A Guest Post by George Kaplan
Production History and Reserves
UK oil production peaked in 1999. The peak was probably pushed out a couple of years because of the major production interruptions following the Piper Alpha disaster. Production declined quickly until around 2011, then the high oil price allowed more brownfield and then greenfield developments that created a third local peak in 2016. Production is declining again this year but there are several large projects due that will create another peak in 2018 or 2019 (nearly equal to the 2016 one). After that terminal decline is likely. The chart below shows C&C production split according to the year of first production of the field.
Like all such all diagrams, this shows that the largest fields were developed first and declined the slowest.
Most data here is taken from the new UK Oil and Gas Authority (which replaced part of the disbanded Department of Energy and Climate Change), some from the Scottish Parliament and the rest from Company and Trade Paper publications (but presented without the implied “Everything is Awesome” imaginary soundtrack that accompanies and influences everything from all such sources).
Reserves for oil and gas have been declining fairly steadily since 2000. The UK reports according to SEC rules (i.e. including only developed reserves and those with definite development plans) and, from this year, reports 3P and contingent resources. The R/P ratio given below is based on 2P numbers. The oil reserves include onshore oil (which is around 100 mmbbls) and NGLs (which are about 4 to 5% of the total).
Natural gas reserves in particular are looking low and declining fast – possibly mostly gone except for some associated gas in the remaining oil reserves by 2030 without some big discoveries – but this post concentrates mostly on oil. Remaining 2P oil reserves (as of December 2015) are 4.2 Gb (so say about 3.9 C&C only) , and for gas, 2.1 Gboe. There have been studies that indicate around 5.6 Gb of undiscovered recoverable oil (and 3.6 Gboe of natural gas): UK OGA
However recent activity for licensing, exploration drilling and development approvals would suggest that the E&Ps think that the putative undiscovered oil and gas is going to be difficult to find and expensive to bring to production. Recent drilling activity has mostly been for development wells with only fourteen exploration wells in 2016 (plus two sidetracks) dropping to five and one in the first half of 2017. Appraisal wells have been even fewer, only eight in 2016 and one so far this year, reflecting previous years drop in discoveries, especially any large fields. 2017 figures are through July.
Many of the development wells are predrilling for subsea completions on projects due over the next couple of years. Hence these numbers, too, will decline as those projects come on line and fewer follow. It’s also notable that drilling dropped after the short price dip in 2008, but didn’t pick up again as prices and overall E&P activity rose significantly from 2009 through 2013.
Discoveries have dropped off in line with the decline in drilling and reserves, as would be expected. UKOGA does not provide individual fields reserves that I have found so this chart only gives numbers of discoveries (only one last year and none this). The fall off would be even more marked based on size as only small fields are now being found (and no gas fields for five years).
The UK Oil and Gas Authority don’t provide easily analysed data concerning the licensed blocks, although there are a couple of Excel files they have that I haven’t been able to download which might. In the two full rounds plus one supplementary round since 2015 there have only been four firm wells bid out of 75 new licences; there are a few conditional wells but all the other bids have been for new seismic (and much of it 2D) or review of data only, followed by drill-or-drop.
Recent Production
Recent monthly production numbers for C&C and Natural Gas, with drilling rig numbers (from Baker Hughes) are given below. Production is highly seasonal because maintenance turnarounds are scheduled in spring and summer when the weather is clement and gas demand is low. Installation of new facilities occur then as well which means that new production tends to ramp up mostly in the first half of the next year.
UK production comes from many small and medium sized fields; this is in contrast with Norway where most production comes from fewer large fields. The top ten fields by production in 2016 are shown below. Collectively they have peaked (note UK is a month behind in producing the data compared to most other governments that issue good data, so these numbers only go to April). Franklin and Clair are offline and all shown are in decline. Collectively they process far more water than oil, as is common in mature fields, and their water cut is still continuing to increase.
Buzzard has been the largest producing field for many years and has stayed on plateau for about three years longer than originally expected, but it now looks to be hitting high decline rates. Its water cut has passed 50%, which is often a threshold for the end of a plateau, and still increasing.
Recent fields additions have been small, and most go into almost immediate decline, for example the Cladhan field started up in December 2015 and looks to be already exhausted, (in fairness it is classed as a gas field so the production would likely but to recover a small oil deposit before starting the blow down of the gas). However the next batch of projects to come on line are much larger – some fields shown in the legend, but with no flow numbers yet are for facilities that have been, or are currently being, installed but did not show production in April.
Future Production Projection
A proposed projection for production until 2030 is given below. The projects before the yellow line are now operating or being constructed. Expected start up times and nameplate capacities (in brackets after the name) have been taken from company presentations. Expected availability, ramp up times, plateau periods and decline rates have been estimated based on the type of installation and to match given 2P reserve numbers. The total recoverable oil for developed and due fields from 2016 to exhaustion, is 3.7 Gb, which matches fairly well with the estimate given above (maybe a bit low, but there may be fields included in the UK OGA numbers that have development plans but are not in construction yet. The “recent” fields are anything started in the last three years, and have slightly different assumed decline parameters than the mature fields.
The developments listed that are above the yellow line are pure guesses based on known discoveries and tentative plans discussed in company presentations and trade papers (i.e. currently in appraisal). There is another 1.2 Gb C&C in the production shown. some of this is from small gas fields which I have just given nominal condensate production numbers (a couple of these have actually had their licenses relinquished, but someone else may take them up again).
All attractive discoveries are immediately fast-tracked, even with recent low oil prices, and many of the more marginal, aged legacy discoveries were developed when oil prices rose above $100. Therefore all of the larger oil developments in these putative projects are quite unusual (read difficult), and likely to be expensive, e.g.: Rosebank has layered reservoirs between lava flows or some such; Fram is a thin oil rim with large gas cap (and has been around since the Eighties); the Hurricane operated fields are basement rock (deposits in fractures in granite which has been pushed above the source rock for the oil), Bentley is heavy oil, the previous licensee went bust, it might be developed using steam injection, which is quite marginal for offshore developments because it’s difficult to prevent excessive heat losses; the Pilot fields are similar but more advance in concept for steam injection; Bressay is marginal heavy oil and it’s development was cancelled by Statoil last year, possibly until they see the results of the Mariner development, which is similar but more commercial.
As pretty well all the forthcoming projects are now in the later development stages of construction, commissioning or installation there are few to none reasonably sized projects for the UK currently in detailed design. Most of the larger engineering design teams have broken-up and the remaining installation and start-up teams will probably soon follow. If there is another boom period it may be difficult quickly to ramp up project activity, so meeting the schedule for unapproved projects as shown is going to be increasingly problematic.
And to end on an upbeat note (as seems to be required in all MSM articles these days – we don’t seem to be considered mature enough to be able to cope with bad news) though here slightly pretentious, this is “At the Theatre” and/or “The First Outing” by Renoir, showing good things really can come from humans using oil (with a UK connection too). Renoir isn’t considered quite top tier and this might not be one of his best (or it just might be) but the young lady shown, at that time and that place, definitely did think everything was awesome; and with no post-modern irony or need to take a selfie either.
Hi George,
I found the following projection from the UK govt (from 2015)
https://www.ogauthority.co.uk/data-centre/data-downloads-and-publications/production-projections/
The UK seems to be much more conservative than the US EIA as their projection is only a little more optimistic than yours through 2026 and then from 2026 to 2030 your projection declines more steeply (which seems accurate to me because these will be smaller fields which tend to decline more rapidly).
I tried to scale the chart similar to yours.
There are also projections from Oil and Gas UK (the industry body) which are more on the higher side. They and the UKOGA present final results with a bit of a range, but I think it’s interesting to dig down a bit, for instance both their and my projections only work if the as yet unapproved and, I think, rather expensive undeveloped discoveries come on line. Also a gentle decline curve makes it look like things gradually wind down, but really the industry in the UK is coming to an end and it will be a series of sudden stops: e.g. no more detailed designs (I think the last big on is not for UK but for Johanne Sverdrup in Norway and that is well into construction phase now; no more exploration drilling; no start ups in a year; no more involvement of the multinational majors etc.
Below is one chart I didn’t include as it is a bit rough and ready and shows average time from discovery to production based on discovery year. It’s natural that this would always show decline as projects only get added once they come on line, which would then bump the line up, but I think it also shows the general move to small, short cycle projects, which will naturally be followed by … nothing at all.
(The granularity is only to the nearest year for each project so zero means a new discovery well which was immediately tied in for production.)
Hi George,
Very interesting, thanks. I agree your decline scenario is more reasonable and as you point out, even that might be too optimistic. Would higher oil prices ($100/b or more) perhaps allow some 3P reserves or contingent resources to move to the 2P category and allow a less steep decline? I expect that some time between now and 2030 that oil supply may not keep up with demand at current oil price levels and that oil prices will rise to previous high levels (2011-2014) or perhaps higher.
A question about the “discovery wells that are immediately tied in”, aren’t these discovery wells already included in 2P reserves, or are these “possible reserves” or possibly contingent resources that were believed to have a low probability of being produced? In some sense it would seem such wells might be considered “reserve growth” rather than “discovery”, in the sense that if a platform already existed nearby, then the “discovery” was made earlier (which is why there is a nearby facility), but the total size of the 2P reserves was uncertain (which is always the case until the platform is decommissioned). In my mind the time from discovery to production (when there is no pre-existing production facility) cannot be less than 5 years for offshore production in deep water.
If it’s an exploration well to a new formation then it would be a discovery. If it’s an appraisal well or development well that accesses more than was expected it would be growth. There are different planning, approval, reporting, tax etc. issues depending on the well type. Sindre (or Syndre or something like that) was a small new field drilled from Gullfaks this year. It would only have taken a few months to build the tie-in from the well bay to the manifolds and it was producing. For such small fields Norway and (I think) UK waive a lot of the development application bureaucracy. The North Sea isn’t particularly deep and there are existing platforms near anywhere prospective for gas, not all with drilling rigs though, subsea tie backs would take a lot longer.
The Baltic Sea: Europe’s Forgotten $80 Billion Oil Play?
The Baltic Sea is universally known as a pathway for oil and product transportation, but little is known of its production potential. Yet a recent flurry of activity in the Baltic offshore has stirred hopes that the best is yet to come, and similarly to the Northern and Caspian Sea nations, the Baltics could tap into their resource potential. According to the United States Geological Survey, the Baltic Depression Province, comprising of offshore Poland, Russia, Lithuania, Latvia, Estonia and Sweden with swaths of onshore territory, holds up to 1.6 billion barrels of technically recoverable oil, of which 82 percent is unconventional.
http://oilprice.com/Energy/Energy-General/The-Baltic-Sea-Europes-Forgotten-80-Billion-Oil-Play.html
So ……. that’s about enough to hold us for maybe three weeks or so, depending on how the cards fall. Consumption per capita could go both ways, up or down. And of course it will take fifty years or more to get that oil out of the ground and into trucks and cars.
Take comfort in such great good news. I had a highly amusing encounter with a self made millionaire relative a few days ago who reads a couple of business magazines and watches Fox news. He is utterly convinced that the oil fields recently in the news up Alaska way are a couple of the BIGGEST ONES EVER.
Well they are, if you limit the discussion to ones that are NEWLY discovered, and not yet developed.
Somebody tell us how many years it’s been since the discovery of a new super giant field.
1.6 Gb technically recoverable is probably only 400 to 600 mmbbls actual – so 2 or 3 projects if it is all in the same place, if it is spread out in small clumps it will never be developed without a main anchor facility. That is probably why it’s forgotten.
Thanks for these details. Huge decommissioning cost in future
https://www.ogauthority.co.uk/news-publications/publications/2017/ukcs-decommissioning-2017-cost-estimate-report/
The impact on oil revenue is in my post:
Brent Exit
http://crudeoilpeak.info/brent-exit
Will bankrupt (or nearly so) countries merely abandon rather than decommission their oil, gas and nuclear facilities?
Huge and increasing with each new report, and the North Sea is now starting to be funded by tax payers.
Libyan Oil Liberator Aims To Boost Russian Ties
http://oilprice.com/Latest-Energy-News/World-News/Libyan-Oil-Liberator-Aims-To-Boost-Russian-Ties.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+oilpricecom+(Oil+Price.com+Daily+News+Update)
Everybody is after that premium Libyan Oil.
Iran port gets first oil swap cargo in 7 years
http://www.presstv.ir/Detail/2017/08/12/531508/Iran-Caspian-oil-swap-Turkmen-crude-Dragon
The collapse of the Soviet Union has given Iran an opportunity to position itself as a major transit route for the Caspian energy. However, plans for building a pipeline to take the region’s oil and gas to the Persian Gulf have been shelved amid US opposition.
08/17/2017 at 4:33 pm
Rune, thank you. Regrettably you might have gotten cut off at the knees with another post and your excellent work will not receive the attention it deserves.
Statements such as these: “We’ve hit the bottom of defaults,” said Steven Oh, global head of credit and fixed income at PineBridge Investments. “By and large, it’s over,” are so ridiculously absurd it is incredible. The shit has not even begun to hit the windmill for the US shale oil industry yet.
Reply
Rune Likvern says:
08/17/2017 at 5:53 pm
Mike, thanks.
Would the blog owner allow linking a thread in the new post?
Kaplan has some good posts!
Some days/weeks ago I noticed on NDIC site that 61 rigs were active, today 53 and 5 MIRU. Not sure what that means.
From looking at the 10-Qs I noted that the companies outspent cash flow from operations so far in 2017.
If present prices are sustained for say another year I would keep a safe distance to windmills.
Reply
Mike says:
08/17/2017 at 6:33 pm
Yes, Mr. Kaplan does have good posts and this one is important. Unfortunately the topic always seems to turn to shale oil somehow and I think your work needs revisiting; I’ll cut and paste it if I need to, with apologies to Mr. Kaplan. I am still reeling from the implications of interest on legacy shale oil production…its like malaria that never goes away.
Roger that on windmills; it seems to me that the first big blob to hit will be WLL. Its in, or on the way, to hospice care.
@ 08:16 CDT:
Mike says:
Rune: timely, and poignant, please see this: http://oilprice.com/Energy/Oil-Prices/Are-Investors-Bailing-On-US-Shale.html…
“The third, and perhaps most glaring, problem with the growth-first shale model is that shale companies were burning through cash when oil prices were $100 per barrel, and they are still burning through cash even after the much-heralded efficiency gains achieved over the last three years. According to Bloomberg and Bloomberg Gadfly, the free cash flow after capex for a collection of 33 shale E&Ps has been profoundly negative over the past 12 months. More worrying for investors is that the cash burn in the Permian has been particularly large, and worse, it has accelerated over the past year.
As Ellen R. Wald puts it in Forbes, “when the financiers lose interest, the Shale Revolution will be over.”
As we gave discussed numerous times, the shale oil revolution would not have occurred but for abundant, low interest credit. It is hanging on now, by a thread, for the same reason.
Saw in Rune’s post an estimate of 6% interest being paid.
Spent some time recently with credit rating websites and found a listing of recent and prevailing debt from some of the producers, and despite their “less than investment grade” credit rating they were paying well under 6%. Rune if you see this maybe a quick scroll will find the links I included. Mostly Moodys.
I use 6% based on averages from several companies SEC 10-K/Qs.
I found Whitings’ effective interest rate (weighted average) for Q1-17 at 6,06% and Q2-17 at 5,86%.
Looking at their notes (from their 10Q for Q2-16) they have;
$961M maturing Mar-19 with an interest rate of 5,0%
$562M maturing Apr-20 with an interest rate of 1,25% (convertible)
$874 maturing Mar-21 with an interest rate of 5,75%
$408M maturing Apr-23 with an interest rate of 6,25%
Then add a senior subordinated note due in 2018 at 6,5%.
For large majors I found that their average interest rate is in the span of 3,5% – 4,0%.
Sounds right for Whiting, but they didn’t seem to be a representative player.
What was most surprising was the rates being paid by companies in shale with credit ratings far below Exxon, (Moodys junk ratings) but interest rates just slightly above Exxon and only . . . 1.5% (from memory) above Treasuries.
Completely insane.
”Sounds right for Whiting, but they didn’t seem to be a representative player.”
With regard to Whiting data on their loans, these are available in their SEC 10-K/Qs and the link below is to their investor relations site so anybody can check by themselves.
http://www.whiting.com/investor-relations/sec-filings/
Whiting is/has been the biggest producer in Bakken(ND).
According to Watcher this does not make Whiting a representative player.
I have provided my information in a transparent way so that anyone with an interest can check it out.
Hi Mike,
Rune can re-post his comments here.
Or I can if he would like.
Here is a link to the discussion. Well worth reading in my opinion. Maybe Rune could write a post on this and it could be cross posted here if he would like? Rune does some of the best work around, in my opinion.
http://peakoilbarrel.com/opec-july-production-data/#comment-612146
Thank you, Dennis; I hope that he will, or you. Even if one completely disregards investor presentation hype it is still often very difficult to sift thru Q’s & K’s, even SEC filings, to find out how the shale oil industry is getting away with it’s funky arithmetic. Rune is doing that now and it is VERY important. Even with what “appears” to be higher productivity rates in newer shale oil wells, those new wells must carry the financial burden of older, legacy wells whose debt has not been paid back. As Rune points out, that burden is increasing and very problematic.
I agree with you, by the way, regarding the ‘size’ of the resource in shale basins and the role that Tier 2 type shale will play in our future. It will be more expensive to exploit, even less profitable, if that is possible, and far less productive. We are already seeing that, even, perhaps, early signs in the Midland Basin. And again, where is the money going to come from to develop these reserves?
For Watcher: I had written a fairly well received article on Oilpro several months ago, which of course is now gone, about bond ratings and the possibility of increasing interest rates, etc., in part based on this paper from Columbia: http://energypolicy.columbia.edu/sites/default/files/energy/Reserve_Base_Lending_Outlook_For_Shale_Oil_Gas_Finance_May2017.pdf It is interesting to me how many, and how far below investment grade, the ratings are for the shale industry.
Mike,
Applying an average interest of 6% for all Bakken(ND) and now, the interest expenses/costs is now about 25% of all costs and specific interest costs is steadily growing. The specific interest is related to the flow, the higher the flow the lower the specific interest and vice versa.
Already now, and as interest rates come up, it becomes a challenge to just roll over debt.
There are other aspects to this as well as most companies now are simply recirculating borrowed money for manufacturing new wells and as I illustrated in the chart in the previous post (and which Dennis now linked to) these wells on average, and despite considerable initial flow improvements, are on a trajectory to take losses spanning $2M – $4M each.
One way to look at this is; instead of paying down principal, the companies keep manufacturing wells and pays interest and risks leaving a big portion of the principal in the ground.
http://cdn.theatlantic.com/static/mt/assets/business/10yr%20Treas%202011-09-21.png
The obvious rebuttal to “as interest rates come up”.
But be that as it may be, there is no way in hell these junk companies should be placing bonds at such absurdly narrow spreads over XOM paper.
Watcher,
It is not much helpful to link to a chart showing movements in US10 year Treasury as of 2012? in an effort to document interest rates paid by Bakken players.
As you are the (only?) one that questions the interest rates I presented I would expect that you gave references/links to data that supported your claims so that everyone could see by themselves.
While we await I can inform that I found that Oasis had an effective interest of 6,30% in Q1-17 and 6,24% in Q2-17.
Link to Oasis SEC filings
http://oasispetroleum.investorroom.com/sec-filings
For both Oasis and Whiting the effective interest rate has been on a general upward trajectory since 2013.
Well sorry about that, the chart looked like it extended 3 or 4 yrs past the 2010 point, given distance between 2007 and 2010 on it.
Better? http://static1.businessinsider.com/image/561674b4bd86effb5b8b527c-1200-900/10-year-treasury-10-8-15.png
That’s out to 2016ish. You see a 32 year trend reversal in that? I know the narrative is higher rates because of central bank success in achieving booming GDP growth, but . . . you see a 32 year trend reversal in that? The US 10 yr instrument closed 2.19% Friday.
Now then, two posts ago (the GOM post) I splashed examination of shale players and their Moody’s rating and a sampling of Morningstar interest rates on their loans. It’s a lot of text. Pretty easy to pop back there to get it.
OAS and WLL are shale players and you sampled them, but EOG is larger revs, Diamondback is not tiny maybe similar revs, Devon is larger revs, Pioneer (PXD) similar size, Apache larger. Diamondback and PXD were being discussed so I got their numbers particularly, but also others.
I’m scrolling thru that comment thread to get what I told you is there, but not pasting it all. Here are the highlights
Diamondback Moodys rates it B1 as PDR (Probability of Default Rating)
As mentioned before the big 3 have different letter nomenclature
Moodys rates Chevron Aa2 (3rd highest rating)
In case anyone cares, for Moody’s nomenclature, it goes as Aaa the highest. AaX where X is 1, 2, or 3, as a division within the preceding letter. So Aa2 means it needs to get to Aa1 as one step and then one more step would be up to Aaa, the absolute highest.
From Moody’s text explaining what the letters mean
B Obligations rated B are considered speculative and are subject to high credit risk.
Below Baa is junk bonds. That’s the threshold for investment grade vs speculative aka junk
This is just Moodys.
So Diamondback at B1 means it’s on the threshold of Ba, then would need 3 more upgrades to get to Baa, and then one more level would lift it out of junk status.
Reviews are not weekly, they gotta do the whole universe, but pretty much everyone goes in their spreadsheets about quarterly, so here are some ratings from moodys
CVX as I said is Aa2 (and that was a recent downgrade)
BP A1 (bumped up June 2017, first upgrade for BP in 19 yrs, mostly cuz there is now litigation clarity)
XOM Aaa max
Apache Baa1 negative outlook (year old)
Conoco Baa2 negative outlook
Devon Ba2 negative outlook
EOG Baa1 stable outlook
Marathon Ba1 negative outlook
outlooks mean credit worthiness trend suggests the next review will hold, upgrade or downgrade depending on outlook
Now then, Devon:
Devon debt
http://quicktake.morningstar.com/StockNet/bonds.aspx?symbol=DVN
This is a Ba2 company paying only 4.83% for 30 year paper. That’s a junk bond company paying 2 lousy % above the 30 year US Treasury instrument? WTF
XOM 30 yr paper 3.7%
Somebody is subsiding this rate. This is bizarre.
Then more:
http://quicktake.morningstar.com/StockNet/bonds.aspx?symbol=pxd
This is Pioneer’s debt. Morningstar rates them BBB-. Moodys Baa2 as of March this year.
finance.yahoo.com’s balance sheet for them lists 2.7 Billion LT debt. Another half billion short term. (these numbers are 7 months old)
But back to the morningstar link above. First debt item 600 million bux due 2022. It was issued 2015 so it is long term. Rate . . . for a friggin Baa2 company . . . 2.75% traded. The US Treasury 5 yr note is at 1.8%.
