USA and World Oil Production

228 thoughts to “USA and World Oil Production”

1. A field is creamed by massive infill drilling with horizontal wells that skim the very top of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is drastically increased. Things will go just great until the water hits those horizontal wells at the top of the reservoir. Then production will drop like a rock.

   I assume this is the money quote. These methods comprise the “game changer” that scuttled peak oil predictions circa 2005.

   By demurring a prediction as to when the stone might–will!–drop, you’re acknowledging the deplorable state of the data. This should give us pause. We might call this the New Peak Oil Reticence.

   Let’s grant that what you say is true (I’m certainly not qualified to refute it). If you know it (that is, that the rock will drop), then “they” know it, and by “they” I mean those who are in the business of developing these “creaming” methods. They must know it.

   So what the fuck are they thinking?

   1. I think only the big fields offer a cushion, in a way or the other, in the end it all depends a lot on Ghawar. Matt Simmons was right about that.

      As I see it in a pyramid scheme if a big player suddenly wants to get out their money it’s over.

   2. In IOCs they are mostly thinking how can I satisfy my boss and/or the stockholders enough in the next quarterly report to keep my job.

   3. More money now.

      Russia is certainly being creamed. The massive infill is visible from satellites and they haven’t found/opened anything new of size, yet have outlasted what everyone (including them) calculated would be the start of their decline.

      Russia needs the oil revenue badly. But is their ultimate decline going to look like China? Very likely.

      1. Only Russia has more resources, a much smaller population, imports little, and is better educated.
         Plus (not a given), global warming will ring some benefit.
         China doesn’t have a chance (if one is biologist looking at it).

   4. The Saudis may have deliberately made efforts not to peak output in an unsustainable way historically (see Mushalik’s post below), either by increasing spare capacity or delaying greenfield projects and expansions. They have been in a position to think a little bit long term, but for most other NOCs and smaller players; they most likely think that the need to replace reserves corresponding to the reckless exploiting they currently are doing is outside their responsibilities.

      1. Responding to:

         “In IOCs they are mostly thinking how can I satisfy my boss and/or the stockholders enough in the next quarterly report to keep my job.”

         “More money now.”

         “…but for most other NOCs and smaller players; they most likely think that the need to replace reserves corresponding to the reckless exploiting they currently are doing is outside their responsibilities.”

         If the assumptions of the oil depletionists are correct–and in spite of severe disillusionment ten years ago, I can’t shake the idea that we are sincerely screwed, and very shortly–then the sentiments quoted above amount to a carelessness and/or ignorance that borders on brain damage.

         1. It’s capitalism, and capitalism is one expression of human evolution. The behaviour is fundamentally no different, and possibly no more damaging, than farmers watching their topsoil gradually wash away so that there might only be 50 years worth left, or drilling ever deeper wells as aquifer levels drop, or building hydroelectric dams that it is known will silt up, or building ever bigger trawlers to catch ever shrinking (in size and numbers) fish stocks, or having lots of children for any number of reasons but mainly because that is what your genes have built you to do.

   5. “Let’s grant that what you say is true (I’m certainly not qualified to refute it). If you know it (that is, that the rock will drop), then “they” know it, and by “they” I mean those who are in the business of developing these “creaming” methods. They must know it.”

      I keep watching the majors because I think they know the future and want to get their money out as soon as they can. Do what you can to prop up your stock, but quietly cash out.

      1. In other words, Mammon controls the planet’s most precious resources.

   6. What do you mean what are they thinking?

      They are trying to produce more oil. Why is that hard to understand?

      1. I meant, what are they thinking by acting as if they don’t know production will “drop like a rock,” as Ron says. By proceeding as they do, they hasten catastrophe.

         1. No one producing country is looking at the global problem. They are only concerned with their own country and the problems at home. Most are old men who realize that they will be long dead if there is ever a catastrophe. And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse.

            But the point is, the oil barons of each individual country, are not even remotely concerned with the collapse of civilization as we know it. They believe God, or Allah, or human ingenuity, will simply not allow that to happen.

            1. “And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse.”

               But doesn’t that require, like, planning? Plenty of planning?

               1. Of course not. If someone else, or something else, is going to save you, you just sit back and let it happen. You do not need to do anything.

            2. Mr. Patterson, i’ve read a lot ‘since Lehman’, on several blogs. I thank you for your non-biased blogposts when you were in charge. And i thank you for your contributions until now on this blog.
               No nonsense. Thanks again.

2. Permian – update through March 2018 – by Enno Peters
   https://shaleprofile.com/index.php/2018/07/04/permian-update-through-march-2018/

3. I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.

   1. Yes, I agree with you on Dr. Minqi Li’s paper. I am not sure, however, that the Permian will show enough yearly increase to hold off the peak until 2023.

      1. There are a lot of other constraints, other than pipeline. My estimation is based on the supposition that oil is north of $100 by 2019. At that price, who knows what barriers they can overcome. Funding will not be a problem at that price. Stupid money has a lot of availability. Local, Federal and State money is being used to supplement ship access that will be useful for only a few years. All because EIA says it will continue until 2042. How smart is that?

      2. The implied increase in the Permian would be staggering. US onshore outside of fracking is in terminal decline. US GOM is peak/decline. Eagle Ford is peak/decline. Bakken is close to peak. Eagle Ford and Bakken have very high existing production decline rates, meaning they will fall like a brick if drilling moves to the Permian.

         There isn’t anything new beyond the Permian. People have looked. No more plays.

         And after covering all of that and its own existing production decline (not as extreme as the other plays but large in absolute number), the Permian is supposed to add millions of barrels per day?

         I don’t think that adds up no matter what the price of oil is.

         1. It was accelerating at the pace of about 150k, until it hit pipeline constraints. I think about two million more is reasonable. Not a lot of additional room for activity, so two sounds about right to me.

         2. The shale industry has more debt than Venezuela and Saudi Arabia combined

            https://imgur.com/a/t7ulB

         3. When oil gets above $120 per barrel there are some interesting possibilities in Russia to drill and frac tight sandstones. These aren’t shales, they are Cretaceous sands we see all over, which can’t be developed at prevailing prices. There is also an interesting possibility in the Jurassic.

            1. Not too many other places are fracked than the USA, are there? When things get tighter, I don’t see why fracking/bitumen sands-type, etc., activities, take off elsewhere than the current, unless ecological/economic/social pressures/limitations really start to dig in. Perhaps we should hope that ~$120+ oil indeed works to throttle the economy and maybe that money is not cheaper than free.

               1. The US has fairly unique geólogy. For example, it’s the only continent which had a very large centrally located ocean cutting right down the middle. Asia had a shallow ocean covering parts of what today is Central Asia, but the section lacks the same super thick, overpressured light oil bearing organic shale mixed with carbonates. The same goes for South America, which had an ocean in the northwest but it doesn’t have a really thick light oil bearing source rock. That leaves only the Vaca Muerta in Neuquen.

                  The USA also has a super efficient oil infrastructure and regulations. And the Permian and Eagle Ford are in Texas. If they were in say California or Massachusetts they would barely be produced.

               2. I understood that there had been a shallow sea in the middle of the US but was unaware of its peculiar relation to oil. Perhaps if or as things get hotter and flood, a similar sea might return.
                  WRT other forms, I was also thinking of deeper-sea and Arctic(/Antarctic) oil (Brasil’s sub-salt-dome?) and other unusual forms, perhaps like methane clathrates?
                  Presumably, we could kiss the climate goodbye for sure if any of that substantially took off.

                  In any case, intriguing stuff, thanks for the insights.

               3. The US won’t flood for several reasons. One is that sea level rise won’t be that much. Even if Antartida melts catastrophically, the ocean won’t even get to Huntsville, Texas.

                  But most of the ice won’t melt, because the continent is now surrounded by a ring of water which usually has a negative temperature anomaly, and this means the ice sitting on land in Eastern Antarctica is likely to increase slightly over the years.

                  I spend at least two hours a day reading papers about the climate, oceanography, etc, and in the past I worked several decades with very brainy geoscientists. I don’t remember everything I learned, but I do know more than most people about general geology, mostly because I had to work on teams which explored and developed oil and gas all over the world. I think the shale business has limited scope, it sure looks too expensive to develop in most offshore settings, and in the end it won’t make much of a difference.

                  The other areas are fairly well described. The Russian Arctic is gas rich, the ice in the Kara Sea will remain a hassle for at least three decades, so I’m leaning towards thinking the region will be limited to produce natural gas (LNG) and eventually it could produce say 1.5 mmbopd of oil and condensate.

                  Further east it’s tough, and the prospects are slimmer until the Chukchi and Beaufort, and that area will probably be limited to no more than say 2 mmbopd in 20-30 years. Not enough to make a difference.

                  Brazil,subsalt is already well defined, so that’s not going to contribute enough to make a difference. The problem is simply that we need to produce 30 billion barrels of oil per year, and that’s a tall order.

4. This is about Trump’s tweet to Saudi Arabia

   5/7/2018
   Saudi Arabia was supposed to pump almost 14 mb/d in 2018
   http://crudeoilpeak.info/saudi-arabia-was-supposed-to-pump-almost-14-mbd-in-2018

   1. Expecting SA to help supply the World’s needs is perhaps going off the deep end. It’s their bread and butter for years to come. As years pass, they become more aware that those years are limited. This is not the 1970’s, it’s 2018. They will supply what is profitable for them, and wasting it early, doesn’t sound real smart, does it? If we offered them massive support to develop their nuclear capabilities, it would probably entice them. Or, jump out of the pot, and into the frying pan. Iran May have more capacity for new oil.

   2. This graph shows that it was supposed to peak in 2018
      http://crudeoilpeak.info/wp-content/uploads/Saudi-Arabia_oil-production_1970-2030_IEA-actual.jpg

      1. Future discoveries is a nebulous measure. Looks like under 12 million is what to to expect.

   3. If I have understood this correctly. When most of their fields are mature, the option they have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily higher volume of water to keep oil production steady and at the same time overinvest in infill drilling to keep the volume rising. All this to sustain or even increase oil output from mature fields, so that the oil price can stay low. And then there is the extra gain in extra barrels to consider as a result of the investments that adds to ultimate recovery at each field. The gain from extra barrels could make up for a mediocre return on investment in some cases and a questionable one in other cases. Given a relatively low oil price assumption.

      Why would they do that? Keeping the facilities as they are for mature fields, accepting only small investments where they are highly profitable, limiting infill drilling to the best locations, let the oil production fall and hope for prices to rise would be a superior solution for them, would it not? Why rush investments in mature oil fields?

      1. When most of their fields are mature, the option they have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily higher volume of water to keep oil production steady and at the same time overinvest in infill drilling to keep the volume rising. All this to sustain or even increase oil output from mature fields,

         Well no, it does not usually increase production, it just drastically reduces the decline rate. For instance, a very mature field may have a natural decline rate of 6 to 8% per year. With infill drilling of horizontal wells along the top of the reservoir, they may reduce that decline rate to 2% per year.

         so that the oil price can stay low.

         No, that’s not why they are doing it. They are doing it to maintain their annual production. Some do increase production but with oil from new fields. These new fields, however, will have a much lower URR and will start to decline after only a few years. All the giant and supergiant field have already been discovered.

         1. Ok, thanks!

            The “so that the oil price can stay low” was a well hidden irony from my part. But you have a point, they want to keep their long term customers supplied, not losing face in OPEC and their long term allies happy. They stretch to keep everyone happy.

