Will the Bakken Red Queen Outrun the Growth in Water Cut?

This is a guest post by Rune Likvern 
Who’s Website is: Fractional Flowa

This post presents a closer examination of actual data on Light Tight Oil (LTO) extraction, developments in water cut and Gas Oil Ratio (GOR) for some pools and individual wells in the Middle Bakken and Three Forks formations in North Dakota.

LTO extraction’s primary drive mechanism is (differential) pressure and there are some noticeable trends for LTO extraction from Bakken:

  • LTO productivity (measured as average totals by vintage) in 2014 have increased, most notably from the Middle Bakken formation which has better well productivity than Three Forks.
    There are differences to LTO productivity developments amongst the pools.
  • Water cut; generally increases as the wells ages.
    An indicator for depletion.
  • Water cut; generally increases for newer wells.
    This suggests that the areas with the highest oil saturation has been developed.
  • Gas Oil Ratio (GOR, produced and expressed as Mcf/Bbl); generally increases as the well ages.
  • What appears to characterize a Bakken sweet spot is the presence of natural fractures (favorable geology), high oil saturation and a pressure above hydrostatic pressure.

Further, this post also has a brief look into well economics and describes how well manufacturing is likely to be affected by the decline in the oil price and what this may entail if a lower oil price ($70/Bbl, WTI) is sustained.

Rune 1Figure 01: The chart above shows development in the water cut [water cut = [water/(water + LTO)] for the “average” wells by vintage in North Dakota. Produced water (brine) is transported to dedicated disposal sites.
Chart by Enno Peters.

What is fascinating about LTO wells in Bakken is that the individual wells appear to have their own “personality” when it comes to productivity, surrounding rock properties, water/oil saturation and GOR which makes well management (of close to 9,000 “personalities”) a paramount task.

This post contains in total 30 charts that hopefully are self explanatory.

Acknowledgements

This post was made possible by contributions, comments and suggestions from several professionals within the oil industry and the academia.

The invaluable talents and expertise of Enno Peters made it possible to transform the NDIC monthly production data with the formation data into spreadsheet format.

The spreadsheet format allows to sort well data by formation, pool, vintage, company and much more.

NOTE: Actual data used for this analysis are all from North Dakota Industrial Commission (NDIC). Some data are missing for some wells and after discussions, the consensus was that the presented average LTO numbers after the first 12 months should have around 5% added to account for missing data from some wells as well as adjusting for the effects from assuming all wells starts at day one of its reported first month of operation (on average each well flows for half a month during its first month of reported operation).

For wells on confidential list, data on runs was used as a proxy for production.

By adding around 5% of the presented average flows for the first 12 months and around 4% after 36 months numbers should come close to actual.

Production data for Bakken, North Dakota: Monthly Production Report Index

Formation data from: Bakken Horizontal Wells By Producing Zone

Water cut is the ratio of [produced water/(produced water + produced oil)] and expressed as a percentage.

Water cuts for individual wells may swing from 0% to 100%, suggesting a shut in well or data not reported. For the early months of a well’s life the water cut may be influenced from water used for fracking.

The important messages from this analysis are the trends in well productivity, water cut and GOR on an aggregate level and by vintage.

For this presentation wells from two pools in Mountrail (Alger and Van Hook), McKenzie (Banks, Camp) and Williams (Squires, Todd) are presented. Hopefully these pools constitutes a good representation of developments for similar pools.

A growing portion of wells have been/are being targeted the Three Forks formation which may suggest something about remaining attractive targets to drill in the Middle Bakken.

Growth in the Water Cut

It was identified two main causes for the growth in water cut;

  1. The growth in water cut for newer wells was found to be due to a growing number of wells drilled into formations with lower oil saturation (or higher water saturation).
  2. The growth in water cut as the wells ages is very likely associated with pressure depletion.

A growing water cut will increase the specific operational costs ($/Bbl) as produced water (brine) needs to be disposed of at dedicated sites that pumps it into a suitable formation.

Gas to Oil Ratio (GOR)

On average Bakken wells has a production Gas to Oil Ratio (GOR) of 1.1 – 1.2 Mcf/Bbl, and this shows considerable variation between pools and individual wells within the same pool. Monitoring the developments in GOR is one paramount task for formation/reservoir/well management.

As (differential) pressure (pressure depletion) is the primary drive mechanism for LTO extraction, a gradual lowering of the down hole well pressure lowers the oil’s ability to hold gas and thus some additional (free) gas gets produced with the oil.

In the shale formation gas is dissolved in the oil and one of the objectives of pressure management of the formation/well is to control the depleting formation pressure relative to the bubble point of the oil. If the pressure in the shale formation falls below the bubble point these risks the formation of unwanted free gas, which affects the flows of liquids (LTO and water).

Normally the lower the bubble point pressure is, the lower the GOR becomes as oil loses its ability to hold dissolved gas.

A general observation from observing the developments for a few Bakken LTO wells showed that when the (produced) GOR suddenly increased the LTO  and produced water extraction rapidly fell below trend, refer also figures 09 and 21.

Mountrail

Rune 2Figure 02: The thin lines in the chart above shows development in total LTO from the individual wells in the Middle Bakken and Three Forks formations in the Alger pool. The thicker black dotted line shows the development for average total LTO for all the wells studied.

For Alger well productivity has declined with time and 2014 is too early to make a final call on.

Rune 3Figure 03: The colored lines in the chart above shows development in total first 12 months LTO by vintage of the wells in the Middle Bakken and Three Forks formations in the Alger pool. The thicker black dotted line shows the development for average total LTO for all the wells.

Note for 2014 the selection were limited to wells with at least 6 months of flow.

Rune 4Figure 04: The red lines in the chart above shows development in the average total LTO extraction from the Middle Bakken formation in the Alger pool by vintage. The black lines from the Three Forks formation.
Note for 2014 the selection were limited to wells with at least 6 months of flow.

In general the productivity of the Three Forks formation in Alger is somewhat poorer than the Middle Bakken formation. For the Van Hook pool the productivity (first 12 months totals) appears to be the same, ref also figure 12.

Rune 5Figure 05: The thin lines in the chart above shows development in the water cut from the individual wells in the Middle Bakken and Three Forks formations in the Alger pool. The thicker black line shows the development of average water cut for all the wells studied.

Water cut of 0% for some wells suggests these were shut in or produced water not reported on the forms where the data was pulled from. The first months flow of produced water may be influenced from water used for fracking the wells.

Rune 6Figure 06: The colored lines in the chart above shows development in water cut by vintage of the wells in the Middle Bakken and Three Forks formations in the Alger pool.
Note for 2014 the selection were limited to wells with at least 6 months of flow.

Rune 7
Figure 7: 
The thin lines in the chart above shows development in the gas oil ratio (GOR, Mcf/Bbl) from the individual wells in the Middle Bakken and Three Forks formations in the Alger pool. The thicker white line shows the development for average GOR for all the wells studied.

Rune 8Figure 08: The colored lines in the chart above shows development in the GOR by vintage of the wells in the Middle Bakken and Three Forks formations in the Alger pool.
Note for 2014 the selection were limited to wells with at least 6 months of flow.

Rune 9Figure 09: The chart above shows developments in LTO extraction, produced water [lh scale] and Gas Oil Ratio (GOR) [rh scale] for one well in the Alger pool in the Middle Bakken formation.

Note how an increase in the GOR reduces total liquids (LTO and water) flows

Rune 10Figure 10: The thin lines in the chart above shows development in total LTO from the individual wells in the Middle Bakken and Three Forks formations in the Van Hook pool. The thicker dotted black line shows the development for average total LTO for all the wells studied.

Developments in total LTO extraction from wells in the Van Hook appear to be all over the chart. Note also that wells in Van Hook are generally better than in Alger shown in figure 02.

Rune 11Figure 11: The colored lines in the chart above shows development in total first 12 months LTO by vintage of the wells in the Middle Bakken and Three Forks formations in the Van Hook pool. The thicker black dotted line shows the development for average total LTO for all the wells.
Note for 2014 the selection were limited to wells with at least 6 months of flow.

Well productivity for Van Hook has in general improved in recent years.

Rune 12Figure 12: The red lines in the chart above shows development in the average total LTO extraction from the Middle Bakken formation in the Van Hook pool by vintage. The black lines from the Three Forks formation.
Note for 2014 the selection were limited to wells with at least 6 months of flow.

Rune 13Figure 13: The thin lines in the chart above shows development in the water cut from the individual wells in the Middle Bakken and Three Forks formations in the Van Hook pool. The thicker black line shows the development of average water cut for all the wells studied.

Rune 14Figure 14: The colored lines in the chart above shows development in water cut by vintage of the wells in the Middle Bakken and Three Forks formations in the Van Hook pool.

For Van Hook the increase in water cut by vintage is considerable.

McKenzie

A general feature of the presented wells for pools in McKenzie and Williams counties is that those with time shows less spread in total LTO.

Rune 15Figure 15: The thin lines in the chart above shows development in total LTO from the individual wells in the Middle Bakken and Three Forks formations in the Banks pool. The thicker black dotted line shows the development for average total LTO for all the wells studied.

Rune 16Figure 16: The colored lines in the chart above shows development in total first 12 months LTO by vintage of the wells in the Middle Bakken and Three Forks formations in the Banks pool. The thicker black dotted line shows the development for average total LTO for all the wells.
Note for 2014 the selection were limited to wells with at least 6 months of flow.

Rune 17Figure 17: The thin lines in the chart above shows development in the water cut from the individual wells in the Middle Bakken and Three Forks formations in the Banks pool. The thicker black line shows the development of average water cut for all the wells studied.

Rune 18Figure 18: The colored lines in the chart above shows development in water cut by vintage of the wells in the Middle Bakken and Three Forks formations in the Banks pool.

Rune 19Figure 19: The thin lines in the chart above shows development in the gas oil ratio (GOR) from the individual wells in the Middle Bakken and Three Forks formations in the Banks pool. The thicker black line shows the development for average GOR for all the wells studied.

Rune 20Figure 20: The colored lines in the chart above shows development in the GOR by vintage of the wells in the Middle Bakken and Three Forks formations in the Banks pool.

The initial GOR appear to be fairly constant by vintage and increases at the same rate as the wells age. The same was observed in the Alger pool, refer also figure 08, and Alger had a lower GOR than Banks.

Rune 21Figure 21: The chart above shows developments in LTO extraction, produced water [lh scale] and Gas Oil Ratio (GOR) [rh scale] for one well in the Banks pool in the Middle Bakken formation.

Rune 22Figure 22: The thin lines in the chart above shows development in total LTO from the individual wells in the Middle Bakken and Three Forks formations in the Camp pool. The thicker black dotted line shows the development for average total LTO for all the wells studied.

Rune 23Figure 23: The thin lines in the chart above shows development in the water cut from the individual wells in the Middle Bakken and Three Forks formations in the Camp pool. The thicker black line shows the development of average water cut for all the wells studied.

Williams

Rune 24

Figure 24: The thin lines in the chart above shows development in total LTO from the individual wells in the Middle Bakken and Three Forks formations in the Squires pool. The thicker black dotted line shows the development for average total LTO for all the wells studied.

Rune 25Figure 25: The thin lines in the chart above shows development in the water cut from the individual wells in the Middle Bakken and Three Forks formations in the Squires pool. The thicker black line shows the development of average water cut for all the wells studied.

rune 26Figure 26: The thin lines in the chart above shows development in total LTO from the individual wells in the Middle Bakken and Three Forks formations in the Todd pool. The thicker black dotted line shows the development for average total LTO for all the wells studied.

Rune 27Figure 27: The thin lines in the chart above shows development in the water cut from the individual wells in the Middle Bakken and Three Forks formations in the Todd pool. The thicker black line shows the development of average water cut for all the wells studied.

Production Management

Given the wide range of individual characteristics of pools and individual wells within the same pools, production management appears to be a very demanding task as this involves dealing with a portfolio of wells with individual characteristics and thus bear much resemblance to herding cats.

A little on Light Tight Oil Economics

An alternative approach to break even price is to reverse the equation and solve it for estimates of break even flows (first 12 months totals) against various oil prices.

At a lower oil price a higher flow (well productivity, here defined as first 12 months totals) is needed to break even (meet expected return requirements) and vice versa for a higher oil price.

A LTO well recovers around an estimated 30% of its Estimated Ultimate Revoverable (EUR) during its first 12 months of flow. This makes the well economics sensitive to the price during the wells’ early life.

The break even oil price is for the estimated lifetime of the well. A lower price than the estimated break even reduces the return (profitability) and vice versa.