That’s less than 1% over Treasury, for a Baa2 company.
I got no problem with sampling OAS and WLL, but it’s a bit cherry pickingish. Tack on other shale players like those from the Moody’s list above — which are also (like OAS and WLL) less than investment grade. They are borrowing at absurdly low rates.
(I just hit the morningstar links, they are slow for some reason but it did load, patience, don’t know why those pages on the morningstar site are always so slow. Morningstar is a major equity rater, you would think they could afford bandwidth)
Watcher,
first of all what I presented was related to the Bakken (which was clearly stated in the charts and in the text) therefore and so far I showed WLL and OAS.
Looking at Halcon (also in Bakken) latest 10/Q Q-2-17 I found an effective interest rate of 7,20%.
Many of the smaller companies have a high interest rate. Some of the bigger a lower, I wanted the average because what I presented was estimates of the average well in the Bakken by vintage.
With regard to PXD (Morningstar link) would have found that its weighted average interest is about 5,1%, for Devon 4,9%.
I have not found that Devon and PXD are active in Bakken!
Watcher wrote;
”I got no problem with sampling OAS and WLL, but it’s a bit cherry pickingish.”
Watcher, the problem is that you do not take the time to understand what is being discussed and so far you have not provided any documentation that gives reasons for me to revise the average interest rate I am using for the Bakken.
I was not referring to US 10 Year Treasuries and with respect to that below is a link that gives you very recent data on US 10YT.
https://fred.stlouisfed.org/graph/?chart_type=line&recession_bars=on&log_scales=&bgcolor=%23e1e9f0&graph_bgcolor=%23ffffff&fo=verdana&ts=12&tts=12&txtcolor=%23444444&show_legend=yes&show_axis_titles=yes&drp=0&cosd=2005-02-09%2C2005-02-09&coed=2015-02-09%2C2015-02-09&width=670&height=445&stacking=&range=10yrs&mode=fred&id=DGS10%2CDCOILWTICO&transformation=lin&nd=&ost=-99999&oet=99999&scale=left&line_color=%234572a7&line_style=solid&lw=2&mark_type=none&mw=1&mma=0&fml=a&fgst=lin&fgsnd=2007-12-01&fq=Daily&fam=avg&vintage_date=&revision_date=#0
Companies are also subject to risks evaluations and debt assumed under better financial conditions may be rolled over into higher interest debt, which some companies already has experienced.
Gargantuan link didn’t load. Familiar with the St Louis Fed site. I’m sure they have a graph of the 10 yr historical — which will look like what I just gave you and end at 2.19% Friday.
Your phrasing was as interest rates rise. The US T is the floor below even Aaa and thus also under Baa. “As interest rates rise” starts with the riskless rate of return.
If you were suggesting spread expansion, well, I am on your side then because the spread compression in these shale companies paying nearly nothing above Exxon’s rate is hard to accept.
As for Bakken only, there was CLR text I remember typing. Didn’t paste it. Their Moodys was also weak and paying not much premium over Aaa. Just relooked at their HY paper. 4.9%.
As for changing what rate you use for whatever, maybe a good idea to use the current as traded yields rather than a profile of the company’s entire issuance outstanding, especially since some of that paper was placed years ago at higher prevailing macro rates. If you are trying to speculate on rollover potential and at what rate, that would be more meaningful.
Beyond these intricate details, do you have a feel for sensitivity? If we’re quibbling over maybe delta 2%, what’s the impact? Small or large?
I use what the companies actually paid in cash for interests by quarter/year (I referred to this as an effective rate) on what they listed as an outstanding financial debt at that period. Admittedly, not perfect either as the weighted average debt also changes within a reporting period.
It is this interest rate that I found (and documented) has been on an upward trajectory. This may also reflect spread expansion.
I also briefly looked at COP and Hess an their interest rate is about 6%.
The other thing is that the total flow is constituted of flow from several companies which has different effective interest rates over time, portions of the flow so the effective interest rate (for Bakken) itself is subject to some fluctuations from one month to another.
Of course I do sensitivities to check how sensitive the results are to variations to one or several parameters.
No, I will not be able to pin point the (effective/paid) interest rate anytime down to two decimal points for several reasons (one being several companies are not public), but if it is (for the average well) within +/- 0,3% (like now moves in the band of 5,7% – 6,3%) that is likely the best one can hope to do with data from public sources.
With sustained low oil prices (present levels) a 1% (in either direction from 6%) has a marked effect on how fast the well recovers the outstanding employed capital (money). This is why I put a lot of effort and attention into this part and I change the interest rate as it actually changed over time.
Doing a full cycle analysis reveals that the (Bakken) wells started after the price collapse are very sensitive to the interest rate and of course the sales price for primarily oil.
This approach illustrates that all the production (despite a small portion with profitable wells) started since 2014 is very, very likely to produce huge financial losses. For now this flows under the radar as the companies report in BOE and further spreads the interest expenses over all production whereby the legacy wells (pre 2014) subsidizes the newer wells.
Using Jan-2009 as a baseline I have estimated that in total in Bakken(ND) some $37B – $40B has been spent above net cash flow as per Jun-2017. This is primarily debt and proceeds from assets and equity sales.
During the period Jan-Jun 2017 gross interest expenses amounted to an estimated $1,100M.
CAPEX out spent net cash flow with an estimated $740M during the same period.
Without this infusion of external capital the completed wells would have been lowered with about 100 during Jan-Jun/17 and lowered the flow.
This would have brought the specific costs up.
Another way to look at this is that the companies financed all their interest expenses in this period with borrowed money and assets/equity sales.
Sounds like a major bubble. Wall Street and the financial community have got to get out before they are left holding the bag.
Or, as Watcher assumes, the government will just keep funneling money that way until there isn’t any more oil to pump, and then everything collapses. I guess by that time the smart rich will have bought lots of land in the safest places they can find.
From what I observe there are now some cracks in this bubble, some companies have already been through Chapter 11 restructuring and some like Whiting is now selling assets likely to pay down debt.
I for one doubt the government will step in and save the day, IMO this becomes like imposing a tax on people to ensure they can continue to get cheap oil/gas.
Almost all US oil is in Republican states. Republicans presently control the govt.
It could happen.
Dennis,
I am pondering on collecting all the pieces around for a post and I am for cross posting it at POB.
Just have to find the time for it and further I will have to update the production profiles as I have verified that the average wells I used for the 2014, 2015 and 2016 vintages have had steeper declines than what I used. This produces a result with a positive bias.
Rune, outspending revenue by $40B in the first half of 2017 in my estimate puts the US upstream LTO industry back over $300B in current long term debt, NOT including the $80B it has already walked the check on.
I actually snow skied in Dubai once, on a pass thru; just to say I did. I bring that up only to suggest that if one throws enough money at something, anything, the end result might appear, on face value, to have worked. To be real.
The shale oil industry is no different; the fact that production continues to grow has absolutely nothing whatsoever to do with it’s success, new technology, higher productivity rates, or lower incremental costs …none of the above.
It’s just not paying its debt back. And its borrowing more money on top of all that old debt. Take away its liberal, low interest CAPEX source and the shale industry is far from “resilient.”
I look forward to your post, sir. Thank you.
Mike, thanks.
I played around with the numbers for Bakken when I came to realize that in a scenario, there no wells were added and all net cash flow was directed towards reducing the principal, the specific interest costs would grow fast because the production would decline faster than the reduction of the principal.
It is well known among mountaineers that it is not the way up that poses the greatest dangers, it is the way down.
I start to sense that managers in some companies have become aware of this.
Then other cost elements could likely follow, G&A, LOE, transport.
It will take me some time to develop the post.
Would it be fair to say that the shale industry is now in overshot territory.
That is an interesting perspective.
For the Bakken a future oil price sustained above $130/bo is what could bail them out.
Just about everybody seems to believe that oil at a hundred bucks or more means a world wide economic depression. I won’t argue with that, but on the other hand, I also believe that the world can adjust to oil prices in the hundred dollar plus range, if the price of oil goes up gradually and STAYS up, so that we don’t backslide, giving up fuel efficiency for hot rod performance and convenience.
Personally considering the FACT of depletion, I’m convinced that oil will be back in hundred dollar plus territory within a decade or so, unless the electric car industry grows as fast as it’s biggest boosters think it will, and batteries or fuel cells get to be cheap enough within the same time frame to use them in real trucks, farm and construction machinery, etc.
Hi Rune,
You forgot your smiley face. I assume you were joking because in the past I think you have said you believe it is unlikely we will see oil prices as high as $130/b for any sustained period as it is likely to result in a worldwide recession.
Your position also may have changed, so I will not presume to know your current opinion on future oil prices.
Dennis,
My understanding of the oil price formation is that there are several nonlinear and complex processes with positive and negative feedback loops where also fiscal and monetary policies needs to be included.
A more granular, full cycle analysis of what oil prices will bail out the 2014, 2015 and 2016 vintages are that these need a sustained oil price above $100/bo (at the WH) to reach payout and higher to earn some return, as from NOW!
Given how far down the decline/depletion curve these vintages are and how such a price shock would affect the global economy, I hold that NOT very likely.
Not sure if that entails a smiley face for consumers or a tragedy for those who will have to take the huge losses.
Hi Rune
That would be great email me at peakoilbarrel@gmail.com when you get a chance.
In the other thread in response to Rune’s comment below
http://peakoilbarrel.com/opec-july-production-data/#comment-612159
I said:
Thanks Rune,
I guess I would do the accounting differently and only apply the LOE,G&A, and interest expense to the oil produced and then add in the net revenue (post tax) from NG and NGL to the net revenue stream.
To make sure I understand properly, when analyzing oil (and ignoring NG and NGL) for Whiting in 2017Q2 , did you use $16.21/bo for the combined LOE, G&A, and interest expense? Or did this number increase because you ignored the BOE from NG and NGL so the barrels in the denominator was smaller.
As a simple example, say we had $20/BOE in expenses for 100 BOE that includes 20 BOE of NG and NGL combined, if we ignore the NG and NGL (assume the price was zero for both), I would now put the expenses at $2000/80 bo=$25/bo and then I would add the post tax revenue from the NG and NGL back into the analysis.
Dennis Coyne
Ignored says:
08/17/2017 AT 12:40 PM
Hi Texas Tea,
Perhaps, but if tight oil output is as prolific as some people believe, then oil prices will fall below $40/b and the worst may not be over, especially if service costs start to rise further. What is your expectation for future oil prices?
Dennis my best “guess” is that oil prices remain range bound for another 6-12 months, below $60 above $40. Regardless of what others say, NEW LTO oil is some of the cheapest NEW oil that can be brought to the market. Since most people, including those making the $$ decision in the board rooms of the large integrated companies know this, they will continue to elect NOT to spend the money necessary to bring the required more expensive, less economic large scale projects to market in the out years, 5 years and longer. There is a oil pig in the pipeline and until it clears new money will not be put to work (in the amounts required) out side of LTO until LTO has peaked.
This will lead to a couple of investable ideas. One there will be a period, my guess is starting in a 1-2 year window and lasting 7-10 years where the LTO companies will increase their production substantially and will be profitable. Domestic upstream, mid stream and service companies should do very well. As for prices, I think the market will be cleared of the overhanging inventory sometime next year and prices will rise steadily to the upper upper $60 lower $70. Is that enough to “flood” the market again, I just do not think so, but I do not know. The work that you guys do here that has value to me seems to indicate at best the world has 2- 3 million BBL/D spare capacity in a 100 million BBL/D market which is slim to offset the built in depletion and any potential geopolitical crises that could eliminate that spare capacity over night. I might also make the point that Robert Rapier made, oil demand is still increasing, so new production will need to meet the depletion as well as the new demand. The lowering of Cap ex over the last 3 years has set us up of a wild ride in the future. The first to profit will be US upstream LTO and then service companies and pipe lines.
On this note:
” Hofmeister cited three independent studies that came to similar conclusions about the penetration of electric vehicles. Bloomberg, Goldman Sachs and the IEA agreed that by 2050, there will be four billion automobiles on the road worldwide. Two billion will be battery driven and the other two billion will be internal combustion driven, fueled either by gasoline or ethanol or natural gas.
“The demand for mobility will drive power-source,” Hofmeister said. “A sudden takeover by public policy that says leave it in the ground—it’s not going to happen.”
https://www.oilandgas360.com/heard-at-the-2017-enercom-conference-and-oilfield-tech-innovation-day/
How odd – they seem to be assuming that there are pure EVs on one side, and pure ICE’s on the other. That’s mighty unrealistic: there are hybrid-electrics, plugin hybrids, and extended range EVs like the Chevy Volt, that use only 10% as much fuel as the average US vehicle. You could have 4x as many vehicles and use half as much fuel as we use today, and still not use pure EVs at all.
And, of course, the true cost of fossil fuel (including oil) is much higher than the market price. Particulates that cause asthma, NOX, SOX, oil wars, etc, etc – oil is too expensive even if you don’t include the real costs of climate change.
I have noticed Total, Sinopec, PetroChina, Lukoil, Saudi Aramco, PetroBras, Chevron and rather a lot of other oil companies have managed to not buy shale companies and make them wholly owned subsidiaries.
Isn’t that odd? I think XTO was the only major acquisition and they were a natgas company then.
Buying an existing up and running shale company means being on the hook for the debts that company owes, to a greater or lesser extent, depending on how sharp your lawyers are.
AND on top of that, there’s the possibility that the federal government will decide to change the xxxxing rules in the middle of the game, and do as it pleases in distributing assets and holding debtors accountable. It’s happened before, at least a couple of times, on the grand scale, in recent years. GM and bank bailouts.
If I were a top executive at an oil major, I wouldn’t really want to run that risk.
They can buy physical assets from bankruptcy judges safer and easier.
Dennis, I think the view outlined in the short video is reasonable and coincides with what I attempted to lay out in answering your question as to the future price of oil.
https://www.woodmac.com/analysis/when-will-tight-oil-make-money
Hi Texas Tea,
The LTO oil is probably cheaper than offshore deep water and oil sands development, and I agree that at $70/b it can be profitable, but the resource may not be as large as some believe and eventually new well EUR will decrease as sweet spots are drilled up and LTO will become more expensive. The total recovered in the US is likely to be about half of what the EIA predicts (maybe 40 Gb and possibly 50 Gb if oil prices go to $120/b and remain that high until 2040, which is unlikely).
So you seem to be bullish on LTO and less so on the rest of the World. My position is that if the rest of the World has enough oil to keep oil prices under $60/b for the next 10 years, LTO producers in the US will not make much money.
Dennis says:
“So you seem to be bullish on LTO and less so on the rest of the World. My position is that if the rest of the World has enough oil to keep oil prices under $60/b for the next 10 years, LTO producers in the US will not make much money.”
without getting into your argument if memory serves that seems to be completely contrary to what your most recent “courageous” predictions were just a few weeks back.
Hi tt,
I make many predictions are you talking about World output?
In this case I am simply saying if oil supply is plentiful and prices remain low there won’t be high profits.
Notice the “if” means if my high scenarios are correct, I cannot predict exact future output, just present reasonable high and low scenarios.
Dennis says ” My position is that if the rest of the World has enough oil to keep oil prices under $60/b for the next 10 years, LTO producers in the US will not make much money.” I suppose the KEY word is IF. because a month ago your position was:
Dennis Coyne
Ignored says:
07/27/2017 AT 5:59 PM
Hi shallow sand,
“I used to think $55-65 would not be high enough to increase LTO output, but clearly I was wrong. Whether World output will continue to meet demand at $55-65 per barrel remains the question. Currently stocks are falling and if OPEC continues its cuts along with the 10 non-OPEC countries, eventually the lack of new projects in the pipeline will begin to hit World output, probably by 2019 or 2020.
At that point even if OPEC and LTO producers produce as much as possible profitably, output is unlikely to satisfy demand.
It is for this reason that I expect by 2020, $65/b will be too low an oil price to keep the oil market in balance.”
Dennis is that still your position?
Hi TT,
So yes that is still my position.
I do not expect there will be enough oil produced at $60/b to meet demand, but IF I am wrong, then LTO producers may not make much money at $60/b, they may have positive earnings, but I doubt they will be doing very well price earnings ratios will still be quite high.
Hi Texas Tea,
Also on re-reading your comment about oil prices, I mostly agree with your position, even the part about a “substantial” increase in US LTO output, I believe this might rise to as much as 6.5 Mb/d if oil prices rise over $90/b, but it will be short lived and the peak will be reached in 5 or 6 years (2022 or 2023) and by 2030 decline will be rapid (maybe 8% per year or more at the fastest point around 2030).
So the only minor point of disagreement is the level of LTO output, you may believe the EIA’s reference scenario with 90-100 Gb of US LTO output is conservative where my opinion is that it is wildly optimistic, we may both be incorrect, time will tell.
Thanks for the excellent work George.
George
Do you beleive the claims being made for the volumes of oil held in the Weald basin?
Really the high claims come from the media trying to sell copy and a bit less from companies trying to sell shares (more hints and nudges than claims, the one obvious con man has now left I think). But I don’t think in the end any real claims are going to be made and validated unless/until a lot of wells are drilled – as is 100% the case for all oil plays. If you look at the Bakken they drilled out wildcats for about five years until they started hitting about 50% dry wells – so obviously they didn’t know what was there before then (and they still hit an occasional duster).
If you are referring to DL the ozzy then no he is still very much involved.
Don’t think it was posted in the previous thread, new Jodi data: https://www.jodidata.org
Sorry if if continue to bring this up but I think it deserves attention: “Saudi crude oil stock level fell to a 65 month low of 257 MBBL in June” (export was down too, their production this year has been about the same as their 5y average).
Chinese oil production was up in June but it looks like it is seasonal.
I think this is very significant and cannot believe that it is so ignored by the media. I am wondering, what the minimum practical storage number is (it can obviously not be zero) and if their export decreases are a direct result of this
Re: George’s topic
July 2014, back when Scottish independence was on the radar screen and future oil tax revs were the focus of how an independent Scotland could fund itself.
http://www.bbc.com/news/uk-scotland-scotland-politics-28260475
They put the likely total between £2.9bn and £7.8bn [oil tax revs] in 2016-17, which could be the first full year of independence under its timetable.
A spokesman for Scottish Energy Minister Fergus Ewing said the respected economist, Prof Sir Donald MacKay, had described Mr Alexander’s oil figures as missing “a mountain of black gold”.
“North Sea oil is a huge asset and will be for many decades to come – and the OBR’s forecasts rest on estimates of future production which are well below those used by the industry, by leading experts and by the UK government,” said the spokesman.
. . .
“It depends on the price of oil in the next 20-30 years, it depends on new technology being developed, it depends on the fiscal regime, it depends on the way the regulator behaves, it depends on our ability to attract inward investment into the UK and to Scotland against very significant investment.”
Lesson: Oil assessment JUST ABOUT EVERYWHERE seems to place geology roughly in last place in the list of important factors in analysis. How can one not be cynical?
It is still popular in Britain to say that we still have a lot of coal if we need it!
We actually need gas and lots of it. See here
https://www.britishgas.co.uk/the-source/our-world-of-energy/energys-grand-journey/where-does-uk-gas-come-from
Thanks George – I will keep a note of this post and your case that the end will come in sudden steps down. And thanks for the lovely Renoir – I did not remember seeing this one.
Gas supply is definitely a problem, I didn’t post the history for gas but see below – that gives kboed based on discovery year (like for the oil). There is only UK data for gas fields (versus associated gas) from 2000. There aren’t many new offshore gas projects, maybe fewer than for oil, although there was one started last week, so additions will be minor from new oil fields associated gas.
I think also the Norwegian fields are about to go into decline, we gat a lot from Orman Lange which is going down fast, they do have couple due this year, but with the Dutch field declining we are competing with Europe for supply.
The Renoir’s in the National Gallery, quite small.
Don’t worry George.
We are going to frak our way out of trouble.
https://www.ft.com/content/f68508f0-8346-11e7-a4ce-15b2513cb3ff
My first thought, when I saw this graph and the oil graph above was it’s time to transfer the British transportation system over to renewable electric
A reality check on renewable energy.
https://www.youtube.com/watch?v=E0W1ZZYIV8o&t=102s
Thanks for the link. I have always believed there is no single one change to fix the problem, but it will take thousands of changes and some technological ones that haven’t been discovered yet. Conservation and efficiency are also going to be a major must to get ourselves off our fossil fuel addiction.
The LA basin will be a much better and healthier place to live. When transportation has been converted to solar and non fossil fueled powered EV’s.
Drill Our Way to Lower Gasoline Prices, President Obama? Yes We Can.
https://www.youtube.com/watch?time_continue=8&v=jCFtE9vlWts
I don’t generally agree with much that GS has to say, but THIS time he has a POINT, one which those of us who believe in renewable energy should take to heart, when talking about renewables.
Overselling our arguments makes us look like damned fools in the eyes of the general public, which as a general rule doesn’t know shit from apple butter about the geological realities of the oil industry, and hardly any more about the realities of population growth and economic growth world wide, implying ever greater consumption of an ever smaller resource in the ground.
We would do well indeed to insert a few QUALIFIERS into our remarks, so as to prevent them from being used as bats, in the bau press and bau blogs, to knock us right out of the ball park.
Bartenders don’t talk about hangovers. It’s our job to be realistic about the easy times, FOR NOW, while being at the same time realistic about what the future MUST hold, and might hold.
At the same time, I want to point out the utter idiocy and or hypocrisy of the right wing political camp which in the same breath celebrates free market ingenuity and results, while simultaneously spouting partisan bullshit about the Democrats waging war on the energy industries, etc.
“Overselling our arguments makes us look like damned fools in the eyes of the general public”
OldMacDonald aka KGB Trumpster, no one should know better than you.
Actually, the oil market and current pricing hasn’t gotten to were it is today by only drilling ourselves to this oil glut. Conservation, efficiency, substitutes and the expectation of more substitutes have also played a major roll. Don’t forget the Saudi’s flooded the market 2 years ago to maintain market share.
I give credit where it’s due, and old HB has a point about conservation, efficiency, and dumping when it comes to the oil biz.
But he STILL managed to miss my POINT, because he is so utterly determined to prove I really am a Trumpster.
He TOTALLY missed my unqualified statement that the tight oil boom, and the gas boom, which is not altogether one and the same, are pretty much OBAMA’s legacy, lol. My point was that the R’s who are foaming at the mouth about D obstructionism of the energy industry, overall, are either deluded, or partisan hypocrites.
API: US petroleum demand highest for July since 2007
http://www.ogj.com/articles/2017/08/api-us-petroleum-demand-highest-for-july-since-2007.html?utm_content=bufferf06cc&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
• Total US petroleum deliveries, a measure of US petroleum demand, moved up 4.9% in July from a year ago to average nearly 20.7 million b/d, the highest July deliveries in 10 years.