            1. It also is probably a bit of Pride mixed in. KSA is proud to the the world’s swing producer. Also that KSA is the biggest OPEC producers sets them as the leader.

               On the Geo-political side, KSA does not want high oil prices to help Iran. KSA & Iran are bitter enemies.

      2. A field redevelopment usually involves additional wells, production facilities, artificial lift equipment, and injection facilities which can be water, gas, CO2, fresh water, and water with additives (for example in some cases we use fresh water and polymers).

         The wells don’t have to be horizontal. In some cases it’s better to drill a directional well and drop perpendicular to the reservoir section. This is used a lot with injection wells, which are equipped with equipment to control injection into multiple zones.

         I’ve seen reservoirs where we drill directional wells parallel to sealing faults to get the very top of all the different stratigraphic members (many years ago I saw a well make 10 thousand BOPD after it was drilled about 50 feet away from and parallel to a huge fault).

         What we do usually has two effects: it accelerates recovery of existing reserves, and it adds reserves. It’s not unusual to see a field recovery go up from say 50% factor to 54% by optimizing well placement and injecting with a more intelligent well pattern. If a field has 1 billion barrels in place, the total reserves are 500 mmbo, and recovery to date is 450 mmbo, then doing a makeover can increase remaining reserves from 50 mmbo to 90 mmbo. But the investment and additional OPEX can be $50 per barrel, so this requires very high prices, a lot of engineering and planning, and in most cases the production doesn’t or it barely goes up.

   4. Thanks Matt, your posts are always very thorough and a pleasure to read. How prepared do you think Australia is for eventual peak oil?

5. https://oilprice.com/Energy/Crude-Oil/China-Throws-Venezuelas-Oil-Industry-A-5B-Lifeline.html

   One should not attempt to catch a falling knife. But China is going to try, because they see the end game better.

   1. Where does Chinese money come from? Why, the People’s Bank of China, of course. They create it. Just like the Federal Reserve creates dollars when they feel like it via Quantitative Ease.

      $5 Billion is created by creating a quantity of Yuan, which is pegged to the USD. This “loan” costs nothing. They’ll be happy to collect interest on it, though.

      Probably useful to note that this means the majority of people on Earth acknowledge Maduro as the legally elected govt in Venezuela.

      1. Probably useful to note that this means the majority of people on Earth acknowledge Maduro as the legally elected govt in Venezuela.

         Only those who can do basic math, and wonder a bit at the news they are getting from MSN.

         1. He was elected by a higher margin than Trump, and no Russian meddling required.

            1. The NY Times on May 21, 2018 has this to say about the election in Venezuela:

               “In the midst of this horror, the election on Sunday was less a contest than a dictator’s classic reach for a false patina of legitimacy. The largest opposition political parties were banned from taking part, key politicians were barred from running and there were widespread opposition calls for a boycott. In the end, the turnout was pathetically low, with Mr. Maduro garnering 68 percent of what votes were cast. Some of those who voted for Mr. Maduro apparently did so in the fear that their food rations would be stopped if they didn’t; others were the remaining Chavista faithful still loyal to the socialist upheavals led by Mr. Chávez from 1999 to his death in 2013 and by Mr. Maduro since.”

               1. Venezuela is up to the throat in the mess of a divided, irreconcilable society (and certainly both sides did their best to get to that point). There are others: The Cuban society, the Haitian vs. the Dominican society, the Spanish vs. the Catalan society. The United States are on their way to join that club with all that “impeach 45”-stuff (writing this NOT being a Trump fanatic).

               2. The words that Trump has said (and his actions such as appointees and executive orders) are the source of the countries disgust with him. Silly to blame polarization on those who somehow are able to find fault with him.
                  He seeks to rule like a dictator. Most people somehow don’t like that.

               3. Nowadays Venezuela isn’t that polarized. Maduro is so bad the overwhelming majority of Venezuelans hate his guts. He survives using a well orchestrated and extremely cruel repression machine, set up for him by Cubans. Many of us think Venezuela has been colonized by the Castros. One proof is that Maduro buys oil in the international market and sends it to Cuba. Venezuelans are starving, suffering from epidemics, there’s no electricity or water, and yet Maduro gives priority to the Castro Mafia.

                  There’s no “Spanish versus Catalan” society conflict as such. The conflict is internal to Cataluña. Roughly 50% is separatist and the other 50% isnt. The separatist side includes youngsters who have been brainwashed in several currents. One is supremacist, they actually believe they have superior DNA and associated factors, such as intelligence and good looks. There’s also a communist/anarchist faction (CUP), more sedate leftists who are supremacists (such as ERC leader Junqueras), and leftists who think they can split away and take control, install a communist republic. So it’s a mishmash which includes a lot of people who don’t realize they are being used by a very corrupt (and suicidal) political faction, the Pujol clan, which had Artur Mas running things until CUP refused to back him and got Puigdemont put in charge. The Pujol-Mas-Puigdemont party has numerous capos on trial for the practice they used: charging 3% of the gross of every public contract they awarded. Separatism is in part driven by their need to escape these trials for corruption, which can put them in jail for decades.

      2. The news seem to say China is offering Venezuela US Dollar loan, not Renminbi

         1. The renminbi is pegged.

            1. Not for long.

         2. That money is usually offered in Chinese products and manpower. China has a mercantilist policy, and this means the products and equipment will have to be procured, loaded in ships, and sent to Venezuela. But I expect that by early 2019 Venezuela will be having a nice civil war. And f the Chinese are seen as trying to prop up the Maduro dictatorship in a very proactive fashion, I wouldn’t give a glass of piss for their interests in Venezuela.

         3. Smart. China wants it back in $ after 10 years instead of heavily devalued Yuan.

      3. The Venezuelan Supreme Court in Exile just declared that Maduro is illegitimate. This court is made up of Supreme Court justices named by the National Assembly, which were being persecuted and put in jail by Maduro’s Sebin (his equivalent to the Castro G2 or DSE).

         Furthermore, Maduro claims to have been reelected on May 20. But that election wasn’t recognized by around 42 countries. Neither is the “Constituyent Assembly” a group organized by the dictatorship, recognized by those countries. I believe crunch time will come in January 2019, when Maduro’s new term is supposed to begin. At that point the whole edifice will come crashing down, because 42 nations won’t recognize him, nor his fake assembly, nor his Supreme Court, nor his Attorney General (the real Attorney General, Luisa Ortega, went into exile when Maduro ordered her arrest after she explained that most Supreme Court justices working for Maduro were illegitimate because she had never signed off on their selection, as required by the Venezuelan constitution.

         If things evolve following the Venezuelan constitution and international law, many nations will not recognize Maduro and his dictatorship in January. The Supreme Court in exile, using article 350 of the constitution, will name an interim executive, who will then take control of Citgo, all government properties abroad, and order that all oil cargoes be seized. This means the crude will have to be shipped to the Chinese communists, Cuba, and a few other no good countries ruled by communists or red mafias. The executive in exile will have cash to help more than two million Venezuelans who are living in difficult conditions all over South America. And it will, with USA help, organize a National Army with 20 thousand volunteers taken from the Venezuelan diaspora. This army can enter Venezuela with USA air support, and take a large portion of territory. At that point the Cubans, who are Maduro’s main support, will have to decide if they keep agents and military forces in Venezuela, or if they stick it out and die to the last man.

         1. Great. Another Bay of Pigs. There has not been anything positive to come from helping another country, militarily, since the Korean War. Aid is good, trying to decide another nation’s future has been a disaster. I am Vietnam era Vet, and it was huge disaster. I am sure we would clearly be able to determine which Socialist politician would be better suited for running the country, than the Socialist who is now in power. I think not.

            1. lol
               US never wanted to help anyone at anytime. All the wars were made for power and concrete interests. Nobody ever cared about the people that were spoiled with US weapons.

            2. Bay of Pig involved a couple of thousand men, it was organized by the CIA to cover up USA involvement. It failed because the US didn’t provide the agreed air cover, and the landing site was switched at the last minute. I’m extremely familiar because I had relatives waiting for the landing north of Trinidad so they could block highways and attack Castros army in ambushes. My dad was a captain in castro’s army, and was in charge of preparing an Annex to the official complaint given by Castro to the UN.

               In Venezuela’s case the prior legal steps are being taken by Venezuelans. The key step was having several dozen nations (including the EU28, 12 Latinamerican nations, USA and Canada) declaring that Maduro’s election was illegitimate and that he would not be recognized. The additional steps are being taken, these are an internal Venezuelan issue, therefore there is no need to go to the UN. However, it has been very helpful to have the European Parliament declare that they want Maduro investigated by the international criminal court. Also helpful has been the OAS report stating that sufficient proof exists for the court to indict Maduro and friends.

               Once a legitimate executive is named and takes over all Venezuelan property, including Citgo and can block ALL oil sales (including those to China), the government in exile can ask for friendly nations to help it liberate Venezuela. A 20 thousand volunteer army is easy to recruit, because about 40% of the armed forces have deserted or quit in recent years, and over ten thousand are already in Colombia.

               So you see, this is purely an internal affair but we would need air support to have it go faster, and putting 100 tomahawks on key targets will cripple what’s left of the dictatorships helicopters and command and control systems.

               And of course, once the first 20 thousand land, the numbers of the liberation army will swell very fast to over 500 thousand. Maduro is really hated, the communists will definitely fight, but they’ll have little popular support, because the liberation army will include recognizable figures from the Chávez military who have fled. I believe it should be over in about 90 days. Afterwards we will hold trials and execute the real bad ones, put the Cubans in prisoner of war camps (they can be released as soon as Castro surrenders). The really neat thing is that Venezuelans will have learned to hate communists as much as I do. This would only be the beginning.

               1. Maduro is not above placing civilians in close proximity to where the bombs need to go. There is nothing in war that goes as planned, including the outcome. Reporting on the results of a conflict goes something like, situation normal, completely FUBAR.

               2. Yep, Chavez built civilian housing units at Fuerte Tiuna, where Maduro hides at night. But there are plenty of military targets.

                  For example, the Cubans have trained a sort of special forces which are scattered around the country in 40-50 man units housed in isolated ranches (they have to be isolated because there’s also Cuban military advisors and they have a fairly heavy vehicle traffic taking them for training and when they are used to murder protesters or the small resistance groups which manage to organize). These special forces do need to get targeted with a large warhead. The same applies to the few Air Force sites with planes able to fight (Maduro distrusts the Air Force and most of their planes can’t even fly anymore. Other targets would be National Guard forts in key locations, and of course the hangars at La Carlota, where the private jets used by narcos and the elite are stored.

                  Anyway, the idea is to take out his rather weak ability to fight by air, cut off Cuban reinforcements and the communications link to Cuba, and make sure they can’t react to block a large landing force as it takes a suitable port, several airports, and sets up shop to welcome and train at least another 500 thousand volunteers.

                  The problem won’t be Maduro’s army, most of them won’t fight. The problem will be terrorist cells they will leave behind and the sheer anarchy. This is why a 500,000 man army is needed. There has to be a way to enforce martial law while the communists are taken out.

                  And that could take time, even if they lack popular support, the Cubans do have hard core terrorist units. And the key is to avoid using USA troops on the ground. Just need to set up shop in a couple of airports near the ocean large enough to land gunships and fly Predator drones.

