is free, and a very handy site. Basically if you want gasoline and the refineries are set up for light oil, Bakken would be selling at a premium. Unfortunately the refiners have just spent a heap of money preparing for the flood of Canadian heavy oil sand, production and have an indigestion problem with all the LTO coming to market.
                  The other issue that seems to be appearing, is the Bakken oil that is blowing up in the train derailment seems to be lighter then what has been advertised. Are the sweet spots for the most preferred oil being crowed out and some of the less preferred oils now being produced? I don’t know the answer to that question but it is shaping up as though there are some near condensate being produced in the Bakken, and being sold as crude oil.

  10. aws. says:

    Gonna burn through a lot of NG in the next couple of weeks…

    Bundle Up for New Year as Door to Arctic Is Wide Open

    By Andrew Freedman
    Published: December 31st, 2013 , Last Updated: December 31st, 2013

    Care to speculate what the price of NG will do in the next couple of weeks?

    • Jeffrey J. Brown says:

      And as noted up the thread, the year over year decline in Texas + Louisiana’s combined (marketed) natural gas production accelerated from down 1.0 BCF/day in January, 2013 to down 1.9 BCF/day in September, 2013 (relative to respective months in 2012, EIA).

  11. Canabuck says:

    Does anyone know what is behind the story about “maintenance water” for LTO oil wells?
    maintenance water
    The water is used to dissolve the salt. Is it done on a monthly basis?

    • toolpush says:

      Canabuck,

      I must admit to never hearing the term maintenance water, but salt build ups whether it is Na salts Barium salts or any other salts are a problem in producing wells. Flushing with fresh water seems a reasonable method of keeping of keeping it under control, certainly beats pulling the completion tubing and cleaning it or replacing it.
      To clean up the returning brine, then it could be put through a Reverse Osmosis unit. This would give a high concentration brine to be disposed of, along with clean water to be used for flushing the well. Now I have no idea of the cost of RO v buying fresh water, but this is the only method to recover any of this water. If they intend using too much water then they will need to get used to RO .

  12. Dennis Coyne says:

    If anyone has any charts to post, please try to choose a chart to upload in the box below the comment.
    Test with Temp images. Only one image per comment so if you need to do multiple images you would either need multiple comments or you could put several images in a word document then take a screen shot and edit.

    Unfortunately this is the best I can do so far.

    DC

    • Aws. says:

      Thanks DC.

    • Canabuck says:

      Wikipedia’s 65 year trend in Canada’s annual high temperatures.
      Notice the warming trend.

      • Dennis Coyne says:

        Not much of a trend. Note that climate change is about the trend in average temperatures on a global basis. So high temperatures in Canada don’t really tell us much. The RSS data is what Monckton writes about when he talks about no warming for 17 years, the UAH data is also satellite data, other longer term temperature data shows similar warming or greater over the last 20 years. All temperature data sets are imperfect, so the best estimate would be the average of several datasets, GISS, HadCrut, NOAA, UAH, and RSS. Also a minimum of 25 years of data is needed to establish a robust trend with a high signal to noise ratio.

        DC

      • Dennis Coyne says:

        Canabuck,

        Thanks for posting the chart. Sometimes the things I try to do only work for Ron and me, so a test by other people is helpful, I am not sure why there is so much whitespace below your chart, but maybe that is just the way your chart looks and it is not the plugin.

        Dennis Coyne

    • Dennis Coyne says:

      AWS,

      Your welcome.

      Canabuck,

      Thank you for posting the chart, now I know it doesn’t only work for me.

      Dennis Coyne

Comments are closed.