• “Strong demand for petroleum is a good sign for the economy, which grew for the 98th consecutive month,” said API Director of Statistics Hazem Arafa. “American workers and consumer continue to benefit from these positive economic signs along with relatively low fuel prices.”
• Domestic crude oil production…reach[ed] its highest July output level in 45 years. Domestic crude production…was up by 8.6% from July 2016 to average 9.4 million b/d in July.
• NGL production in July averaged nearly 3.7 million b/d… This was the highest July output level on record.
Not everybody back before the 2014 oil price crash was drunk on the peak oil Kool Aid. There were people who got it right and saw the oil glut and price crash coming. From a 2012 article in Rigzone:
Harvard Study Refutes Concerns over Oil Becoming a Scarce Commodity
http://www.rigzone.com/news/article.asp?hpf=1&a_id=119949
And you gotta love this rebuttal from the comments section. The biggest howler of all is when Weiss asserts that the “rise of unconventional production such as US shale oil…is moot.”
The aggressiveness with which Weiss attacks Maugeri’s forecast is also quite striking. Maugeri was certainly right in pointing out the “psychological factors” and the “still deep-rooted belief that oil is about to become a scarce commodity” that are in play.
Rick Weiss | Aug. 13, 2012
111 mbpd is Magueri’s call and 3 yrs to get there.
Per the bible, last year’s total was a bit over 92 million bpd. It rose only slightly last year, from OPEC and Russia since the US was down last year.
So if 111 is the call by 2020, he has 3 yrs to go from 92 to 111.
Shake doesn’t really change much in the big picture.
https://aleklett.wordpress.com/2017/04/16/fracking-tight-oil-forskjuter-peak-oil-med-nagra-ar/
texas tea,
It looks like you guys are doing all the good up in Oklahoma.
Evolving Oklahoma STACK play continues to draw interest as E&P operators seek sweet spots, IHS Markit says
http://www.businesswire.com/news/home/20170817005283/en/Evolving-Oklahoma-STACK-Play-Continues-Draw-Interest
Glenn,
you ain’t seen nothin yet…The Scoop and Stack Plays are in the first inning. With at least 3 currently economic horizons in scoop (15-20 wells per unit), with the dry gas, wet gas, condensate and oil windows being clearly defined and now largely all HPB, an operator can make decisions where they want to spend $$$ for what product mix they think will be most profitable. I think what is lost on many here, is what the short video I posted up thread attempts to explain, the cost of the land and initial well and other infrastructure does look expensive (uneconomic) when compared to ONLY the 1st well or 2 production. What they seem to miss (willfully ignore) is +90% of the total value sits waiting to be exploited. This is truly an oil man’s wet dream. I am very happy to be a very small part of it all.
“The value of that pipe in the ground, most often as long as you’re in the right areas, isn’t decreasing in value — that’s increasing in value every day,” Conklin said Thursday in a phone interview. “We’re certainly in the early innings when it comes to pricing the space efficiently.”
http://www.worldoil.com/news/2017/8/18/blackstone-bets-on-shale-boom-lasting-with-harvest-deal
TT
While the Scoop/Stack operations are in the first inning, it might be instructive to look to the Bakken, which is slightly farther along, to get a sense of future developments.
A quick glance at Enno’s well profiles shows a big uptick in 2008 wells output.
Slightly more focused, Dunn county shows the most dramatic increase.
I’ve not been following Bakken events too closely, but the increase may be linked to refrac’s or halo effect, or both.
Whatever the reason, this is but one example to look for as operators continue to leave no oil behind.
Glenn you may have noticed;
EIA’s Drilling Productivity Report initiates coverage of the Anadarko Basinhttps://www.eia.gov/petroleum/weekly/archive/2017/170816/includes/analysis_print.php
come a long way since all the geniuses here did not even know about it when I began posting?
will the free market win again?
https://www.extremetech.com/extreme/253842-mazdas-2019-efficiency-breakthrough-diesel-engine-runs-gasoline
http://market-ticker.org/akcs-www?post=232310
The free market guided by government regulation to average 54.5 miles per gallon by 2025. Just like how this post should have been guided to the non oil post section.
Fifty four. five in ‘ 25 is technically possible, and might even have been politically possible, had the Democrats gained decisive control of the federal government.
It’s damned unlikely now.
Let’s just wait until the fat lady sings before we count our chickens. Trumpster is the ODD small hand boy out in the world.
I have some hopes that the D’s will regain control of the government in 2020, but they are no more than tenative hopes.
For now, Old HB as usual manages to ignore key facts if they don’t suit his own personal religion, one of these facts being that the R’s are FIRMLY in control of government at all levels on a national basis.
Hey guys, how many of you know that HRC wants to be a preacher?
It looks like ICE vehicles are fixin’ to show EVs how the cow ate the cabbage.
But how does this square with all the predictions afoot of “peak oil demand”?
It doesn’t square, of course. Somebody’s predictions are going to be wrong.
Why Would Oil Demand Peak, Contrary to Peak Oil Supply?
http://www.rigzone.com/news/oil_gas/a/151442/Why_Would_Oil_Demand_Peak_Contrary_to_Peak_Oil_Supply
The general concept of peak oil is that crude oil is a finite and non-renewable resource. That’s all there is to it, contrary to this guy’s constant belly-aching that the concept has somehow been disproved.
I think it’s more like how humans are learning how to eat Lean Cuisine frozen meals
how does this square with all the predictions afoot of “peak oil demand”? It doesn’t square, of course.
I’d say it’s perfectly consistent: ICEs are competing with EVs to see which can reduce fuel consumption faster. That’s a recipe for falling oil consumption.
“That’s a recipe for falling oil consumption”…. WELL if you ignore population growth perhaps. What it is a recipe for is slowing the rate of growth of NEW demand.
Let’s just wait until the fat lady sings before we count our chickens. It’s still in the first quarter of the EV’s vs. ICE game.
except this is like a Harlem Globe Trotters game, all the adults know who is going to win,it just the children that do not and if they did not give away tickets and pay the other team to show up…. they could not even fill the stands… ?
Hi Texas Tea,
When output stops growing whether it is due to geological and technological constraints or because high oil prices reduce demand does not really matter (and it will be both effects in combination), there will be a peak and it is likely to occur between 2017 and 2030 an exact date cannot be foretold. In the mean time output is likely to increase until it doesn’t. High oil prices will change the game as will the falling price of EVs. The future is unknown, you seem to be sure oil output will increase for the next 20 years or more, I am highly skeptical that will be the case.
Dennis says..”you seem to be sure oil output will increase for the next 20 years or more, I am highly skeptical that will be the case.”
No Dennis, what I am sure of is that the free market is in a much better position to address the needs of the future then a bunch of bureaucrats and bloggers.
A person as intelligent as your self should now be aware why freakin models NEVER work, models show one possible outcome, in many cases a per-conceived outcome. only fools trust models, the intelligent folks always ask what are the known unknowns and what are the unknown unknowns, and then present a model that has the following disclaimer: “This model aint worth a shit” but here is something to think about and call it a day, NOT MAKE FREAKIN PUBLIC POLICY BASED ON IT.
The model is simply that crude oil is a finite and non-renewable resource. It works perfectly fine for an individual well or for the set of all wells on earth.
No wonder you have such mistrust. You have been under the impression that oil is infinite.
Seems like the marketplace is saying oil isn’t worth that much even if it is expensive to produce. And therefore it isn’t a good investment.
And the marketplace seems to be saying that even if the government makes more leases available, there aren’t a lot of bidders.
Hi Texas Tea,
I agree well regulated markets do a good job providing efficient outcomes when externalities and public goods are taken into account. I always state the assumptions of my model with the understanding that the assumptions may be incorrect. I also usually give several cases high low and middle where typically the high and low cases bound about 80% of the probability with about a 10% chance higher or lower scenarios would match reality better, the middle case is typically meant to be representative of the infinite number of scenarios that could be created between the high and low cases.
Yes models are simplifications which are unlikely to be precisely correct in any case but simply give a sense of what might happen under different possible cases.
I often invite people to make suggestions on how the scenarios might be improved, different price or cost assumptions for example, but usually no suggestions are offered.
What should public policy be based on?
Hopes and prayers? I think rational analysis is a better way forward.
Oil resources are limited, we should plan accordingly or we will find ourselves short of energy.
You sound like a free market fundamentalist, markets are not perfect there are a number of problems that often need to be addressed. See
https://en.wikipedia.org/wiki/Market_failure
If markets were perfect there would never be a need for government intervention in markets. We do not live in a perfect World with perfect markets.
And do you mean then that you do not think oil output is likely to increase for the next 20 years or are you one of those who have no idea, you surely talk a big game, but I guess revealing what you believe about future output is a little too scary. So what do you think? Higher output or lower in 2025 than in 2016 (annual average C+C output) and what about 2030, 2035, and 2040 relative to 2025? Maybe you expect an undulating plateau between 80 and 82 Mb/d from now until 2040.
models NEVER work
That’s unrealistic. We know models work well enough to rely on for everyday planning decisions.
There’s a whole industry based on models, that all of us rely on for risk management for both personal and business insurance. It’s called the insurance industry. And, there’s a well respected profession that develops those models, known as actuaries.
The interests of Little Oil (non-integrated US domestic oil companies and royalty owners) and Big Oil (integrated international or transnational oil companies) have come into conflict one more time.
For my own personal self-interest, I would like to see Venezuelan oil taken off the market, because that would drive up the price of oil. That would be great for my pocketbook, and it would be a shot in the arm for US shale, as well as other domestic oil producers. However, it would not be good for the integrated globalist oil companies.
Big Oil Urges Trump Not to Levy Economic Sanctions on Venezuela
http://www.texasmonthly.com/energy/big-oil-urges-trump-not-levy-economic-sanctions-venezuela/
The law of supply and demand works the same when it comes to sanctions against Russia. Stunting Russia’s ability to produce and export oil and gas makes for higher prices.
However, Russian sanctions (both those of 2014 and the more extensive sanctions passed by the Senate in June, 2017) would have hurt the interests of the globalist oil companies:
Steve Bannon’s economic nationalism squared off against Rex Tillerson’s globalism and neoliberalism in Trump’s White House, and Bannon lost:
“) would have hurt the interests of the globalist oil companies:”
what’s a globalist oil company.
who would you have them sell to
Since October of 2016 almost every oil producing country in the world has attempted to voluntarily reduce its oil production to raise the worldwide price of oil…EXCEPT the goddamn America shale oil industry. It has exhibited no cooperation with the rest of the world whatsoever and, if fact, has taken great advantage of those that did by borrowing MORE money and and INCREASING its production. Now the price of oil is back below October 16 pre-cut levels, the entire N. American conventional oil industry including Canada and (gasp!) MEXICO (isn’t that where you live, Mr. Stehle, Mexico?), and entire world economies are back on their financial heels, again. In the mean time the shale oil industry is deeper in debt, still filing bankruptcies and still unable to make a stinking nickel of profit. It needs a shot in the arm alright.
The people of Venezuela don’t actually get to vote for who governs them and things are SO bad down there right now they are literally eating house cats. But to hell with that. America needs to teach them a lesson in democracy. Lets sanction their oil exports and finish them off completely. A nice coup would do, and the death of what, 25,000 people; is that enough? Why don’t we just invade Venezuela; now there’s an idea. It’ll help the US shale oil industry and Mr. Stehle’s pocketbook. The same guy, by the way, who is always telling me the shale oil industry is raining on my parade, now thinks Venezuela is raining on his parade.
I think I am going to hurl.
A couple of companies did report some small profit last quarter. GAAP.
But they are pretty much all still showing a ttm loss. ttm is almost as standard as GAAP now. (Trailing Twelve Months).
PXD for example posted a small quarterly profit but finance.yahoo.com (and others) show EPS -$1.97 (TTM)
Sanctions on Ven are pretty complex. The GOM refineries process that heavy oil at a profit. They don’t want sanctions. But deeper down, the Russian(Rosneft)/Goldman funded big refinery being built inside Ven is due to come online in less than 12 months. That will cut off the US GOM refiners from that profit source.
••••Mike said:
That is undoubtedly true of some world economies, but it is certainly not true of the United States’ economy.
US shale, by bringing about lower oil prices and diminished volumes of imported oil, has worked wonders for the United States’ trade deficit.
••••Mike said:
US shale makes it possible for the US to de-militarize its energy policy, to disengage from its far flung resource wars around the world. That argues against military intervention in Venezuela, not for it.
The US should just tax gas at the pump. Then it would become a net exporter of liquid fuel. Until it gets serious about that, it will remain a net importer.
California gas tax increase is now law. What it costs you and what it fixes
Nov. 1, 2017: The base excise tax will increase to 30 cents a gallon.
July 1, 2019: The price-based excise tax will reset to 17.3 cents a gallon, about half-a-cent more than the rate the Brown administration projects will be in effect by then anyway.
The 47.3-cent combined excise tax in effect July 1, 2019 will be adjusted for inflation beginning July 1, 2020.
http://www.sacbee.com/news/politics-government/capitol-alert/article147437054.html
This is no gas tax, this is a joke.
We here in Europe are above 30 cens A LITRE – and this the last 50 years. You can live with it. Even at the farm, use your pickup truck only to transport things and buy a small car to drive your children to the baseball team.
At the moment we are at 1.3 € / litre – that’s cheap. It’s about 5.8$ / gallon. Diesel is cheaper, it has reduced tax to help truckers and farmers. Btw, farmers get a small contingent of tax free diesel.
Well surely by now Eulenspiegel you have realized Americans like to take baby steps. When it comes to doing the correct thing regarding tax policy. The only thing the right cherish’s more than their religion is their dollar. Health and a livable environment won’t be valued until it’s lost and an opportunity to make a buck trying to recover it.
Only in America
“The only thing the right cherish’s more than their religion is their dollar.”
Coming from a hypocrite who has bragged about making a killing in the oil biz, here in this forum, at the expense of the consumer, lol.
There’s not really all that much difference between a Republican Lite congress critter or president aka Clinton wing D and a real Republican, lol.
Mike says: “America needs to teach them a lesson in democracy. Lets sanction their oil exports and finish them off completely. ”
Mike, you know more about the oil industry than most people on this site, including especially me, will ever know. I believe that your comment is [sarcastically] saying what I believe. If we sanctioned their oil, that could lead to abnormally low oil prices, even if there were a shortage. That is because investors would then “know” that Venezuela will fail, and that a new government might be able to increase production back to historical levels.
There have been countless stocks that have declined in value because they paid a 6% dividend because of a low price. They keep paying it, and the price drops another 33%. Now it is an 8% dividend. The price drops another 25%, and now it is a 10% dividend. Finally, they cut the dividend to zero, and the stock rises significantly. Why? Because the investors knew that they could not keep it up without going bankrupt. Now that they took bankruptcy off the table, the company is investable.
After a government failure [morally correct in my view], oil will likely come under increased pressure because production projections will lead to thinking similar to what we are now dealing with in Libya, and to what has been dealt with in both Iran and Iraq.
Clueless, thank you, that is precisely what I meant regarding Venezuela, which is dear to me for many reasons, and you have speculated properly. Venezuela has tremendous reserve potential in the Orinoco region, oil that America needs now, and will need desperately in the future. It is the height of American arrogance to want to harm its people, to sanction its oil export ability, to cause more chaos than already exists in that country and to wish to destroy what might be left of potential investment in Venezuela, regardless of who is in charge of its government. You have given three very good examples of just how that works, thank you.
Its a world oil market, not an American oil market. The US shale oil industry has NO “hammer” over anybody in the world; without low interest stimulus money to borrow it can’t stand on its own two feet, BOTH of which now have self inflicted bullet holes in them anyway from overleveraged oversupply. Thank you again, sir.
Glenn,
With all due respect, you are one hell of a self-absorbed individual.
Do you actually post that many comments because you believe people are interested, or rather because you need to continue reassuring yourself that you are correct in your own mind?
Steve
I notice that his posts aren’t triggering many replies anymore. I think more people are hiding him and not seeing his posts. People seem to be skipping over him now and not trying to have a conversation.
That’s what happens when a troll floods too hard. It’s a fine art.
Javier Part 2
A lot of similarities in their rhetorical technique- ad hominem, argument by assertion, cherry picking, opposing facts with normative arguments etc etc.
Both frequently comment at Juddith Curry’s site. They’re probably cubicle buddies at the Koch brother sock puppet brigade office.
Glenn was over at OFW (which has degenerated into a alt right boys club) for a while– it wasn’t working.
I guess the main requirement is not being capable of being embarrassed, and a aversion of reality.
That, and being a sociopath.
Normative is almost being polite, it’s like a succession of delusional, bullshit just-so stories masquerading as deep scientific analysis, and the ad-hominems are just a part of standard passive aggressive narcissist/gaslighter make up.
Mike said:
Nah.
There’s Iran.
There’s Nigeria.
And there’s Libya.
I have always found that part of Mike’s argument to be the most ridiculous. Ron has shown for years now with his charts that OPEC went to great lengths to flood the market, over producing and even selling reserves into a flooded market to force a slowdown in LTO. But Mike always focuses on his fellow countrymen, his neighbors, and co workers in the industry to lay blame on. The US producers are doing what free market business men do. His values and condemnation are misplaced from where i sit.
I think Mike and Maduro must be related, perhaps separated at birth or perhaps he just fell asleep during his one hour economics class, after roughnecking all day I can’t hold it against him?
What does overproducing mean?
Does that mean KSA produced oil for which they had no customer?
I would suggest that to Texas Tea ‘over production’ means pushing the price of oil is so low that shale oil producers can’t make any money. Then again they weren’t making any at $100/barrel either. It’s an investment scam. Wall Street has to pump and dump something. It appears to be the only thing many people in Texas have going for them.
Chatting about finances in 2007 with Americans who thought ‘investment diversification’ meant buying another house, but in a different neighbourhood, had a similar droning quality and repetitive pattern.
Survivalist, the username should not remotely suggest that all Texans ‘supposedly’ in the oil business are arrogant assholes who like to flaunt their free RI and ORRI money and promote their over the top political idealism. That has always been my biggest fear when these guys comment; that the American public will read their stuff and be further assured that our country’s oil and gas resources are being managed by airheads. The antagonistic manner in which these guys comment, the stupid little smiley faces with their tongues hanging out at the end of sentences, just pisses people off. I suppose that is the intent, actually. Why, I have no idea.
Please know that many Texans in the oil business are not like that, are not at all like what the shale oil industry appears to be. Many are mindful of reservoir management, conservation of usable water resources necessary for human use, the environment, of employment stability for our workers and our long term energy future in America. Some of us actually seek better public relations, trust, and understanding of the oil and gas business from the American public. Which, by the way, is going to need a healthy, viable oil business for a very long time. The ‘anti-oil’ rebuttals to the ‘shove MY oil in your face’ comments on POB are equally antagonistic and equally unrealistic.
The US shale oil industry is on its own self serving path, run entirely by a different breed of cat, not many of which are more than assembly line well manufacturers. Using other people’s money, if they can erode conventional GOM and stripper well production in America to improve their the market share for LTO, they would do so. They have already put tens of thousands of good, hard working men and women out of business and/or out of work forever. Because the shale industry is woefully unprofitable it is constantly soaking service and supply providers for lower costs, dragging out payment of those costs often for 120 days or more, and has no plan whatsoever for paying its long term debt off other than hope for higher oil prices. It does not care about the strife and economic hardship it may directly or indirectly cause other countries in the world with overleveraged LTO oversupply (please see comments). It is in charge of much of our remaining hydrocarbon resources in America and it is pissing those resources away for CEO bonuses, under the guise of cheap gasoline that is good for America, but on an ‘enjoy it now, pay the price later’ basis.
Even facets of the shale oil industry itself loathe each other. Hamm with Continental warns the Permian Basin not to overproduce and drive the price down, but himself has, what, 30 rigs running? Albert Walker with Anadarko makes $18M a year in compensation and blames Wall Street for his company being deeply in debt. The rest of the shale oil industry whines to OPEC all the time to cut production, none more vocal than Scott Sheffield with Pioneer, a $15M dollar a year beneficiary of inflated EUR’s. Its all pretty pathetic.
But that does not represent all Texans and certainly not all Texans in the oil and natural gas industry, I assure you, sir.
you are intelligent enough to know what it means. the strategy is as old as markets, flood the market to drive out the higher cost producer, reclaim the market share, then jack up price the calculation is to take the pain now, which many OPEC producers did, for more control and higher profits in the future. the problem is it did not freakin work this time? they took the pain and lost market share. must have studied where Mike did?
I don’t often agree with TT, but he’s right about the shale oil business bouncing back fast, regardless of whether it’s profitable, or not. It’s NOT profitable, but so long as the people running it are collecting big salaries and bonuses, it’s the SAME as profitable, in terms of this argument, and it will remain up and running until the ponzi money runs out.
I don’t know beans about actual oil field work, having never worked in the industry, but I said all along that shale oil could and would come back fast, when the market changed in it’s favor, and that driving the shale companies out of the market was a game plan that wouldn’t work, at least not any longer than the major conventional producers were willing to eat rock bottom prices.
The reasons I cited were simple enough that even a farmer could easily understand them. FIRST OFF, most of the work necessary to start production , or in this case, RESTART production, was already done, such as exploration, purchases of leases, building of roads, building of drill rigs, training men in the specific skills needed in shale oil work, setting up regulatory and permitting processes, etc etc. Nobody scrapped oil rigs that were relatively new, or bulldozers, or tanker trucks. They just PARKED them.
Conventional production has a time frame very similar to the time frame I work with in the orchard biz. It takes five to ten years from the decision to start actual work to actual significant production. Shale oil is more like the field crop farming model. If I can rent the necessary land, I can easily double my production of corn or soy beans simply by putting more men on my payroll, and maybe buying or leasing some additional equipment, NEXT YEAR.
Some people argued that there would be a big problem hiring enough men to get the shale fields up and running again, but I never bought that argument. There was no place for the men in the industry to go that they could make anything like as much as they made in the oil fields, and so most of them, being the kind of men that follow the lifestyle associated with construction work, were ready to give up whatever jobs they did find, and go right back to the oil fields.
The ONLY thing that could keep the shale oil industry down permanently would be that the price of oil would stay low enough that the shale biz could never be profitable.
Now that I’m OUT of the apple biz, it would take me at least five years to get back in,USING THE LATEST APPLE PRODUCTION TECHNOLOGY, unless I buy or lease an EXISTING orchard. Tuff for me, because apples are up, and my neighbors are doing well. Twenty years ago, it would have taken me ten years to get back in again as a producer.
Now if the price of potatoes jumps a couple of bucks a bushel, I can make money raising potatoes, and have a big crop ready for harvest next fall…….. even though I have NEVER grown potatoes on the commercial scale. My only problem would be buying or hiring a harvester machine, and there are plenty of new ones sitting at farm equipment dealerships.