               3. US war planes and drones set up in airports near the coast. Protected by whom? A cobbled together militia? The no boots on the ground concept would not work. The vast majority of Venezuelans were raised as socialists under Chavez. Capitalism is as foriegn to them as Christianity is to Iraqis. The likely end result would be that they would hate us more for the intervention. We would likely be supporting another Saddam Husain as the new ruler. That’s not saying it won’t happen, as Venezuela does still have some oil, making it an attractive sell when oil prices skyrocket.

               4. You are disconnected from reality. Are you just a US based communist or are you writing from a bot shop in Havana?

               5. Someone disagrees with you, you become a very nasty person. No, I am not a bot, my website can be viewed at guyminton.com. My 40+ years of being Texas CPA can be viewed online at Texas State Board of Public Accountancy. I am a forty year member of Atascosa Masonic Lodge 379, member of the Sons of the Republic of Texas, and a Vietnam Veteran. I have a DD214 to prove it, and will post it if Dennis or Ron request it. It shows I was enlisted, and exited as an E5 in four years. If the US decides to enter any war. I would fully support the military who participate in it. I will be vocal to keep them out of wars, which I consider that are not in the best interest of the US. Having been through a useless war, in which some of my neighbors never returned, and some military friends died, or will never be the same; I am naturally skeptical. I earned that right. I am a patriot, not a Communist. I am only assuming the US granted you citizenship, in this reply, and that my reply needs to be constructive in wording. As for the comment below, where you question my understanding, you have that right, I helped fight for that right. The dumb part I was referring to, is not doing sufficient research to see if an investment decision will pan out. Since over a year ago, I have been pointing out logistical problems that will crop up in the Permian. I am not in the oil business other than royalty owner and investments. I have frequently asked for your advice, because while I am fairly ignorant, I am not stupid. Or a bot, or a communist, or someone who is interested in seeing young US citizens being shot down, overrun, or damaged fighting a questionable outcome. Yes, the Venezuelan country is in condition of which deplorable is an understatement. So was Vietnam. We had no chance in ever turning that into a productive democratic society. I have the same questions regarding Venezuela. Capalism is a very imperfect solution. Socialism or dictatorships will always be worse. I am cheering on Conoco, as they are winning, legally.

               6. We haven’t had good luck with most of the wars we’ve fought since WWII. Iraq was supposed to be one of those quick in-and-out wars according to the Bush administration and wasn’t.

                  Given all that we have learned or supposed to have learned, getting involved militarily with Venezuela may not be an especially good idea or even one the American public wants to see.

               7. I’m fully aware of the US inability to win wars. But I don’t look at this like a neocon trying to get the USA in another stupid war in the Middle East. Plus I have relatives in the USA armed forces, including a grandson who seems inclined to be in fighting infantry even though he has a high IQ and could probably be better off as a drone pilot in Colorado. So I have absolutely no interest in seeing US Army or Marines exposed.

                  Some of the comments I read show enormous disconnect from what goes on in Venezuela. The bulk of the population hates Maduro (and no, that socialist education doesn’t take hold like you think when you see the abuses and go hungry knowing the government is corrupt and viciously evil).

                  On the other hand, I read a lot of social media and hear from friends who try to articulate why the USA should just invade. So I have to explain to them that a US invasion would be incredibly stupid. And that they really need to sign up as volunteers to go fight on the ground. Taking Maduro down won’t be difficult because he lacks popular support. The problem would be terrorist units the Cubans have been training. This is why it’s important to avoid the huge mistake made by Bush in Iraq, and have Venezuelans in a very large army, at least 500,000, to keep control under martial law.

                  The USA really needs to focus on the fact that these communists take over nations, destroy them, and cause huge refugee flows. Mexico will be next now that López Obrador has taken over. The process will be slow, but in 10-20 years the USA will need a heavily fortified southern border because tens of millions of Mexicans will try to flee. So if the USA keeps wasting it’s time in the Middle East serving as an Israeli proxy, in two decades, if the USA isn’t itself controlled by communists, it will face enemies to the south and huge refugee flows.

               8. Not legit until a supramajority of the the Org of American States votes for multinational action.
                  Now tell me how wrong I am about this notion.

               9. All that’s needed is for the Lima Group to confirm they don’t recognize Maduro. This would happen in January, at the beginning of the dry season (it’s easier to use gunships and drones in the dry season), and when Maduro is supposed to start his illegitimate term. The key of course is getting USA support, because the logistics to land 20 thousand men armed to the teeth, plus the food and water they’ll need to take care of the population in places they take is a USA only capability.

                  Legally, the fact that Maduro isn’t recognized, and an interim executive is recognized because it fills a vacuum, us good enough. This of course will come as a surprise to the hordes of commies backing Maduro in the USA and other countries, even though he’s clearly a genocidal nut.

               10. I believe that was going to happen several years ago—
                   We shall see– I have no info.

               11. I am pretty sure Canada’s days of fighting alongside US troops is long gone. This probably holds true for many other countries as well. This is certainly the case while Trump is in power. It’ll be the US alone and if maduro is ousted by an invading force US troops will be right behind them heading for home.

                   China will get their oil for goods in exchange.

               12. US support is only needed from the air and water, the transport logistics to move 20 thousand men and women, and the supply of food, water and medicines to the liberated population as different parts of the country are freed.

                   Don’t forget this takes place in a step by step process, and it won’t start until January 2019. By then it’s even possible that Castro will give up. As for the Chinese, they’ll stay out of that fight.

                   I would worry more about the Cuban forces and the pile of commies they’ll recruit to go to Venezuela. I suspect it may be a bit like the Spanish civil war, when communists went there to fight for the red side. I suppose they’ll have to be treated as enemy combatants and placed in a suitable internment camp for years.

            3. Well said. Time to sort out US problems like huge incarceration rate.

      4. For those who read Spanish I offer

         http://elestimulo.com/blog/tsj-en-el-exilio-maduro-dejo-de-ser-presidente-y-debe-ser-reemplazado/

         1. In Spanish and in English: why Guym is right to warn against military intervention. Maduro unpopular; right wing even more so – to say nothing of the US.

            http://www.socialistworld.net/index.php/espanol/internacional/europa/9817-venezuela-tras-las-elecciones-presidenciales

            And
            http://www.socialistworld.net/index.php/international/americas/63-venezuela/9835-venezuela-after-the-presidential-elections

            1. Good gawd! A far left is the answer? Not! Exactly the direction I would expect, or another “socialist” dictator, more likely. It defines Maduro as a “capitalist”. Thus, capitalism is bad, because Maduro is a thug. The solution per this article is to return back to a “purer” form of socialism than Chavez started. Which, I am guessing could be a heavier handed thug than Maduro is (if possible), because there is nothing left to work with. Not paying back the debt, is already the only rational solution to the debt. Conoco is going to get what the courts awarded them. Compensation for the theft by Chavez. I DO NOT see any win win situation for any military assistance by the US, here. Just mad cow logic. More to the point, the direction would be from one Castro lover to a new Castro lover. We could help in a military intervention, and replace Maduro with a Ghandi, but he would not survive. Only those deemed worthy of the grand Commie himself would survive. For a little while.

               1. You don’t have to be too much of a genius to detect the source of this publication. The article demeans Russia and China as being imperialists and capitalists, which leaves which country to be a shining light for socialism? (yeah, I thought those were pretty socialistic countries)

               2. Russia and China are moving towards capitalism with a fascist control system. China is also mercantilist.

                  Socialism has a broad range, the hard core socialists are North Korea, Belarus, Cuba, and Venezuela.

                  Angola, Equatorial Guinea, a couple of Caribbean nations, Nicaragua, Bolivia are ruled by socialists who tend towards hard core, but they are held back knowing Marxism doesn’t work. They are very corrupt and ruled by dictators or self perpetuating pseudopresidents.

                  Mexico has a brand new president, who’s hiding the fact that he’s communist the same way Chavez hid his true nature. In Spain we have an alliance of socialists, comunists, former terrorists and separatists forming an odd alliance. They have been in power a month and have already announced much higher taxes for self employed middle class professionals, higher corporate taxes, more fuel taxes, lower taxes for movie tickets. They also gave control to state TV to communists, and the polling and statistical survey agency will now be headed by a socialist party hot head. They also offered to take the invasion force coming from North Africa, and rejects from Germany. So it’s a matter of time until we start seeing lots of terrorist hits.

                  I expect the economy will feel the damage starting in about six months, and three years from now we’ll see serious brain drain as the middle class and companies leave. So now I get my news from Al Jazeera and YouTube, and in about three years I’m packing and heading to a suitably capitalist country. Maybe I’ll move to Hungary.

               3. Belarus is a real oddity. The only reason it is stagnating in the socialist stage, and not moving faster toward capitalism is the dictator, Lukashinko. The population is actually highly educated, which is the enigma. Normally, it’s easier to brainwash the lesser educated. However, as the Belarusian ruble continues to slip, I don’t give it too much longer.

               4. It’s not brainwashing. It’s a very effective secret police state. You have to live inside one for several years to understand how it works. Nowadays a dictator can keep control with the support of say 10% of the population…people he keeps well fed in the armed forces, secret polices, government ministries and selected entertainment and media figures who provide propaganda.

            2. The opposition to Maduro isn’t “right wing”. Right now Maduro has in jail several generals who were very close to Chavez (Baduel for criticizing Cuban military presence and Rodriguez Torres for trying to organize a left wing political movement opposed to Maduro are two famous cases). The Attorney General, Luisa Ortega, fled the country, has been calling for Maduro’s overthrow. She also provided documents which prove Maduro is corrupt, and this is being used in his trial.

               One thing I note is that leftists tend to define opposition to communist dictators as “the right wing”. But what really happens is that at least 50% are left wing, because these dictators and autocrats aren’t popular.

               We are seeing that now in Nicaragua, where another Castro ally has murdered over 300 persons during recent protests. The way Nicaragua is going, it will soon be another failed state, or another Cuba, generating large flows of refugees.

6. Ron, many thanks for your very informative post about world oil (as always) and your comments on my post.

   However, like much of the peak oil community, having missed some of the previous peak oil predictions, now I may err on the conservative side. Many have criticized the EIA projections and OPEC reserves. But again, even with those projections/reserves, the world oil production is still projected to peak in 2021. This suggests that world oil production may indeed peak in the near future. As I promised, I will follow up with part 2 on this.

   Regarding China, China’s oil consumption growth has re-accelerated as its oil production is in decline. This development may have some major impact on global economy/geopolitics in the coming years. On top of that, China is (or will soon become) the world’s largest natural gas importer.

   1. If China cannot not get the oil that it needs, pretty much every single day heading northward along its East Coast, 4 million barrels transport to Japan.

      The seizure scenario would, of course, involve Lloyd’s of London and insurance on tankers. But if you need the oil and the oil is there just offshore already produced and contained in a tanker, then the responsible thing to do for your people is to take that oil.

      1. I think that’s projecting American thinking on the Chinese. I have doubts that the Chinese government is willing to waste international political capital in an attempt to reduce their trade surplus.

         America is happy to spend trillions to make importing oil easier. In the end that just increases the country’s trade deficit. The rest of the world does not necessarily have the same mind set.

         1. China’s not going to suffer so that Japan does not. I don’t know why people are projecting altruistic thinking on what’s a stability-focused, authoritarian, Red nationalist state with a large military and a HUGE vulnerability in oil.