Rune 28
Figure 28: The chart above shows the development in well productivity (first 12 months LTO totals of reported flow) for all the wells in the 6 pools presented in this post versus time (month) of reported first flow.
The red dotted line shows estimated first 12 months break even flow with an oil price of $70/Bbl (WTI), the green dotted line at $100/Bbl (WTI). Well data as of September 2014.

Assumptions to break even flow as described in figure 30 and with a 7% discount rate. Estimates are on a point forward basis (half cycle) and does not include costs for acreage acquisition, exploration etc.

Rune 29Figure 29: The chart above shows developments in the trailing 10 well average for the first 12 months total flow for the wells in the pools presented in this post.
The red dotted line shows estimated first 12 months break even flow with an oil price of $70/Bbl (WTI), the green dotted line at $100/Bbl (WTI). Well data as of September 2014.

Assumptions to break even flow as described in figure 30 and with a 7% discount rate. Estimates are on a point forward basis (half cycle) and does NOT include costs for acreage acquisition, exploration etc.

Rune 30Figure 30: The chart shows estimated break even price (WTI) versus break even flow for Bakken type LTO wells (first year/first 12 months total LTO extracted). The green line is at a discount rate of 7% and the red line at a discount rate of 10%.
NOTE: Presented estimates are on a point forward basis (each well looked at as a freestanding project) thus estimates does NOT include costs for acreage acquisition, exploration etc.

The higher the requirement for return, the higher the breakeven price or breakeven volume becomes.

Cash Flow Positive

The LTO wells will flow as long they are cash flow positive, estimated at an oil price above $10 – $12/Bbl at the wellhead (or roughly $25 WTI).

This should not be confused with what price the wells require to break even, that is; earn a return on their investment.

What a lower Oil Price may lead to

If oil prices remain low ($70/Bbl  WTI) I would expect the oil companies to target those areas that have profitable potential at this price level. This will with time, reduce the scale of well manufacturing, but also result in an increase average well productivity.

A sustained lower oil price brings also with it the prospects of lower costs for well manufacturing in the shales as suppliers reduce their prices.

A sustained lower oil price and higher interest rates may bring deleveraging forward in time, that is companies with a heavy debt load will bring this down by using a portion of their lower cash flow. This will affect the company’s capital expenditures for well manufacturing.

According to the Directors Cut for November 2014 there were more than 600 wells awaiting completion in Bakken North Dakota and it takes money to complete these wells and bring them into production.

What remains to be seen is how a sustained lower oil price will affect developments in total LTO extraction from Bakken.

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405 Responses to Will the Bakken Red Queen Outrun the Growth in Water Cut?

  1. Huckleberry Finn says:

    Some of your pics have not shown up.
    A question you can perhaps answer. What is the LTO attitude towards their drilling inventory? Do they target their sweetest spots first, or do they use it evenly, or they do not know exactly what they are targeting?
    When these oil companies say they have 10 years of drilling inventory should I believe them?

  2. Huckleberry Finn says:

    First company acknowledging this fuck up in prices for what it is.
    http://www.lightstreamresources.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=169

    2015 average and exit production of 30,000 – 32,000 boe per day, 77% oil and liquids-weighted;
    That is a 25% reduction folks. 25%!!!!!!!!!!!!!!
    Good luck holding on to $55 a barrel in 2015.

    • Caelan MacIntyre says:

      “In a capitalist economy the activities of ‘private enterprise’ are rigorously excluded from public scrutiny and control. We have no input into the decisions about production and investment which determine the basic conditions of our existence and which are made in corporate board rooms.” ~ Rob Sparrow

      • Rob Sparrow is wrong. I suggest he start by browsing USA federal tax and financial accounting, corporate governance, and SEC rules. Afterwards he can move to OSHA and EPA.

        • oldfarmermac says:

          Both right and wrong. The regulatory apparatus is subject to capture by the very people it is supposed to regulate and this has happened at the very top- in the banking industry..

          Bankers control the banking regulations. OBAMA has put enough people from gold in sacks alone in positions of high authority that expecting the banking industry to be properly regulated is naive. Of course that damned fool Romney would have done more or less exactly the same thing.

          Other than banking I must agree that Leanme is more nearly right.All the other really important industries are pretty much right out in the open when it comes to what they are up to.They get away with murder sometimes but it is no secret that they do so.Tobacco companies still sell cigarettes but every body knows smoking causes cancer these days.

        • Caelan MacIntyre says:

          “…the State has the self-limiting mechanisms of a separation of powers such that no one institution or agency can dominate the State and thus the nation.

          But as we have seen, the separation of powers has failed to limit the expansion of the State; rather, it has become a competitive advantage, feeding the State’s expansion. There are no State-based limits on the State’s concentration of wealth and power.

          There is a great irony in this concentration of power in the State: the power is concentrated to protect the citizenry from predation and exploitation, but that concentration becomes an irresistible attractor for all those seeking to increase their private gain via monopoly, cartels, collusion, fraud, and other forms of predation.

          The wealth that can be concentrated in private hands is not limited or self-regulated, and so private concentrations of wealth inevitably exceed the ethical threshold of individuals within the State (i.e., their resistance to bribes and self-interest). This structural imbalance leaves the State intrinsically vulnerable to the influence of private wealth. Once this wealth has a foothold of influence within the State, it can then bypass the State’s internal controls and become the financial equivalent of cancer: a blindly self-interested organism bent solely on growth at the expense of the system as a whole.

          Rather than protect the citizens from exploitation, the State’s primary role becomes protecting the private gains of elites who have taken effective control of the State’s vast powers.” ~ Charles Hugh Smith

          My previous post was accidentally posted in the wrong place, incidentally, but no matter…

          • Nick G says:

            This is a highly unrealistic reversal of reality.

            Prior to the “state”, private parties owned everything. Feudal lords owned the land and the slaves or serfs on that land.

            The history of the “state” in the last 1,000 years is one of growing democracy.

            The idea that we have fallen from an early egalitarian state of grace requires us to reach back to a pre-history hunter-gather society which was far more violent than current society and far, far smaller.

            • Caelan MacIntyre says:

              That you don’t notice the everyday violence ‘steam’, in part because it is overseas in places like Iraq, Afghanistan or Ukraine, or in a sweatshop in other places overseas, or relatively-invisibly-embedded in your own daily life, slave, and/or neatly-stuffed into a policed/militarized stainless-steel ‘pressure-cooker’ doesn’t mean it is not there, or that it won’t explode at some later date.

              When one considers things, it seems rather important to consider them as holistically as possible, and this includes over time, space and scale, etc..

              “Inverted totalitarianism is a term coined by political philosopher Sheldon Wolin in 2003 to describe the emerging form of government of the United States… In Days of Destruction, Days of Revolt by Chris Hedges and Joe Sacco, inverted totalitarianism is described as a system where corporations have corrupted and subverted democracy and where economics trumps politics. In inverted totalitarianism, every natural resource and every living being is commodified and exploited to collapse as the citizenry are lulled and manipulated into surrendering their liberties and their participation in government through excess consumerism and sensationalism.” ~ Wikipedia

              “Neofeudalism… signifies the end of shared citizenship… As such, the commodification of policing and security operates to cement (sometimes literally) and exacerbate social and spatial inequalities generated elsewhere; serving to project, anticipate and bring forth a… ‘neo-feudal’ world of private orders in which social cohesion and common citizenship have collapsed… Out of such a marriage of business and government, a symbiosis emerges between the commercial sector’s own private security forces and the local government’s police forces, with repressive outcomes shaped by profit-driven definitions of deviance and a commodification of social control…” ~ Wikipedia

              • Nick G says:

                Again, it’s unrealistic to suggest that there was in the past a utopia, in which private interests had little or no control over government.

                I agree that more democracy would be wonderful – that, in fact, appears to be the direction of history.

                And, of course, greater “social development”, including industrialization, has been an essential component to greater democracy. Nothing causes more tyranny than poverty.

                • Caelan MacIntyre says:

                  There is no real democracy– not even close– in the current model of ‘industrialization’, and there probably never will be, to use ‘probably’ ridiculously charitably.
                  Maybe in another few million years when another species that actually gets the concept and replaces us or we evolve beyond our technofetishistic illusions.
                  “Industrial democracy” is practically an oxymoron and only exists in part in the minds of those who might let the MSM do their thinking for them.
                  I suspect you’ve been Borgged, Nick. Yes, like in Star Trek.

                  • Nick G says:

                    Again, can you give any examples anywhere or anytime of what you’re talking about??

                  • Caelan MacIntyre says:

                    “can you give any examples anywhere or anytime of what you’re talking about??” Nick 6

                    You can find it here, sweetie.

                  • Nick G says:

                    I mean;

                    Are there any examples anywhere anytime of the ideal civilization that you’re talking about??

  3. Andy Hamilton says:

    Lots of focus now on shale oil junk bonds:
    http://fuelfix.com/blog/2014/12/15/u-s-shale-junk-debt-tumbles-amid-oil-crunch/

    ”The $173 billion in U.S. energy junk bonds make up the biggest portion of the high-yield debt market after the Federal Reserve set low interest rates for years and pushed yield-starved investors toward riskier investments.
    Now, as prices for those bonds are in free fall, those investors may begin wondering “what sector would be next,” prompting them to avoid or sell off more debt-market sectors, said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “It doesn’t take a lot for one sector to affect another.”

    Spread to broader junk bond market:
    http://www.bidnessetc.com/business/will-the-junkbond-market-bubble-burst/

    • Watcher says:

      Various bond funds, not labeled HY, when they could not get yield up by moving maturity out, they moved ratings of their portfolio down. There are quite a few of these with average rating for the portfolio at BBB, which is the HY/Junk threshold. They are probably required by the fund bylaws to be BBB or higher, but it means 1/2 of their portfolio is junk.

      In other words, non junk bond fund investors are also feeling it. The FOMC starts its meeting tomorrow. Conclusion language is released noon Wednesday. That will be their first opportunity to jawbone a bailout.

      • WeekendPeak says:

        There is a bit of a self-correcting dynamic going on in those funds. As the junk proportion is going up in yield / down in price the proportion as a part of the whole portfolio shrinks. If anything that may even allow them to buy more junkbonds (catch a falling knife). new additions to the portfolio may be supportive of yield, offsetting some of the capital losses on existing holdings.
        rgds
        WP

    • Ilambiquated says:

      certain strategic initiatives, including a 62.5 percent dividend reduction and plans to monetize all or a portion of our Bakken business unit

      Translation: Dump the cargo boys! We’re sinking!

  4. Average Joe says:

    Hi Rune, the images from #24 to #30 are missing. Can you fix this?

  5. Ronald Walter says:

    https://www.dmr.nd.gov/oilgas/stats/historicaloilprodstats.pdf

    In 2006, month 10, there were 3412 wells pumping oil in all of North Dakota’s oil producing counties, all formations. The total amount of oil was 3,524,450 barrels, the average per well monthly total was 1033.

    In 2014, month 10, there are 11,507 wells which produced 36,647,393 barrels of Bakken crude oil. The average per well monthly production is as of October of this year 3185 barrels, the highest per well monthly total for all formations in North Dakota ever.

    3412 wells pumping 3.5 million barrels per month in 2006.

    11,507 wells pumping 36 million barrels per month in 2014.

    34,120 wells pumping each day to obtain 36 million barrels would have triple costs. It is a cost savings, leads to a tax credit, reduced costs should be rewarded, leads to greater profitability, profits which should not be taxed at all, a tax credit should be allowed, an oil production tax credit, equal to the value of the oil, will guarantee a profit. Congress could pass an oil production tax credit similar to the PTC for wind energy. Energy from oil is more important than energy from wind. Another tax credit, one for oil, is probably necessary now, it will offset market volatility and balance the cash flow for oil producers and shippers. In essence, make sure everybody gets paid because they need the money.

    Translates to print more money to pay for the actual value of the commodity, not the market value, which is too low; double the price and you have what it is worth. A direct subsidy to the taxpayer, more or less, subsidized gasoline by Fed fiat. Just supply the Navy, Air Force, Coast Guard, and Army with Bakken oil production, buy it all every day, for all purposes and it will be gone each day. The bail out will help the oil industry regain profitability and the military will have a guaranteed source of supply. It is far better and easier to support the oil industry, financially and logistically, than it is to butter Wall Street’s bread each day.

    Those drilling for oil in the Williston Basin and the Bakken are improving well production and oil production, it should be rewarded, not financially burdening.

    • Ilambiquated says:

      The only reason to reward people for pumping oil is if you don’t want the oil in the ground as far as I can see. Why not just leave it there?