The price of potatoes WILL NOT be going up two bucks, on average, because tens of thousands of farmers are in a position to jump in and glut the market with spuds, with the result being that the price would crash and everybody involved would lose their ass.
Neither the Saudis nor anybody else will be able to force the shale oil guys OUT except if they are ABLE and WILLING to sell enough conventional production cheap enough to keep the shale biz unprofitable.
The fact that the shale industry is borrowing money that it can’t pay back is basically irrelevant to this argument. It simply means that the current day to day cost of producing shale is lower than it would be otherwise. I don’t pretend to know how high the price needs to be for shale to be profitable, but whatever it is, that’s the price that determines whether shale oil comes to market, over the long term.
Ya don’t need a masters in business administration to understand this sort of shit. They teach it in Ag Econ at the sophomore level in cow colleges everywhere. I took the basic course in the same classroom with the econ and b a majors at the same hour back in the dark ages. Same text book, same everything, except my transcript reads Ag Econ 201,202,203 and the other guys transcript reads Econ 201,202,203. Ditto my biology classes, at the freshman and sophomore level.
Figure 1, Figure 16 and conclusion are of interest.
“The stacking order in Fig 16 is: declining North Sea and Mexico, growing Russia, rest at peak, OPEC and on top Canada and the US. The dashed horizontal line is the 2005 production level outside Canada and the US.
Conclusion:
The world outside the US and Canada does not produce much more crude oil than in 2005 The growth came from unconventional oil. There is no evidence to suggest that OPEC is flooding the world market.”
http://crudeoilpeak.info/incremental-crude-production-update-august-2016
Can you spot who flooded the market? It’s not exactly rocket surgery. I suppose all you special cases in Texas expect others to cut so you don’t have to. Why would they do that, charity?
USA is making lots of oil. Unfortunately the name of the game is making lots of money. And Shale oil producers are definetly not making any of that. I’m interested to see who’s left holding the bag. Once USA LTO peaks the carousel ride is over. Musical chairs. Early to mid 2020’s will likely see it all shake out. Or as I like to call it, the second half of Trump’s second Term.
“There is no evidence to suggest that OPEC is flooding the world market.”
really….
http://peakoilbarrel.com/opec-july-production-data/
what part of Ron’s chart do you NOT understand?
April 13 -Apr 15 OPEC average production was ~30,250,000BBLS /D
July 2016 they were producing ~33,500,000BBLS/D
an increase into the market of ~3,000,000 BBLS/D in a year…it made all the news….where were you? did demand increase 3,000,000 BBLS/D during that period? why would OPEC( a production cartel) increase oil production at that rate when there was NO demand for it? come on you can say it….it’s ok….to flood the market and drive out competition/increase market share.
and just in case english is NOT your first language:
car·tel
kärˈtel/Submit
noun
an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.
Kudos to this guy…looking back he was spot on;
Why has the OPEC decided to flood the market with cheap oil? Is it to hurt Russia, Iran and ISIS?
1 Answer
Dan K. Eberhart
Dan K. Eberhart, Chief Executive Officer of Canary, one of the largest privately held oilfield services companies in the U.S.
Answered Dec 3, 2014
OPEC’s decision to not cut production and allow the price of Crude Oil to drop due to a market surplus is to try and drive US producers out of business. The Shale Oil boom in the US has changed the global landscape of oil. The US has surpassed Saudi Arabia as the largest oil producer in the world, and the US is importing less Oil from OPEC nations, amongst others. The balance of power in oil is shifting, and OPEC is looking for ways to maintain control.
By not cutting production, OPEC hopes the drastic decrease in oil prices will make it unprofitable for US producers to continue to drill at their current rates. Presently, oil is around $70 a barrel. Most US shale producers can be profitable around $62 a barrel—and many can withstand even lower prices. US producers have planned for fluctuations in the market, and oil will reach a plateau before the price ceases to fall and starts rising again. Therefore, OPEC’s plan may not work. Or, the amount of time needed for it to work will end up being longer than OPEC members can handle.
What OPEC’s decision may show is that richer committee members — like Saudi Arabia — aren’t sympathetic to the plight of less affluent nations who need oil to stay above $100 a barrel to keep their state budgets balanced. Among the latter group is Venezuela, whose argument in favor of a production decrease that would prop up prices was rebuffed. OPEC appears to view the battle against US producers as more important than their own members’ wellbeing, and their choices may eventually have an adverse effect on their own organization.
Hi Texas Tea,
OPEC output increased by about 10% (30 to 33), US output increased from 5 Mb/d to about 9.5 Mb/d or about 80%.
Also OPEC was only about 1.5 Mb/d above recent peaks in 2008 and 2012 at around 32 Mb/d (about a 5% increase).
So it was the US “flooding the market” and the OPEC increase in April 2015 didn’t begin until well after the oil price level had started falling in Nov 2014 due to the US increase in output.
Dennis I may have missed the news. Who belongs to the US oil cartel, and where/when are the meetings held? If you can not distinguish private independent oil and gas producers doing what they do vs. the OPEC CARTEL and or state owned oil companies collaborating on market strategy, I can say you are leaving your credibly in the trash can with Mike’s
Hi Texas Tea,
OPEC rarely agrees on much and when an agreement is made it is rarely followed. In fact OPEC and Russia were not acting in concert when they increased output, they did the same as US producers and produced as much as they could.
Now when OPEC does not act as a cartel they are behaving badly and flooding the market by increasing output by 5%.
When the “good guys” in the US increase output from 5 to 9.5 Mb/d over 5 years, nearly a 100% increase, that’s great. US shale producers should be happy OPEC is now acting like a cartel as they have a shot at positive earnings. When OPEC starts following free market principles, the LTO producers may be in for a World of hurt, unless OPEC and Russia cannot increase output any further. In 2016 that seemed not to be the case, but eventually it may be and everyone will be able to produce flat out with high oil prices until either supply outstrips demand at those higher prices or demand destruction causes demand to fall faster than supply, in either case prices fall and supply falls beyond the peak (sometime between 2020 nd 2030).
What do you expect World output of C+C will be at the peak, assuming you expect a peak will be reached eventually? The EIA expects World C+C output will be 99.5 Mb/d in 2040, how about you?
The most recent trailing 12 month average (TTMA)for April 2017 was 80.5 Mb/d and the peak TTMA was 80.7 in March 2016.
The EIA also projects World C+C at about 84 Mb/d in 2022 and 86 Mb/d by 2025 and 90 Mb/d by 2030. After 2025, if these output levels are reached I expect flat or declining output. The EIA only expects oil prices at around $95/b by 2030.
It is not clear that supply will meet demand at these prices, I think oil prices may be higher than $95/b by 2030.
I can’t disagree with most of that but the distinction is this. If two or more US oil men get together and plot a strategy to influence market control, either by coordination of raising prices or flooding the market to drive out competitors they would be put in jail. As I am sure you are aware, US companies are regulated, they answer to lessee’s, shareholders, regulators lawyers etc. Each company acts in what they perceive is their best interest. That is NOT what OPEC is by a long shot, they meet routinely to determine what is in their best interest and how to achieve it, weather or not they agree or are successful is another story.
Hi Texas Tea,
US output was regulated in many states (Texas, Oklahoma, and Louisiana) between 1936 and 1970 by state agencies. This was considered the heyday of the US oil industry.
The end of this regulation brought us oil industry booms and busts, in the mid-eighties there were a lot of unhappy people with no work in Texas and elsewhere as a result.
So much for the magic of the free market.
Also something conservatives miss is that the Reagan recovery was due to old fashioned deficit spending as military spending was increased, taxes were reduced and deficits ballooned. Again all the BS about reducing government interference in the market mostly applied to regulations the government intervened strongly in the macroeconomy. It had little to do with a laissez faire economic philosophy.
Also omitted from your morality tale is what OPEC did between March 2015 and October 2016.
I must hand you one thing, though, and that is that you are very adept at twisting things around so as to make US shale the lone villian in your vaudeville act.
I make and sell stuff. When the price of stuff goes down I make and sell more of it. Keeps the wife in the pink. It’s not a morality tale. It’s business. I wouldn’t expect you to understand that though. Shale is a charity case, a Wall Street pump and dump of epic proportions.
Somewhere up above, somebody posted excerpts from a Harvard School of Government doc that includes the following.
“Only geopolitical and psychological factors and a still deep-rooted belief that oil is about to become a scarce commodity can explain the departure of oil prices from economic fundamentals.”
This refers of course to the time period when oil prices were running up to and past a hundred bucks for several years on end. I call it bullshit, pure and simple, coming from a source that simply does not understand the REALITY of supply and demand. Now of course supply can be manipulated, but not easily or quickly, and any significant manipulation has to be at the level of the major producers, because there is NO OTHER PLACE it CAN be manipulated.
I have not seen any data that doesn’t smell as bad as last weeks fish bait indicating that ANY major producer was doing ANYTHING other than producing AS MUCH as possible, as FAST as possible, during those years, speaking in general terms, using the broad brush, so to speak. Maybe most producers maintained at small reserve capacity that they could have brought on line for a little while, but it’s damned unlikely these capacities exceeded ten percent of production in ANY case, and a lot less, in most cases. Running an industry long term at ninety percent plus of absolute capacity is pretty much running it pedal to the metal.
If any body has solid data indicating OTHERWISE, PLEASE post it here, now.
Since I have not seen any such data, I’m presuming it doesn’t exist.
Now at the OTHER END of the industry, the consumption end, it’s also obviously possible to manipulate demand, but not by very much, and not quickly at all, meaning short term. The medium to long term is different of course, as for instance governments putting substantial taxes on motor fuels, and or mandating better fuel economy.
When fifty million barrels, or eighty million, or any amount , comes to market, it is SOLD, and it’s sold, in the last analysis, to the highest bidders, the USERS of it. Those who aren’t willing to pay the going price do without to the extent they can or must. Those who can pay the price buy as much as they want, at the going price. Not a barrel more, not a barrel less. The amounts that go into strategic reserves are trivial in relation to consumption, and any that goes into commercial or speculative storage comes out again sooner or later.
The consumers of the world paid the price, because they HAD to pay it, or do without,or with less, because the oil flowed to the people willing to pay the most, at the final delivery points.
Anybody who believes otherwise has his head up his ass, and doesn’t understand the abc’s of supply and demand.
IF I’m wrong, in terms of the big picture, it’s because the producers were holding back on production during the run up, and during the time the price stayed up. SHOW ME THE EVIDENCE that they were doing so.
Ron Patterson seems to be as as knowledgeable on this topic as anybody I have ever heard of, and I don’t think he believes that any major producer was holding back to any significant extent.
Does ANYBODY here think any major producer was holding back in a serious sustained way?
Is anybody here stupid enough to think that if somebody somewhere was able to force the price of gasoline up a dollar by playing some middleman game, we wouldn’t know WHO it was, and HOW it was managed?
WHY should the great white sharks of the business world, such outfits as Exon and Walmart, allow a bunch of shady unidentified middlemen to get between them and suck up money that either or both of them could be recording as profits?
Now I am not arguing that an organization of PRODUCERS, overt or covert, can’t manipulate supply to raise or even lower prices. OPEC at one time was obviously capable of doing so.
And an organization of consumers, if it were large enough and cohesive enough, could force prices down, to some extent, by refusing to buy at higher prices, but this assumes that enough producers will sell at a lower price, to them, to meet their needs. This might or might not happen.
“Only geopolitical and psychological factors”
Hey Trumpster, clearly your hate for HRC must have distorted your memory. Clinton and Obama took about a million barrels of Iranian production off the market for a few years by sanction. Convincing them to not build nuclear weapons.
HI HB,
Now it’s true that war hot and cold, mostly cold backed by the threat of hot, in this case, does occasionally force reductions in production.
But as usual, you are displaying your blind political allegiances instead of THINKING.
Reductions forced by sanctions or war are not voluntary moves. Nobody so far as I am aware cut back or held back significantly on production DELIBERATELY, in order to keep the price up.
Such subtleties seem to be lost on you.
I try to post the truth as I perceive it to be, regardless of political allegiances, my own, or those of anybody who might read my comments.
Bottom line, every barrel of oil that is produced, minus what might be lost by accident or leakage, etc, is sold, and it is ALL sold at whatever price it takes to sell it.
NOBODY can FORCE an oil consumer, from the commuter who needs a few liters a day to a major trucking company or airline, to pay any more than he has to, because the consumer has the option going to a competitor, in the grand scheme of things.
And even though the oil industry is highly concentrated, it’s still a cut throat competitive business, on the global scale. Some producers are perfectly willing to sell at a loss for a substantial period of time in order to inflict pain on their enemies, perceived or real, and the rest hang in there as long as they can, hoping for better prices, which always eventually return.
See ya over in the non petro thread.
“Some producers are perfectly willing to sell at a loss for a substantial period of time in order to inflict pain on their enemies”
Jeez, who is not in that category?
Imagine that.
I have to agree, most people, companies, and countries are happy to inflict pain on their competitors.
But not very many can AFFORD to do so, at least not on the grand scale over an extended period of time.
The Saudis and a few of their sand country neighbors are about the only ones who can afford it, but even the Saudis have been forced to tighten up recently.
Russia couldn’t afford it, but hung in there anyway, so as not to lose any customers, and to inflict punishment right back at the Saudis.
This whole game has played out so far to the great advantage of Uncle Sam, lol. It looks as if it will last a while longer yet, probably until the combined effects of lack of upstream investment and depletion flip the market from glut to shortage.
Personally I don’t believe ANY country has the capacity to keep prices down by selling cheap for more than maybe another four or five years, unless maybe the world economy crashes,which is a real possibility, or unless electric vehicles take over the market virtually overnight, which seems extremely unlikely.
And some are wiling to produce at a loss to keep the ponzi scheme rolling. If it weren’t for USA LTO Wall Street would have very little to loan to and live off of with service fees. And USA oil imports would be considerably higher. It’s a house of cards. Give it 5 years.
Survivalist has a point, some are INDEED willing to produce at a loss, and in part, the unstated goal IS to keep the ponzi scheme rolling.
But none of the people producing at a loss expect to lose their OWN money. They are EITHER optimistic, and betting on holding on until the price goes up enough that they can get deep into the black, recovering their investments, paying their debts, and banking some hefty profits, OR they don’t really give a shit, because even though their business venture may be hemorrhaging money, they themselves are collecting hefty salaries and bonuses while burning thru OTHER PEOPLE’S money. Damned few of the people running shale companies could find other jobs paying anything like what they are making now, and they will continue to make their OWN financial hay as long as they can.
And SOME of the people who are actually supplying the money likewise don’t appear to give a shit, because the money they are supplying is NOT their OWN money, it’s either money put into their hands by customers, or money that belongs to the bank or other financial institution they work for.
Consider this. Suppose you are running a huge bank, and you loan out a hundred million actually expecting to collect only half of it back from the people you loan it to, but you think there’s an EXCELLENT possibility you will get a bail out via the tax payer for the remainder; AND by risking the loss of the fifty million, you do your part to keep the LARGER economy humming, the portion of the economy where you are lending hundreds of millions and billions to car buyers, home buyers, and businesses of every sort from a to z.
Even if you are a high ranking manager who KNOWS the shit is going to fly concerning loans to tight oil companies, at some point, you are riding high for the moment, because most of those loans are being rolled over, and you know how to insulate yourself from the consequences later, the worst of which is that you may get fired from your seven figure job, AFTER you make a few million more in salary and bonuses.
Suppose you are a manager who wants to reverse course NOW, and you try to do so? Maybe you will succeed, but there’s maybe a much greater chance that OTHER managers , some or most of them higher ups, will squash you like a bug, because you will be putting THEM on the spot, because THEY were the ones who approved all this questionable lending to shale companies IN THE FIRST PLACE. You just don’t do things that make your BOSSES look bad in the banking industry, if you want to stay in it. The fact that the shit must hit the fan LATER doesn’t matter TODAY to your bosses.
If you are the president, or a congress critter, you want the economy to roll right along, NOW, because that virtually guarantees you will be REELECTED next time around, given that we routinely re elect incumbents, the only real exception being that when the economy goes sour, or the “in” party REALLY misinterprets the mood of the voters, a dozen, maybe two dozen incumbents might lose.
If you work at any level in any federal agency that is supposed to be looking out for financial hanky panky, you very quickly realize that the BOSS, who is invariably indebted to the president and a few of the more powerful congress critters, wants to please HIS bosses, and that there is an UNSPOKEN BUT WELL UNDERSTOOD rule that you don’t mess with the shale oil biz,BECAUSE UNCLE SAM is WELL PLEASED with it, as it currently exists.
It’s keeping down the price of oil, so fucking what? There aren’t very many people who are unhappy about that, lol, but there are tens of millions of people who LOVE cheap oil.
It’s helping the economy hum, it’s hurting our real and or perceived enemies, it’s helping our friends who are mostly dependent on imported oil, so what’s to be unhappy about ?
Anybody who expects anybody in Washington DC ( other than maybe a handful of congress critters from oil states who owe their seats to oil interests who paid for their election) to give a shit about the people in the oil industry is unspeakably naive.
Now I’ve painted fast , with a very broad brush, and this comment should be read for INSIGHT rather than interpreted literally. There’s a substantial element of truth in it, but how much, precisely, is impossible to say.
“The “dot-com bubble” was a speculative bubble covering roughly 1995–2000 (with a
climax on March 10, 2000) during which stock prices in Internet based companies rose
rapidly to a level far in excess of what those companies were worth. This was followed by
a collapse of Internet company stock prices in 2001 as investors realised that they had
paid too much for the stock and that most of these companies had not and never would
make any profit.”
http://www.postpeakmedicine.com/PostPeakMedicineBook.pdf
Sound familiar? USA LTO. It’s a bubble.
You know, the shale boys take a lot of blame but I wonder how much money the majors are making on $600,000 a day offshore platforms that pump a hell of a lot of oil all together. Please comment, George, if you would.
I think at $600,000 per day you are referring to late generation offshore drilling rigs, rather than a production platform. A lot of these have been stacked – utilisation is around 50 to 60%, actually less than 50% and going down in GoM. But that won’t make any difference in oil supply for 5 to 10 years. Offshore operating costs are around $10 per barrel, although there is also a fixed price independent of production rate. The wells don’t decline as fast as LTO so they would have to shut in a well to make an immediate change o production – that would never happen voluntarily. They have cut brownfield development and i think some major maintenance campaigns, but these too don’t have much impact for a few years.
In some areas royalty and tax costs tend to be backloaded so they aren’t paid out until after the project development costs have been met, and then only as a proportion of profits, this means that the producer country has taken a lot of the impact from lower prices (also it means they would like the oil to keep flowing at maximum rate).
I forgot to say so in my reply to old HB, but not only was everybody producing flat out during the high price period under discussion, the oil went to the people who were willing to pay enough that they OUT BID other buyers, who consequently bought little or none, being unable or at least unwilling to pay the going price. There weren’t any shady secred middlemen responsible, the buyers themselves forced the price up until some buyers simply quit buying.
Prices behave this way in commodities markets, when producers can’t up production fast enough, and consumers are flush with cash and want the product.
Some members of my family, decades back, hit a golden year in the fruit biz, having a big crop when the national crop was short, and made enough in one year to build nice new brick houses for cash, plus buy a new car and a new truck, cash again. etc.
And they were basically nickel and dimer one horse farmers. Well, thirty horses, because that was the size of the one tractor they owned back then.
Interesting post George. I appreciate it. Do you have an update on world oil production?
I find the world production quite difficult to get a handle on (no surprise there I expect). Conventional oil is kind of predictable a couple of year’s out as the projects have to go through FID and they always make the news, likewise discoveries. But LTO works on much shorter cycle times, and doesn’t seem to follow normal investment logic (as is discussed here ad nauseam). Also Iran and Iraq are a bit of a black box.
Overall I still think we will hit the end of the pipeline of projects started in the high price years some time around mid 2018, probably when the announcements for Egina and Khurais start-ups muke the news. We will then go from around 3 mmbpd new production (plus some gas) to about 1, with little chance of adding short term conventional projects for about 4 years – and because of the dearth of discoveries probably not much easy oil would be available even with a big price spike. IEA, OPEC and some others have the supply drop in 2020, but I don’t know where they think the production is coming from the two or so years until then. There will be some ramp up of new projects (as the chart for UK shows, possibly a lot more in Russia which come on line very slowly), and a few projects have been delayed (e.g. Big Foot in GoM is 3 years late, Angola Kaombo FPSOs are a year late, Khurais has been delayed). The places that there is reserves that could be developed – Iran, Iraq, Brazil and less so Angola and Nigeria – have slowed to a crawl in terms of licensing, JVs etc. On the other hand I think the budget cuts since late 2013 are going to show up in increased downtime (from lack of planned maintenance on ageing facilities) and increased decline rates (from reduced brownfield and in fill work).
Sometime in the next three years conventional oil supply is going to be falling fast, most countries don’t have the undeveloped reserves to do much about it no matter what the price. So if there is a big demand gap (i.e. no recession driven demand crunch, and insufficient efficiency drive or renewable surge) then it’s either up to US LTO or we do get a energy price driven crash. That’s really not much different from what I’ve thought since 2014. What I have changed my mind on was I though that scenario was our biggest problem, now I think without question it has been surpassed by climate change.
Between depletion, global growth slowdown, climate change concerns, energy substitution, and increased energy efficiency, I think oil use has got to go down. How disruptive the transition will be is the big question in my mind.
Yes I can imagine that it´s not only a major task but also difficult to guess the wells future production. But it was mostly near term I was interested in, so I got the answer I was looking for, thanks. Currently world petroleum stocks are falling by maybe 1,5 mb/d. This means that by the summer next year, stocks should be back at normal levels or bellow and falling by maybe 3-4 mb/d and with the deficit increasing rapidly. The question is how low the commercial stocks can get before we start to see petrol stations running out of gasoline occasionally. I think an oil crash could happen much faster than most people can imagine.
I don´t agree that climate change should be a bigger problem currently. It is a slower process than an oil crash. Or has there been any news that made you change your mind?
I wasn’t suggesting climate change will present immediate problems worse than an oil shock, but longer term it is a higher consequence and cannot be dealt with if left until the huge disasters are obvious to all. What’s changed is a) I’ve learnt a lot more about it, b) things are going bad faster than expected, c) almost all the new research results seem to indicate worse outcomes than previous ones, d) the non-linear and stochastic nature of the system means the risks from the bad scenarios are going to much outweigh any good or neutral possibilities.
One thing that I didn’t mention that has surprised me (and I expect many others) over the recent years is how discoveries have crashed in both number and size. All the IT innovation was supposed to mean fewer dry holes, in fact the opposite has happened. To me that can only mean there is much less oil actually to be found than saw thought. What the technology has done is let us produce it faster once it is found. The limits to growth studies had a BAU case, which we have been following fairly closely, and a high tech case which led to a cliff like crash after higher growth – but what if we have lower than modelled resources and are only following the BAU case because of technology, and therefore are going to get the fast collapse without the previous increased growth?