            1. What I’m saying is that the Chinese government tends to regard importing oil as suffering.

               1. Maybe the phrasing is murky. If China needs the oil, and the operative word is needs, then international capital, and mindset, and philosophical or ideological preferences don’t really carry any weight at all when your people can’t get food.

                  Oil is life. Shanghai doesn’t grow any food. It has to be transported.

                  The microsecond that it becomes clear that food cannot get to Chinese citizens, that oil heading to Japan is not going to get to Japan. This isn’t even debatable.

               2. Evidently Japan won’t be buying oil if the Chinese are seizing it, and oil tankers won’t get to China because the oil won’t be put on tankers so they can get into a war zone. The idea that China would seize oil tankers in the high seas is really silly. Better skip the video game scenarios.

               3. But you did not think this through. If Lloyds says the oil tanker can’t leave port. how does Japan feed itself?

                  Outbid? What does that mean when PBOC can create as much money as the BOJ can?

               4. Japan would not buy it knows would be seized by the Chinese. Sellers won’t load into a war zone. Remember, it would be a war zone. These countries would have to use strategic reserves, and eventually the USA defense treaty kicks in, the USA nukes Harbin, and the Chinese surrender.

               5. Harbin is pretty close to Bakken latitude. Ditto Detroit and Canada’s major cities.

                  Not a great target for fallout flow. But that IS the direction things go when Japan is burning 4 mbpd China needs.

               6. Hey, this discussion is make believe anyway. So I’ll just point out the USA has neutron bombs it uses to kill everybody without causing much fallout. Or it can use a secret airplane which fires a death ray which turns people into pocket fuzz.

            2. “projecting altruistic thinking on what’s a stability-focused, authoritarian, Red nationalist state with a large military”
               No need to invoke your impressions of their character on this. No nation willingly ‘gives up’ their imported energy supply for others.

               1. Of course countries “give up” imported energy. Why do you think gas costs $8+ a gallon in Europe? Governments tax it punitively to suppress oil imports and improve the country’s trade balance.

                  Look at the idiotic contortions the Republicans are going through, sometimes cursing the Saudis for selling too cheap, sometimes begging them to sell cheaper. They have no policy because they can’t understand the consequences of their actions.

                  Other countries aren’t that stupid. Importing oil and cutting prices to consumers so people can waste it doesn’t do the country any good at all.

                  And as someone else mentioned in this thread, China is basically mercantilist. They like to hoard money by increasing exports and decreasing imports. The government does not have the goal of increasing oil imports, because that means sending money out of the country.

                  China still has plenty of options if there is ever an oil shortage, including restricting the use of private combustion vehicles. I suspect that would be their weapon of choice.

               2. Why would they endure such a thing rather than take it from Japan? Because they want Japan to have use of vehicles they cannot use themselves?

               3. Come now, gas has to be cheap to fill up the F350– and need plenty for beer, and the Monster Truck Rally.

               4. alimbiqu- thats a pretty fuzzy example for your argument.
                  What country do you expect to forgo energy they are importing so that it can flow to another country. S. Korea imports something like 87% of their energy consumption. Think they may want to yield some to Japan, who imports about 95% of their consumption? Maybe you think China will yield some of their current imports to their neighbors.
                  I don’t count on it, quite the opposite. They will fight like hell in the marketplace for a piece of the pie that suit their needs, and on the battlefield if need be.
                  Just keep watching the action as depletion rolls on.

               5. I’m hoping China offers to invest in Trans Mountain and Energy East pipelines. At least invest for contracted supplies at the going rate…world prices.

7. > USA net imports averaged over 12,500 bpd in 2005 and 2006. They are now down to around 3,400 bpd.

   Is this correct? I though it was more like 3-4 million bpd.

   1. He certainly meant kbpd. If we talk about net imports, including NGL and products, the US are currently below 3 million bpd according to eia’s weekly reports for the average of the last 4 weeks.

   2. Fixed it. Thanks.

8. Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes above $80 and stays there. Iran is threatening to blockade the Straits or Hormuz and Venezuela is threatening to invade the White House. The Saudis, Russians and E&Ps must be hoping for some more “art-of the deal” Trump magic: a couple more contra-interventions for lowering oil price on his part and we’ll see $150 by Xmas.

   1. LOL! And the top of the morning to you as well!

9. MSNBC announced that the Aramco IPO may never happen. MSNBC didn’t say why, however I suppose those reserves that the Saudis have touted for so long could be very difficult to have verified based on SEC rules. I think that much of the last two years of prep for their IPO has been shopping for a exchange that would allow them to get their stock issued without drastically revising their prior reserve disclosures.

   You can also look at this development as an indication that the above discussed “rock” may have already dropped.

10. 2018-07-05 (Platts) While Saudi Aramco CEO Amin Nasser told Platts recently that “maximum sustainable production” was 12 million b/d, industry experts believe Saudi Arabia will struggle to pump more than 1 million b/d of additional output.
    Platts Analytics says even if Saudi Arabia produces close to 11 million b/d it would be running its system at stress levels.
    https://www.spglobal.com/platts/en/market-insights/latest-news/oil/070518-factbox-anatomy-of-saudi-arabias-crude-oil-capabilities?
    OPEC June oil production (Platts) https://pbs.twimg.com/media/DhWBRxDXcAAlaqq.jpg

    1. Yeah, I think that is pretty much what Ron and George have been saying. It is why all these drops in production, and projected production that will not get out of the ground has to cause demand to exceed supply within the next year by a substantial amount. Throw in Iran’s sabre rattling over the Homez, and oil prices should be through the roof. That it is not, is mainly complacency built up over the past four years from the inventory overage. As Scarlet O’Hara said, “After all…tomorrow is another day”.

    2. But S&P Global Platts Analytics believes the global crude market could be left short by that very same 2 million b/d by the end of the year.

       I don’t see BAU continuing with that sort of shortage appearing within 6 months. Even if the strategic reserves are released it will be obvious what is happening and futures prices will be going up. Add to that the generally worsening economic situation, the EU possibly falling apart – or at least considerably distracted and no longer with a single policy set by Germany/France, and a guarantee that Trump will do exactly the wrong thing and there could be some big upsets coming.

       The oil situation is unlikely to get better next year even with some relief for the Permian bottlenecks: there are far fewer projects due on line than this year; Angola decline might accelerate and could be joined by Nigeria, allowing for Egina start-up this year (the deep water FPSOs have similar vintages in both countries); Oman, Canada, Kazakhstan and UK will all likely switch from growth/plateau to decline; natural decline rates in all mature fields will increase based on trend and the way they were exploited in the high price years; Asia-Pacific production decline will accelerate; Venezuela and, possibly, Libya will deteriorate; labour and service shortages are likely to start showing up quickly if high prices prompt a lot more exploration and development activity, but also there aren’t too many short cycle projects left and few discoveries this year; tight natural gas supply might start to show up as another call on resources.

       I’ve said before that the drop off in discoveries has been more severe than I expected, but now so too has the hiatus in development approvals. Even with the price reasonably high and rising and costs having come down a bit the total new production going through FID seems maybe less than last year. This is masked in many reports because they give only the number of projects and mix oil and gas rather than providing Gb of reserve or mmbpd of nameplate for oil capacity that is being approved.

       1. For those reasons, Ron may be correct in questioning my 2022-2023 Peak. It may have already happened, and Permian increases may not be enough by then. Although, I am still skeptical about how much Iranian oil production will be impacted. If there is not enough oil, and the price is right, we will see some serious manipulation of reality to get it to markets. Whatever. My estimation of 2.5 short in 2019, was done without the aid of any Iranian oil drops. I think we are past the point of trying to get oil supply to line up with increases in demand. It’s supply/consumption, now. Peak demand was always an inane argument, to me. If Professor Minqi Li drops EIA projections, and simply makes the decline curve a lot sharper, it would probably come pretty close to nailing it. Peak may be a rear view window projection, now. Oil prices will continue to be manipulated down to allow for the election in November. Although, I’m increasing skeptical of how long the Clown can do that. For the Dems to take full advantage of that, they would need to say the Rep’s manipulated the price down, and prevented new oil production. In other words, the price of oil was too low. That kinda goes against the grain. But, heck, if the Clown can blame OPEC, then any presumed reality they can come up with may work. For that matter, Trump conspired with Russia still works.

       2. When push comes to shove enough nations will buy Iranian oil. Iran exports ~ 2.5 mmbopd, if this gets cut by 1 million, and OPEC plus Russia are having trouble making it up (Venezuela should go below 1 mmbopd by January 2019 and Libya sure looks iffy), then Iran’s cash flow will be similar or higher to what they had in 2016. In other words, looks like Trump will be taught a lesson about how the oil industry works.

          1. Countries will have no choice but to buy Iranian oil because there are no other supplies available to fill their requirements. They’ll buy, starting with India and China.

11. I don’t know if this has any significance.

    https://www.reuters.com/article/us-china-bp-oil-independents/bp-holds-millions-of-barrels-of-oil-off-china-as-demand-falters-idUSKBN1JP1DN

    1. China has increased import quotas for teapots after this article.

       1. The article is only a week old. The quotas have changed that recently?

          1. Yes, there was a recent announcement.

             https://oilprice.com/Latest-Energy-News/World-News/China-Issues-Second-Batch-Of-Crude-Oil-Import-Quotas-For-2018.html

12. Rise of the Machines: Fracking Execs Plan Profits by Using Automation to Shrink Workforce

    The fracking industry certainly has increased economic activity in America and created jobs within the industry. Less discussed, however, is the fact that the industry has consistently lost money on the wells it’s drilling and is heavily in debt. One way to address this structural problem in the industry’s finances is to eliminate high labor costs by replacing people with computers and robots.

    Will fracking one day become profitable when companies shrink the human element from the labor equation? It seems much more likely. And the industry appears more than willing to find out.

    I really don’t understand how that can be possible. Robots cannot drive trucks or drag those big pipes around.

    1. I guess they could use roombas to clean the company man trailer cleaner. I looked into the introduction of better equipment in drilling and completion rigs about 20 years ago, and the best investment was in large diameter coflex to reduce the use of chiksan pipe. We spend too much time making chiksan connections. And I haven’t seen anything viable for onshore rigs other than top. Drives, power tongs, and in some cases a high quality expresso machine placed on the right side of the driller’s console.

       I have supervised large pumping jobs offshore from Big Orange boats, and I see onshore spreads look like a bowl of spaghetti. Putting wells on a pad may allow the use of wide loads to carry more integrated equipment, reducing the work force needed to hookup and run a large frac job. But that’s not a robot issue.

    2. That article is not to get the oil out, but to keep investors in.

13. 2018-07-06 Libya’s NOC says oil production today is at 527 kb/day
    (The official account for the National Oil Corporation of Libya)
    https://twitter.com/NOC_Libya

    May 2018: 955 kb/day (OPEC MOMR)

    TUNIS, July 6 (Reuters) – Libya’s Tripoli-based National Oil Corporation (NOC) is asking for U.N. sanctions against 48 individuals and entities they accuse of trying to sell oil illicitly in a struggle over the country’s oil wealth.
    https://uk.reuters.com/article/libya-security-oil/libyan-noc-requests-sanctions-over-push-to-sell-oil-from-east-idUKL8N1U22FP

14. 2017-07-05 (Financial Post) CALGARY – The Syncrude oilsands project could be offline longer than expected
    The reason the Syncrude plant is expected to be offline for longer than expected is the sudden power outage caused some of the vessels at the plant to shutdown with products still inside, and those vessels need to be emptied before they can be cleaned out and inspected.
    https://business.financialpost.com/commodities/energy/expect-a-ripple-effect-on-oil-prices-boots-on-the-ground-analyst-says-syncrude-wont-return-to-full-capacity-by-august

    1. Interesting the onsite backup generators did not kick in and prevent this. Every plant or refinery that I have ever worked in had such backup.