      • Watcher says:

        I think it was you that weighed in on the supply/demand discussion with the gem . . . how can there be oversupply when there are no warehouses large enough to store the excess product?

    • Watcher says:

      Ah, the Should Be meme.

      The universe doesn’t care about noble endeavor. The universe doesn’t care about hard work. The universe doesn’t care about the price of oil, body count after a war or interest rates on high yield paper.

      God fights on the side of those with the biggest artillery.

      Russians are going to be faced with high prices for imports, and thus not buy ’em. They’ll eat Russian food shipped using Russian fuel. Germany will be hit very hard by the loss of Russian purchases. Nigeria will buy less stuff. KSA, Kuwait, UAE, will all buy less stuff. If you depended on selling to them, you will be smacked. Which sounds a great deal like reduced economic activity (and reduced oil consumption).

      • Verwimp says:

        It’s called “anti-globalisation.”

        • Caelan MacIntyre …..

          You can post damn near anything here, as long as it is related to peak oil or energy. But links to punk rock videos?

          • Caelan MacIntyre says:

            Well, hell, Ron, while I appreciated your appearance on the Doomstead Diner, I would have linked to it instead if you were singing something similar!
            (Actually, DD posts all kinds of relevant music videos, for what it’s worth and yes, much of it I wince at.)
            More seriously, while it was just a short link, at least over here, rather than the actual embedded video, I just thought it went ok with the Nuland brilliant quote, that’s all. Like a smiley face at the end.
            For the record, I’m less than crazy about most punk rock, but do appreciate some of the POB-issue-related sentiment behind it sometimes. In fact, now that I recall, lyrics of Leonard Cohen’s The Future was recently posted without a peep from you, so I figured I could get away with it.

      • Nick G says:

        Less income for oil exporters, more income for oil importers.

        It evens out.

        • oldfarmermac says:

          I generally think NICK is a little too optimistic although I agree with most of the points he makes about efficiency and innovation and so forth.

          In this case I am with him one hundred percent. It evens out.

          But it won’t stay ” evened out” very long. Depletion never sleeps. Population growth is constant for decades to come.. Oil will go back up again before very long- a year or two at the most. AND WHEN IT DOES- it will probably stay up for years and years. And when it crashes again- the new low will be higher than the low it goes to this time almost for sure.

          Now if the global economy progresses from chronic heart failure to a heart attack oil will stay down longer.

          • Dennis Coyne says:

            Hi OFM,

            I also think Nick is too optimistic, but I think he nicely balances the pessimism of others, I think your view is a nice balance between the optimistic and pessimistic views.

            As I understand your position (which seems to vary day to day), there will be collapse, but it will be uneven, some places with good resources (US, Canada, Russia) will make it through the energy bottleneck, but it will be very difficult with another Great Depression which will make Great Depression 1 (1929-1938) seem like a nice day at the beach.

          • Nick G says:

            Thanks.

            I make a distinction between “could” and “will”. We could replace oil relatively quickly and cheaply. A Nissan Leaf is cheaper than any ICE car, even without the tax credit. A Chevy Volt is one of the cheapest vehicles around, even without the tax credit.

            If oil were suddenly scarce, there’s things that “can” be done. We’re not doing them now out of sheer social inertia.

            • DuaneX says:

              I don’t look at cars much, but Google tells me a Leaf MSRP is $29K and a Yaris or a Ford Fiesta about half that??

              • toolpush says:

                Duane,

                I would agree, but Americans in general call those cars “death traps”, because they refuse to understand safety and refuse to wear a seat belt??

              • Nick G says:

                Look at Edmunds.com, five year total cost of ownership.

    • clueless says:

      Actually, to compare apples to apples, I think that you would have to compare the average length of time the 3,412 wells [from “all” of North Dakota] in 2006 were on production to the average length of time that the 11,509 wells in 2014 have been on production. For illustration purposes, let’s say it was 6 years in 2006 and 3 years in 2014. Then adjust for the extra 3 years of average decline curve for the 2006 wells and then see how much more productive the drilling has been to get a “rough” idea. I say rough because I believe that the % of “all” wells in ND coming from the Bakken has likely increased in 2014 over 2006, so comparing to an exactly right average decline curve is dicey. In summary: Newer wells have a higher natural monthly productivity than older ones.

    • nNgass says:

      “11,507 wells pumping 36 million barrels per month in 2014”. Typing error? 36Mb/month is much more than whole of OPEC pumps per month.

  6. Enno Peters says:

    Awesome post Rune.

    Based on the latest NDIC well information, I updated my numbers.
    Below 2 charts that show:
    1) The contribution from wells starting production in a certain year. Wells starting production before 2014 currently contribute just over 50% of the current output in ND.
    2) The average cumulative production of wells in ND, per year. It now has become increasingly clear that the average well performance in ND has not improved since 2010. Wells starting production in 2012 and 2013 have more front loaded oil production compared with 2010/2011 wells, but at the expense of output after the 1sts year of production. This approach seems to reduce the overall average well EUR, with the benefit of a slightly improved cash flow in the first year. Although 2014 wells again show an improvement, I would not be surprised if also these wells will start a slow descend to below the cumulative output of 2010/2o11 wells, at the same well age.

    • Watcher says:

      “It now has become increasingly clear that the average well performance in ND has not improved since 2010. Wells starting production in 2012 and 2013 have more front loaded oil production compared with 2010/2011 wells, but at the expense of output after the 1sts year of production. ”

      This is startling. Is there some interpretation issue here, because this would say stage count increase since 2010 has not achieved improvement in total lifetime well output.

      • Watcher says:

        BTW the chart, Enno, and your text above says half of production is from wells before 2014, and given this was the October report damn near half is coming from wells only 9 months old!!

        • Watcher says:

          Hmmm.

          With almost half of 1.2 million bpd coming from wells less than 9 mos old, and those wells in that steep first year of decline, a cessation of drilling should smash production somewhat more than we’ve projected.

          If 600K bpd drops 60% in one year, we lose 360K just from that half of production. The out years decline less steep, call it 20%? That’s another 120K.

          We’d lose almost 500K in the year.

          • Jeffrey J. Brown says:

            In regard to your thoughts about demand, I wonder if we have seen a small decline in demand combined with Saudi Arabia aggressively cutting their selling price while trying to also talk the price down.

            • Watcher says:

              Tough to deduce agenda. For KSA, I’d guess they are reacting and trying to optimize, rather than cause.

              It’s not in Russia’s best interests, nor in KSA’s best interests, to allow the US shale industry to survive. So now that the ball started rolling (or was pushed), optimal strategy is to put their heels on the neck of that industry and bear down on it (no pun intended).

              But I would guess no one whatsoever knows what results from Fed intervention — which would have profoundly powerful justification if there is a claim of foreign efforts.

              • Russia has very expensive oil too (relatively speaking, of course). The Pechora Sea and Nenetsky Okrug developments are in the Arctic environment. I assume companies such as Lukoil are extremely concerned.

                • Watcher says:

                  Russia sits very pretty. If their cost of production averages $15/barrel, so what?

                  If inability to drill to offset decline, so what? That means they start declining about maybe what, 4% / year with a little bit of drilling so that’s net decline.

                  So they lose 400K bpd out of 10.5 mbpd? So what? They only burn about 4 mbpd. If price is too low for them to bother, why produce more? For foreign currency, of course, but the can grow enough ruble based food for themselves and ship it to themselves. Losing output to decline rate doesn’t put their populace at risk of their lives. They’ll have to import none of it.

                  The US, on the other hand, when it loses its 3 mbpd from shale, will have to import every drop to replace it, or endure a likely much worse recession than Russia would.

            • Watcher, the Russian industry reaction is better guessed at by looking at it by cost segments. I say “guess” because I lack the detailed cost data, but simply consider that, within Russia, there is a large diversity as well technical conditions of individual wells and fields. The low price environment erodes the ability to keep producing at an average decline because wells are not economic to repair, and in some cases they aren’t economic to produce either. Think about it.

    • Rune Likvern says:

      Enno, thanks!
      Without your expertise and patience this post would not have happened (I never planned for it, but from back in 2012 I had noticed the (produced) water numbers with some interest.)

    • clueless says:

      Rune has done some great work. Everyone should be able to get valuable information for future investment.

      Specifically, looking at Figure 30 for breakeven and the assumptions [which we all understand are educated guesses, that nonetheless are valuable for general computation purposes]: At $70/bbl there is $31.95/bbl left after expenses. At $60/bbl, there is $24.60/bbl left. So with a $9 million cost and a $70 price it will take 281,690 bbl to repay the $9 million. At $60 it will take 365,854 bbl.

      Can someone [Rune??] create a graph that shows, based upon the average well, how LONG it will take to breakeven at various prices of oil. For example, at $70 it might be 5 years and at $60 it might be 8 years. And, for each selling price point have a graph that shows what % of wells will never payout. For example, at $100 it might be 1% and at $60 it might be 50% (or more).

      If these figures are in the ballpark, and the bankers are smart enough to do the math [I know that the oil producers can], then the Bakken is about to come to a screeching halt. I assume ditto for the Eagleford. Alternatively, the price of oil could bounce back quickly.

      Musings. Should we take OPEC at its word – they just want to find out the true market price of oil? They have been blamed for manipulating prices higher for over 40 years. What if current OPEC production is near a peak? They can put out 30 million bbl/day, but that is about it. So they set that as their production and the price plummets. Then rises dramatically the next couple of years with the same OPEC production because non-OPEC has cut production. Don’t like high prices? “Don’t blame OPEC, we did not cut production – YOU did.”

      • Watcher says:

        Another amusing thing. Shale contribution to GDP disappears. Maybe the conomy enters freefall.

        “See! This is what happens when you elect a GOP Congress!! Don’t make it worse in 2016.”

        • Ilambiquated says:

          But see my claim in the last thread that the loss to the US GDP caused by the crash of shale will be offset by the gain from falling import costs.

          At $100 those import costs are largely profits coming from the pockets of American consumers and going to foreign producers. So that loss is no loss to American GDP (although perhaps to GNP) and it’s a huge sum.

          • Watcher says:

            But the S&P earnings, 50% from overseas, are slashed by the dollar differential. Can’t be good for GDP.

            • Ilambiquated says:

              Earnings from overseas are part of GNP, not GDP. Compared to GDP, GNP adds earnings from domestic entities overseas, and subtracts domestic earnings from overseas entities.

              But I have ignore the value of the assets (mostly mineral rights and such) of the LTO companies. Those are the only profits the oil companies have made in most of these plays so far, and it is disappearing fast.

              On the other hand, those profits were mostly unrealized (the assets were never actually sold). On the other hand if the S&P falls because of falling overseas profits that would be realized losses and GDP too.

              • Are you referring to overseas profits being reduced by a stronger dollar?

                • Watcher says:

                  yup

                • Ilambiquated says:

                  Actually I was talking about something different though. I was talking about the lost profit in the oil business by foreign oil companies owned by US companies. That would be part of GNP but not GDP.

                  The loss Watcher was talking about (which I wasn’t thinking about because it is related to the currency change, not the oil price change) would be part of GDP.

                  I think Watcher and I agree there is probably a connection between the changes in oil price and the dollar exchange rate, but the two aren’t the same.

          • TechGuy says:

            “But see my claim in the last thread that the loss to the US GDP caused by the crash of shale will be offset by the gain from falling import costs.”

            I would doubt that claim:

            1. The Last few times the economy had strong growth, even when oil prices was much lower, there was a Bubble. In the 1990s it was the Internet\Y2K bubble, in 2004 to 2008 it was the housing bubble. The US will need another bubble, fueled by Cheap and easy credit. Its seems unlikely this will materialize anytime soon.

            2. Shale drilling was a mini-Bubble as investors pour billions into drillers which created a boom in jobs based upon cheap and easy credit. Investors are going to pull that punch bowl away.

            3. American consumers and probably all of the West are tapped out. They still have the debt the accumulated from the previous bubbles, and now student loans (as large numbers of consumers went back to school when they could find jobs).

      • Rune Likvern says:

        Exactly, the chart of break even prices/break even flows is to provide general guidance, not to make investment decisions from. The numbers are believed to be close.
        I sense you refer to undiscounted cash flows (which does not earn a return). Disounting the cash flow and depending on the discount rate, you will arrive at different numbers (and/or different time frames before you have recovered your investment with expected return).
        In my post “Will the Bakken “Red Queen” Have to Run Faster?” of July 29th 2013 on The Oil Drum
        http://www.theoildrum.com/node/10102
        And I figure SD2 I presented the distribution of wells, according to productivity (first 12 months totals) for around 500 wells…it is possible to update this by vintage etc…but takes some time, but I do not expect the distribution to have changed much from my post on The Oil Drum.