Hi George,
Is there anyway to estimate how much reserve growth there has been in the UK?
Even though there have been few discoveries, reserve growth may continue, though the rate of growth is likely to decrease over time.
There was some work done just after the peak that suggested overall growth had been about 25%, mostly on the large fields discovered in the 70’s. It also found that the growth had followed an exponential curve over time, based on some work done in Canada – i.e. over time it tended to an asymptote, I think at around 20 years it was effectively maxed out. There was actually a lot more growth in Norwegian fields as they tended to start with a more conservative recovery factor. The recent reserve numbers downgraded most of the “Possible” reserves (less than 50% chance of recovery) to “Contingent” (less than 10% chance, which would suggest little, and possibly falling, chance for any more growth. There used to be things called “Brown Books”produced which had a lot more detail but now I can’t even find individual field reserves so everything is lumped together from year to year, but small discoveries since 2000 won’t have much growth and any that would occur has mostly already been included.
Thanks George,
I should have been more specific, I was thinking of 2P reserves and how the estimates of those has changed over time. To make sure I understand your asymptote comment, this implies reserve growth will fall (or possibly has already fallen in the UK) to zero?
Do you roughly remember the Norwegian reserve growth was it 50% or maybe somewhere between 25% and 50%?
Great stuff thanks.
2P numbers mostly grow if possible gets turned into probable, thats what I was talking about. The asymptote is applied from field discovery or production (I can’t remember which) so growth on that fields reaches a maximum and stop getting bigger. Norway growth on their big fields was around 40% to 50% I think, but they are all pretty much exhausted now
Hi George,
I just wanted to clarify that I was on the same page as you because you also talked about a reduction in possible reserves (which made me think you were thinking 3P when I was thinking 2P, but I see now what you mean, if possible reserves are smaller there is less potential for 2P to increase from possible reserves being reclassified as probable reserves. Thanks.
Yes I agree. Considering how fast discoveries have declined and how fast they are extracting the oil, it looks more likely that the decline curve will be seneca cliff like. I saw that the well you mentioned, Egina , will have a reserve / production ratio of only 7,5 years. By the way, it looks like on the ndp homepage that they have started to drill Korpfjell. It will be very interesting to see if they find anything.
Here is an article about Korpfjell
https://thebarentsobserver.com/en/industry-and-energy/2017/08/statoil-spuds-controversial-prospect-northern-barents-sea
If I was to bet I’d say gas most likely, dry hole second, oil third, and most probable of all that I’m completely wrong.
A lot of deep water production platforms have shorter than usual plateau times and actual lifetimes for the facility, especially Nigeria and Angola, but even Brazil and GoM. At one time I think I might have known why, but can’t remember exactly. The deep water wells have extremely high initial production but decline quickly and the cost of deep water rigs might come into it as well.
Hi George,
It would seem that FreddyW’s so called “Seneca cliff”, which usually implies decline of 10%/year or more, is not what you think is very likely for UK oil, or your projection does not look like a Seneca cliff to my eye.
Let’s assume oil prices increase by 15%/year annually for the next 8 years (oil would be at $150/b in 2025), wouldn’t your scenario be pretty conservative under that assumption?
Dennis,
I wrote “seneca cliff like” with a “like”. With that I meant that the decline will be higher than the increase we have had. I think the decline rate will be at least 4%, not 10%. But of course wars or a collapse of the financial system could cause higher decline rates than that.
World decline rate depends on two things, the average decline rate of individual fields and the decline in discoveries. Total decline rate will eventually reach the lowest of those values. So if for example decline rate in discoveries are 5% and field declines are 4% then total decline rate will be 4%. If field decline rates increases to 6% then total decline rate will be 5%. According to this article field decline rates are 5%:
https://www.platts.com/latest-news/oil/london/analysis-decline-rates-spending-crunch-fuels-26507001
So then the question is what discovery decline rates will be. Hard to say, but I would say maybe the same, 5%, or maybe even more. Reserve growth has absolutely no impact on the decline rate as long as both old and new wells have the same reserve growth. It only means that the decline will start from a higher level and a bit later. An increase in oil price could add more reserves which would temporarily increase production or lower the decline rate, but after those reserves have been added, then total decline rate again depends on field decline rates and discovery decline rates.
Freddy’s question was about the world not the UK, and I think I kind of expanded it further to be resources in general. I personally don’t think of a Seneca cliff implying 10% per year decline – it surely depends on the time scale over which the cycle happens (e.g. yeast die off is a measured in minutes or hours) . My projection includes pretty much all discovered undeveloped oil, I don’t think high prices would make all that much difference without new discoveries – maybe some more effort at EOR on some fields, but then there’s the problem that a lot of the platforms are at the end of life.
George,
Yes it sounds possible that the high depletion rates in deep water are because of high costs.
I don´t dare to guess if they find anything in Korpfjell. But I think it’s a very important well for Norway. If they find something, then not only may it be a very big discovery, it also increases the odds for finding more in that area. If on the other hand it’s dry, then Barents sea doesn´t look very good. Anyway, in two weeks we will know.
Hi George and Freddy,
Notice what happened to the time from discovery to production in UK.
If something similar happens at World level decline rates are reduced, just like the overall decline rate in the North sea fell.
The different basins all over the World will hit the steep part of their decline curves at different points so the 4% decline scenario is unlikely until demand falls at that rate after 2040. This assumes no major Wars or recession.
Dennis,
What makes you think that those decline rates will not happen before 2040? You know that currently producing oil fields decline by 5% and that oil discoveries have been significantly bellow production even when oil prices were high.
Hi George
Statoil are also drilling the Verbier prospect, located within the P.2170 Licence area, using the semi-submersible rig Transocean Spitsbergen.
Maybe 40 or 50 mmboe if they hit something, but likely oil, and could open up a couple of other prospects.
I mislabelled one of the graphs – production was by start-up year not discovery year. I’ve also added the total average water cut. This is above 80%, coming down a bit with the new fields being added, but it means most of the older fields are 90% and above, and Buzzard might be going that way soon. It’s pretty difficult to get much higher production from a field once it hit’s that sort of level. Higher prices might extend the life of field but only with ever decreasing flows.
Hi Freddy W,
George might think that long term, climate change is much more of a problem, but that short term increases in carbon will affect that long term outlook.
Perhaps a peak in oil output is a good thing from that perspective as it might result in lower carbon emissions, though this will depend in part on how much natural gas is around to aid in the transition and the relative price of coal, natural gas and non-fossil fuel energy sources. If we move heavily to coal as an energy source, then carbon emissions will increase rather than decrease. There is also the problem that the amount of economically recoverable coal and natural gas is not very well known (it has been studied far less than oil).
I mostly agree with George’s assessment, but higher prices might allow more infill drilling in OPEC and Russia and faster completion rates in LTO which might be enough to keep us on plateau until 2025, I expect a peak in World C+C of roughly 81 to 85 Mb/d between now and 2025, but perhaps it might be as high as 90 Mb/d (C+C only) with definite decline after 2025 or a lower peak of 83 Mb/d might have an extended plateau out to 2030, a lot depends on oil prices and progress in efficient use of limited oil supply which are difficult to predict.
Dennis — “There is also the problem that the amount of economically recoverable coal [and natural gas] is not very well known (it has been studied far less than oil).”
This is incorrect, just talk to any coal geologist. Coal reserves (unlike oil) exist almost entirely on land and have been assessed in great detail more-or-less continuously since the industrial revolution. And, there is a huge volume of coal that could be exploited though hopefully that won’t be the case.
Solar energy falls down on us every day whether we use it or not. Imagine if coal did that in equal amounts of energy.
Coal does not dig itself out of the ground and jump into a furnace.
Fish — I was arguing the reliable of reserve estimates of coal vs oil and not advocating anything. I’d prefer it if not one additional ton of thermal coal was produced.
Hi Doug,
I agree that the technically recoverable resources may be pretty well known, but the reserve estimates have changed quite a bit over time and the economically recoverable reserves depends upon the future price of coal which is difficult to determine.
If you have this somewhere it would be interesting to see 🙂
Steve Mohr did his PhD Thesis on fossil fuels
http://ogma.newcastle.edu.au:8080/vital/access/manager/Repository/uon:6530
A summary at
http://www.resilience.org/stories/2010-07-20/projection-world-fossil-fuel-production-supply-and-demand-interactions-paper-exce/
Basically Mohr’s estimates are between 400 and 600 Gtoe for coal, also Rutledge has published relatively low estimates of 365 Gtoe where BP reports about 570 Gtoe. Note 2 Gt coal is about 1 Gtoe.
http://rutledge.caltech.edu/
I also hope the lower estimates by Rutledge prove correct possibly due to low coal prices due to plentiful natural Gas and wind, solar, and nuclear power, but the natural gas resource is limited and whether solar, wind, and nuclear can be ramped up quickly enough to limit coal production is unknown.
The problem with coal resources is that there is not a standard World wide as to what depths, overburdens, and seam volume are economically feasible. The estimates can vary widely depending upon the assumptions about feasibility.
“…the economically recoverable reserves depends upon the future price of coal which is difficult to determine.” Yeah, I think I was aware of that Dennis.
“The problem with coal resources is that there is not a standard World wide as to what depths, overburdens, and seam volume are economically feasible.” No, that’s not a problem. Coal geologists are (mostly) Professional Engineers who are quite at home calculating reserves in Australia, Zimbabwe or anywhere else on the globe.
“The estimates can vary widely depending upon the assumptions about feasibility.” No, feasibility studies are very conservative documents based on geology, “metallurgy”, markets, political stability, everything a potential mine will face respecting operational viability.
Hi Doug,
It thought that would be the case, but maybe you missed that in my original comment I said economically recoverable resources and you suggested my comment was incorrect.
Perhaps you meant the part about it being studied less than oil, I know that there have been many evaluations of coal particularly in industrialized nations, there seem to be very different estimates of the Worldwide coal resource by different authors. The difference is fairly wide between the low and high estimates ranging from 690 Gt (Rutledge) to 7600 Gt (Hubbert). See pp 61-62 of Steve Mohr’s Thesis. Mohr’s low and high estimates are 700 Gt and 1500 Gt with a best guess of 1000 Gt for World Coal URR.
It is for this reason that the coal resource seems relatively unknown, there have been fewer studies published on the URR of coal relative to oil based on Mohr’s analysis in 2010.
A newer study by Mohr et al in 2015 at link below
https://www.researchgate.net/publication/267870440_Projection_of_world_fossil_fuels_by_country
In the newer study coal resources are estimated from 663 to 1718 Gt with a best guess of 1161 Gt. The peak in coal output is expected between 2018 and 2024.
Dennis — Not being a coal geologist I can’t speak with any authority, however, I did have a Coal Geologist (P.Eng) on staff for more than a decade who quarterbacked Feasibility Reports on thermal coal deposits in Korea, Australia and B.C. Canada. BTW, the USGS does not have access to coal reserves for many deposits, deposits which are often held in company and/or government files. I doubt if you are an expert either.
Hi Doug,
No I am not an expert, I just read reports written by experts. Before you said the coal reserves are well known, now you say experts at the USGS don’t have access to all the data which would seem to imply that the reserves are less well known.
Now I am confused, do you think they are well known World wide or not?
The question we are trying to answer is how much coal (cumulative total produced) is likely to be produced?
I would say the answer is not very clear, would you agree?
Dennis – Coal reserves are well known to people who mine coal (as proprietary info.) but not to others (i.e., Financial Analysts). As to how much is likely to be produced I have no idea but nor does anyone else. Just hope it’s less, much less, than anyone imagines.
Seems to me that the ultimate amount of coal burned will not be limited by the resource size, but rather by demand and the prosperity of nations.
A poor and rapidly growing region like the Indian subcontinent will have high demand and plenty of resource to purchase. But if they achieve a sufficient level of prosperity they would prefer to utilize Nat gas, Solar or even Nuclear rather than coal. How this pans out there is up for grabs. Goals vs reality are not aligned clearly at this time.
Also, isn’t there a large pile of seabed coal here and there?
Hi Doug,
Thanks, now I get it and I agree. The problem for policy makers is that nobody knows how much coal is likely to be produced.
I believe the companies are usually willing to share their data with government agencies, the government just does not attach names to who owns what and simply gives an estimate that x amount of coal is in y basin, etc or that is the way the USGS works as I understand it, much of their data comes from private companies.
Absolutely agree that it would be better for the environment if the low estimates are correct, unfortunately Hubbert-like analyses often underestimate future URR.
Hi Doug,
Does every engineer working for every company in every country in the World use the same depths, amount of overburden, and seam width when doing their resource estimates?
I suspect there is considerable variation.
When doing a feasibility study would every engineer make the same evaluation of future prices, political stability etc, and would these not change over time so that any evaluation would be different depending upon when it occurred?
In addition for the reserve estimate to be correct one would need to be able to assess the future accurately which is pretty much impossible.
So the best we can do is have a range of estimates that were done at a variety of different times made with a variety of different assumptions.
Perhaps we have a pretty good idea of upper and lower limits, but the difference is pretty large according to the range of estimates in the published literature.
And yes you would know better than me as a geophysicist, do you have an estimate of World coal URR?
World thermal coal resources are truly vast; reserves not so much. My hope is that, every ton of it remains in the ground. Metallurgical coal will continue to be mined for decades of course.
George, maybe I’m confused, but I thought Khurais came online at about 1.2 million bopd in 2009, and had been increased to around 1.5 million bopd currently.
The expansion project was delayed to mid 2018 (or was it advanced again and I missed it), that was what I was talking about. Sorry for the confusion.
So the 300,000 bopd expansion has been delayed, but they are producing (or capable of) around 1.2 million from Khurais?
That’s how I understand it.
I found a article which says they are projecting to increase Khurais from 1.2 to 1.5 sometime in 2017 or later.
http://www.constructionweekonline.com/article-35229-saudi-arabia-khurais-oil-project-delayed-past-2017/
Do you know of any major oil projects they have in process, or are they just doing small oil projects and gas?
Thank you George for sharing your work on the UK. I’ve learned a lot from the information you have shared.
I think Khurais is going to be May 2018, maybe a bit later and the CEO has said it would only replace declining output elsewhere, not add to overall production. They have ongoing work replacing offshore wellhead platforms – I think this is to include ESPs. The project has some name like “Maintain Flow” so again it suggests no new oil but more like sucking on the dregs. They are looking at developing tight gas, which I think is proving difficult, and the other stuff is petrochem and refining work. They also have to replace the Manifa (? from memory) water injection line that has corroded.
Texas monthly initial production reported for June 75,254,080 oil, 8,763,138 condensate. Expect less for July, as oil well completions were substantially less. Meanwhile, in the Twilight Zone, EIA (Endless Imagination Agency) reports US production at over 9.5 million a day. Do not adjust your set, the government has control of it.
Texas production must of surpassed the March, 2015 peak for US to be at 9.5 million BOPD?
I miss the Texas correction factors posts by Dr. Dean Fazzani(sp?).
TX production must still have a large lag. I remember we used to debate this all the time.
Texas initial production for March was 77,252,815 oil, 9,413,187 condensate. Do just a little math, and you get an idea of what is really happening. Not the actual final numbers, but the direction it’s going. July numbers could be higher, as there is sometimes a lag between completion, and posting it. All told, I’d say EIA is lost in space.
This really should come as no great surprise. Texas production, at this point in time, is decreasing, versus increasing. Completions to July in 2016 was at 5621. In 2017, as of July it is at 3516. There may be some improvement in completion techniques, but probably not any magic. DUCs don’t add much to production. My guess is that there is, at least some, Permian conventional decrease in there, too.
If it is any help, I found his Texas RRC May charts on Twitter, dated July 19th.
oil and condensate
https://pbs.twimg.com/media/DFHuHT1WAAAUcF7.png
natural gas
https://pbs.twimg.com/media/DFHuYM3XoAQdY3A.png
Hi Shallow sand,
The weekly estimates of oil output should be ignored. The monthly estimates are much better and for May 2017 (latest monthly estimate) US output of C+C was 9169 kb/d.
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm
At the end of May 2017 the 4 week average for estimated crude output was 150 kb/d higher than the monthly estimate at 9320 kb/d. We will have to wait a few months to know what August output is (late October). The June production data will be out on Aug 31, 2017. Also note that Dean Fantazzini’s estimate for the most recent month (May 2017 in this case) often varies quite a bit. His April estimate is about 30 kb/d lower than the EIA estimate if we use the most recent 12 months of vintage data to do the estimate.
The EIA estimates are not perfect, but for most of the past 12 months (except April and May) the EIA estimates for Texas have been lower than Dean’s estimates.
Also some people have access to Drilling info data and at least for Oct 2016 to March 2017 the drilling info estimate for Texas output is also higher than the EIA estimate.
Texas is tough to judge, one has to be patient, also we need to be careful about the total number of completed wells as vertical wells have far lower output than the horizontal wells so not an apples to apples comparison.
As an FYI, the theory that KSA controlled the price of oil and gained or lost market share (with the US as customer) as a result.
Interesting graph from EIA:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mttimussa1&f=a
That’s annual. Nothing much is happening. Certainly not recently, when their supposed flooding of the markets allegedly happened in order to affect market share. Nothing happened. The US hasn’t grown import from KSA, nor has it fallen.
Useful to also realize KSA has grown output since 2008ish. They grow output, they send the same to the US, obviously they send their growth elsewhere.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mttim_nus-nrs_1&f=a
Russia. With sanctions. Headed back up to 2010 levels.
Russia developing it’s own Fracking technology.
http://www.businessinsider.com/russia-claims-to-have-invented-an-alternative-to-fracking-2017-8?IR=T
Looking at JODI Data the USA and Saudi Arabia account for most of the worlds excess oil inventories (no surprise there)
I used the EIA numbers for the USA, without NGLs or ethanol. The June monthly number hasn’t been published yet and so I used an average of the weeklies.
JODI June closing stocks, 30 countries (31 including Saudi Arabia) with consistent data. Nearly all OECD countries.
Another version on Twitter
https://pbs.twimg.com/media/DHrdw9bXkAAt-xC.jpg
Six OPEC countries with data available on JODI
https://pbs.twimg.com/media/DHqvNrlXoAA03xX.jpg
What is an excess oil inventory
Inventory beyond what
Hi Watcher,
Excess inventory would be higher than normal levels and usually coincides with lower prices.
OPEC production has increased 0.9 million b/day from the March low. Before this most analysts were predicting world inventory draws into 2018. But now supply/demand is too close to call, especially as the EIA say that LTO (shale) production is going to increase.
Hi Energy news,
If you compare the DPR report with the EIA’s tight oil output estimates you will find that the DPR likely overestimates projected tight oil output in Sept by about 350 kb/d, if OPEC does not extend its cuts (along with several non-OPEC producers) after March 2018 then there might be an over supply, but if low oil prices continue the growth in oil supply may reverse. Note that eventually the oil that was hedged at $55/b will need to trade at lower prices as the hedges don’t last forever, the companies that have managed to obtain positive earnings in 2017Q2 may have done so due to hedges. Prices under $50/b are unlikely to lead to a continued oversupply of oil.
By 2019 the market is likely to be back in balance, especially if oil prices remain stuck under $50/b.
Opec August production is forecast to be down 419,000 bopd per petrologistics, which is one of the outside sources used by OPEC.
https://www.reuters.com/article/us-oil-opec-supply-idUSKCN1B11FL
You really can’t make this stuff up.
Angela Merkel is essentially the de-facto global head of modern political liberalism. The central tenet, almost religious-based in its importance, is the lunacy over CAGW.
Chancellor Merkel is not a stupid woman, she knows the long-term ramifications to leftist feel-goodisms and how they can undermine national economics. The fact that Merkel would be attempting to spin diesel fuel as an eco-friendly fuel source is beyond laughable.
Bottom line, it’s the economics that really matter beyond all else.
You won’t see this in the MSM – but Merkel’s statement this past week is another stark admission that Germany is retreating from the Paris Climate Treaty.
Diesel, apparently, is the New Green in all things renewable energy related.
The South Australia government just purchased 9 GE TM 2500 turbines to provide peak power (hopefully) as the summer season arrives in a few weeks’ time.
Burning diesel at a rate of 20,000 gallons per hour may stave off looming blackouts – load shedding, in Aussiespeak – but major mining and smelting industries are already announcing plans to shut down operations absent reliable, affordable juice.
For the folks counting on wind power in the US, the Missouri decision blocking the building of the massive transmission line should be a sobering wake up call.
For many years, the obfuscating tactics directed towards hydrocarbon buildouts/development are increasingly being directed towards renewable infrastructure.
All the whirleys in the world are ineffective sans transmission lines.
The dozens of dead whales floating up on European and Atlantic coast beaches in unprecedented numbers provide potent ammunition for the foes of Zephyr.
It matters little if there is no connection to expired whales and offshore wind farms.
In our present OMG!!!-fact free environment, graphic pictures of beached Dora’s Mommy will inspire Melissa McCarthy type eco warriors to Get.On.Ur.Ass …bigly.
Popcorn heating in the microwave at the moment.
Merkel has a doctorate in quantum chemistry, which would be called a subbranch of physics at Hopkins.
Germany’s primary export is cars and they mostly burn diesel. It’s all about money.
Simple minds often have a problem understanding that while a thing may be bad, taken all around, it may still be the best available solution to a critical problem at any given time.
Transportation personal and commercial is a do or die problem, and diesel fuel is at this time the best and only really practical solution we have to fueling transportation on the grand scale.
It’s nastier than gasoline in terms of nitrogen oxides, but it’s still a better fuel than gasoline in terms of TOTAL pollution, because a diesel engine gets substantially more useful work out of a liter. Depletion matters, fossil fuel wars matter, and carbon dioxide matters.
If manufacturers can’t get the last incremental speck of no x out of diesel exhaust at a reasonable cost, we would arguably be better off to live with it, and spend the money on other environmental problems, where we can get a bigger bang for the buck.
Electrification of the automobile is moving right along, even as we learn how to build more efficient and cleaner internal combustion engines.
In the meantime, everybody in general and Germany in particular must survive economically as best they can.
But it IS true that the world is over supplied with well intentioned but ill informed environmentalists who never stop to think about the fact that Mother Nature doesn’t do redeals just because we are holding nothing better than a pair of fives, lol.
If we were to just abruptly quit using manufactured fertilizers and pesticides, Dick and Jane would be having Spot for dinner within a couple of months.
Barring near miracles on the tech front, we’re going to be depending on diesel engines for at least another half century or so, maybe longer.
It could be that diesel engines will be our best all around option for some essential machinery for a century, or even centuries. We can manufacture synthetic diesel fuel from bio materials in smallish quantities now, and we may be able to manufacture more from co2 and water later on, using otherwise surplus wind and solar energy.
Consider just how important a heavy duty crane truck is, when working on elevated electrical transmission lines, after a storm, or anytime, for that matter.