       1. Stupid way to save money. I believe Arco designed the Hamaca upgrader w/o generator back up, and PDVSA had the same problem.

       2. A power failure would cause a complete shutdown with isolation of the vessels and depressurisation. Even with sufficient back-up it would be unsafe to keep things running without knowing the cause of the problem. Sometimes liquids are drained as well – but it has to be designed such this will work without power – I don’t know the ins and outs of an upgrader so can’t say what it has – also sometimes such safety systems don’t work on demand.

          Typically an emergency generator and bus will just be designed to provide enough power for emergency and key support systems: lighting, some HVAC, safety and control systems, communications etc.

          Therefore typically plants during an emergency shutdown will leave the vessels full, and without pressure it’s difficult to remove any liquid. Usually this is not a problem, in fact it helps with a faster restart. I’m not clear why they need to inspect vessels after a shutdown, maybe they are taking advantage just to advance some maintenance work, so actually they would be saving down time later. If they are doing vessel entry it doesn’t really make much difference how much liquid is left (any hydrocarbon is enough), the process of emptying, purging, cleaning and then purging back into service is going to take a long time.

          Another problem here might be that the thick bitumen cooled down and gelled or worse. Usually there is some heat tracing which can get things back to flowing conditions, but it might not be so easy in big vessels or if the liquid is really solidified – or they might have some areas not covered. I can imagine a fluidised bed with thick gunk in it posing all sorts of problems.

          Blowing up a transformer, in fact any major, long-term downtime on the main electrical systems, is pretty rare and it would be uneconomic to design for it just to save a few days on a restart on a low risk event (i.e very unlikely, and only a seemingly relatively minor economic impact with no safety risk).

          1. Upgraders do require very reliable electricity supply to manage an emergency shut down properly. Given the huge cost, the best solution is to have three quick start 200 hp diesel generators, and three 800 hp gas fueled generators (assuming there’s good natural gas supply). The idea is to have about 2000 hp up and running in case of an outside power supply loss. That kit, including the control building, used to cost about $6 million USD. I suppose nowadays it could run $12 million? It’s nothing.

15. Attached is a comparison of the EIA’s monthly and weekly oil production. They have been much closer recently. Note that the EIA weekly numbers will hence forth only be reported to the nearest 100,000 barrels. The last 4 weeks have been steady at 10,900 kb/d

    

    1. They were close in March. May 4 weekly had US at 10,703 kbpd, April monthly was 10,467. That’s over reporting by approximately 236, which is not close. Admittedly, 98k of that was from a planned maintenance in the GOM. Overall, I think it is rapidly becoming greater.

16. Baker Hughes weekly rig count
    Oil: up +5 to 863
    Natural gas: no change at 187
    Permian: +1, New Mexico: +4, Cana Woodford: -6, Williston: +3
    http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother

17. A weekly measure for inventories (Total: crude + products)
    chart on twitter: https://pbs.twimg.com/media/DhcyD7PVMAAuDSw.jpg

    1. It is easy to become a little myopic when it comes to the storage situation. Even if storage (crude+products) in the US is reasonably well supplied right now and maybe a while longer, better look out for storage drops in Canada, Saudi Arabia, Europe and Asia. The disruptions and decline rates in several countries are so significant that I will be surprised if substantial storage drops can be avoided globally. Even if Saudi Arabia contributes with more barrels.

       It is difficult to see how the Iran sanctions in November could bring anything good in terms of long term supply. Likely outcomes: Saudi Arabia disappointed with sanction results and reduces exports which was planned anyway due to capacity restraints; Iran let ouput slide to punish US/funds rebellion somewhere in the ME, Libya being the easy target. Btw I am not the only one thinking that outside powers pull strings in Libya.https://sputniknews.com/middleeast/201807051066053148-qatar-libya-oil-militants-attacks/

       Another likely outcome could be that Iran does not reduce output because it is not necessary in a high oil price enviroment and there could be some immense pressure to keep up output by trading partners if the oil price is high enough. Iran will export more oil to China than ever before – their main trading partner.

       1. Yeah, real myopic. Imports were a little over 9 million barrels a day this week. A million barrels over average imports in 2018, and 1.5 million over the average this time last year. A temporary situation, yet the market freaked, because inventory for the week went up a little over a million barrels. Two weeks ago, imports were at the average for 2018, exports were about the same as this week, and we had a 6.1 million draw in crude. They are not just myopic, they lack cognitive abilities. Meanwhile, in the rest of the world…. (Hint: WTI/Brent spread is now less than $3.)

18. Brazil production rose 11 kbpd to 2608 for May, but it’s still down from December 2016 peak of 2736. There are two large FPSOs ramping up but they are continually fighting high decline rates in Campos basin and on land, and now maybe older Santos fields starting too.

19. Total have taken a decision to develop the ACCE fields in Angola. The interesting point of this is that they will be tie backs to one of the Kaomba FPSOs, which haven’t even started up yet. One interpretation might be that the pre-drilling on the originally planned wells hasn’t been as good as expected and they need other sources to fill the facilities.

20. https://oilprice.com/Latest-Energy-News/World-News/Bernstein-Oil-May-Jump-Past-150-On-Chronic-Underinvestment.html

    A company is finally willing to put a number on the “oil spike” price. The price they put very vaguely into the future, that will actually happen by next year, in my guess.

    1. I’m waiting for the first investor targeted oil article that says “lack of oil” instead of “lack of investment”. All the IOCs, even ExxonMobil despite what they say, seem to be changing strategy to some sort of contraction to fewer and more localised areas, less exploration, less risk, moving more towards gas, fewer pronouncements about the ever rosy future for oil.

       1. One would think that IOCs starting to invest heavily in EV batteries, and charging stations should be a clue, ya think? I think the trend to defining themselves as “energy companies” vs oil companies should have them investing in cow farts, soon. Down to ten years at economically recoverable, I think. Of course, that expands when we talk about $150 oil. That tier three looks downright profitable at that price.

          Even if oil companies can smell the upcoming price uptick, they are going to play it conservative for this year. Most will get a decent profit, and they want good cash flows for the year. It’s been a long four years, and they need good financials.

          1. It doesn’t matter, because they won’t have plans, budgets, engineering, materials or contracts ready. If prices take off we should see 2019 budgets increased a bit, and the fast ones will start lining up materials. But oil companies run on a fairly dumb clock.

             1. The clock is not the only thing dumb, sometimes.

                1. Can’t turn plans around that fast. Many years ago I got called by a company executive who asked me what the prior day’s production had been. He got a bit upset when I explained that I didn’t know, but would have somebody give him the number in a few minutes.

                   Seeing that he wasn’t satisfied, I had to explain to him that we ran like a factory, and the daily issues were handled by the field supervisors, that I had people making sure things were done properly so that weekly production was as expected, another group of people working on the execution of projects which would give results in several months, a group working on medium term projects, and a group which was mostly geoscientists and petroleum engineers worrying about what we could do in a couple of years. And that our success required that we worry about all these groups, making sure they got raises, training, and pizza when they worked late. Which meant I really didn’t worry about daily production because if something had gone wrong they would have told me about it.

                   I’m explaining this because you don’t seem to understand much about how run things properly (if you happen to know much at all). The reason we can’t react that fast is because we have a lot of inertia, we work lean, we don’t usually keep extra tubulars and wellheads sitting in a warehouse, nor do we build road and locations several years ahead of time. Running an oil field is sort of complicated. Quite a few of those who get to run one can’t do it properly even when they have 20 years in the industry.

                2. The only reply I have is posted above, in which you accuse me of being a communist.

                3. And a very good reply it was too. Thanks for remaining civil when attacked.

                4. And he wants your help to his fascist friends.

                5. Well, someone who had to leave a right wing dictatorship as it collapsed, and then went to Fascist Spain under Franco, it seems “fascist” is the preferred system and vision.

                6. I, personally, have never discerned from Fernando’s posts that he leans toward fascism. We both share a dislike of Communism, although he probably more vocal on it than I am. I do not believe that, overall, that countries differ that much from the people in them, only in the type of governments and what they do. The Cuban in Havana is no different than the Cuban in Miami, nor the Dutch person in the Netherlands. I hold no ill will towards him, and respect his knowledge of the oil business. It’s invaluable on this board.

                7. Sorry, I thought “The clock is not the only thing dumb, sometimes.” was intended as an insult. Im having an allergy attack and it’s got my left eye burning like crazy. I can’t take drops because they can give me glaucoma, so all I can do is pour water and wait.

                   I do get pretty tired of the fascist insults and seeing people write defending abusive regimes. I get so many pleas for help getting out, medicines, and advice it’s a real grind.

                   A lady lawyer I helped get away is now in chile and tells me they have tens of thousands of Venezuelans running around, so it’s causing some resentment, especially towards the mixed ones like her. So that’s also got me on edge, because we have to move millions of people out if the move to get Maduro out doesn’t work. And placing several million refugees running from communists can get hard when so many governments are either racists or left wing (the left wing can be particularly vicious, so I’m not expecting Mexico to cooperate now that they have a commie as president).

                   You can see the endless bs about me running away from Cuba, and ending up in Spain. This kind of insulting behavior is typical, and I’m afraid that if I ever get into Venezuela I may become incredibly ruthless with Maduro regime supporters to make sure they don’t ever ever get a chance at me. And I really really don’t want to be that way.

                8. You can see the endless bs about me running away from Cuba, and ending up in Spain.
                   So, you didn’t leave a right wing dictatorship and go to Fascist Spain?
                   You had a whole Continent, with the exception of Brazil, plus Central America to go to.
                   Why Fascist Spain?
                   If I’m getting your travel wrong, please correct me.

                   https://www.youtube.com/watch?v=VWXYsi3zoCQ

                9. Hightrekker,

                   Spain was a temporary stop which enabled Fernando to escape Cuba, he went to high school and University in the US and like many Cuban immigrants to the US does not like c0mmunists, that does not make him a fascist, just an anti-communist like many Americans.

                10. I value his knowledge on this site.
                    However, being a member of the Cuban Elite under a right wing dictatorship, then escaping to a Fascist Country that had brutally murdered the current government, is not a high point.
                    I know he was young (I’m older) and not that politically literate, and it is not his fault that he was born into a right wing dictatorship that benefited him.
                    So, I’ll go with his knowledge on this site.

                11. Hightrekker, I didn’t have a whole continent. I was 14 years old and was given an exit visa bought for $300 deposited in a Canadian bank account owned by the Castro dictatorship.

                    The plane I used to cross the Atlantic was owned by KLM, it had 152 children aboard (the oldest you could be to get on that plane was 14), and four Dutch adult chaperones.

                    I think the refugee system put us in Spain because they spoke Spanish. But I’ll level with you, in that camp I was placed with hundreds of other children, there was not one who would defend anything close to communism. And as far we were concerned, if a country was killing communists, that was fine with us.