      • Ilambiquated says:

        So with a $9 million cost and a $70 price it will take 281,690 bbl to repay the $9 million. At $60 it will take 365,854 bbl.

        Can someone [Rune??] create a graph that shows, based upon the average well, how LONG it will take to breakeven at various prices of oil. For example, at $70 it might be 5 years and at $60 it might be 8 years.

        Five years is 60 months. The last chart (average cumulative well production) shows the best vintages get to 200K barrels in 60 months. The quantities you mention are off the chart — no data available.

    • Nawar Alsaadi says:

      The Eagle Ford is showing a similar trend, the production at the Egale Ford is increasingly front loaded with decline accelerating in year two from 30% to 50% (not sure how to post images here, but here is the link):

      http://www.eia.gov/todayinenergy/detail.cfm?id=18171

      Regards,
      Nawar

      • Enno says:

        Thanks Nawar, interesting link.

        You can add a single pic to your post, by selecting it with “choose file”, when creating a new post. It will be displayed below your comments.

        There may be another explanation for the stagnating well profiles: perhaps there are improvements in well performance over the last years, but combined with more drilling in the fringes that may not be visible in the average well performance. I can imagine that this happened when oil prices where high, and the expected return still good.

        Using the same logic, we now may expect well performance to go up, as only the best remaining spots are being drilled.

      • Ilambiquated says:

        The first year decline has stayed about the same, and the second third and fourth year decline rate has zoomed up.

        I suppose very clever geologists could arrange this…

        • Nawar Alsaadi says:

          Enno, Thanks (the image link was hiding under the bottom of my screen!), attached is the relevant image.

          I was wondering if this trend could also be due to down-spacing? perhaps improved completion is leading to better initial performance, but interference is kicking by year two and thus leading to accelerated declines.

          One thing for sure, this front loaded production makes those wells ever more sensitive to prices as a big chunk of EUR is produced early on, even though higher production could be lowering the overall average cost per well assuming constant drilling/completion costs.

          Another observation, rising decline rates in year two seems to argue that declines at the field level are unlikely to slow down soon since newer production is leading to higher overall decline rates in subsequent years. Thus, while higher initial production will lead to a higher peak, the decline will be ever sharper on the other side.

          Regards,
          Nawar

          • MBP (ManBearPig) says:

            Higher IP, greater pressure drawdown, greater decline. Makes sense to me.

            • Watcher says:

              I hope we all do realize what that says.

              Get the oil faster! Collect the money now!

              That claptrap about people having jobs for generation upon generation doesn’t buy management’s yachts. There is ZERO imperative to keep people working for many years.

              Kill 20 guys a week on the highways? Collateral damage. Get The Yachts NOW!

              • Mike says:

                People that work in the oilfield accept the uncertainties of it; the money is good. Price volatility and boom to bust cycles are as old as the oil business itself; everyone knows that. Well, almost everyone, I guess.

                More people get killed in New Jersey yaking on cell phones when their driving than in the oil business. There is no “claptrap.”

                I know, you are a former member of the KGB living in Moscow, now in the vodka export business.

                That’s it, uh?

                • Ilambiquated says:

                  People that work in the oilfield accept the uncertainties of it…Price volatility and boom to bust cycles are as old as the oil business itself

                  If peak oil is really a thing, then drilling the stuff is a matter of urgent public interest, not just a question of whether drillers accept their fate. Also, this bust cycle, or one in the near future, would be the last.

                  I won’t even get started on why health and safety standards are a good idea. But it would be nice to see your data on car accidents in New Jersey.

                  • Mike says:

                    The safety standards in the oil and natural gas business are very, very high. Nevertheless, it is dangerous line of work because of the big iron and long days, Occasionally accidents happen. Just like any other business. Oilfield traffic accidents on highways are due to congestion and often fatigue (and I am sure cell phones).

                    I’ll leave the data on car accidents in New Jersey up to you; my point is that people out of the oil business, that do not know which end of a rig to walk to, should not criticize it’s labor force. Why people want, or need to work, and the risks they are willing to take to feed their families, should not be questioned. I work in the oilfield and I am sensitive to armchair quarterbacking by people on computers.

                  • Safety first. I had a zillion days with no lost time accidents….and I never killed anybody. I did have a close call once. Or twice.

                  • Watcher says:

                    Why aren’t those jobs automated? It’s a legit question. We’ll forgo the truck drivers issue because there is indeed talk (in australia) of automating that, but what of the other jobs.

                    Can’t see why robots can’t be built to do them. Pretty much all repetitive high paying jobs should have no future.

          • Mike says:

            Nawar, one of the numerous reasons for difficulty in judging reservoir performance in the Bakken and the Eagle Ford, in my opinion, is how financing the manufacture of these wells enters into the evaluation. Debt to reserve asset ratios, interest, cash flow demands, stock performance, etc. all must play a big role in how shale wells are drilled and produced; different companies have different IRR requirements, different financing standards, that sort of thing.

            The biggest shale operator in the US, in the Eagle Ford, is quite famous for enormous IP’s and spontaneous press releases. Within weeks those wells are going on rod lift, however. In Texas, a pooled unit is formed, named, and eventually 12 wells get crammed into that unit with no requirement for individual well production data; only total production for the unit is reported. If interference is an issue, it is going to be tough to sort out, in Texas anyway. For instance there might be re-frac’ing efforts planed for #2H that is 5 years old, as soon as #9H has pipe set and is ready to be frac’ed for the first time. We see a big jump in production in that unit and assume some new technological breakthrough has occurred, incorrectly, on #9H.

            In other words, its hard to judge a book by it’s cover, or a shale well by its performance, without knowing the author, editor, type setter and what its publisher is expecting in the way of sales. Excuse the bad analogy.

            Mike

            • MBP (ManBearPig) says:

              You should have production data from all wells off of the W-10. Its only a single data point a year, but it is production data.

              • Mike says:

                Yes, sir, you are right about W-10s. W-2s for retests also, I guess. I doubt I am the only operator in Texas who embellishes those from time to time, however; I like to be underbalanced instead of overbalanced, so to speak. It is a one time thing, however.

          • Nawar that spacing sure looks tight. As far as I know well spacing isn’t scientifically established in Texas.

        • oldfarmermac says:

          How about a combination of clever geologists who are better at locating the remaining not quite as sweet as they used to be sweet spots – and clever operators who are choking to make the wells look better on paper in the near term- getting a more even production for the first twelve months by choking enough early on to flatten out the first year’s production?

          This could be a worthwhile trick to pull to keep investors and lenders happy maybe. Just speculating not proposing.

    • Mr Peters, first of all thanks for all the work, and may I suggest some more. What might be useful is your upper graph with a projection extended out three years. We would then get an idea of what sort of hole has to be filled.

      • Dennis Coyne says:

        Hi David,

        I show two cases in the chart below. A no new wells added case (not very realistic) and a case where new wells added decreases to 60 wells per month and remains at that level until 2040 (also not very realistic , but more realistic than no wells after Oct 2014). The number of wells added is for the second case (read off right axis).

        • Dennis Coyne says:

          Chart mislabeled sorry, the “no new wells” is the lower of the two cases(TRR= 3 Gb), the other is the “low case” with new wells following the dotted line shown on the chart(TRR=7.5 Gb). About 28,000 total wells are completed on the “low case”, EUR decrease begins in June 2018 and the 5% maximum annual rate of EUR decrease is reached in June 2019.

          Chart below with 30 year estimated ultimate recovery (EUR30) in kb and the annual rate of decrease of new well EUR for the 7.5 Gb scenario.

        • toolpush says:

          Dennis,

          “new wells added decreases to 60 wells per month and remains at that level until 2040”

          Projecting 60 wells per month out to 2040, may not be realistic as you say, but I feel it may be very realistic over the next year or so, as some companies cut drilling by 60% and I would suggest others will cut by 100%, when they go bankrupt that is.
          With the combination of winter and some drastic early cuts in drilling, we may just have seen a peak in Bakken oil, at least in the medium term?

          • Dennis Coyne says:

            Hi Toolpush,

            I misread a comment in a previous post where someone said Helms said the rig count may go down by 50 rigs so that would be 130 rigs still turning, so I was off by over a factor of 2. Wells were at about 200 per month at 195 rigs so if Helms estimate is correct and the wells drilled is proportional to the rig count (which may not be correct) we would expect the new wells added to fall to about 130 new wells per month rather than 60.

            Elsewhere I showed scenarios where the rig count drops to 60 by Aug 2015 and then turns around and rises back to 150 wells/month completed by April 2016. In this case we get a secondary peak in 2018.

            • Thirunagar says:

              “Elsewhere I showed scenarios where the rig count drops to 60 by Aug 2015 and then turns around and rises back to 150 wells/month completed by April 2016. In this case we get a secondary peak in 2018.”

              That seems quite realistic as there may be a bounce back in prices within an year or so which will lead increased activity in the tight oil patch. I seemed to have missed your post. Can you please post it again if it is not too much trouble? Thanks!

              • Thirunagar says:

                Got it. Its right down the page! I imagined it was in some other post.

                Looking at the graphs, it looks like we are not going to see an implosion in production as commonly assumed by many folks here particularly if there is going to be a price bounce back anytime soon.

            • toolpush says:

              Dennis,

              I did see where you miss-interrupted Helms numbers. My gut feeling is your miss-interruption will be closer than Mr Helms actual number, so I didn’t comment as such.

              I am sure we will not have too long to wait to find out. I think how the bankruptcies are handled will be the telling point of what is left drilling.

              • Dennis Coyne says:

                Toolpush and Thirunagar,

                Thanks for the feedback, maybe 90 to 100 new wells per month may be right, if the rig count falls to 95 rigs or so, hard to know what will happen, even if the rig falls to 60 rigs and assuming 60 new wells per month are added, the decline will be rapid for the first 12 months, but then will be more gentle. I do expect that prices will increase by late 2015 and drilling will pick back up, how much depends on prices which are very hard to predict.

                • toolpush says:

                  Dennis,

                  The Hayneville shale, should actually be a good model. When Nat gas was $10 mcf, they were pedal to the metal. Not sure how many rigs, but they have since dropped back to 40. The gas production dropped quickly but now seems to have leveled out. It maybe worth a look and see how it compares to your models.
                  Good luck

  7. Does the public data show if a well is on pump or gas lift?

  8. Mike says:

    Mr. Leanme, in the Eagle Ford gas lift was popular several years ago and may still be in high GOR areas in the condensate window. ESP was vogue for awhile but I don’t see a lot of that anymore either. There are sometimes paraffin issues to deal with in shale in Texas and lots of scale issues. In the oil window of the EF, where initial GOR is lower, gas lift is problematic. The vast majority of Eagle Ford wells go on rod lift very quickly in the well’s life. Rod lift I believe is more economical. Perhaps Tfark can elaborate on the Bakken.

    As you pointed out once, rod lift does not preclude putting a choke in the well head configuration to hold back pressure, or regulate static producing fluid level in the annulus, or manage reservoir pressure. Honestly, I don’t think there is too much of that going on. I think they get those wells on rod lift as soon as they start to get a little weak in the knees and thereafter its wide open liquids extraction. Cash is king.

    Mike

  9. The problem of the missing graphs has been corrected. Sorry it was a mistake on my part, not Rune’s. Thank you for your patience.

  10. Mike says:

    Rune, thanks for this. It turned out really well.

    In spite of the rhetoric for, and against unconventional shale oil, its growth and contribution to domestic production rates has been very important to America. I understand the ongoing debate about at what cost, nevertheless, shale resources are going to be an important component to our energy future. The more we can learn about that future, the better.

    I am a member of the Produced Water Society; in 1993 we estimated 1.09 trillion gallons of produced water were generated from oil production in the US – enough water to flow over Niagara Falls for 9 days. I am quite certain that number today is twice that volume. Produced water gives us insight into depletion, as you elude to in your article, and it also impacts the economic viability of oil production in a huge way. In many areas of the Eagle Ford in S. Texas disposal rates for produced water can be as high as $5-6.00 a barrel. Several hundred barrels of water per day per shale well and we are beginning to talk about real costs. As produced water rates increase over time, managing that water has a direct impact on the wells ultimate recovery.

    I think this is important work on a number of fronts; thank you, Rune.

    Mike

    • Rune Likvern says:

      Mike,
      Thanks! Our (private) email exchanges of viewpoints (from real field experiences with produced water) on interactions between LTO, water cut and Gas Oil Ratio (GOR) were very helpful in speeding up the process and feeding my inspiration for producing this post.
      There are others (not named) who also contributed in a great way to this post.
      There is something about details and devils.