Or consider just how practical in might be to run a small reasonably clean diesel engine to power a heat pump, while capturing the heat thrown off by the engine to supplement space heating needs, while also being able to use the same engine generator set to supply critically needed juice at times of peak demand, such as during a winter storm when a lot of wind and solar farms will be more or less off line.
Sure batteries and fuel cells might eventually be cheaper. And sure they might NOT, especially in applications where the need is intermittent. Diesel fuel stores easily. Electricity does not, especially long term.
“Simple minds often have a problem understanding that while a thing may be bad, taken all around, it may still be the best available solution to a critical problem at any given time.”
OldMacDonald aka KGB Trumpster, those same simple minds gave America Trump. Take a look in the mirror.
This is why assays are everything.
Why not a steam engine instead of Diesel? You can even burn wood when cut of in an emergency and coal runs out.
There will be relieable new possibilies – fuel cells are powered by compressed gas, which can be easy refilled at gas stations or a local farm gas tank. You can even produce your own hydrogen with solar panels and pump it in your tank – these systems exist already in experiments. If this technic is mass produced it will get cheaper as anything.
Harvesting corn to create diesel is a dead end – you can put solar panels on 2-3% of the space and harvest hydrogen instead. You can even high mount them and plant sun sensitive vegetables under them.
Or Goodenough(the original inventor of lithium ion batteries) was right with his new batteries and in 20 years most thing will run on dirt cheap sodium batteries:
https://en.wikipedia.org/wiki/Glass_battery
At least Toyota will do the next step in electric cars: double range, faster charging and cheaper with solid state batteries:
https://www.forbes.com/sites/bertelschmitt/2017/07/25/ultrafast-charging-solid-state-ev-batteries-around-the-corner-toyota-confirms/#3c0a2eda44bb
I don’t think they announce something big like this without having a good plan – they’re not a small tech startup begging for investors money but could confuse their own products with false annoucements.
Perhaps even somebody gets fusion energy working – IPhones wasn’t in the public pipeline 20 years ago, too.
“Merkel has a doctorate in quantum chemistry, which would be called a subbranch of physics at Hopkins.”
Merkel has a diploma (master degree) in physics, her work was on chemical reactions. Then she did her PhD in a institute of physical chemistry in the field of quantum chemistry, where most people are physicists. 🙂
“Germany’s primary export is cars and they mostly burn diesel. It’s all about money.”
That is too crude: Cars, especially diesel cars are not the primary export of Germany, the range of products with the same as cars value is much wider. Cars and trucks, however, produce a large share of the trade surplus, i.e. the German imports in this field are small.
The issue is that cars are advertising mediua for German industry and the damage of the diesel scandal is felt not only by the car makers. The other aspect is of course, that ICEs have to be replaced and some people in Germany get the feeling that the car makers are stonewalling this development and are in danger to be killed by Chinese competitors.
A sensible politics would set mandatory shares of EVs for the coming years and would support some aspects of the transition, esp. in case of trucks Germany could do a lot.
Just try to let it go Ulenspiegel. Watcher drives a KIA.
I drive a Lexus.
Bought new. For cash. It’s no longer new, but refuses to fail.
Annoying.
Hi coffeguyzz,
The start of summer is Dec 21 in the southern hemisphere, in a few weeks it will be spring in the southern hemisphere.
Dennis
While I thank you for seasonal education, you may want to glance at the aemo site, medium term outlook, sa graphic to grasp my meaning by summer season.
All the orange spikes above the blue will be the shortfall in consumption/generation greatly exacerbated by rising temperatures starting long before December 21 … the summer season.
The sharp red spikes are what currently terrifies the local government as that is what the GE turbines are to overcome … hopefully.,
It will provide a stark example of the perils of shunning hydrocarbons should the SA experience prove wanting.
The foes – political, economic, industrial, ideological – are all circling with knives out in anticipation.
Hi Coffeeguyzz,
I imagine they will manage, not really following what is going on. My daughter has been living in Australia and is unaware of the problem, there can always be shortages of electricity, I can remember big blackouts in the metro New York area in the 70s when there were virtually no renewable power sources. Probably demand pricing would help a great deal, when supply is short prices increase and people turn up the temperature in the air conditioner and use a fan instead.
Judith Sloan, writing in The Australian:
From Wikipedia
“Carbon Monitoring for Action estimated that this power station emitted 3.62 million tonnes of greenhouse gases each year as a result of burning coal.[3] Other air-borne emissions were reported annually to the National Pollution Inventory. As of 2012-13, from greatest to smallest quantity, airborne emissions included: sulfur dioxide, oxides of nitrogen, hydrochloric acid, particulate matter, carbon monoxide, volatile organic compounds, manganese, mercury, chromium, boron, chlorine, zinc, nickel, copper, lead and others.[4]
Marine
Northern Power Station drew cooling water from Upper Spencer Gulf and returned it to the sea at an elevated temperature. The water was returned 7 °C warmer than the original intake water. The flow rate was 47 m³ per second.[5] Its outfall channel is intended to be used by Sundrop Farms to disperse desalination brine from a proposed seawater desalination plant to create freshwater for a greenhouse, expected to be completed in 2016.[6][7]”
“Despite being the lowest marginal cost fossil fuel generator in South Australia,[2] Northern’s economic viability was progressively eroded as wind and solar generation increased in South Australia. During the operation of carbon pricing in Australia under the Clean Energy Act, Northern reduced operation to seasonal summer-only operation.[8]”
Additional marine emissions included (from largest to smallest quantities): boron, fluoride, arsenic, manganese, chromium, nickel and mercury.[4]
“Despite being the lowest marginal cost fossil fuel generator in South Australia,[2] Northern’s economic viability was progressively eroded as wind and solar generation increased in South Australia. During the operation of carbon pricing in Australia under the Clean Energy Act, Northern reduced operation to seasonal summer-only operation.[8]”
Note that this was an EXISTING thirty six year old plant that might have been economic to maintain for another fifteen years, or might not. Thirty six years is pretty old for more or less constantly used machinery, and it’s par for the course to be spending a LOT on maintenance past twenty to thirty years.
And it probably had very little in the way of effective scrubbers to capture all those pollutants, which are well known to have severe adverse health impacts on human beings, not to mention the rest of the biosphere.
Australia is in the same enviable position as Saudi Arabia, in that Aussies can generate electricity from sun and wind and save their coal for export, and come out ahead, just as the Saudis are now able to build solar farms for less than they can sell some or most of the oil they are currently burning to fuel their grid.
Of course there may not be all that big a market for coal later on, but otoh Australia is well situated to ship it to the Asian market.
But it might be good policy to keep some of the newer existing coal fired plants in mothballs, or in ready reserve, so that they could be put into action again in a few days. There might be a time when having them available would be well worth the cost of maintaining a skeleton crew to keep them in running order.
The sun and wind might refuse to cooperate for a few days even in Australia.
OFM
The Australia power situation, and the state of South Australia in particular, might offer a real world scenario of how renewables (wind/solar) impact existing practices in an advanced society.
While I am still trying to get a handle on the goings on (the political/ideological schism seems comparable to US), couple of points should be noted …
When economics are discussed, there is a huge bias towards wind/solar as they are first in line to sell their juice to the grid.
Gas and coal follow behind.
There are numerous credits involved – similar to US ITCs and , especially, PTCs – that can skew the economics significantly.
The Aussies shut down a couple of coal burners and the consequences have been severe.
Meantime, there are approximately 1,600 coal burning plants either being built or in the planning stages, around the world – many burning exported Aussie coal.
Does this make sense?
The single biggest issue is the hours from 7:00 AM to 9:00 AM, and 5:00 PM to 9:00 PM.
This is when the sun don’t glow and the wind don’t blow (sufficiently.
If you read up on this a bit, the Tasmania situation is interesting in that they have hydro, some wind, and a backup 200 Mw gas turbine.
That AEMO site is highly instructive.
Regardless, if the South Australian folks hit some big turbulence with power in a few weeks’ time, the political and ideological opponents will have a field day.
Crude oil opens new vistas in India-US relationship
http://economictimes.indiatimes.com/articleshow/60096990.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
In addition to crude (prompting an evaluation to transform LOOP into an export facility), the brand new cracker in Gujarat, India, is receiving liquefied ethane from the US in a virtual pipeline mode using 6 brand new ships from Reliance Industries.
I am not clear on how many more years need to pass, how many indisputable, large scale developments need to be implemented, before people recognize we are experiencing an entirely new paradigm in energy production.
coffee there are those here who can’t SEE their own shoes on their own feet because their heads are too far up their liberal end of the world is coming bottoms?
Energy doesn’t move food to your table. Only oil does.
Ethane is not oil.
You can’t eat dollars. You can’t eat data.
And you might want to think twice about drinking your dinner
As a liberal, I shouldn’t have to put up with this ongoing ad hominem liberal baiting from….
Oh, right, I DON’T have to. There’s an IGNORE button…and I’m pressing it now.
(I really like the little animation where the ignoree’s comment just kind of fades away….)
What took you so long? 🙂
Not for me Lloyd. Keep your friends close and your “IGNOR”ant opponents closer.
The VERY FOUNDER OF THIS SITE IS A SELF DESCRIBED HARD CORE DOOMER.
Ask Ron Patterson himself, he has said so many times.
Actually there is no need to bother Ron. Just go to the very top of the site, and hit all the links he has posted there, which are his own personal work.
Up until the last four or five years, maybe less, I was convinced he was more or less on the money in every thing he wrote.
Any body who does not believe that there is a VERY REAL possibility that our entire industrial civilization may come crashing down is ignorant of the basic facts involving the way biological systems react to imbalances in populations, shortages of resources, etc.
We are talking tool making naked apes, no more, no less, who still behave just like our ape relatives in all the more important respects.
I am nowadays personally cautiously optimistic that a substantial part of industrial civilization will survive, but there is no doubt at all among leading biologists and scientists in related fields that we are deep into overshoot ALREADY.
Mother Nature has ways of dealing with overshoot. They work, but they aren’t pretty, no sir, not pretty at all.
The only real question is how many of us will survive, and how much of industrial civilization will survive.
The incredibly fast growth of the renewable energy industries has given me hope that we won’t necessarily more or less exterminate ourselves by way of NBC WWIII fighting over the dregs of our one time thru gifts of nature such as oil, coal, gas, farmland, clean water …… etc.
Liberals who don’t have any better sense than to go around making fun of other people should wise up, and face up to the fact that those other people are going to make fun of them, and show them the middle finger at election time, for trampling on their values and culture.
And until I’m banned, I will point out this OBVIOUS truth, in the hopes that at least a few nincompoop liberals who may read my comments will come to understand that talking about religious people like trash, etc, is about as good a way to elect Trump type politicians as exists.
Hi coffeeguyz,
Do you mean natural gas production? From EIA
https://www.eia.gov/dnav/ng/hist/n9070us2m.htm
Dennis
I’m not clear on the meaning of your question.
If you are referring to the liquefied ethane heading to India, the EIA has current (weekly, I think) numbers and charts right on their site.
This exporting of ethane is actually an entirely new ‘industry’ as only miniscule seaborne movement occurred prior, mostly up in the North Sea area.
When the Mariner East 2 pipeline is in operation shortly, the US ethane exports should skyrocket out of Marcus Hook.
BTW, if you poke around the EIA site, or even just Google for speed sake, check out LPG exports (propane). The US is now the world’s leading LPG exporter.
(If you are referring to LOOP, that might be reconfigured for oil export as it can accommodate the largest of ships).
Hi Coffeeguyzz,
I cannot get very exited about 200 kb/d of ethane exports in May 2017 or even the 900 kb/d of propane exports. Note that in each case the energy exported is far lower than a barrel of crude.
See
http://www.ct.gov/deep/lib/deep/energy/energyprice/energy_conversion_factors.pdf
For ethane it is about 53% of the energy content of a barrel of crude so the exports are about 100 kboe/d. For LPG it is about 69% of the energy content of a barrel of crude so about 620 kboe/d if all propane exports are LPG. So in energy terms this is about one tenth of the net imports of crude oil by the US. The US should do its energy data by mass rather than volume as it better reflects the energy content of liquid fuels.
Not sure if you want to look on ethane as an energy source since most of it goes to produce ethylene, which is mostly used to make polyethylene.
What Trump has managed to achieve on the energy front in such a short time is remarkable.
WE ARE SELLING LNG AND COAL ALL AROUND THE WORLD LIKE NEVER BEFORE
https://fleporeblog.wordpress.com/2017/08/20/we-are-selling-lng-and-coal-all-around-the-world-like-never-before/
And from a linked article in the Wall Street Journal:
Virtually everything that has been built, or that is currently in the permitting or construction stage, in the energy industry, is part of OBAMA’s LEGACY.
It takes a dingaling, or a cynical lying hypocrite, to give Trump credit for things that for all intents and purposes happened well before his election.
The Limey’s exported their gift from Sky Daddy oil over the last few decades, and now they’re in the position of buying it back, at what will likely be triple or more the price they sold it for, in terms of purchasing power.
People who think the USA is doing great things by exporting our natural resources, rather than conserving them as the precious one time gifts they are, have their heads up their asses, in more ways than one, because they are more often than not the same people who oppose the renewable energy industries, tougher fuel economy standards, etc.
Also, how can people complain about “globalists” and still brag about increased fossil fuel exports? Either you welcome global trade and what it brings to you, or you don’t.
can you say Dakota Access pipeline ? maybe be should reserve our precious food too, we do have hungry people in the US right? this from a man?? who promotes banning the eating of meat to save our planet.
What else from this list of our main exports should we ban?
https://en.wikipedia.org/wiki/List_of_exports_of_the_United_States
how about medicine, if we keep it all here maybe the prices will go down? come on OFM help us all out what products makes your “approved to export” list?
you may not be aware the US does not have the refining capacity to refine for domestic use the lighter oil so we export the light oil to countries who can refine it and we import the heavy oil for the refineries we have. It’s a win win for anyone who understands the bigger picture. But don’t let facts and common sense get in your way of making uniformed conclusions. The fact that the US now has domestic resources the scope of which was unthinkable just a decade ago allows most of US to sleep better at night. We no longer can be held hostage by foreign powers the way Europe has allowed itself to become. Making America great again??
Didn’t I put this to bed some months ago? The export restriction was only lifted recently. Since that is true that light oil that you claim cannot be refined domestically clearly was indeed refined domestically since it could not be exported.
2015 and before all the shale oil was refined domestically because it could not be exported.
And lastly condensate was never export restricted. You can find months of 2014 with 500K bpd export numbers. Half a million bpd found a loophole in the export restriction because it was declared not crude.
It still is in the export numbers. Many (most?) of those oil exports numbers aren’t oil.
From 2014
Domestic oil production approaching refinery capacity
“An oversupply of crude oil in the United States isn’t something mentioned very often, if at all. But as a result of surging domestic production, that could be the case in the months ahead with light sweet crude oil production likely exceeding current refinery capacity for that class of crude in the near future.
Tight oil extraction in plays like the Bakken in North Dakota and Eagle Ford in Texas, have led to a renaissance in domestic oil production. The catch – U.S. refineries are nearing full capacity for light sweet crude oil processing – is that most facilities are configured to process heavy crudes instead.
Advances in hydraulic fracturing techniques have led to growing production levels in the U.S. over the past several years. North Dakota, where oil production was stagnant and even declining, is now the second-highest oil producing state in the country trailing only Texas. In April, production in North Dakota reached a new milestone, surpassing the 1 million barrels of oil per day mark according to preliminary numbers from the North Dakota Department of Mineral Resources. The majority of the oil produce was high quality light sweet crude.
Like North Dakota, Texas is also experiencing rising levels of crude oil production from shale reserves as drillers aggressively target and develop new geographies. The result may be too much of a good thing, at least for now.
As evidence, the continued buildup of supply of light sweet crude at the U.S. coast may be an indicator that refiners are nearing capacity to process U.S. shale oil at this time. While refiners are making investments to increase fuel processing capacity by more than 800,000 barrels of oil per day, it will take time to bring new facilities and improvements to existing ones, online.”
As I’m sure you know, the goal is to eliminate the discount that WTI sells to Brent.
There has been a marked improvement in this regard since the export ban was lifted, and Harold Hamm believes further improvement may be in the cards.
Dood, the oil either was refined domestically. Or it was not.
“you may not be aware the US does not have the refining capacity to refine for domestic use the lighter oil . . .”
That is what you said. Not developing it. “Does not have.” The entire year of 2015 (to December) exports were forbidden, but strangely that oil got refined. In the US.
You have this wrong. And you know it.
Watcher,
The US has been exporting condensate to Canada for quite a while. It’s used as diluent for the oil sands crude, and is sent back to us. I don’t know if it’s recovered during refining.
This from memory.
Hi Texas Tea,
We always have had plenty of coal, so let’s set that aside as a concern about not having enough coal to burn. The US has certainly made great strides in the output of oil and natural gas during the Obama administration. Note that the US has never been dependent on the middle east for natural gas imports (most of these came from Canada with a small amount of LNG from Trinidad), so concern over Middle East natural Gas is also misplaced as the US has plenty of domestic gas at present and possibly for the next 20 years (though at very low natural gas prices this may not continue, but exports will increase natural gas prices which will help to maintain output and I am in favor of free trade).
So I would set both coal and natural gas aside if we are concerned about the Middle East as they mostly affect oil prices and supply on the World Market.
The EIA expects (in the AEO2017 reference case) the US to remain a net importer of crude and petroleum products through 2050, though the quantity of exports (in Quadrillion BTUs per year) will fall until 2030 to 44% of current levels and then rise from 2030 to 2050 back to about 80% of current net import levels for liquids.
I generally agree.
One thought: US oil import dependency isn’t the only source of world conflict, or even US-world conflict. The US is very concerned about Europe, Japan, Australia, etc., and even if the US were energy-independent, it would still react politically and possibly militarily to serious oil blockages.
If we are seriously preparing for war, we would also have to expect our global trade in gas and oil would be curtailed for multiple reasons.
So any US company touting exports has to factor in that this might not last.
I don’t have ANY problems with exporting any product, or commodity, so long as the result of doing so isn’t fucking over the PEOPLE of this country, and so long as exporting the product or commodity doesn’t put us in physical danger.
The pharmaceutical industry is fucking us over big time, selling to other people cheaper than it sells to us, and this sorry state of affairs is due primarily to the R’s controlling our government with the collusion of R LITE Democrats.
I have always argued that any barrel of oil exported is a wash, because we have always imported as much or more, leaving us in a neutral position in this respect.
Sometime down the road, it seems DAMNED likely that oil will be a critically short commodity that will be subject to hoarding and to heavy EXPORT taxes in the small number of countries that have any TO export. So I support doing all we can to free ourselves from our dependence on oil NOW, while we still have a window of opportunity to do so.
It’s FOOLISH and dangerous to export certain technologies, such as advanced weapon tech of course.
It worries me somewhat to think that if the gas industry has it’s way, and we start exporting gas on the grand scale, we will suffer for it, due to our own cost of living going up, and to the shrinkage of certain domestic industries, such as the manufacture of nitrate fertilizers, and plastics, etc.
My thinking is that in five or ten or twenty years, gas may be in critically short supply. Gas is a war material in times of war.
The thing I oppose, for the most part, when it comes to imports and exports, is the exportation of ENTIRE INDUSTRIES, with the result being the impoverishment of tens of millions of our own citizens. Life is about more than fucking AVERAGES, when it comes to economics, as is fully demonstrated by the election of Trump to the WH.
Exporting people’s JOBS tends to piss them off, to the extent they vote for anybody who they think MIGHT do something to keep their jobs home.
I’m getting a little far afield to be in this thread, but nose in the air holier than thou liberals from blue states who make fun of the south, etc, never stop a goddamned minute to think that the industries they go along so happily with exporting were and are MOSTLY located in the south, etc.
My own family moved up from penniless immigrants to small farmers to mechanics and factory hands and managers in the textile and furniture industry a couple of generations back, with the result that most of my generation, and the next one, by way of making some sacrifices, were able to send the kids off to college, and thus allow the move into the middle and even the upper classes. Now there are almost as many professionals in the younger generation as there are mechanics, lay farmers, and other working class people.
Well, let me tell ya, when Momma and Daddy HAD jobs in furniture and textiles that paid enough to build a nice brick house and drive a new car and send the kids off to university, and lost those jobs, and went to work at fucking Walmart or Mc Donald’s, well…….. AFTER THAT there was NO MONEY for college for THEIR kids.
And goddamned blue state idiots who have so much fun laughing about it accuse them of being economically backward, and voting for Trump out of stupidity.
Well, they are often poorly informed, but stupid they are not. They voted AGAINST HRC, as much or more so than they voted FOR Trump. I live among these people , and associate with them on a daily basis, and KNOW what I’m talking about.
OFM
Your background, and outlook in general, have a great deal in common with mine.
I appreciate your input on this site.
Addressing a few of the points you raise … the multifaceted nature, the many ‘players’ involved, the perceived winners/losers in this fast moving narrative of the current hydrocarbon world – more specifically, the impact of the ‘shale revolution’ – can make for a challenging read, let alone accurate analysis.
Future projections? Ask the eight ball.
Regarding US exports of natgas and associated liquids, the US supply can be measured in many decades. This is insufficient for US based petchem outfits from objecting to US exports as a ‘captured’ feedstock gives them enormous cost advantage over non US competitors.
As for oil, there is a huge amount but not nearly as much as gas.
Oil equates with transportation.
Up above, Eulenspiegel may have posted the most significant comment on this thread, yet it may not be seen as such without deeper understanding … specifically, the commercial size generation of hydrogen from solar sources.
While I have no clue whether or not this will come to pass, if it does, it will revolutionize our entire world.
One small, concrete example, Nikola Motor out of Utah.
Bunch of exceptionally bright fuzzy heads with uber cutting edge entrepreneurial spirit.
They have a prototype of an electric, OTR truck that can pull a fully loaded, 53′ trailer up a 6 degree hill at 65 mph … and accelerate from there.
Science fiction sounding, huh?
Well, with a 320kwh battery, 1,000 lbs horsepower, and 2,000 lbs torque, they can do it.
Problem, as with all electric sources, is maintaining supply of power.
Apparently, OFM, just a few months back, this company did a dramatic pivot in their planning and are now looking to power their batteries with on board hydrogen fuel cells.
The hydrogen is to be supplied throughout the country via these new fangled solar arrays creating hydrogen from water (electrolysis).
Company’s sales pitch is 1 million miles free fuel with truck purchase.
Will it work?
Beats me, but as Eulenspiegal also noted, smart phones were not even in existence a short while ago, and , they have changed our world.
Interesting times.
Hi Coffee,
Thanks for the kind words.
MY firm personal opinion is that we are at a generation of battery tech from having batteries adequate for use in over the road trucks, and it might be anywhere from as little as five years to twenty five before we have batteries that good.