                    I think Franco missed an opportunity because he could have trained us as attack dogs, and we would have gladly put plastic bags on communists heads, skinned them alive, or do whatever niceties were ordered.

                    Living in a communist country can be a traumatic proccess for children, and most of us were so badly adapted to being brainwashed the Castro dictatorship felt it was better to let us out for a few dollars.

       2. I keep wondering who they think is supposed to do this investment. Whose financial responsibility is it supposed to be to get this oil out of the ground?

          For private investors, why fund oil if there are better places to put your money?

          For oil companies, why throw money at such projects if you can avoid losing money by pulling money out of your company or by funding something more lucrative?

          For countries, is it in your best interests to find oil and then keep the price low so it can be exported or pissed away by people driving big vehicles for non-essential purposes?

          1. All I know is that I’m not selling oil stocks I bought in 2015. They are doing ok, and should be about to take off into Amazon territory.

             1. ?Yeah, I have some USO options expiring Jan. 2020 that are beginning to look pretty healthy.

21. https://www.rigzone.com/news/dallas_fed_energy_sector_growth_strong_but_permian_challenges_remain-28-jun-2018-156115-article/

    Dallas Fed. 55% see pipelines as a short term hinderance to growth. Personnel shortages a close second. If 55% are not growing, the Permian is not growing. Somewhere not too short of 50% of the production is from small producers. Of course, there is a lot of new production that needs to keep coming just to offset declines.

22. Going by this chart and news articles, it appears that the United States has hit about the same amount of oil production as its former peak in the early 1970s, meaning that for the United States, we will have at least Twin Oil Peaks.

    https://www.cnbc.com/2018/01/31/us-oil-production-tops-10-million-barrels-a-day-for-first-time-since-1970.html

    This makes me wonder whether or not there will be Twin Oil Peaks for the world as a whole as well, especially if production efforts are ramped up in an effort to keep up with high oil demand. It seems possible that could happen (or maybe even a Triplet Oil Peak scenario if new large arctic findings occur and are developed later), and that we have not yet really reached the first of those Peaks.

    Regardless, however, it seems reasonable to expect that the days of cheap oil are over. We’ve struggled to keep production up to pace with consumption, according to the data, since at least the late 1980s. Moreover, even if we have a massive arctic finding or two of oil, the hunger of the large governments to spend money that they don’t have and hence for central banks to keep interest rates below market equilibrium (near or below zero, actually) will lead to inflationary pressures on prices for things like oil over the long-term. Governments could try a two-tier private vs. govt. interest-rate system, I suppose. But so far, nobody’s been smart enough (or perhaps, dumb enough) to try that stop-gap measure against default.

    1. Fracking as a second peak requires specific geology. The Monterey Shale formation was supposed to contain reserves comparable to Permian fracking but the rock structure turned out to be all wrong, cutting the reserve estimate from 16 billion to 600 million (generously). That’s the best, most transparent example of why this is hard to say.

       Fracking’s logistical demands also mean that it can’t be done with offshore oil fields (assuming the geology even worked) or places like Alaska and Siberia. Using tens of thousands of low volume wells (the Bakken currently has over 12,000 producing wells) is both really expensive and really impractical.

       1. Well put. And Arctic developments take a very long time from first appraisal well to first oil. I used to work in Russia, and most of my work was focused on the Arctic prospects, and also did some consulting for the USA Arctic and Mckenzie delta and Canadian Beaufort prospects. And I don’t see a world wide peak from Arctic waters. The winter ice is just too tough, and there’s no chance global warming will stop the near shore ocean from freezing in February-March until say 2050.

       2. I think the Monterey debacle should be a lesson that these recovery estimates are rough, and largely far over stated.

       3. It would also require a lot of easy financing. Where would US shale be without that?

          Suddenly many who applauded the most recent oil price collapse are whining there isn’t enough investment.

          Sorry, but why the heck would anyone who actually needs to make money on the oil production want to stick a neck out after having went through a three year blood bath?

          Furthermore, there was a lot of talk about “peak oil demand.”

          I think we will just keep the wells that we have pumping going, and maybe drill a well or two in a few years.

          These dolts who talked the oil price down into the $20s in early 2016 really didn’t know what they were setting up? I think they knew full well, the smart ones, anyway.

          1. Noted they were drilling a few more vertical shallow sand wells in district one and two in Texas. Future looking better for ya.

             I can’t complain on my royalties. They drilled some wells that were dumped on by low oil prices, but the majority look like they will be produced after oil gets north of ninety. So, when I go fill up, later, I’ll be the only one at the pumps smiling. Lower for longer? Yeah, ya get what you pay for.

             1. I will be smiling too. Cost of gasoline per mile for average car at $4 per gallon is 16 cents. Cost of electricity per mile for EV is 4.5 cents from the grid and 2.5 cents per mile from a home PV installation.
                Keep those high prices up there for a few years or more, please.
                Plug in global EV sales have more than doubled in two years and prices are falling. If this keeps up for 12 years, there will be few ICE’s produced and somewhere before that oil prices will have fallen and demand will decrease rapidly. Most ICE’s bought in 2020 will be junked before their life expectancy, even if you can still get parts.
                Enjoy the next 5 years, after that ???
                BTW, aircraft will become twice as efficient so I wouldn’t depend on them as a driver of demand. Oil heating will be mostly gone by mid-2020’s.

                1. I wii be long dead by then. Maybe, they can stitch my mouth into a smile. Besides, by that time it will be converted from oil into cash, and most donated to charities. Not a bad outcome.

                2. Gone long before 2030? You are going to miss most of the excitement! This century could get a lot more exciting in both positive and negative ways than the twentieth.
                   We should know by 2023 if the transistion is actually working or not. If not, well best not to be here in 2030 anyway.

23. The U.S. has now become a net exporter of natural gas on an annual basis for 2017 . The first time since at least 1957. Amazing sprint. Any guess how long this production rate can be sustained?
    https://www.bloomberg.com/news/articles/2018-01-10/u-s-became-a-net-gas-exporter-for-the-first-time-in-60-years

    

    1. IHS thinks that production could grow for years

       June 2018 (IHS Markit) U.S. unconventional gas
       U.S. production is expected to grow by another 60 percent over the next 20 years
       U.S. LNG export capacity to more than double in the next five years and rise to at least 10 Bcf/d by 2023. https://ihsmarkit.com/Info/0618/shale-gale-turns.html

       1. That IHS report contained some startling information that should give anyone following the oil/gas world some reasons to ponder the future potentialities.
          Possibly the most significant data point is the US having 1,250 Trillion cubic feet recoverable at sub $4/mmbtu (Henry Hub).

          That is 45 years’ present US annual consumption.

          That ($4/mmbtu) is the energy equivalent of $23 bbl WTI oil.

          The impetus to transition to natgas from oil, especially in the transportation arena, is strong and growing.

          Associated gas from Texas and Oklahoma is plentiful.
          Cost of producing huge amounts of gas from the Appalachian Basin is exceptionally low.

          Infrastructure in the LNG world, particularly modularization and floating platforms, will accelerate the rapid adoption of natgas on a global scale.

    2. That is just looking at the liquified part. Pipelines are opening to Mexico for natural gas, and more are planned. There is a mass of new LNG plants in the Port of Brownsville, and many more along the GOM. Gas is just an ugly stepchild in the Permian, and not much is being targeted in Texas due to the price. Although, there are many areas to drill for it. Just not as profitable as oil.

24. US LNG Import and Export Projects and Status.
    https://www.ferc.gov/industries/gas/indus-act/lng/lng-approved.pdf
    Global Energy Dominance brings Local Market Balance or potential Shortfalls?
    The Money on City NG Infrastructure is massive for a Temporary or Bridge Fuel.

25. 2018-07-09 (Reuters) Canada’s Syncrude hopes to restore partial production by late July but full production not anticipated to return until sometime in September:
    http://www.imperialoil.ca/en-ca/company/media/news-releases/180709-imperial-provides-update-on-syncrude-outage

    1. Sounds like their safety systems didn’t work as planned, and they maybe still don’t know why.

    2. Suncor says, coke removal is required on one of the 3 cokers due to the nature of the shutdown ?

       CALGARY, Alberta, July 09, 2018 (GLOBE NEWSWIRE) — Suncor — shipments of treated product are estimated to be approximately 60% to 70% of capacity for August. It is expected that Syncrude will ramp up to full production in early to mid-September.
       https://www.nasdaq.com/press-release/suncor-provides-update-on-syncrude-recovery-plan-20180709-00202

26. Eagle Ford – update through March 2018 – Enno Peters
    https://shaleprofile.com/index.php/2018/07/09/eagle-ford-update-through-march-2018/

    1. How come the number of rigs from Baker Hughes has hardly changed this year, actually increasing a bit from around 63 to over 70, but the number of spuds shown for shale oil has dropped from over 50 to 9? Something to do with vertical vs. horizontal or delay in data or other? At current rate all the DUCs will be gone by early 2019, but they must need a few months inventory to allow scheduling for the completions crews.

       1. My guess is they know the price is going up. I follow Atascosa County all the time, and I noted XTO completed to DUC status 6 wells in July, so far.

27. Eni announces oil discovery in Egyptian western desert
    https://www.rigzone.com/news/eni_announces_oil_discovery_in_egyptian_western_desert-09-jul-2018-156224-article/

    1. 5k a day is pretty healthy.

28. 2018-07-09 (Bloomberg) Libya’s Oil Chief: oil production is 527,000 b/day and will keep falling every day as long as its major ports remain closed. Libya was churning out more than twice that amount before fighting broke out.

29. Baker Hughes international rigs down 8 for June (5 land, 3 o/s; but oil up 10, gas down 18 – 12 of which in Saudi, could be Ramadan related). Overall down 1 from last year. Gas rigs are the lowest since 2004.

    http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview

    1. International Rig Count – Split OPEC & Non-OPEC (oil & gas) Baker Hughes
       Chart on Twitter: https://pbs.twimg.com/media/Dhqg1eSWkAEhIQz.jpg

       Argentina +5
       Mexico +3
       Egypt +2
       Saudi Arabia -8
       Venezuela -2

    2. Brazil still doesn’t have enough offshore rigs to facilitate growth, only 8 rigs (down 1 rig).
       Saudi is up 4 oil rigs, down 12 gas rigs. I do think oil rig numbers there will continue to rise.

30. Another outage: -54 kb/day in Gabon due to a strike

    2018-07-09 LIBREVILLE (Reuters) – Gabon oil workers’ union ONEP began a 15-day strike at the facilities of French oil producer Total on Monday after demands for higher pay and other issues were not met, the union said in a statement.
    Total produces about 54,000 barrels of oil equivalent per day in Gabon.
    https://www.reuters.com/article/us-britain-poison-police/uk-police-say-unclear-if-latest-novichok-poisoning-linked-to-attack-on-skripals-idUSKBN1JZ1BN

    1. There are long turn arounds for SeaRose and TerraNova, offshore Canada, scheduled this year which could take out 40 kbpd for a couple of months, also Alaska and UK maintenance seasons just starting (plus Total strike on some UK platforms), and Statoil has at least twice as many turn arounds this year as last in Norway.