    • oldfarmermac says:

      This comment is no doubt WAY out there in left field – but in a place as hot and dry as a lot of Texas it seems to me that a large enough area of flat land could have a clay floor compacted and a berm built around it and a HELL of a lot of water gotten rid of by evaporation- especially if the wind is blowing even a little bit.

      I hear the wind blows just about all the time in Texas.

      This would not work worth a damn on a small scale- but the area squares as you double the dimension.

      With just one good size pump attached to a fountain rig- shooting the water a few feet into the air from hundreds or thousands of nozzles – the evaporation rate ought to be awesome and adequate if the evaporation pond is measured in square kilometers to get rid of enough water to make this a profitable undertaking.

      Say the volume is lowered by fifty to eighty percent- that could cut hauling costs in proportion from the pond to a disposal well in proportion and also the amount of water going into the well in proportion.

      It could be that evaporation could be pursued to the point that only solids are left if enough ponds were built- and there might even be a market for some of the solids. Maybe there are rare earth metals or something dissolved in the brine -just joking about this last but even so – evaporation by the square kilometer sounds cheaper to me than hauling by the barrel at six bucks or more.

      And if the ponds are numerous enough and large enough there might even be an occasional extra tenth of an inch of rain someplace immediately down wind of them.

      Ya all heard it here first. I am ready to take on a partner experienced in quick money scams – er, I mean venture capital and startups. 😉

      Beyond this there might be ways to capture some of that nice clean water vapor and condense it and use it right in the neighborhood.Say by flowing that very humid air coming off a hot pond over a huge black sheet of plastic exposed to the sky on a nice clear cool night??? There is probably not enough water to be recovered that way to be profitable but what do I know about the price of water in Texas? Only that it is high.

      • PeterEV says:

        Hi OFMac,

        It is an interesting idea. The problem will arise after the water has evaporated and the compounds have dried. At that point, any toxic particle can become air borne under moderate wind speeds and redeposited outside any berms. From there, any additional winds or rains can transport the particles further.

        There would have to be a way of containing said particles. Placing the solutions under glass might speed the operation without letting the wind in but what about the toxic substances that can evaporate at relatively low temperatures? How would they be contained?

        Can the residued compounds be separated and reused??

        I like the idea in concept but a lot of work would have to be done to make it work.

        • Ilambiquated says:

          Of course you don’t have to dry it completely. Just reduce it to sludge. That would reduce shipping costs as well.

      • Ilambiquated says:

        Using the water locally sounds like the saltwater greenhouse concept, which apparently works.

        http://en.wikipedia.org/wiki/Seawater_greenhouse

      • ezrydermike says:

        I think you may be underestimating the extent of the contamination of the water…trace oil, VOCs, metals, salts, radioactivity, etc. Also, there is probably a huge variation in the contamination concentrations and ratios.

        As the water content goes down, the contamination % goes up and eventually you’ll get to the hazardous waste area. Costs then would skyrocket. Even before that, the brine sludge itself would be suitably nasty and difficult to deal with and likely to be very hard to deepwell inject. What exactly would one due with high metal and oil contaminated radioactive brine sludge?

        I’m not sure but evap rate is probably to slow to keep up with production of the water, so these ponds would have to be everywhere.

        Ponds would literally have to be leak proof or you’re back to groundwater contamination. Leak proof evap ponds are not just digging a hole in clay. Spraying the water in the air would be a sure way to release all the VOCs.

        Also, I imagine that a good piece of the disposal cost is actually transportation. Actual deepwell injection is probably relatively cheap.

        I have visions of pig shit sludge ponds like the ones in the southeast only worse.

    • Mike, at that cost I think I can lay a line to the sea, head 100 miles offshore, and use it to improve the mineral contents of sea water in the Gulf of Mexico. Did anybody look into it?

    • Nick G says:

      What about recycling the water with reverse osmosis filtering?

    • ezrydermike says:

      produced water society.

      your in the big time Mike

      http://www.producedwatersociety.com/index.php/produced_water_facts/

  11. Ilambiquated says:

    Someone was predicting the Permian Basin would be the first to stop drilling in a recent thread.

    http://eaglefordtexas.com/news/id/142290/rig-count-drops-permian/

    Rig count down 4% this week. Could be a coincidence of course.

    • MBP (ManBearPig) says:

      Eh I know Apache was/is laying down a few rigs. I’m sure several others are doing the same. However, most of the production is still conventional, which can operate at a lower price, so there will still be plenty of rigs active.

  12. Doug Leighton says:

    Having a little experience in the conventional oil patch (none in shale) I found Rune’s post interesting. The main “take away” for me was the hole-to-hole variability. We always seem to be given the opposite slant: That LTO sources are vast more-or-less homogeneous reservoirs with a few scattered “sweat spots”. I’ve seen many boring shale formations in my life so this misconception was (almost) creditable but Rune’s analysis kills any false impressions: Which is great. Now, with oil prices below $70, I suspect the economic ill-effects of the US being the world’s high-cost oil producer will kick in. With a lot of investment in the oil sector becoming unprofitable a wave of bankruptcies may result.

    • Watcher says:

      The Fed has its first chance to speak tomorrow — either in the official FOMC language release or in the followup Yellen Q&A.

    • Rune Likvern says:

      Doug, Thanks!
      The different well “personalities” is part of the (IMO) bigger story. That is about trends for several of the key parameters driving LTO extraction. Further the interactions between LTO extraction, water cut and Gas Oil Ratio. These are not conventional reservoirs.

      As one puts this into context, what has been happening/going on in Bakken is by all measures impressive.

  13. Watcher says:

    I see oil flat to + 10 pennies. With equities up 1%, oil issues are dragged up by the rising tide. Suncor up an absurd 6%, Continental up 6%, Exxon up 1%.

    The 10 yr Tnote is down 3 bps screaming deflation. HYG up 1/2 a smidgeon.

    • Ves says:

      Suncor up 6%. ?

      Did they found their gas for in situ, equipment and employees for free? This stock markets are all matrix. 🙂

      • Watcher says:

        Oil at $55.98 up 9 pennies. Suncor and CLR now +7%.

        How’s this for Fed intervention. “The Federal Open Market Committee has decided on aggressive action to protect the banking system from any difficulties resulting from the fall in the price of oil. Therefore effective immediately, in its traditional role as lender-of-last-resort, the Fed will make available lines of credit to shale producers until the credit markets for energy stabilize. This will prevent widespread defaults.

        There will be an as yet undetermined limit placed on oil production permitted by any producer who avails itself of such LOCs, in order to prevent inappropriate windfall profits.”

        That would be cool.

        • Ves says:

          so invisible hand of market worked again 🙂

          That last paragraph in your quote is a beauty 🙂

          • Watcher says:

            That’s not a quote. It’s an imagined quote. So far.

            • Ilambiquated says:

              True story:

              In his memoirs alan Greenspan talks about his visit to the Soviet Union (shortly before its demise). He visited the central bank and Gosplan, where the five Year Plans were worked out. He remarks that he came away with the impression that the Fed is the American equivalent of Gosplan, and that the Soviet central bank was more like the Mint.

        • Watcher says:

          Holy crap, equities have given up that 1% in just 1 hour, with no news. Ahh, the unmanipulated market of Greenwich, Connecticut HFT engines.

          • oldfarmermac says:

            ”Ahh, the unmanipulated market of Greenwich, Connecticut HFT engines.”

            I am totally lost on this one.

            • Wake says:

              Greenwich is where a lot of hedge funds reside. HFT is high frequency trading, I believe, with the implication that the market moved quickly on computer/algorithmic trades I assume, and maybe a hint of conspiracy in who and why the algorithms act.

              Though I think true HFT shops are set up nearer the exchange due to the limits of the speed of light, Greenwich is too far and too slow (35 miles, .18 milliseconds according to Wolfram Alpha)

              • Watcher says:

                You can still quote stuff that far out. The hedgies funded some of their own engines, but they are hurting now.

              • oldfarmermac says:

                Thanks I got the HFT from seeing it before but I didn’t know that Greenwich is home to a lot of hedge funds..

  14. Watcher says:

    Ransquawk

    Russia to boost Q1 daily oil exports from Q4 to 52.32 million tonnes. (I think that’s about 7.3 mbpd).

    Kuwait minister says some shale producers are pumping at a loss, according to Kuna (I think that’s the Kuwait news agency?)

    • Watcher says:

      A glance at mazama says this is a slight uptick for Russian output.

    • Jeffrey J. Brown says:

      Russian net exports hit 7.2 mbpd (total petroleum liquids + other liquids, EIA) in 2007 and have been at or below that annual rate since 2007. Their ECI Ratio (Ratio of production to consumption) fell from 3.7 in 2007 to 3.2 in 2013, which implies that they shipped about 23% of their post-2007 CNE (Cumulative Net Exports) through 2013.

    • Jeffrey J. Brown says:

      Item posted on Peakoil.com. Decline in Rouble continues:

      http://www.bbc.com/news/business-30492518

      • Watcher says:

        ZH just blasted an article saying Russia has achieved what Japan and Draghi long for, inflation driven demand.

        There is a current explosion of spending in Moscow as shoppers are flooding stores to buy furniture and jewelry before the price rises.

  15. Sam Taylor says:

    Very intersting post as always Rune, thanks to both you and Enno for putting the time in. It is certainly interesting to see that well productivity is going nowhere, despite all the noise that the industry is making to the contrary with longer laterals and multi-stage fracs.

    One thing I’m starting to hear a bit more about is refracking of wells that are already drilled. I appreciate that it’s still rather in its embryonic stages as a technique, but does anyone have much in the way of data/theory on how long this might serve to extend things for? Part of me thinks that it’s just a way of getting what’s there out even more quickly, and won’t really serve to increase EUR significantly. There’s also the possibility that it will increase communication between wells in areas where they’re drilled extremely tightly together.

    A further question, has anyone looked at how production might be affected if there’s a dropoff in drilling for, say, a year, and then it picks back up again? I wonder just how hard they’d have to drill to make up for a period of low activity.

    • Rune Likvern says:

      Sam, Thanks!
      I expect the most important dynamic going forward will be the financial one. The lower oil price reduces cash flows, thus limits the abilities to fund new wells in addition the companies will be looking at deleveraging, reducing their debt load in the face of lower cash flows.

      Then add that LTO wells are front end loaded when it comes to EUR (around 30% of its EUR extracted during the first 12 months (1. Year flow)) and you are left with few prospective drilling targets with $60/b WTI (less at a lower price). It simply does not make commercial sense to drill many wells in a low price environment.

      Wells drilled so far in 2014 and late 2013 (talking about the “average” here) will come out with a loss if $60/b is sustained for some time and this will show up in the balance sheets of the companies as write downs.

      Add this to the likely prospects of declining (total) production, and you start to get worried shareholders and creditors. $60/b over some time (say a year) will take down total production and at the same time make investors more cautious, which (I believe) will make it hard to bring LTO extraction (and activities) back up to present levels.
      Then add quality of remaining acreage.

      Things could start to slow down in Bakken in the very near future (which is sad) and the indicators to carefully watch will be net additions of producing wells, rig counts may be deceptive.

      • Watcher says:

        Maybe, maybe not re: key indicator. Ron will have this data.

        How many wells are mothballed? Out of production. They could be restored (though I don’t know why) and it would corrupt the “net additions of producing wells” statistic into thinking fracking continues.

        Actually, THAT would be why. To corrupt that number and encourage lenders.

        • Rune Likvern says:

          ?????????????????
          Could you pls be more specific?
          And for your information I also track the developments in IDLE WELLS defined as the differential of total number of wells capable of producing and the number of actually producing wells as reported monthly by NDIC.

          • Watcher says:

            I was commenting on the presumption that increases in wells in production would tell us that fracking is continuing and financial impediments have been overcome.

            Maybe not.

            If the increase in wells-in-production comes from re-activating idled wells, brought back into production just to delude lenders into believing the industry is enduring, then watching that number: wells in production — would not tell us if fracking is continuing.

    • Dennis Coyne says:

      Hi Sam,

      I tried to simulate what things might look like if drilling dropped off rapidly to 60 new wells per month and then rapidly increased to 150 new wells per month. I based the 60 wells per month on Helms estimate of rigs dropping from 180 to 50 by mid 2015 and assumed new wells added will also drop roughly proportionately from 200 new wells per month to 60 new wells per month.