I suppose existing mobile or portable fuel cell designs could be scaled up enough to supply enough juice to run a big truck…… three hundred horsepower will actually get the job done, there are plenty of older eighteen wheelers still running with three hundred under the hood.
But so far as solar farms providing hydrogen on the grand scale…… fugettaboutit for at least twenty years or so, because it’s going to take that long to build out enough solar infrastructure to have enough surplus juice available at peak production hours mismatching peak consumption hours. But manufacturing hydrogen and oxygen from water probably will be a major industry one of these days, unless we find other ways to use off peak solar power more efficiently. I do believe that solar farms and small scale solar as well will continue to grow until we have solar juice running out of our ying yangs when the weather cooperates.
In the end……. I’m with the dreamers…………. IF industrial civilization survives overshoot. I believe it will, at least in part and in some places, but there are plenty of people, some of them a LOT smarter than I am, who believe otherwise.
About importing critical materials……. So far as I am concerned, any country rich enough to avoid importing materials CRITICAL to the economy in a time of war is stupid not to develop domestic sources if such sources exist, unless CLOSE FRIENDS have some available to export. At the very least, we should have a strategic stock pile of rare earths, etc, adequate to our military needs for as long as it would take to get domestic mines up and running.
liberals from blue states…the industries they go along so happily with exporting were and are MOSTLY located in the south, etc…in the textile and furniture industry…
Ahem. The textile and furniture industries started in the North (“blue” states?), and got exported to the South for lower wages. Grand Rapids MI furniture companies went to N. Carolina. Maine textiles went to Southern mills.
Now, most of the decline of those industries was due to automation, but to the extent it’s happening, the “exportation” from the South is happening for the same reason those industries arrived in the first place.
Hi Nick,
The North got started industrializing earlier than the South for a several reasons, such as the availability of water power on the grand scale, etc.
Yep, a LOT of industries have moved south in order to avoid paying higher wages up north. You seem a little bit hypocritical when you talk about these things, since you think we ought to pay more for drugs so other countries can pay less, lol.
The IMPORTANT POINT at this point is that these jobs are GONE now, mostly, and the northern states are suffering from their losses, southward, just as the southern states are suffering from their losses to offshoring.
Yes, automation is the biggest single killer.
But Trump is president to a very large measure because we have so foolishly offshored so many jobs and industries for the opium of cheap imported consumer goods.
I may be wrong, but I believe we would be FAR FAR better off paying more for the junk we import, instead of having to deal with our VASTLY expanded and reactionary underclass as the result of throwing so many millions of people out of work.
There was no real need to SPEED UP the loss of these various industries.
The Permian seems to have enough oil takeaway capacity, so that isn’t going to be a limiting factor.
https://pbs.twimg.com/media/DHwhk32XcAAPWY2.jpg
“Why the price of oil could spike before that
That leaves the period until the end of the 2020s, during which we believe overall oil demand will continue to grow (albeit slower than before).
“Supply forecasts developed on this basis hold that more 20 million barrels per day of new production will need to be brought on stream until 2026 for natural production declines and demand growth to be properly addressed. According to WoodMackenzie, only half that quantity can be delivered by projects that are currently underway. The other half will need to come from still-to-be-launched projects (Pre-FID). But, WoodMackenzie says, many of these still-to-be-launched projects are uneconomical at oil prices in the $50s per barrel, meaning that they should not be expected to get the all-clear anytime soon. Since (non-U.S. shale) oilfield development projects can easily require 5 to 8 years to be completed, all this means that the seeds for a supply crunch in the period 2020 – 2022 are currently being sowed.”
all and all a reasoned article for oil price.com
http://oilprice.com/Energy/Crude-Oil/The-Next-Oil-Price-Spike-May-Cripple-The-Industry.html
Dennis
Is there any possibility that the blog could be further divided.
Non oil, oil and LTO noise.
That way those of us that regard shale oil production to be a gnat on the arse of a buffalo won’t need to spend so much time looking for the gems in a pile of gravel.
Ta.
Spoken in true Bolshevikean fashion.
Sign me up for that, capt,’ except I don’t think it is as big as a gnat.
We’ve been hammering away at this unconventional “resource” stuff for nearly a decade, spent well over a trillion dollars up and midstream, a third of which has not even been paid back yet, and never will, and for what? From the Bakken, Eagle Ford and Niobrara, a little over ONE YEAR of total crude oil consumption in the US. And now those plays are pooping out.
America is the largest oil consuming nation in the world by a wide margin; the way this last remaining resource is being managed, and promoted, in America (for personal CEO compensation and ungodly interest payments), is an atrocity.
http://oilprice.com/Energy/Crude-Oil/The-Next-Oil-Price-Spike-May-Cripple-The-Industry.html
Mike is saying , reading between his lines, is that the shit is going to hit the fan as far as the availability of easily affordable oil is concerned, no matter WHAT, and probably sooner than most people would guess.
That is correct, sir; and exporting hydrocarbon resources from these resource beds, the very bottom of the barrel in America, for the benefit of short term greed, is long term stupid.
I totally agree.
People who believe that resource wars are a thing of the past are naive to the nth degree, in my estimation.
And people who believe in technology always riding to the rescue in time to save our asses tend to forget the precautionary principle. There’s no telling what the future may hold, on the one hand, but on the other, there’s good reason to believe that we may run seriously short of oil and gas well before we are ready to cut back enough to compensate for declining supplies at increasing prices.
Have forgotten the US refinery gain total.
As API number increases, refinery gain in the context of volumetric increase of output vs input . . . it should decrease.
This means conventional right and proper API 39 oil would have a refinery gain of X. API 41+ oil, the new WTI number, would not see the same volumetric expansion. So barrel for barrel added to US production, you get less quotable because the gain is less than X for high API liquid vs low API liquid.
This can’t be good. Maybe it’s seeable in an EIA graph.
BHP TO SELL US SHALE UNIT, BOWING TO ACTIVIST PRESSURE:
“BHP Billiton has bowed to calls by activist investors to sell off its US shale oil unit, saying it is “actively pursuing options” to exit the business.”
https://www.ft.com/content/815d78e9-5211-34a4-abcb-34ae17c693b9 (paywall, limited articles free or via Google)
https://www.oilandgaspeople.com/news/14912/goodbye-contango-oils-long-march-toward-backwardation/
FUNDAMENTAL CYCLE
The regular alternation of backwardation and contango in the crude oil market suggests a fundamental cause rooted in the behavior of supply and demand.
Deep and wrenching cycles have always been the defining characteristic of the oil industry and are not some incidental problem or aberration.
Oversupply and lower prices tend to beget under-supply and periods of higher prices in a repeating pattern that extends back to the 1860s.
So it is very likely the current period of low prices and over-supply is already creating conditions for the next upward movement in the cycle.
Oil demand is growing strongly in all the major geographic regions, with the exception of the Middle East and Africa, and global demand is increasing above the long-term average rate.
The International Energy Agency forecasts that global consumption will grow by 1.5 million barrels per day in 2017 and another 1.4 million barrels per day in 2018.
U.S. oil production (crude and condensates) is predicted to rise by 800,000 bpd in 2017 and another 1 million bpd in 2018, according to the U.S. Energy Information Administration.
Crude production is also increasing from a number of non-OPEC countries, including Canada and Brazil, in most cases as a result of investments approved before oil prices slumped in 2014.
But the pipeline of new non-OPEC non-shale projects is drying up as a result of investments canceled or postponed since 2014.
The oil industry’s spare production capacity is shrinking and set to fall below 1.5 million bpd in 2018, mostly in Saudi Arabia.
Global oil inventories remain well above the five-year average, but given the fast growth in consumption the five-year average is likely to prove too low.
For all these reasons, oil prices are likely to move into backwardation again in 2018/19, just as they did during previous recoveries in 1999/2000, 2007/08 and 2013/14.
Every once in a while, I have to agree with TT.
“Oversupply and lower prices tend to beget under-supply and periods of higher prices in a repeating pattern that extends back to the 1860s.
So it is very likely the current period of low prices and over-supply is already creating conditions for the next upward movement in the cycle.”
So it reads in all the econ textbooks I ever opened , in describing the way production, consumption, and price of commodities revolve like moths around a light. The light can be,and usually is, a moving light over any extended period of time.
This pattern holds until a fundamental disruption of some sort interferes, such as demand for a particular commodity crashing due to superior substitutes getting to be cheap and plentiful.
It will be interesting to see how much oil output can increase if oil prices increase as oil stocks decrease further, at high (above $80/b) oil prices we might see LTO output increase to as much as 6.5 Mb/d by 2020, but whether increases from Russia, OPEC, Brazil, Canada, and the US are enough to more than offset decreases from existing fields is an interesting question.
Let’s say the existing 80 Mb/d of output declines at about 5% per year on average, that suggests we need 4 Mb/d of new output to be started up each year just to maintain output at 80 Mb/d, clearly 1 Mb/d of US LTO output won’t get the job done we need at least another 3 Mb/d from other places, perhaps Canada, Brazil, Russia, and OPEC will be able to fill this gap (the OPEC and non-OPEC cuts aim for about 1.8 Mb/d). Let’s assume for simplicity that the OPEC and non-OPEC nations that have cut can bring on 1.8 Mb/d of higher output, that leaves another 1.2 Mb/d from Brazil and Canada and elsewhere, it is unclear if that is doable (George Kaplan has a better handle on new projects than me). Note also that this is only year 1. In year 2 we no longer have the 1.8 Mb/d of cuts to bring online (that happens in year 1), if we assume US LTO can continually bring on another 1 Mb/d each year (doubtful) we now need 3 Mb/d from non-US oil producers in year 2.
It becomes clear at least to me that it may be a struggle just to maintain World output at 80 Mb/d, any increase in output just adds to the 4 Mb/d needed to maintain a plateau. Optimistically we get to 82 Mb/d by 2023 and perhaps maintain a plateau until 2027, its all downhill after that in my view in the most optimistic (pessimistic from an environmental perspective) oil scenario.
That’s what I am most interested in. Depletion rates. Even with higher prices, how much oil will be left to get?
the environment will be just fine in 10 years, how do I know because I have 4.5 billion years of history to model ?
but to your larger point I think we have reach a moment of clarity, the world will require Tight oil and we will supply it and yes it will be at a profit?
if you are correct that we will reach peak oil flow regardless of a inflation adjusted affordable price, peak oil and peak demand will occur on your suggested timeline.
Countries with demand increase over 100 kb/day from June 2014. July 2014 was the last month that WTI averaged over $100. As you would expect, most of the increases come from China, USA and India.
Chart of Brazil, China and India on Twitter. Demand in Brazil has been down but they are said to have potential for growth once they’re out of recession, so I left them on the watch list.
https://pbs.twimg.com/media/DH1XJOgXoAAMSIr.jpg
I’m not sure how much use this is, it might keep someone amused for a few moments
And another one 🙂
BHP Intends to Sell US Shale Business
http://fortune.com/2017/08/21/bhp-sell-shale/
They will need to pay someone to take it off their hands. BHP was completely suckered by shalie huxters Floyd Wilson and Aubrey McClendon.
The story is running and CNBC phrased it “activists have pressured BHP to divest themselves from shale” and I think their reporter misunderstood “activist”. He thought it was some sort of environmentalist victory.
The activist is Paul Singer at Elliott. It’s “activist investor”. He has made the point BHP has lost $40 billion on their shale acreage buy in 2011 when oil price made everything look profitable. So BHP’s new CEO is listening and divesting, but it’s not in any way environmental.
Pretty sure BHPs land is in the gas window of Eagle Ford. The hoped for buyer will be other gas players, not oil (which is all that matters).
Useful to note Total was offered the chance to get into shale just last week. They opted for the Maersk buy yesterday. Several $billion in the North Sea. Said no to shale.
Total got hoo doo’ed by McClendon too. Lost lots of money in the Barnett before they bought out the rest of CHK’s acreage in 2016. Sumitomo lost over a billion in the Permian with Devon. That was when prices were high. Shell lost billions in the Eagle Ford before selling to Sanchez. BHP might lose well over $10billion in its little shale experiment.
BHP – Late to the Party, now running for the door while finding an exit strategy to limit further carnage.
No Fear of the billions:
“The U.S. could become a NET EXPORTER OF ENERGY in coming years, according to the federal government’s Annual Energy Outlook 2017.”
http://www.npr.org/sections/thetwo-way/2017/01/05/508421943/u-s-likely-will-become-net-exporter-of-energy-says-federal-forecast
Keeps popping up in Searches – Get your Energy news Fix from the MSM.
What’s not to Like?
Rune Likvern says.
“If the 9 OPEC members shown above were pumping flat out to benefit from the high prices during the summer of 2008, then recent responses of oil supply to the recent price growth suggests these countries now have little, if any, spare crude oil capacity.”
http://europe.theoildrum.com/node/6859
“This analysis suggests that we may continue to see strong oil prices as long as all the wheels stay on the major economies.”
How has his analysis held up?
OPEC production in 2016 was at an all time high before cuts, and even now higher than 2008.
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/OPEC%20MOMR%20August%202017.pdf
Rune if you rerun the story each year, one day, like the boy who cried wolf you will be right.
Hi Jan, that’s exactly right. That’s the big advantage peak oil theorists have over their rivals – one day they will be right. Depletion never rests, and the world is finite. And the fact that they were wrong in the past makes it even more likely that will be right now. And if they are not right now, it is even more likely they will be right next year.
It’s interesting to consider everything that is going right in the world this year that is keeping the supply of oil so high. If only one or two had a humpty dumpty moment, the scenario could change rapidly. Just off the top of my head:
Politically unstable countries whose oil production could fall dramatically under severe unrest:
Libya: 1MM/day
Nigeria: 2MM/day
Venezuela: 2MM/day
Iran oil added free from sanctions: 1.5 MM/day
Iraq: 4.5 MM/day
Or the bubble could pop on US shale: 5 MM/day.
Or Ghawar could peak. The crisis in Qatar and Yemen could spread into regional war. Etc.
Does anyone else have the feeling that the latest black swan is already in the air but we just can’t see it yet?
Hi Stephen
I agree with you, there are so many oil producing countries that are on the brink.
What many oildrum contributors could not grasp is, if a country like Iraq becomes stable, then it’s production potential could be realised. Iraq is now producing double what it did under Saddam and ISIS is on the back foot there so there is still further potential on the upside.
Peak oil is a geological limit and no matter how much drilling or technology is invested oil production falls.
If a country experiences political upheaval and the oil production falls, that is not peak oil as it is caused by other things and must be separated from countries like the United Kingdom.
Peak oilists refused to do this and grouped all countries in decline together, now some of them are increasing production, so obviously they were not in peak oil.
Perhaps Venezuela will in a few years have a decent government and be able to develop it’s heavy oil potential, who knows, certainly the likes of Rune do not.
They also made a great deal about peak exports, which is important. When I conversed with Jeff Brown, he simply could not grasp that the model works in reverse also. If a country such as the U.S. starts producing more oil, it requires less imports. Therefore the exporters will not be able to export all they want to and exports decline. He simply put declining exports down to production constraints and was blind to the fact that these exports were not needed, hence the fall in prices.
I have had the privilege of working with and assisting Rune Likvern in several research efforts on shale oil economics and shale oil corporate finances over the years. I find his work impeccable, his attention to detail very precise, always supported by actual data and the sources for that data. I consider him an honorable man, interested in the truth. He can defend himself if he choses to bother, otherwise I consider your personal attacks on him, Jan, unfounded and unnecessary to any specific point.
The future inability for the world to meet its daily oil needs (‘peak oil,’ as you call it) has been deferred for a couple of decades with the onslaught of the US unconventional shale phenomena, America’s adversity to debt and the rest of the world’s oil producing countries adversity to debt. Debt increased hydrocarbon demand and debt allowed the world’s oil producing countries to meet that demand. I can think of no better insight into what ‘peak oil’ might look like than American shale oil; some 80,000 shale wells have been drilled in America the past decade for UR equal to a little over 1 year of daily oil consumption in the largest consuming country in the world. As a whole the shale oil industry has a been a complete financial disaster.
Those that find themselves hyperventilating about shale abundance and a ‘paradigm shift’ in the world energy order need to do some simple arithmetic on the money going out vs. money coming in. Its not working very well. Or, if you don’t mind spending your children’s future, its actually working very well.
Mike said:
What “personal attacks on him”?
Can you show me one single place where Jan wrote a “personal attack” on Likvern?
Mike, your fact-free allegations may resonate with the “expert consensus” here on POB, but if you want to have any influence beyond the echo chamber, you’re going to have to stick with the facts and stop making stuff up.
”What many oildrum contributors could not grasp is, if a country like Iraq becomes stable, then it’s production potential could be realised. Iraq is now producing double what it did ..”
”Perhaps Venezuela will in a few years have a decent government and be able to develop it’s heavy oil potential, who knows, certainly the likes of Rune do not.”
Jan, that is patently FALSE!
Jan, be a man and provide documentation that I have claimed that Venezuela, Iran, Iraq or others in OPEC has not had the potential to grow production.
Jan, is your MO (Modus Operandi) to attach false statements to an opponent when you realize you do not have anything concrete to present?
Jan, what I also find interesting is that 7 years after an article of mine was published on TOD and which you so far has not proved me wrong on, in anything that matters, you for some reason come out of the birch woods and tries to discredit me.
High oil prices give higher supply – if oil prices where at 500$ people would try to tap kerogen with a negative energy bilance just to make $.
So the better peak oil theories don’t neglect oil price, global economy and money – it’s coupled. And therefore hard to tell.
But it looks really we’ll go into a peak demand in the next 10 years, at least a demand plateau.
With the up and downs of oil price substitutes will be more attractive, and there are substitutes.
From electric cars 2.0 and 3.0 (https://www.forbes.com/sites/bertelschmitt/2017/07/25/ultrafast-charging-solid-state-ev-batteries-around-the-corner-toyota-confirms/#1f4de31244bb), I count today Teslas more a toy for rich guys, fuel cell cars
to simply natural gas driven cars in poorer countries like Bulgaria and Mexiko – if you don’t like the up and down of oil you can start to leave it.
If you have 150$ oil and dirt cheap natural gas from local fracking – just convert and poof 1 million barrel a day demand vanished. It can be done in a few years even converting current cars.
Oil product driven cars will go the way of the steam engine once investment in alternative concepts starts in earnest.
India and China have no interest in oil economy anyhow, since their own reserves and controlled regions are in severe decline (they’re already past peak oil) and better investing a few 100 billion Yuan in tech than in global military power to join the big oil game.
With advanced batteries, solar, wind and nuclear power they can get rid of pesty imports of fossile energy alltogether – nothing better for a world power to have no achilles veel.
Closing the street of Hormus for months and more is easy with lowtech sea mines.
So it’s on the horizont that peak oil happens in near future – as a combination of depleting the big old cheap field (drill a hole and earn) and unstable return on investing (spending now 50 billion $ for a deep sea field with high costs??) and more tech not needing oil anymore.
Aviation will be the last, but there is enough cheap oil for the next 100 years of flying when all other uses dim out. By the way, you can fly to the moon with hydrogen, why not someday from New York to Shanghai.
Too bad the modern rockets are using kerosene based fuels.
Jan,
The article was published in 2010, more than 7 years ago.
Could you please provide links to where I have published this story each year?
The oil price remained strong from 2010 until it collapsed in 2014 (I for one did not expect such a dramatic price decline back in 2010).
Yes, OPEC production is up, and then from primarily KSA, Kuwait and UAE.
The other 9 OPEC members I referred to in the article in 2010 is at about the same level as in 2008 primarily thanks to growth from Iran and Iraq, if data from EIA is to believed.
Jan wrote;
“Rune if you rerun the story each year, one day, like the boy who cried wolf you will be right.”
Jan, could you please elaborate more on your statement?
Rune
You like many contributors on the oil drum wrote alarmist articles of imminent peak oil. Your assertion that OPEC’s spare capacity was about to peak was based on incomplete data and a lack of imagination. The sanctions in Iraq deprived it of, not only new technology but the ability to repair even the old infrastructure it had. Yet the possibility of a large increase in production once sanctions were removed did not even enter your narrative.
Also I am making the point that on day you will be right since oil is finite, but when you have been wrong so many times before there is no credit to be had.
Jan wrote
”You, like many contributors on the oil drum wrote alarmist articles of imminent peak oil. Your assertion that OPEC’s spare capacity was about to peak was based on incomplete data and a lack of imagination.
Jan, for me this is very easy and I am willing to revise my views if you can provide links to credible sources that in 2010 and/or before gave other data with regard to total near term (less than 5 years) OPEC (12) production capacities and spare capacities.
Jan, what kind of incomplete data and lack of imagination do you refer to? Try to be specific.
What was IEA’s take of that situation in the summer of 2010?
The chart below shows actual developments for OPEC 13 (includes now Gabon that is minor) as from Jan-07 to Apr-17 based upon data from EIA.
Since the article was published (Aug-10) OPEC 13 supplies grew from 32,6 Mb/d to 33,2 Mb/d by Dec-2011 and reached a preliminary high of 34,1 Mb/d by Apr-12. Then OPEC supplies declined somewhat (Libya for one) and did not surpass that level before Jun-15.
Jan wrote;
”The sanctions in Iraq deprived it of, not only new technology but the ability to repair even the old infrastructure it had. Yet the possibility of a large increase in production once sanctions were removed did not even enter your narrative.
I take it he means Iran.
Jan, can you point to any place where I wrote anything to that effect?
I cannot recall to have written anything about OPECs long term potential (like 5+years) and yes, I was aware that Iran (as well as Iraq) had potential to grow their supplies.
”Also I am making the point that on day you will be right since oil is finite, but when you have been wrong so many times before there is no credit to be had.”.
Jan, so far you have not provided any evidence that I was wrong in my article on TOD from Aug 2010, so perhaps you have other references?
Oh, and while I am at it, why not introduce yourself by your full name (it is not very manly to hide behind a handle) and credentials with references to your work so that anyone can have a chance to look at your perfect scoreboard.
I have a pretty good idea who hides behind the handle Jan, and this could be someone who was/is at the Uppsala University in Sweden.
Rune
The title of your article is would OPEC run out of spare capacity by 2011.
You wrote that article in 2010, you should therefore have fully considered all possibilities of oil production increases in OPEC at least to 2011.
Let us be specific. When you wrote your article how did you asses the increase in production coming from OPEC projects that were being developed at that time?
Just give us 2 examples Khurais and Ruamila
https://en.wikipedia.org/wiki/Oil_megaprojects_(2010)
I am simply saying your article was very one sided and a full analysis of the oil fields being developed would have ensured a correct analysis. Rather than the failed one you delivered.
Jan,
I have made my case. The burden of proof is on you and I expect you will be concrete and quantify how much I was off.