    2. 2018-07-10 Norway (Bloomberg) Shell shut down Knarr field due to strike. Knarr produced about 23,000 barrels of oil per day, 3,500/day in NGL in April. Union warns it will escalate the action over the weekend

31. Increased oil price isn’t encouraging Anadarko to do much more on the E&P side:

    Anadarko to add $1B to stock buyback, $500M to debt reduction plan

    Anadarko Petroleum (NYSE:APC) says it is increasing its stock buyback authorization to $4B, a $1B increase, after completing the first $3B buyback on June 29.
    APC also says it will reduce its debt by $500M, bringing its total debt reduction program to $1.5B.
    The measures raise the aggregate equity and debt buyback programs to $5.5B, in addition to the recent $400M annualized increase to APC’s common dividend.

    https://seekingalpha.com/news/3368522-anadarko-add-1b-stock-buyback-500m-debt-reduction-plan?dr=1#email_link

    1. You can’t tell me most oil companies do not know as much, or more than we do about the coming spike. But, they can’t turn on a dime, and these plans have been hardwired into budgets to accommodate the investor revolt. They can show healthy financials this year, and increased production will have to wait for 2019. When they do, the Permian will not be much of an option until later in the year. Heck, EOG is still using the $40 price of oil to determine where most wells will be drilled (exceptional tier one).

       When the uptick in production does come, I look for the Bakken and Eagle Ford to get a larger portion of the pie, even after Permian pipelines are completed. Permian is great production, but the constraints do not stop at the pipelines, as indicated in various reports.

       The Eagle Ford still has a good number of good tier one locations, regardless of the reported death of the Eagle Ford.

    2. Buybacks may be more lucrative than any current or future projects they may do.

       1. Oh, I don’t think we are finished on the borrowing and equity creation, yet. It just looks good, now. Let me give an example. Let’s assume that oil supply is far short of demand, and would have a very difficult time in going over demand. Because of that, oil is at $100 a barrel. Your a company that has a lot of locations that could produce, at least, 150k barrels in first year production. Your cost, let’s say in the Eagle Ford, is about $6 million per well. Your expected gross profit the first year, after paying yourself back for capex, is about 5 million. There are other costs, but that’s a heck of a lot of leeway. But, you are stuck only drilling a limited amount of wells, because the piggy bank is not big enough. Want to venture a guess as to what will happen?

          The vast majority of E and P companies lost big time, because oil dropped to $40, while they were thinking this way in 2013-14. Even worse, they were drilling in locations that were tier three, and could produce less than half the 150k the first year. Different this time? My guess is that they will take the gamble. By this point, investors will reverse course, and be in agreement. It is the nature of the beast. Boom or bust, and I think this is the last boom, although it will be a big one.

       2. They may not have a lot of other things to spend it on. Phobos and Shenandoah in GoM have not turned out well and they are completing the development drilling on some other small discoveries there (Horn Mountain Deep, Lucius etc). Their exploration in Colombia wasn’t a big success (maybe some other failures offshore Africa but can’t remember for sure), I can’t remember them being very active on lease sales, for LTO the Permian may be bottlenecked and Niobrara may have peaked, Algerian gas is probably not going to expand, so they have LNG offshore Mozambique and I don’t know what else.

          1. That’s my assumption. These companies see the future (fewer opportunities) and want to get money out as they can.

          2. Yeah, forgot. Anadarko did sell its Eagle Ford shale back in 2017. Still in the Permian.

32. With this much disinformation and misguided headlines no wonder people are confused about where the oil market is going. There is no reason for everyone to be confused by the bombardment of mass media news ticking in, the oil market is a slow moving beast. I guess it just a consequence of the new interconnected society, you have to behave like a scientist to be sure of what is going on.

    Russias Finance Ministry warns of another price collapse

    https://oilprice.com/Energy/Energy-General/Russias-Finance-Ministry-Warns-Of-Another-Price-Collapse.html

    1. Lol. She needed to catch him before that second bottle of vodka. It’s going to be lower for longer. That’s why Russia wants to produce more oil, so they can help keep prices down. The Saudis have the same goal of keeping the price down. We must be overproducing, because world inventories are dropping like a rock. ?

       1. Yep, that is pretty much it. The handshakes and meeting at the football world cup between Mohammed Bin Salman and Vladmir Putin was all about football. End of story.

          And by the way, Trump has a goal to increase oil prices; that is the cause of the harsh Iran sanctions. Just to make everything crystal clear.

          1. I think you are applying a degree of logic and planning to Trump’s decisions that almost certainly doesn’t exist.

             1. I think he meant to include a smiley face on that comment.

                1. My mistake – actually I completely misread what was written. Any mention of Trump seems to erode my cognitive abilities these days.

                2. He does have that effect.

                3. Smiley face intended. I am not sure what to make of the Iran sanction policy, that is why I am speculating. I don’t really understand it fully.

          2. And as November draws near, Trump will continue to blame OPEC for the higher for longer oil prices, while the Dems blame Trump for colluding with the Russians to get it higher. Meanwhile, part of EIA will keep projecting US production at 1.3 million increase for 2018, and another 1 million in 2019, while the EIA monthly will only report a 500k increase through September. Crude oil inventories, by that time will drop way below any level in the past ten years. Russia will continue to project a drop in oil prices. D-d-d-dat’s all folks. ?

       2. Is there any good source in the web for actual world oil inventories? I didnt find any, except the eia, but they only show us stocks.

          1. OECD inventory data is readily available. OECD is most of the worlds storage. If that’s of any use…

             EIA – Monthly Energy Review – International petroleum
             Table 11.3 Petroleum Stocks in OECD Countries (million barrels)
             https://www.eia.gov/totalenergy/data/monthly/

             

             1. The free data sources tend to include liquified natural gases (ethane, propane & butane) which confuses things as there can be big swings in liquid gas inventories, like this…

                

             2. And OPEC’s monthly oil market report has all sorts of free data in it
                Chart of EU plus Norway inventories on Twitter https://pbs.twimg.com/media/Dhlwm1OXcAAYBQG.jpg

                And the IEA’s oil market report (free after 2 weeks)
                Chart of OECD commercial products inventories: https://pbs.twimg.com/media/Dhlvb6vX4AAQmnS.jpg

                Bloomberg chart
                https://pbs.twimg.com/media/DhvqzE_XUAE8jSq.jpg

33. https://oilprice.com/Energy/Energy-General/Why-Natural-Gas-Hasnt-Dethroned-Gasoline.html

    Europe sees it as a viable alternative. Just need more charging stations.

    1. At some point, perhaps when the Metallic Organic Framework fuzzy heads do their thing, natgas fueled transportation could become more mainstream.

       That !inked article did not reference the economic comparison between gasoline and CNG regarding the price per gallon.
       GGE (Gallon of Gasoline Equivalent) does not get the mileage performance, but it is presently about 2/3 the cost.

       Fueling at residences with natgas supply will be feasible when the Adsorbed boys get it viable down to 500 psi.

       Almost there.

       1. ‘At some point, perhaps when the Metallic Organic Framework fuzzy heads do their thing, natgas fueled transportation could become more mainstream.’

          It once was:

          https://tinyurl.com/yabmlqh8

          Perhaps not very aerodynamic, but certainly gasodynamic!

34. STEO will be out this morning. They have to address the Permian slowdown in growth somewhat in this addition. How much is going to be revealed? Not much, is my bet.

35. EIA Short Term Energy Outlook

    EIA estimates that U.S. crude oil production averaged 10.9 million barrels per day (b/d) in June, up 0.1 million b/d from the May level.
    EIA forecasts U.S. crude oil production to average 10.8 million b/d in 2018, up from 9.4 million b/d in 2017, and to average 11.8 million b/d in 2019.
    If realized, both of these forecast levels would surpass the previous record of 9.6 million b/d set in 1970.
    https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf

    1. They have gone off the deep end. Total increase from Non-OPEC (US and Canada) is expected to be 2.4 million for 2018. Seriously! Ok, total garbage from the EIA until after November. Ok, I see what they did, they just reshuffled where the 1.2 million will come from. 600k from the Permian, and 600k from the Bakken, Eagle Ford and GOM. That be a pretty good trick. So, my tongue in cheek prediction above, is not so comical, now. It’s reality. But, I am still having a problem adding up 1.2 million from the US, plus .3 million from Canada, and making that equal 2.4. Something must be wrong with my calculator. Either that, or there needs to be an edit between Non-OPEC supply, and US supply. Two completely different numbers.

       600 from Bakken, Eagle Ford, and the GOM defies reality, too. Based on the permits for July in the Eagle Ford, they are going down. I believe George estimates, we will have a slight decrease on the GOM by year end. Which means the Bakken best get movin’!

       The reality is the EIA is playing a political game to keep oil prices down to November. It’s all BS, and keeps moving around to justify stuff, including math so bad a third grader can identify their errors.

       1. The 200k from the GOM, isn’t going to happen. It’s the same unsupported BS they have been doing the past five years I have been looking at it. The 200k from the Bakken is possible, but 100k may be more within reason? The rest can be easily measured, as it will come from Okla, Texas, and New Mexico. 600 barrels from the Permian, 200 from Eagle Ford/and/or Okla. Of course, we may have to keep a close eye out for increases in DC. Texas and New Mexico were up about 350k in April to count against that 800k, but it is not going up another 450k. Unless oil can be teleported.

          All they have done is spread it out enough, so their ridiculous assumptions of the Permian will not become as noticeable. I know they have quoted higher projections from the Permian than .6. Don’t pee down my pants leg, and tell me it’s raining.

          So my shortage estimate now needs to be broken out. 250 from the GOM estimate, 100 from the Bakken estimate, and 350 from the Permian plus Eagle Ford estimate, or 700k, same as before, and 300k short from the 2019 estimate. One million short (plus or minus 100k) for 2018-2019 from the US, which is not an outage, it just does not meet expectations.

       2. Between the STEO of June and July, the main differences for non-OPEC production come from the production of Brazil (+327kb/d instead of +121kb/d) and Russia (+234kb/d instead of +19kb/d).

          I took the difference between jan 2019 estimation and jan 2018, using the tables listing all liquids production. So, that makes 500kb/d increase of non-OPEC (outside NA). If we add the production of North America, 2’500 kb/d, that makes roughly 3Mb/d of increase for non-OPEC. US alone is 2.2Mb/d including NGL. Alone, crude increase by 1.5Mb/d.

          I don’t usually check much the STEO. It is interesting anyway that they forecast that US and Canada are no more alone in the growth of non-OPEC production.

    2. Attached is a chart that shows how the EIA STEO projection for on-shore oil production has changed from March-18 to July-18.

       

36. My dad is a big believer in the shale hype. Next time I see him in September I need to set up a
    high stakes bet. I bet I could get him to take the over on a 15 mbd secondary peak in the US. Realistically can the US even hit 13 mbd on a yearly basis? Say 2021 or so….

    1. US is not at 10.9 million, now. Outside guestimate would be 10.7. Rough ballpark by Dennis and myself would be an additional 2 million, which puts it close to 13. We are over two years away from that happening, and by then, the question should be: is it smart to do that? When the spike occurs (if it does), and the cognition that we have a finite amount sinks in, will we not look at all the exports and question, why are we doing this? It is unlikely refineries will suddenly change their ways, and supplant most imports to accommodate the shale oil. I probably am raising a question that may never be seriously perused, but it should. I would be quite happy to have all my oil sucked up, and converted to cash, but I will always ask myself, is it right? Couldn’t the good ole USA lasted a little longer if we had rationed it, somewhat?