      Then I assume that the fall in output will cause real oil prices to rise from $68/b in 2015 (2014$) by 2% annually. I assume well cost is $8 million, OPEX plus other costs are $8/b, transport cost is $12/b, royalties and taxes are 26.5% of wellhead revenue and that real oil prices are at the refinery gate (wellhead price is refinery gate minus transport cost), and the real annual discount rate is 7% (10% nominal assuming 3% annual inflation rate.)

      Rune believes that well productivity will increase as the rate that new wells are added decreases.
      I agree, but I do not know by how much it will increase and he did not venture a guess. For this scenario I assumed no well productivity increase and that the eventual EUR decrease is delayed by the reduced drilling rate. Usually I assume this will begin in 2015, but for this scenario I pushed it forward by 12 months to June 2016 with a maximum rate of EUR decrease of 8% reached in June 2017. Note that this rate is chosen so that 42000 total wells (from 1990 to 2040) drilled at the 150 new wells per month rate reached in Sept 2016 will produce a TRR of 9.6 Gb (the mean USGS North Dakota Bakken/Three Forks estimate). Chart below suggests that under these assumptions (with no well productivity increase) output may return to the Sept 2014 level by early 2017 and that output will peak in 2018. Economically recoverable resources (ERR) if the assumptions prove correct (unlikely) are about 8 Gb. The price assumptions are quite conservative with 2030 real oil prices (2014$) at $92/b, lower prices (1% annual rate of increase) would reduce the ERR by about 1 Gb and higher real oil prices would increase the ERR. Nobody knows what oil prices will be in the future (except B Hill, who believes they will be low). Ron has suggested in the past that oil prices will not rise above $120/b as such high prices will crash the economy, this seems very reasonable to me. In this scenario no new wells are added after mid 2040 and at that point 30,000 wells have been drilled (less than the 42,000 wells used in the TRR scenario) and prices are $112/b in 2014$.

      • Dennis Coyne says:

        For anyone interested, I have created the TRR (technically recoverable resource)scenario to go with the scenario above (medium TRR=10 Gb, EUR decrease=8%) along with a low and high scenario that is the same in every respect except that the maximum estimated ultimate recovery (EUR) decrease for the average Bakken/Three Forks well is 16%/year for the low case and 4%/year for the high case.

        Note that for the TRR scenarios there are no economic assumptions, one could think of these scenarios as having some needed rate of return (7 or 10%) and some given well cost, transport and other costs, and royalty and tax rates and that oil prices rise at the rate required to make continued drilling profitable until all viable locations are drilled (assumed to be 42,000 total wells for these scenarios.)

  16. Political Economist says:

    http://data.giss.nasa.gov/gistemp/tabledata_v3/GLB.Ts+dSST.txt

    Based on the latest NASA data, the December 2013-November 2014 was the second warmest December-November on record (after 2010). The quarter from September to November 2014 was the warmest September to November on record

    • Lenny R. From Ocala says:

      I hope you realize that the NASA and NOAA climate data has been completely exposed as being fabricated so as to promote the warming myth and hide the fact we are heading into our 19th year of no global temperature increases.

      http://www.breitbart.com/Breitbart-London/2014/06/23/Global-warming-Fabricated-by-NASA-and-NOAA

      I find that there are a few useful scientific terms to understand when discussing anthropogenic global warming with the unaware.

      PEER REVIEW: The act of banding together a group of like-minded academics with a funding conflict of interest for the purpose of blacklisting any voices of reason that threaten the multi-billion dollar government grant gravy train.

      SETTLED SCIENCE: Betrayal of the scientific method for politics, money, and/or control.

      CLIMATE SCIENTIST: A person skilled in spouting scientific-sounding jargon that has the effect of deflecting requests for actual “DATA” by “DENIERS.”

      DENIER: Anyone who suspects the truth.

      CLIMATE CHANGE: Something that been happening naturally for millions of years, but must now be flogged as being caused by humans in order to produce “panic for profit.”

      DATA, EVIDENCE: Unnecessary details that are typically ignored by the climate scientists.

      CONSENSUS: What remains following the censorship of all scientists whose livelihoods do not depend on government grants tied to proving anthropogenic global warming.

      • Cave Bio says:

        How many times does this type of nonsense have to be disproved. Jesus Christ, even when the Koch Brothers fund the research of a climate skeptic, and that skeptic shows that the climate data is real, this type of idiotic B.S. keeps popping up.

        http://www.nytimes.com/2012/07/30/opinion/the-conversion-of-a-climate-change-skeptic.html?_r=3&pagewanted=all&

        The Conversion of a Climate-Change Skeptic
        By RICHARD A. MULLER
        CALL me a converted skeptic. Three years ago I identified problems in previous climate studies that, in my mind, threw doubt on the very existence of global warming. Last year, following an intensive research effort involving a dozen scientists, I concluded that global warming was real and that the prior estimates of the rate of warming were correct. I’m now going a step further: Humans are almost entirely the cause.

        And from NOAA

        http://www.ncdc.noaa.gov/sotc/summary-info/global/2014/11

        Global temperature highlights: Year-to-date

        The first 11 months of 2014 was the warmest such period on record, with a combined global land and ocean average surface temperature of 1.22°F (0.68°C) above the 20th century average of 57.0°F (13.9°C), surpassing the previous record set in 2010 by 0.02°F (0.01°C). The margin of error is ±0.18°F (0.10°C). 2014 is currently on track to be the warmest year on record if the December global temperature is at least 0.76°F (0.42°C) above its 20th century average.

        • Lenny R. From Ocala says:

          Again, NOAA and NASA have been caught “cooking the books” on their climate data over and over again. Whatever temperatures they claim to have been recorded are pure fabrications, carefully curated and manipulated so as to legitimize and therefore prove the anthropogenic global warming narrative.

          The article I linked to must not have been enough to convince you of the NOAA and NASA temperature shenanigans. Well here’s another article from this year, http://dailycaller.com/2014/06/30/noaa-quietly-reinstates-july-1936-as-the-hottest-month-on-record/

          Facts can be real funny things. Unfortunately for the Marxists pushing the phony global warming narrative, the facts show a slight cooling trend going as far back as the 1930’s!

          • Drk Horse says:

            The important question to me is why are these people so willing to fabricate data in such an obvious manner? Is it only about the money? Fear? Something else?

            • D.Blakely says:

              Yes the money from the sweet sweet government grant trough is a really large motivation. The scientists even earn bonuses if the made up data is able to fly under the radar and not raise too many suspicions. Just look here http://godfatherpolitics.com/6783/global-warming-fear-is-about-money-not-science/ for example.

              But you still can’t forget about the power of control. The climate change sociopaths would like nothing more than to control every single aspect of our lives by taking away our freedoms and prosperity.

          • Aws. says:

            Lenny, HorseShit and Blakely,

            The three of you are idiots.

            • Enno says:

              +1
              They could well be the same person, or better said, corporation, as well.

            • FrY10cK says:

              LennyHosrseBlake would seem to be violating Ron’s policy of not promulgating baseless conspiracy.

              Dailycaller.com …. Ha! That’s like linking to World Net Daily, The Blaze, or The National Inquirer for peer reviewed science.

      • ezrydermike says:

        begone troll

      • oldfarmermac says:

        Lenny I just can’t help myself even though I know it is a total waste of time. You are either just a paid laborer working for some outfit with money on the table – OR ELSE-you are SO IGNORANT that discussing anything more complicated than a hammer with you is total waste of time.

        You are totally wasting your time in this forum.But maybe you get paid by the number of times you post. I hope you are making at least minimum wage.

      • Boomer II says:

        You guys (or maybe you are the same guy or a machine) comment anywhere there is a mention of global warming. You don’t contribute anything else to the conversation. You do this anywhere on the Internet where you can comment.

        We can’t take you seriously because you are a one-note person. You have nothing else to say and it is obvious that you look for places to post this stuff.

        I am amused, though, at the thought that you have an never-ending, and expanding job to keep up with the discussions. Global warming discussions won’t go away. So for you to comment on every mention is going to absorb more and more time.

        • Not to worry, these one note folks don’t post here for very long. Neither Lenny or Blakely will be back.

          • Enno says:

            I hope that implies that you did with them what should have been done.:-) Otherwise I am afraid they will just return with different names and IP addresses.

      • PeterEV says:

        Hello Lenny,

        What causes the climate to cool?

        What causes the climate to warm?

        Make a list of the glacier fields. What did they look like 20 to 50 years ago? What do they look like now? What are the dynamics that are causing this to happen?

        Please reply with something that says the taxpayer has not wasted their money on your science education.

        • notanoilman says:

          I guess that is why the Republicans are trying to cut back science education, so they don’t waste money on people like that.

          NAOM

          PS Trolls are slow off the mark, at the moment.

    • Political Economist is right, this year was warm, we also had a lot of rain in the mountains. The mushroom crop is very good. And if the Russian troubles end we should see more tourists. I’d rather see the EU be friendly towards Russia, it’s better for business.

  17. Verwimp says:

    Rune,
    May I suggest you to choose for a dot cloud instead of line graphs? Some graphs contain really too much information. Nevertheless I got the point. Very interesting post.

  18. Andy Hamilton says:

    Reasonable attempt at pulling different strings together in terms of the oil price fall (though no doubt Watcher will rubbish it):
    http://www.vox.com/2014/12/16/7401705/oil-prices-falling

    • Andy Hamilton says:
      • Jeffrey J. Brown says:

        From the linked article:

        They (the Saudis) can sell all the oil the world needs at whatever their posted price is . . .

        I guess that means that the Saudis could supply 88 mbpd or so of total petroleum liquids + other liquids, about 7.5 times their current production.

        In any case, curiously enough, after increasing their net exports from 7.1 mbpd in 2002 to 9.1 mbpd in 2005, as annual Brent crude oil prices rose from $25 in 2002 to $55 in 2005, Saudi net exports have been below their 2005 rate for eight straight years, as annual Brent crude oil prices were in the $109 to $112 range for 2011 to 2013 inclusive.

        I estimate, based on the 2005 to 2013 rate of decline in their ECI Ratio (Ratio of production to consumption), that Saudi Arabia has already shipped, through 2013, about 40% of their post-2005 CNE (Cumulative Net Exports).

        • The author is mistaken. The Saudis can’t produce that much oil. I seriously doubt they’ll ever reach 15 mmbopd.

          • PeterEV says:

            The Saudis and Matt Simmons gave presentations back in 2004. It was Simmons contentions that the Saudis’ reserves were inflated which was part of his book: Twlight in the Desert. The Saudis said they could raise production from 10 mbpd to 12 mbpd. Their peaks would come respectively in 2042(?) and 2034(?). My memory is a little fuzzy on the exact year quoted by them but they are close.

            They also said that in an “emergency”, they could output 16 mbpd. They neither defined “emergency” nor how long they could keep up at 16 mbpd.

            The overall idea is that the Saudis were husbanding their resources and were not going to create a Hubbert Peak bell shaped curve. They were going to keep their production relatively flat until their crude runs down.

            • Makes sense to hold plateau and save oil. My 15 mmbopd estimated guess was based on conversations with friends who know a little bit about Saudi fields.

    • Watcher says:

      haha Rubbish is a good Britism. How about “balderdash!”. That chart btw says 750K bpd imbalance mid year? That’s what it looks like. 750K X 165days to date haha is damn, that’s over 120 million barrels someone put in warehouses. The US SPR is what, about 270 million?

      I just checked my basement. None being stored there.

      • Watcher says:

        woops, US SPR is 720 million, not 270

      • oldfarmermac says:

        Countless little fellas like me have stocked up a few barrels each on farms and at the home bases of small construction companies. One of my neighbors who runs a couple of dozers for hire bought a truckload – about three thousand gallons of diesel a few days back.That will last him well towards spring with work so slow but if he had plenty of work it would be gone in a six weeks or less. I wonder how many million barrels this sort of opportunistic stockpiling adds up to on a world wide basis.

        I will be buying a thousand gallons myself when I think prices have bottomed out and are ready to start up again. Diesel keeps and the bank doesn’t pay sxxt interest any more whereas I am just about dead sure diesel will cost more next December than it does now.

        Any prepper types who might be reading this blog and have a few bucks handy should definitely be keeping an eye out for such items as large fuel storage tanks. I have nailed a couple at going out of business sales in the last few years for just about scrap metal prices. If I can save twenty five cents on a gallon of diesel over a years time by storing it in these tanks I am home free on the investment. Plus delivery charges are less for larger purchases. Nickel off. That’s fifty bucks on a thousand gallons.