In said article I wrote;
”If the 9 OPEC members shown above were pumping flat out to benefit from the high prices during the summer of 2008, then recent responses of oil supply to the recent price growth suggests these countries now have little, if any, spare crude oil capacity.”
The 9 members then were as shown in the chart below.
The chart also shows development in crude oil supplies for these 9 as per Apr-17.
Adjusting for Libya, these 9 (including growth from some and decline for some) remained more or less flat to 2013.
Then I based on several sources assumed a spare capacity of 2MB/d within Kuwait, KSA and UAE and yes we saw increases from OPEC 12 and these 3.
So actual data proved me right on production developments for the OPEC 9 for the years covered 2010-2012/13.
Jan, this is clearly not about debating an outdated article. All your comments strongly suggest a discredit/smear campaign towards me. I also note that you have not responded to some of my questions further up.
Rune
OPEC did not run out of spare capacity in 2011, 2012,2013 2014,2015 nor 2016.
You were wrong because you failed to do any proper analysis of the fields being developed and coming to completion in 2009, 2010 2011 etc.
Anyone reading your article can see the shortcomings of your research.
It is obvious you cannot look objectively at any criticism.
Jan,
In 2009 and first half of 2010 actual data were available.
Therefore, no reason to forecast anything for that period!
So what spare capacity did OPEC have in 2011, 2012 and 2013 (let us limit it to these years)?
And why was the oil price high?
The article tried to explain why oil prices could be expected to remain high for some time due to the supply situation.
My analysis, forecast was never meant to go much beyond 2012, and yes, I was very aware of new major fields under development within OPEC at that time.
(The article was subject to approval by editors of which at least one had very detailed insights into Middle Eastern oil.)
”Anyone reading your article can see the shortcomings of your research
It is obvious you cannot look objectively at any criticism.”
Wrong again!
First, I do not know you and your credentials.
You fail, when encouraged, to produce any documentation (after several exchanges you continue to make general and false claims) that proves me wrong and that could have moved this forward.
If proven wrong, I will of course revise my views.
Jan, you on the other hand make false claims and when that is proven to be false, you offer no retraction!
In other words, now there is nothing for me to relate to than some obscure (and mostly false) claims from an unknown person.
I repeat, the burden of proof have been and still is with you, Jan.
Jan, why not write a rebuttal under your full name.
Jan,
There is not enough OPEC oil to sustain todays “disposable” economy in the West. OPEC does not have enough juice so Banana Republic/Zara can force a change of fashion every 3 months or Apple can introduce “new” (repackaged) phone every year. You must pay for it. Right now, nobody is paying for anything. Governments are not paying, consumers are not paying. You have to understand this deeply. $ 1 T worth of cars just in US are not paid for. 5 mbd of new shale oil is not paid. Banks do not care if you return or not some paper, but nature cares so you have to pay for it.
No – it’s already paid. When a shale oil well delivers it’s first barrel, all preparation costs are paid – otherwise the steel, sand, crews, diesel … wouldn’t be there.
It’s not necessary paid by the owner of the well – perhaps the owner is late with payment to the contractors because he still has to get some OPM (other peoples money), so the contractor has simply paid it. If he doesn’t get paid and defaults, the owner defaults and Mr. Joe buys the well for cheap from the default, the oil still keeps flowing.
Dept and money is only a social, not a natural construct that keeps the poeple happy and working and is used for better resource distribution. It works and does the job better than central planing (you don’t need any money there), but nothing on earth is perfect.
You can’t create oil with money, only with geology and technic.
Crassus (the richest man in the roman empire) wasn’t able to create oil with all this money, because the drilling rig wasn’t invented yet. You need money to pull of the resources from other places as building IPhones to drill for oil – that’s the job of money.
“When the Last Tree Is Cut Down, the Last Fish Eaten, and the Last Stream Poisoned, You Will Realize That You Cannot Eat Money” Native American saying
Eulenspiegel, you always pay on the end. It’s like going to restaurant for a meal you pay on the end. Right know world is munching on 100mbd but it did not pay for it yet. America is munching on their last, bottom of the barrel oil. But it is not paid. It will be paid on the end when there is nothing to show for billions of barrels of oil consumed. Oil is not the problem. It is the same gift from existence like trees, sun, and ocean. Our unsustainable greed is the problem. You have to become more aware of it and greed will dissolve.
“Dept and money is only a social, not a natural construct that keeps the poeple happy”
Really, debt & money makes people happy? Who is happy? Have you observed people? They don’t look happy too me. Angry – yes, Serious-yes, Long faces-yes, Shouting – Yes, Depressed – yes. Even to the point of committing suicide. Have you seen Lion committing suicide? I have never seen brave Lion the king running of the cliff.
First, let us take a step back and look at the facts from where Jan is trying to build a case against me;
From my introduction to my post that was published on The Oil Drum August 18, 2010.
”In this post I present an analysis of how OPEC oil supplies have responded to changes in crude oil prices during the last 10 years. My objective was to estimate OPEC’s probable marketable crude oil capacities as of May 2010, based on the responses of OPEC oil supplies to price changes.
This approach suggests that as of May 2010, OPEC’s marketable spare crude oil capacity was approximately 2 Mb/d and that a majority of this spare capacity is most likely in Kuwait, Saudi Arabia and UAE.”
There is nothing in that post where I talk about the future production potential for OPEC.
I was talking about spare capacities as in 2010 and thereabouts, now we are in 2017.
Then Jan quotes from my post (still the one from August 2010);
“If the 9 OPEC members shown above were pumping flat out to benefit from the high prices during the summer of 2008, then recent responses of oil supply to the recent price growth suggests these countries now have little, if any, spare crude oil capacity.”
I did not say anything about that this was the future potential for those 9 OPEC members and note also I used the word now to specify.
(More to come)
Rune Likvern said:
Right. The problem is that this claim is not borne out by the facts. To wit, the title to your post specifically asks, “OPEC’s Spare Crude Oil Capacity – Will it Disappear by the End of 2011?”
Can we all agree that on August 10, 2010, that 2011 was in “the future”?
You then go on to speculate in your post that:
You then turn your attention to the future of non-OPEC production when you ask:
To which you answer:
And:
Chart below shows OPEC 13 (includes now Gabon) supplies from Jan-07 through Apr-17.
Since the article was published in Aug 2010 OPEC 12 supplies grew with about 2 Mbo/d by early 2012 and then declines somewhat (Libya primary reason) while the oil price remained 100ish. OPEC Supplies had a new high in the fall of 2016.
So where did I get it wrong?
Rune,
Are you arguing that on August 10, 2010 that “the End of 2011” was not in “the future”?
So where did you “get it wrong”? Isn’t it obvious from the quotes I cited above?
You got it wrong when you asserted that “There is nothing in that post where I talk about the future production potential for OPEC.”
You got it wrong when you asserted that “I did not say anything about that this was the future potential for those 9 OPEC members….”
Glenn,
Nice tries, but you are completely missing all the points.
Yes, I looked forward and in hindsights how much did I miss the target with as of end 2011 or 2012 if you like.
But is end of 2011 the same as 2017?
How old are you Glenn?
Below is the article, so where in it do I forecast OPEC total capacities? The article is about possible erosion of OPEC spare capacities by end 2011.
http://europe.theoildrum.com/node/6859
So why is it that Jan and Glenn are not willing to discuss on the subject the article is about?
Well, I don’t know who Jan is and what his/her beef is exactly. Stehle, on the other hand, is afraid of you. In a few short comments you proved beyond much doubt that not many, if any Bakken wells drilled since 2014 will even come close to paying out and the role that interest on legacy wells plays in new shale well economics. Basically the same model applies to the Eagle Ford, and ultimately will apply to the Permian. That’s a direct threat. He cannot refute your analysis with his own data, or personal analysis himself, so he relies entirely on links from shale oil investor presentations. If that does not work, and it doesn’t, the next step is to discredit you anyway he can, about nothing. He has done the same to me numerous times, I think a few comments ago drawing some kind of comparison to Nazi’s and/or white supremacists (?); whatever it was it was something really stupid and not very ethical coming from a petroleum engineer bound by standards to be as unbiased as possible when dealing with the public.
If he can he will simply drive you into getting sick of his bullshit and leaving POB before we can get the benefit of any further analysis from you, which, I am quite sure, is his full intent. He has then regained control of his personal blog.
Good luck dealing with him. From my perspective he has completely destroyed all reasonable, rational debate about our hydrocarbon future here on POB.
Rune Likvern said:
OK, now that we have established the fact that you did make predictions about the future in your August 10, 2010 post, how did those predictions pan out?
• Rune Likvern prediction: “a slight decline in Non OPEC oil supplies”
CORRECT: According to the BP Annual Energy Outlook, OPEC production declined from 48.2 mmbopd in 2010 to 48.0 mmbopd in 2011.
• Rune Likvern prediction: “…it is probable that demand for OPEC supplies could grow by approximately 2 Mb/d between 2010 and the end of 2011.”
WRONG: According to the BP Annual Energy Outlook, world oil consumption increased by 1.0 mmbopd between 2010 and 2011. If non-OPEC supply fell by 0.2 mmbopd, then the demand for OPEC oil grew by 1.2 mmbopd between 2010 and 2011.
• Rune Likvern assumption: “estimated current OPEC spare capacity of 2 Mb/d ”
UNKNOWN: We do not know what OPEC’s spare capacity was in 2010, nor do we know what it was at the end of 2011.
• Rune Likvern predicion: “OPEC’s spare capacity may be completely eroded by the end of 2011”
WRONG, ACCODING TO LIKVERN’S OWN ASSUMPTIONS: We don’t know what OPEC’s spare capacity was at the end of 2011. What we do know, according to the BP Annual Energy Outlook, is that OPEC increased its production from 35.1 mmbopd in 2010 to 36.0 mmbopd in 2011, an increase of 0.9 mmbopd. This is 1.1 mmbopd below Likvern’s assumed OPEC spare capacity of 2.0 mmbopd. So according to Likvern’s own assumptions, OPEC spare capacity would have still been 1.1 mmbopd in 2011.
• Rune Likvern prediciton: “present global spare crude oil capacities may become eroded by the end of 2011”
WRONG, ACCORDING TO LIKVERN’S OWN ASSUMPTIONS: According to Likvern’s assumption, global spare capacity was 2.0 mmbopd in 2010. Between 2010 and 2011 non-OPEC capacity fell by 0.2 mmbopd and OPEC increased supply by 0.9 mmbopd. That’s a decrease, according to Liverns’s own assumption and predictions, in global spare capcity of 1.1 mmbopd. So according to Likvern’s own assumptions, global spare capacity would have still been 0.9 mmbopd in 2011.
• Rune Likvern prediction: “as supplies become even tighter in the future, prices will rise even higher yet.”
CORRECT, BUT FOR THE WRONG REASONS: Supplies did “become even tighter” in 2011, and prices did “rise even higher yet” (WTI averaged $79.48 in 2010 and $94.88 in 2011), but not for the causes Likvern predicted.
Supplies “became even tighter” because demand for OPEC oil increased by 1.2 mmbopd between 2010 and 2011, and OPEC increased its supply by only 0.9 mmbopd. This happened despite, according to Likvern’s own assumption, OPEC still having the capacity to increase supply by 1.1 mmbopd. This is what cartels do. They set supply so that it is less than demand so that the price will rise.
• Rune Likvern prediction: “OPEC’s spare capacity may be completely eroded–a very serious situation.”
WRONG: OPEC, according to Likvern’s own assumption, still had excess capacity of 1.1 mmbopd in 2011.
Glenn,
For a 2-3 years timeframe I would use monthly data.
Doing a rebuttal based on other sources (Glenn Stehle uses BP Annual Energy Outlook!!) than was used in my article (EIA) will also produce different results, likewise different time units, year instead of month.
Then Glenn conveniently mixes in all liquids, while my article was about crude oil and condensates.
Glenn Stehle conveniently omits the fact that Libya’s production was affected from 2011 and later and did not adjust for that.
NUFF said.
Rune Likvern,
Use whatever data you want — monthly, EIA, crude oil only, you name it — and demonstrate that the assumptions and predictions you made in your August 10, 2010 post, for either FY2011 or “the End of 2011,” proved to be correct.
I cited my data and sources and made my argument. Are you incapable of doing the same?
Go ahead, show us how right your assumptions and predictions of August 10, 2010 were.
Glenn,
My sources are listed in the article are given in the charts.
And no, I do not have to answer to you.
Energy Transfer suit claims Greenpeace incites eco-terrorism with Dakota Access interference
By ANDREW HARRIS AND TIM LOH on 8/22/2017
I hope they can get directly to the officers. stop this nonsense
http://www.worldoil.com/news/2017/8/22/energy-transfer-suit-claims-greenpeace-incites-eco-terrorism-with-dakota-access-interference
On March 9, 2016, chief Archie and his gang accepted 2 $125,000 donations from Con Ed Development and Fagen contractors, developers of local wind farms.
Three weeks later, the ‘Sacred Stone’ camp was established claiming – amongst other hilarities – that the new pipe, running 22 feet away from the 42 inch Northern Border gas pipe which was emplaced decades prior – was suddenly “sacred ground”.
5 days later, Archie and his boys got another $125,000 from Con Ed Developers.
If people had any awareness of the lengthy list of atrocities that occurred over those several months of protests, they would be shocked.
Repetitive lockdowns of local schools while caravans of “E Coli Bringers” rampaged through small towns, doxxing out of state law officials and then threatening their families’ safety while their menfolk were out of town, armed escorts – both LEO and family – escorting school busses to ensure children’s safety , and on and on.
Decent people would be aghast at the goings on, or should be, regardless of political and ideological stance.
No matter.
Now, the whirley builders are poised to build infrastructure.
The Ra/Hope catchers will discover how simple it is to throw sand in the gears of these massive projects by opponents simply observing and following the scorched earth, take no prisoners attitude of the fossil fuel haters who have blocked hydrocarbon pipelines every step of the way.
Payback, they say, is a bitch.
These men and women don’t scatter like cockroaches when a light is turned on like our conservative citizens in Charlotte.
They take down whalers and governments.
Right.
But if the past is the key to the future, groups of violent thugs don’t have a good track record of “taking down governments,” not in these United States.
You calling me a democrat?
That is a low blow!
Most people who know enough about American history to know doo doo from apple butter know that Lincoln was a Republican, and that the Union won the Civil War, and that therefore the South was solid Democrat up until my own time, due to the aftermath.
Starting in the sixties, the MODERN Democratic Party dominant in the rest of the country took up the cause of civil rights, with the result that the South largely switched from D to R, for the next thirty or forty years.
The South has continued to vote R, but not so much because of racism as most people think. Racism has relatively little to do with day to day life in the South these days, no more than in the North. I see mixed couples every day and nobody except a few antique old drunks too old to leave home anyway even notices. It’s been DECADES since I saw anybody display any animosity or disgust as the result of sharing a store or restaurant, although there are some remnants of times passed still around, such as old Confederate era war memorials, etc.
The South mostly votes R these days because the people of the South don’t care for the CULTURE associated with the modern D party.
Glen S’s six o one comment consisting of two pictures is about as big a misrepresentation of the truth as I have run across in the last few days, although the Trump camp generally produces a some equally misleading propaganda pieces just about every day.
There are limits to how much the government will intervene to save an industry. I’m putting this here because it could become relevant to gas and oil down the road.
“The Trump administration has rejected a coal industry push to win a rarely used emergency order protecting coal-fired power plants, a decision contrary to what one coal executive said the president personally promised him.”
https://apnews.com/bac7510776874d6f88c255e73de00e6c
The scenario of cancelled major projects getting the 6%/yr conventional field decline rates to assert themselves is interesting. It’s not 92 mbpd X 6% = 5.7 mbpd lost per year because everywhere doesn’t decline at 6%.
KSA has no major project pending. They just completed one. No sign of production falloff that isn’t voluntary.
Russia has been increasing production without a major project completing. Infield drilling.
But the major projects of Kashagan’s later phases and others might very well be deferred. So the question is how much oil comes off of the 92 mbpd? It’s not 5.7 mbpd per year. It is probably 1 or 2.
Per year.
It would be amusing to see long lines at gasoline stations as oil remains at $47 per barrel. That will be cool.
Hi Watcher,
You might be correct that it is only declining fields as a group that have a production weighted decline rate of 5% per year. Not every field is in decline. I don’t know if there is data on what the average decline rate of all wells that are currently producing weighted by production volume. I just picked 5% as a round number, perhaps it is less than this, I do not know.
My God! Look at what the racists, nazis, Ku Klux Klan and mentally deranged are doing! I am appalled, absolutely appalled at the moral turpitude.
Go quickly Mike, SRSrocco and @whut. Crank up that jihand against engineers of yours so you can prevent this crime against humanity from happening.
https://www.eia.gov/petroleum/weekly/
US crude down 3.3 mmbbls, gasoline down 1.2, distillate no change. All three levels are about at Jan 2016 levels and the trend is down for the total and crude in particular (looks like it’s lost over 10% since June at a pretty steady rate) – gasoline and distillate maybe on a plateau.
Hurricane H (?) in GoM is strengthening but looks likely to miss the production areas.
US ending stocks, the sum total of crude oil and oil products, we’re 3 million barrels below last years low in October (without NGLs or ethanol).
I Think that we need to take a big picture approach to this peak oil condition. In the 1980’s there were about 17 oil fields producing 1 million barrels per day or more. In 2017 we are down to two fields I.E. Gahwar(not sure if spelled correctly) and the Burgan field I believe in Kuwait producing 1 million or more barrels/day. If this is not decline in conventional oil production worldwide I don’t know what is. Best
Doc Rich
Would also like to add the great appreciation from Mr. Kaplan, Mike, Rune, OFM, and others on their contributions to this site. I have learned a great deal and even though I am a physician, even I can enjoy learning about the oil bidness. I also think that your contributions are far more appreciated then you may realize from me and many others. My heartfelt thanks.
TAEP: Texas upstream economy expands for eighth straight month
http://www.ogj.com/articles/2017/08/taep-texas-upstream-economy-expands-for-eighth-straight-month.html
.
I find the gleeful exuberance at the effects of the shale boom on the Texas economy somewhat interesting, seeing as it is built on the back of copious amounts of other peoples money, much of which will never be returned to the people supplying the money. It reminds me of those in my own neck of the woods who benefit from illegal activities like drug smuggling or what is known locally as “Lotto Scamming”. Google search results for “876 Scam” include Jamaican lottery scams often start as 876 calls
People who benefit from the activities of these criminals often don’t find anything wrong with the deception being practiced and idolize the perpetrators. In the case of LTO the deception is being carried out by MBAs in suits while the lotto scams are carried out by third world scumbags with cell phones.
islandboy,
You’re really falling down on the job.
Besides being crooks, you failed to mention that the people involved in US shale industry are racists, nazis, members of the Ku Klux Klan and mentally deranged.
You need to up your game.
Seriously? Is that the best response you can come up with?
You Send Me – Vaquero’s Integrated Plan For Moving And Processing Rich Gas From The Permian
https://rbnenergy.com/you-send-me-vaqueros-integrated-plan-for-moving-and-processing-rich-gas-from-the-permian
US energy set to cash in on Mexican demand, NAFTA permitting
http://thehill.com/blogs/pundits-blog/energy-environment/347684-us-energy-set-to-cash-in-on-mexican-demand-nafta
I wonder if a rise in troll activity here is an indication that they know the party is coming to an end and therefore they are trying to delude the public as long as possible, though whatever is posted here will be seen by very few non-petroleum types.
Trump’s Lawyers Sue Greenpeace Over Dakota Pipeline, Making Jaw-Dropping Accusations
http://www.alternet.org/environment/trumps-lawyers-sue-greenpeace-over-dapl-making-jaw-dropping-accusations?akid=16010.52744.qnfQvM&rd=1&src=newsletter1081534&t=22
That’s when you know you have been effective, when the corporate scums stormtroopers come after you.
The “corporate scums strormtroopers”?
Well that sort of anti-police rhetoric may play well in Berkeley, Charlottesville, Boston and New York City, but do you really believe it’s going to play well in Peoria?
I wont take the time to address the complete idiocy of that comment but it speaks to the quality (lack there of) of the some people and the level of intellectual honesty Ron and Dennis have attacked to their blog. This is not to paint the whole with a broad brush because it is fair to debate on when peak oil may occur and it’s ramifications.
The lengths the radical jihad eco-warrios go, including breaking the law and infringing on private property rights is not subject to debate, it is subject to the laws. Denying others the right to work, the right to enjoy their land for profit or pleasure, the right to enter into legal contracts never ends well in the societies that go that direction. you are one very ignorant individual.
… And that article perfectly captures the gist of what Katie Couric was referencing in her recent “Fake News Tearing the country apart” interview.
“to build … on the Standing Rock Reservation” as the above piece states is false. The pipeline was north of the reservation and colocated with the pre-existing Northern Border pipeline.
“unarmed water protectors” ???
So, Redfawn Fallis, currently charged with attempted murder for firing three shots at the cops should be released forthwith, I suppose.
Sophia Wilansky’s situation is instructive.
This Brooklyn native rolled a homemade propane bomb down the bridge and it prematurely exploded, severely injuring her arm.
Sympathetic press reports immediately characterized this as injuries caused by police action using concussion grenades.
This is but a tiny, tiny sample of how wildly divergent ‘realities’ are being created by an ever growing mass of people – all across the political/ideological spectrum – to inflame oppositional views.
Yep–
https://cdn.fstoppers.com/styles/full/s3/media/2016/11/29/standing-rock-protest-ryan-vizzions-5_0.jpg
https://cdn01.theintercept.com/wp-uploads/sites/1/2016/11/zumaamericassixteen685836-article-header.jpg
Exactly.
Viewing the video of the “spirit horses dapl’, would indicate why the police continued to increase the show of force to dissuade assaults upon them by the E Coli Bringers.
I’m not going to now re-view the dozens of videos that were online, but there were numerous – including the lead up to the pic of the water spraying – showing the several fires being set, the E Coli Bringers flanking the police position that night, chief Archie pushing into a cop trying to provoke a violent response.
The shithead cutting through the wire with circular grinder and then pushing into the line of National Guardsmen was my personal favorite.
Make no mistake, the more the unvarnished facts emerge from this debacle, the more – hopefully – people of good will can recognize how they have been played.
And, should anyone spend the three minutes viewing that spirit horse video, keep in mind that was private property upon which that assault took place.
‘Protestors breaching security fence’ video has shithead attacking line of NG troops.
Yea, it was just out of view—
So we will take the authority’s word.
I’ve been saying that public sentiment concerning gas and oil is changing in Colorado. More cities wanting control over how and where activity is conducted.
http://www.denverpost.com/2017/08/24/oil-gas-colorado-erie-broomfield-thornton-new-rules-industry-fights-back/
Hi all,
A new post is up on Texas Oil and Natural Gas production
http://peakoilbarrel.com/texas-update-august-2017/