       1. Yeah sadly no one thinks ahead more than a year it seems. If oil is $120 plus in 2020 all they will see is huge dollar signs and production will go full steam ahead. I wonder if things get desperate enough will the Federal government allow offshore Atlantic and Pacific drilling. I’m guessing the geology isn’t too promising in those areas for big discoveries.

       2. Guym

          The USA does not need to ration production, the problem is massive over consumption.
          If the US used as much oil per person as the UK it would only use 7.5 million barrels per day. Taking GDP per barrel, the US should only use 9.5 million.
          The US simply consumes too much.
          If the US used that much, it would not have had to invade Middle Eastern countries to secure oil.

          http://watson.brown.edu/costsofwar/files/cow/imce/papers/2016/Costs%20of%20War%20through%202016%20FINAL%20final%20v2.pdf

          Oil prices would never have hit $150 per barrel.
          The costs have just piled one over the other, no wonder you cannot afford free health care like we have in the UK.

          1. US is a little bigger than United Kingdom. Population per square mile in Britain is 650, while the population per square mile in the US is 84. Australia has 2, and they are going to use more than us, per capita. If you have a map of the world, it could help you reference how big areas are. You can’t build mass transits from Fort Worth to El Paso, the fares could never cover the costs. I like it this way. I spent three years in Japan, and loved the people, but hated the crowded space (339 people per square mile). I’m sure I’d feel the same way about United Kingdom. When I was younger, I contemplated immigrating to Australia, until they started restricting immigrants. I still feel safer paying a doctor, than relying on whichever doctor I can find that relies on the government paying them. Or, as this debacle in the US, only getting the service that some moron in the insurance company decides is what you need.

             1. Just take the Greyhound.
                With more demand, you could drive more often. Lot’s less energy needed than with everyone driven it’s own car.

                Bus traffic is best for regions with spare population.

                But in the 19th century, when the USA was a lot less populated, it was possible to cover the whole country with railways and trams. Things changed with the cheap oil.

                Until the 1950th, you could reach almost ervery rural town in the USA at least 2 times a day with a train.

                Problems was the great depression, leaving many people stranded in suburbs when the local interurban company filed.
                In Europe the railways survived because of being a state institution, but the comercial focus in the USA led to a car – only society, with airtraffic for long distances (the same in Europe, nobody sane drives London – Rome with a car).

                1. Yeah, you can take Geyhounds and trains from towns to towns, still. My dog doesn’t like them, and a divorce is more likely. So, if I have to suffer through the pains of an EV, it’s still preferable than a damn bus.

                2. Eulenspiegel Wrote:
                   “Problems was the great depression, leaving many people stranded in suburbs when the local interurban company filed.
                   In Europe the railways survived because of being a state institution, but the comercial focus in the USA led to a car ”

                   I don’t think that’s it. Europe never had abundant Oil fields to tap like the USA did. Europe was also hit hard after WW2 which resulted in Europe rebuilding a lot of infrastructure destroyed during the war. The higher cost of oil and the lack of highways stunted car use in Europe. The US auto system took off under the Eisenhower highway system. Once the highways connected large areas of the US, it literally paved the way for cars and killed off passenger rail. Also US economic policies shaped its transportation needs. People living in cities migrated to suburbs to escape the grime & crime of cities. Parents didn’t want to raise their children in grimy cities. Europe rebuilt most of its cities after the war, Europe embraced their cities by making them more livable comparied to US cities.

                   “Bus traffic is best for regions with spare population.”

                   Not in the USA. It can take a full day to travel a couple hundred miles by Bus since typically buses make a large number of stops and bus depots are usually located in congested locations. There aren’t many bus stops\depots in rural america. You need to drive to a bus depot, which could be further away than your destination. Rail in the USA is far superior than any bus, either for long distance or local commutes. For longer distance, it not much more expensive to travel by air than by bus, and plane can get you coast to coast in about 6 hours, were a bus would probably take closer to a week.

                   FWIW: where I currently live, in a semi-rural region, There is a train station about 15 minutes away. The nearest Bus depot is over an hour away.

             2. Guym

                The European Union is bigger than the United States in area and it’s population far bigger, by over half. The European Union uses 5 million barrels per day less than the United States.
                Anyway the size of the States is a red herring, 90% of people travel less than 15 miles to work.
                What is lacking in the United States are good rail and bus services going to outlying boroughs and towns.
                With regards to medical services, in England, if you do not think your doctor is good you can find another. Doctors can work privately if they wish, but most join the profession to serve the community and are very good in my experience.

37. Today’s WSJ has a big article on loss of jobs in the oil field. Some new jobs are being created, but they require different skills and often don’t go to those whose jobs have been cut.

    “Oil prices are back up to their high­est lev­els in more than three years. U.S. pro­duc­tion has topped record lev­els, hit­ting 10.9 mil­lion bar­rels a day in the last week of June, ac­cord­ing to the U.S. En­ergy In­for­ma­tion Ad­min­is­tra­tion, com­pared with its high of 9.6 mil­lion in 2015. But as of May, na­tion­wide oil and gas em­ploy­ment is down 21% since 2014, ac­cord­ing to state and fed­eral data com­piled by Karr In­g­ham, an econ­omist for the Texas Al­liance of En­ergy Pro­duc­ers, an in­dus­try group.”

    1. Higher technical skills that are required may be a small part of that decrease in employment, but I think the main reasons are a little more mundane, and will reverse in the future. Oil completions were over twice as high in 2014, than currently. The bulk of the extra wells were vertical. They are still doing verticals, just not as many. Why? Bear with me, as I am just applying some basics I know about, and I am not as knowledgeable, as say, Fernando. Vertical well production, in general, has less of a decline rate as horizontals. They are cheaper to drill, by about 20-30% of the cost of horizontals. However, they do not have the high early production rate, and the payback time is generally longer. They can be profitable long term, but they need a higher oil price and/or borrowing to cover the capex until payback. I think that is coming, and full emplyoyment will ensue.

       1. rig count 8-2014 ~1600
          rig count 7-2018 ~850

          1. Yes less rigs and also the Houston Chronicle said that the new semi-automated electric rigs need less workers to operate them. Numbers of new rigs increasing…

             March 8, 2018 (Platts) Superspec Class D (1,500–1,999 horsepower) rigs now account for nearly 9 out of 10 active land rigs in the US, and AC (electric) Class D rigs alone likely represent almost two-thirds of that total.
             Bar chart on twitter: https://pbs.twimg.com/media/DX3MPBUU0AAwFAm.jpg

             1. Yes, and I reference completions, and everyone quotes rigs. Completions for May 2014 in Texas was 2057 for oil, and for May 2018 was 739. That’s 64% fewer oil wells completed and brought online. There is a vast amount of work needed around those completions, which does not involve drilling. With multi pad horizontal wells, there is even more economies, which are not available to a single well.

38. Norway’s production bounced back from maintenance in June.
    Crude + condensate production (without NGLs) June 2018: 1,510 kb/day
    Average full year 2017: 1,618 kb/day
    May 2018: 1,350 kb/day
    Chart https://pbs.twimg.com/media/DhztM6VXUAEbrTK.jpg

    1. A lot of maintenance going on in May. Grane and Oseberg having the biggest impact on production, but also Brage, Heidrun and Veslefrikk had low production figures. There was some mention of technical problems impacting production in May from NPD, maybe that was the relatively newer field Goliat or Maria – both had lower production than normal.

       Production has been dropping like a rock for a long time for the Shell operated Knarr field; the field where there is a strike going on now. But officially that is in accordance with the production plan, the field came online 3 years ago with a very high initial production compared to the small reserves.

       A new oil field is approved in 2018, Nova. It has half of the reserves of Maria, 80 mill barrels (boe) mostly oil, costs 2/3 of Maria 10 billion NOK and has a life expectancy of 9 years. Coming online in 2021, or most likely fast tracked to an earlier start up date like Maria. Wintershall is the operator for both fields.

39. It looks like Libya is coming back from outage…
    2018-07-11 (Bloomberg) Libya oil export operations to return to normal within hours after National Oil regained control of eastern ports. Force majuere lifted at Ras Lanuf, Es Sider, Hariga and Zuetina: according to a statement.

    Kazakhstan’s oil production looks like it is back from outage
    Chart: https://pbs.twimg.com/media/Dhzyw9QWsAAllyT.jpg

40. Pompeo says US could issue Iran oil sanctions waivers

    https://www.ft.com/content/2eba7240-8455-11e8-a29d-73e3d454535d

41. A good study of fuel prices and taxes in Asia

    2016-07-11 (Vanda Insights) Pump price spikes shine spotlight on taxes
    In Asia, a combination of an unwinding of fuel subsidies and depreciating currencies against the US dollar has dealt several countries a double whammy. In India, where the government has raised taxes five times since 2014 and the rupee collapsed to an all-time low against the US dollar in recent days, pump prices have hit historic highs.
    What is the proportion of tax in petrol and diesel prices consumers pay at the pump? We surveyed the retail prices across major Asian cities and segregated the overall tax component – often made of a combination of central and local government taxes – to find a wide variation, from as low as 5.6% in Philippines to a high of 45% in India.
    Linkedin website: https://www.linkedin.com/pulse/pump-price-spikes-shine-spotlight-taxes-vipul-garg/?published=t

42. OPEC MOMR crude oil production rose by 173kbpd in June to 32.3mbpd, led by Saudi Arabia, Iraq, UAE, Kuwait and Nigeria. Production declines were seen in Libya and Venezuela
    Saudis Tell OPEC They Boosted Output by 459kbpd in June

    OPEC sees 2019 non-OPEC oil supply growing by 2.10 mbpd, revises up 2018 forecast to growth of 2.0 mbpd
    OPEC says 2019 global oil demand growth to slow to 1.45 mbpd from 1.65 mbpd this year

    secondary sources https://pbs.twimg.com/media/Dh0q6DSW0AI-Me6.jpg
    direct comms https://pbs.twimg.com/media/Dh0rGOJXcAAEfjr.jpg

    Venezuela, secondary sources: down -47 kb/day to 1,340 kb/day in June
    Chart https://pbs.twimg.com/media/Dh0snPaW0AI1Idb.jpg

43. EIA Weekly Petroleum Status Report
    Crude oil inventories drawdown of -12.6 million barrels, largest since September 2016
    Imports drop 1.6 million b/day
    https://www.eia.gov/petroleum/supply/weekly/

44. maybe some comment to: http://peakoil.com/geology/the-energy-cliff-approaches-world-oil-gas-discoveries-continue-to-decline ? -“Thus, the world will be facing the Energy Cliff much sooner than later.”

45. May I suggest you stop using the “fear-porn” of the “fossil fuels” label and instead use the more educated, intelligent and accurate label: “Hydro-Carbons.”
    All green plants use solar energy in combination with the plant’s chloroplasts to make “Hydro-Carbons.”
    Man has used one form or another of the solid, liquid, and gaseous Hydro-Carbons for a very long time, at least since the invention of the Zippo ‘wind-proof’ lighter, if not much earlier.

    Get with it.

46. Ron
    Thanks for all your very helpful graphs.
    With BP 2018 now out, may I encourage you to update global Exports vs total production and Brown’s Export Land Model. http://peakoilbarrel.com/world-exports-versus-consumption-the-elm/
    MazmaScience export browser shows exports about flat since about 2005 (but only has BP data to 2016).
    http://mazamascience.com/OilExport/

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