        In the event of teowacki that thousand gallons would make me a HEAP BIG FELLA locally since I would be able to go around and plow gardens and subsistence sized fields for my neighbors who won’t have a drop beyond what they have in their tractor tanks and maybe one two hundred gallon fuel tank. They habitually get that one tank filled as needed. It won”t last hardly any time at all once they start putting it in the diesel pickup truck.And most of them don’t even have a tractor at all of course. Nor any farming tools or skills any more either for that matter. Nor any seed. But most of them do have an acre or two or more of arable land.

        If we get into that situation I am going to own a hundred plus mpg Honda scooter and I keep a hundred gallons of gasoline on hand.Plus three or four pairs of new boots.

        • wimbi says:

          Good play, OFM, on the diesel. I have thought a little and made one move above that. Made an energy trailer that has a load of PV, batteries and inverter. I tell my neighbors if, or more accurately, when, the grid goes down and the trucks don’t roll down our dead end, I can trot out the cart and give them a little power when they get desperate. Has already happened a little.

          Am working on the wood gas generator to fill in during dim weather, of which we have had a severe overdose last few weeks.

          I am urging the local go-getters to think about putting this package on the market, targeted to us hill folk used to living on not much.

          A little power is a hell of a lot better than no power.

          • Edgy says:

            Now that is an outstanding idea, wimbi! Let’s face it, there is going to be a need for this type of locally focused business ideas. As much as many of you regulars post about what… can, should, might, can’t, won’t, maybe, etc… happen, the fact is there are millions upon millions who will not be prepared and thus become a customer in search of, well, lots of things.

            Given said scenario, it would follow that such a business person would consider beforehand, based where along the continuum the scenario exist, what types of payment are acceptable. For surely as the scenario worsens, this business person will need to adapt/expand (perhaps on a daily basis?) what constitutes acceptable payment.

            Recently I had a discussion with my partner and then again with our neighbors, who we are friends with, dine, socialize and hang. I posed the question, ‘Let’s say some event happened that turned out to be major, and before a week passed, it became apparent that grocery stores (let alone any other type of store) would not be replenished on any known schedule. And, you, for whatever reasons, had a year’s supply of food. Would you tell anyone and, if so, who?’ Nervous laughter preceded our lively discussion.

            Here’s to a slow decline with ample opportunity for community oriented entrepreneurs.

            And since I’m a very infrequent poster, I’ll take this moment to thank Ron for his efforts and congrats on a job well done. And to you regulars, my gratitude for an education that has far surpassed my experiences in college.

            Edgy

  19. Watcher says:

    Just looked up Cushing, which is apparently biggest non SPR storage in the world. 46 million barrels.

    No telling where they are keeping that 120 million.

  20. Watcher says:

    Oil settled up 2 pennies at 55.97.

  21. FalloutMonkey says:

    I suppose it is a mistake that figures 27 and 28 are the same, is it not?

  22. Andy Hamilton says:

    Well constructed piece on impact of shale oil on US employment:
    http://d21uq3hx4esec9.cloudfront.net/uploads/pdf/141216_TFTF2.pdf

    • Watcher says:

      Powerful stuff. The line pointing out national disaster is getting more visible. Hard to see how the Fed ignores it.

      • oldfarmermac says:

        The unemployment that will result from a collapse of the tight oil industry is nothing to sneeze at for sure and because it will be concentrated in both time and location it will dominate the news like a major plane crash.

        The flip side of that coin is that many many times as people per passenger mile get killed in automobiles. This far larger death toll – hundreds to thousands of times larger most years- hardly attracts any attention at all compared to the occasional plane crash. Just three or four people getting killed in a puddle jumper makes the national news.

        The IMPROVEMENT in employment all thru the REST of the domestic economy due to the stimulating effects of low oil prices will not get even a tenth and maybe not a hundredth of the attention the crash of employment in tight oil will get but this is par for the course since bad news and sex are the big sellers. Good news can’t find it’s shoes while bad news has already circled the globe.

        NONE THE LESS- It is safe to assume that the fed is not in any hurry to do anything to raise the price of oil.I do not yet have a firm opinion as to which way the wind will be blowing in the event that prices stay down low enough to really massacre the tight oil guys. Right now it seems as if most of them are still working and will still be working a few months from now. That gives the Fed and OTHER the big boys in DC a little breathing room.

        They just don’t have to say a whole lot either way RIGHT NOW in my opinion.

        But if the price of oil doesn’t start back up pretty soon- then they will have probably have to make an announcement one way or another about supporting the industry via some sort of bailout. THE big guy in DC for now is OBAMA.

        The repugnants (republicans) are in an unenviable spot politically in this case -in order to support a bail out will have to support OBAMA since he is the big guy- which they are reluctant to do. Beyond that they would rather avoid a bail out if they can since they have been running on cutting back government interference and spending.

        (I KNOW they are hypocrites in this respect and will bail out THEIR OWN buddies in a flash if necessary. I am just not sure how tight the tight oil industry is with the republican party as a whole. If a tight oil collapse gets BAD ENOUGH and oil prices start go up A LOT pretty quick the republicans will may support a bailout but not otherwise in my opinion.Which is to say that I don’t have an opinion as to what the likelihood of a bail out is for now.)

        I don’t think there is any way the Fed itself can target bailout money to the tight oil industry without bending the rules far enough that the republicans can put a stop to it if they so desire. Bail outs are pretty much executive and legislative turf.

        • Watcher says:

          “The IMPROVEMENT in employment all thru the REST of the domestic economy due to the stimulating effects of low oil prices will not get even a tenth and maybe not a hundredth of the attention the crash of employment in tight oil will get but this is par for the course since bad news and sex are the big sellers. Good news can’t find it’s shoes while bad news has already circled the globe.”

          This is the Old Normal. It’s not reality anymore.

          Companies make money now. They do it by having fired a LOT of people in 2009.

          They take those profits they make now and they buyback their own shares. THEY DON’T NEED PEOPLE. You think an oil price decline will be stimulative to employment? Why? The companies already make lots of money and they don’t use it to expand and hire people. There isn’t any generalized economic demand.

          The top line isn’t growing much. The bottom line (earnings per share) IS, because the denominator shrinks. You buy back your own shares, the denominator is smaller and EPS is bigger and the CEO gets a pay raise. If the top line isn’t growing much, and you subtract generalized consumption from the high pay oil workers, is the $400/year gasoline savings for other people going to jack demand for . . . stuff more than the lost pay of those other guys reduces demand for stuff?

          This is not the world we grew up in. 2008 destroyed it and it is never coming back. When you have Wall Street for 5 years celebrating companies getting smaller (that’s what it means to buy back your own shares, you’re getting smaller because you can’t think of anything better to do with that money), the world can’t possibly be anything like it was in the past.

          • oldfarmermac says:

            Watcher you are a pretty smart guy but once you get your teeth into any given idea you stick with it like a pit bull without seeming to consider any facts or influences that would tend to lead to different or even opposite conclusions.

            Now it IS true that there has been a long term trend towards industry and commerce needing fewer and fewer employees to provide any given good or service.This trend can be traced easily all the way back to the Industrial Revolution in the case of many products and some services.It is also true that it has accelerated to some extent here in the US over the last few years.

            But some industries are hiring NOW and some others will be hiring if oil stays cheap for any length of time.My dear deceased old grandfather used to put blinders on his mule back when I was a kid to keep that mule from seeing anything not directly ahead.

            I doubt if Walmart can figure out a way to get by with without hiring at least a few new employees employees if business picks up five percent.

            Ditto many other businesses.The art of getting by with less help is an old one and quite mature by now.

            The money and the ownership of it are unquestionably issues of the utmost importance but in the end the real economy consists of flows of goods and services and will always consist of the flow of goods and services.Cheap oil means more goods and more services everything else held equal.

            Now as to the long term outlook for employment right across the economy here and elsewhere world wide – long term-I believe it is DISMAL due to advancing technology.The Luddites were onto something profound. But this would be the case even if there were no super rich people gaining an ever larger share of the ownership pie.

            Some people of course see new industries providing employment for all the people who need work due to an ever expanding economy. I don’t believe in eternal growth or that there will ever be enough new industries to provide work for every body.

            The profession of personal servant is probably going to be one of the biggest growth professions in coming times in relation to the population.

            Even though I am personally pretty hard up by current day American standards I am ready and willing to take in somebody who would like to live here free of charge .He will have plenty of time to seek gainful employment else where.He can leave any day-any minute- . I will feed and shelter him but I will not pay him a dime.

            Paying him would put me in the position of being his employer with all the legal entanglements involved. Such a person would be a guest in respect to his or her visit with me. I would never TELL him or her to do anything at all. I would just tell him to leave if he turns into a couch potato.

            But if he goes out of his way to earn his long term welcome then he could stay indefinitely and save every dime he earns elsewhere rather than spending it on rent and utilities.

            If a judge asks I will swear I have been keeping him as a live in for free lover. LOL.

            This will not happen at MY HOUSE of course- I will not take in anybody I have not known for a very long time. But I have reason to believe it is happening quite often all over the country already. More often than not sex is involved as well as just sharing of expenses and work but sex is not necessary to such a relationship.

            • Watcher says:

              Automation is a big deal. 1/2 of the population has an IQ under 100. If sub 100 jobs are well paid, they are pretty easy to automate economically. If they are not well paid, no reason to automate them, but that’s also 1/2 of the population condemned to a cruddy job forever.

              1/2 the population, or 1/2 of that 1/2 of the population, is a lot of unemployment / welfare money being paid to keep them fed and loading down The System.

              But, that’s probably never going to happen because oil scarcity and its many tendrils everywhere will kill that many long before they discover their brains condemned them to a life of misery.

              • Watcher says:

                But that’s digression. The point is a huge proportion of job gains were from shale. If those are erased, we lose 2009 onward, and who is going to have salary to buy stuff that is cheaper with cheaper gas?

                Behold deflation.

              • Boomer II says:

                1/2 of the population has an IQ under 100.

                I don’t believe that’s how IQ works. It isn’t a median measure. It is a bell curve. Most of the population has an IQ of 100.

              • Boomer II says:

                Well, it is the median. But half of the population falls in the 90-110 range.

                • Watcher says:

                  IQ 1 sigma is 15.

                  The tests are normalized to have 1/2 the population under 100. It’s a by definition thing each year with the tests. Unless that’s changed recently.

            • Philip Backus says:

              Mac, The ideas put forth in your last few paragraphs are rather interesting to read. At one tine these types of relationships were not at all unusual in rural areas. The gentleman who taught me to blacksmith and weld had a grandfather who had a live in hired man who drew no wages at all but received room and board as well as his clothing and shoes. His horse was provided with pasture and barn space plus hay and grain. If my friend’s Grandfather was flush for cash that week he would receive a silver quarter to get drunk on Saturday night. That arrangement went on for over ten years. His Grandpa was from the Netherlands and was a well educated and very busy man Farming, saw-milling and shoeing horses and repairing wheels and wagons hence the need for outside help in spite of a large and extended family. my wife teaches natural building (cob) and we hold five or six workshops per year consisting of twenty to thirty students who camp for a week at the place. The preparation and logistics…not to mention the events themselves keep us busy from daylight until dark for at least nine months of the year. The last months of the gardening and canning season are particularly rough and caring for the wonen’s ageing mother’s needs has caused us on occasion to consider live in help but it would not be in our budget nor would we want the responsibility of an employee. There are in our area at least several live in arrangements like you describe that seen to be working quite well and I think that as you state there are likely many more than are connonly known.

              • oldfarmermac says:

                My own maternal grandfather took in a mild mannered but mentally challenged man from the community who would otherwise have been homeless or at the ”poorhouse” or more likely confined for life it a mental hospital.

                Little John as he was known ate with the family and had a room in the house and all his needs taken care of plus he got some spending money so that he was never without a fifty cent piece for favorite visiting grandchild or snuff money.

                Now he did quite a lot of heavy farm work- but that was done right along side my grandfather and he lived quite as well as the family in every sense except he had no ownership stake in the farm. My grandmother on that side- who was one of the earlier women to get a job in town- worked out the cost of his funeral- which had less flowers but otherwise was precisely the same funeral the rest of the family has traditionally gotten- by sewing in a clothing factory. Her job was the sort commonly referred to as sweatshop work by the modern liberal press but it was a god send to her and hers. She made a lot more in CASH most years than Pa did. Some years a small farm runs in the red- lots of years as a matter of fact.

                Now most such live in helpers or servants or adoptees- call them what you would like- are not treated so well.But my grandparents were the gentle hearted sort of Baptists who took the ” do unto others” rule seriously.

                Taken all the way around Little John lived a far more satisfactory life than most of the other people in the neighborhood.He lived from 1950 until he died in his own nice room in a nice new brick house – my grandparents were able to get out of their own two room house at that time into their new house- whereas my own mother moved out while the new brick house was still a dream and married my Dad who built his now new family a two room green oak board and batten house. We lived in it until 1959 at which time he was able to build a new house which we still live in today.

                But today some self righteous busybody would make sure my grandparents were hauled into court and bankrupted if they were still alive- sueing for a lifetime of estimated wages with interest.

                There are kids in the neighbor hood who could hang out with me and learn a thousand useful things that would enable them to earn a living and grow up to be responsible adults if it were legal and I could pay them according to what they can actually get done.

                BUT in its wisdom the nanny state has decreed that I will be locked away in the pokey for a good long while and my assets seized for such activities.

                So- a potential helper is left to hang out with the older deadbeat boys who will teach him to drink and smoke and admire professional musicians and athletes and crooks and crooked lawyers and despise people who actually work.There is no doubt in my mind that the risks associated with that environment are greater by a factor of ten than the risks associated with hanging around with me.

  23. oldfarmermac says:

    I am of course a complete amateur when it comes to the oil industry BUT nevertheless I have spent my evenings for the last half century reading good books rather than watching mindless tv or drinking in a bar so perhaps I know a FEW things about the way countries and corporations and individuals and crowds and organizations of varied and sundry sorts tend to behave.

    One thing that I have noticed is that it is rare that any given course of action – other than in response to an emergency- is undertaken for a single reason when the actor is a sovereign country.

    But we have countless often over educated pundits out there wondering why the Saudis or the Yankees or the Chinese are doing or not doing this or that or other thing as if there were some mystery involved.

    Generally there is no mystery at all. The people in charge – the oft mentioned TPTB- get together in their figurative smoke filled back room and cut a deal and decide on a course of action. Some of them will get what they want. Some won’t. A policy is decided on. It is announced or not as the situation calls for. It is implemented.

    Now let us take the actions of the Saudis right now as an example and list SOME of the reasons to maintain production that the key players must have looked at before deciding that they would not cut production.

    In no particular order:

    Punish the OPEC members which have been the worst cheaters in the past and left the Saudis to carry the load when it comes to cutting production – The point being to teach them a lesson. Let them bleed for a while and maybe they will be more amenable LATER ON – if it is necessary –to doing their fair share when it comes to cutting production to maintain prices.

    Bleed the Iranians. The Saudis have plenty of incentive to do all they can to keep the Iranians down and out.Potentially very dangerous enemies, the Iranians, especially if they manage to build the BOMB.Dangerous enough even without it.

    Curry favor with UNCLE SAM. This might sound a little counter intuitive to people who spend all their time hanging out at peak oil sites and such. But any body with a little more distance between their personal prejudices and their good sense must see in an instant that while the fortunes of the people in the oil industry are important to the people running this country that the Yankee Powers That Be are perfectly happy with the crash in oil prices taken all the way around. The BIGGEST problem the current administration and the congress and the Fed have all been concerned with for the last few years has been the near dead economy. Cheap oil is a shot of whiskey to cheer up the consumer and the equivalent of a generous dose of amphetamines in terms of economic stimulus. NOTHING could be more welcome in Washington right now than cheap oil although the democrats are no doubt crying the blues that it didn’t get cheap sooner and the republicans are probably sorry it didn’t stay up until the next round of elections when they will have the WH almost for sure and could then have taken credit for the low price.

    (Ambassadors and high ranking officials are capable of discussing such affairs of state without the details being printed in the next edition of the papers and without signing treaties – excepting a Snowden revealing them of course.)

    Maintain market share- this has not been so important in the past when suppliers could assume a more high handed attitude about selling their oil. But it no doubt matters right now. If the world wide economy remains in the dump and the Saudis are the leaders in raising prices then their customers will remember this later and not be any more loyal than circumstances force them to be.

    Lay a whupping on the high cost producers that are their most important competitors. For damned sure they are happy with the thought that American tight oil producers are up shit creek without a paddle right now and will have a hard time maintaing let alone increasing production. In the words of the original big oil Rockefeller, the idea paraphrased is to ‘ let ’em sweat a little.” There is plenty of high production cost oil in the market that will stay on the market FOR A WHILE.

    But it won’t stay there very long without constant new investment that is not going to be made with prices below eighty to a hundred or more bucks. Depletion never sleeps. AFTER depletion takes away the marginal high cost barrels glutting the market today THEN prices can stay up a good long while later on (due to increasing demand and falling production of legacy oil ) before the rest of the oil industry regains enough confidence to start spending the money again on deep water oil, far north oil, Yankee tight oil, etc. There will be gravy train years with prices being up without ANYBODY having to deliberately hold back production if the world economy recovers.

    For what it is worth I believe that the Saudis believe that peak oil is here now and that the low price problem is temporary and one that they can easily ride out given their huge foreign exchange reserves and some things they can do to manage their own internal affairs more efficiently.

    Make things a good bit harder on the Russians. I am no flag waving idiot that thinks we have had our own troops in Sand Country for the last couple of decades more or less continuously out of the goodness of our hearts but neither am I an ivy tower leftist fool unable to distinguish between the soft imperialism practiced by Uncle Sam and the hard kind practiced by the Russians.

    The Saudis know the difference.

    The Saudis OWE THEIR VERY KINGDOM and their alpha positions as royal family members in it to the fact that we have sheltered them under our conventional and nuclear umbrella since way back when – the defacto bargain being that when the chips are down they support us by helping us implement our foreign policy by increasing or decreasing oil production. Their decision to maintain production now is no doubt exactly what all the striped pants Foggy Bottom guys want. And all the four star generals in the Pentagon most likely are pleased with the Russians being in such a jam. Russians with big enough economic problems will not be launching as many new warships or deploying as many new advanced missiles.This of course is another just one more aspect of currying favor with Uncle SAM.

    Now some lamebrains may have a lot of trouble deciding between these and some other reasons I have missed just why the Saudis are maintaining rather than cutting production.

    I don’t have any trouble at all. They are maintaining production FOR ALL these reasons. Plus a bunch more most likely that I haven’t even thought about.

    Sometimes some things are simple. But when it comes to great powers politics things are Seldom Ever simple.

    Energy pundits generally don’t seem to understand any more about big time politics than I do about programming computers in Chinese script- which is to say , nothing whatsoever.

    • Ves says:

      Why after pumping oil for 10 years for $100 a barrel Saudi would decide to pump oil practically for free? why now?

      • Jeffrey J. Brown says:

        Annual Brent prices were only above $100 for three years–2011, 2012 and 2013–although 2008 was close ($97), and the annual 2014 price will probably be very slightly below $100.

        http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RBRTE&f=A

        And as noted above:

        After increasing their net exports from 7.1 mbpd in 2002 to 9.1 mbpd in 2005, as annual Brent crude oil prices rose from $25 in 2002 to $55 in 2005, Saudi net exports have been below their 2005 rate for eight straight years, as annual Brent crude oil prices were in the $109 to $112 range for 2011 to 2013 inclusive.

        • Ves says:

          ok so practically 5 years and other 5 was more then $55, I don’t know what was in 2006 and 2007. but it doesn’t matter. Now they are pumping for free. Why they are pumping for free the only and declining export product that they have?

          • oldfarmermac says:

            For two basic reasons. One is that fifty to sixty bucks is not exactly ” for free” and still quite profitable for them given their low cost of production from legacy fields.

            They aren’t broke but they do spend it as fast as it comes in these days according to what I read about them.

            The other basic reason is ” all of the above ” that I posted at 6:18 pm.Plus a few more reasons that I forgot about and very likely some more I don’t know about.

            • Ves says:

              ” One is that fifty to sixty bucks is not exactly” for free”

              Well, that is today’s price. But you have to very closely follow the narrative. They said they are comfortable with $40 just yesterday. Considering that we expect increase in production with new projects that are finishing this year we can be very confident that $40 is new target price in 2015. And anyway why it has to go to $40 when Shale and Tar Sands are in the $70-100? Why leave $40-60 bucks on the table? It just does not make any sense.

              the other reasons you mention:
              Because Venezuela cheats on quotas? It is very minor thing.
              Because of Iran? Iran already have their production in decline, on the top of the sanctions.
              Because somebody told them to do it? But what they get in return?

              • oldfarmermac says:

                I personally have very strong doubts about the price falling as low as forty and staying there for any length of time such as a year or two.

                The Saudis can easily ride out a bad year. Or two if necessary..

                It is true that production may continue to increase for a year – but it is also true that it may not and that some companies or countries will choose to shut in some production to wait on higher prices.IF I owned some oil wells and had the cash on hand to put off selling any oil for a year I would either leave it in the ground or store it on a bet that it would bring a much better price within two years.

                My guess is that tight oil production is going to start falling off like a sinking stone by June if prices stay below eighty bucks. The industry is already laying off. Once the backlog of drilled but not Fracked wells is worked out and new tight oil production wells are not coming on line in the usual numbers tight oil production will start falling off fast.

                Somebody correct me if wrong but I am thinking the backlog of ND wells waiting to be FRACKED is only about three months worth of new wells- in other words if drilling stops today and Fracking continues at the usual pace there would be no more new wells coming on line in ND by April or May .

                The price went back up in a HURRY the last time it crashed and my opinion is that it will go back up much faster this time that most people expect.

                Cheating is not such a minor thing if it is a stab in your back and you have been repeatedly stabbed in the back by the same cheater ever since you first cut a deal with the cheater.There is such a thing as pride, and there is such a thing as recognizing that if you don’t take a stand on that sort of thing it will go on FOREVER.

                Maybe you don’t think the House of Saud is on the throne because UNCLE SAM keeps them there. Remember DESERT STORM? Do you think the royal family would still be on that throne if not for UNCLE? Countries go to WAR to support each other over such matters.The Saudi half of the deal is to support UNCLE when he is in a jam by putting oil prices where he wants them to the extent they can.

                Right now the low price of oil is as valuable to the US economy as a few pints of blood are to a just about bled out accident victim- very possibly the difference between economic life and death.

                But maybe you don’t believe we are at high risk of sliding off into really deep depression. I do. QE is desperation medicine and the Fed has been more or less forcing it down with a funnel for a good while now. QE has its limits. NEW medicine is desperately needed. CHEAP OIL is the only thing available at the moment that might be powerful enough to do the trick.

                With the US teetering (Check out the true unemployment rate and true wages etc) and most of the rest of the world in recession raising the price of oil right now is NOT the sort of thing that will save royal Saudi asses the next time they are threatened – by …. well take your choice, there are plenty of outfits in that part of the world that would like to hang them one at a time party fashion so as to make the party last a while.

              • Venezuela doesn’t cheat on quotas. Venezuela produces below quota. It’s hard to envision $40 per barrel in 2015. It’s more likely to be $70 to $80 by year end.

                • oldfarmermac says:

                  I agree but it is my impression Venezuela USED to cheat. It will take the oil industry freight train a few months or maybe even a year to slow down but slow down it will and prices will go back up when deliveries start slowing down.

                  • I bet venezuela used to cheat…but that was over 15 years ago. If the Venezuelan dictatorship is in the Saudi’s crosshairs…then I guess it’s due to a combination of their support for Assad in Syria, the way they get in bed with Iran, their cooing noises towards Russia, and the way the regime interferes in internal politics in other countries, which evidently doesn’t make them a USA friend. Chavez and Maduro are what in Spanish we call “bocones”, they have very loud mouths. Obama is a rather mild character, but he does have a duty to react. But I think if this was orchestrated Russia and Iran were the main targets. Venezuela and Cuba are collateral damage.

                • Jeffrey J. Brown says:

                  Here’s some “Net Export Math” that you might find interesting.

                  You are far more aware of the heavy oil potential in Venezuela than I am, but following is what the extrapolated trends suggest, and it seems to me that in the short to medium term, the outlook may be for an even sharper decline in production.

                  In any case, following is what the EIA data indicated for Venezuela (total petroleum liquids + other liquids for production, total liquids for consumption), followed by my extrapolation of the data.

                  1997:
                  Production: 3.5 mbpd
                  Consumption: 0.5
                  Net Exports: 3.0
                  ECI* Ratio: 7.0

                  2013:
                  Production: 2.5 mbpd
                  Consumption: 0.8
                  Net Exports: 1.7
                  ECI* Ratio: 3.1

                  1997 to 2013 rates of change:

                  Production: -2.1%/year
                  Consumption: +2.9%/year
                  Net Exports: -3.5%/year
                  ECI Ratio: -5.1%/year

                  Based on the observed rate of decline in Venezuela’s ECI Ratio, their estimated** post-2013 CNE (Cumulative Net Exports) would be on the order of about 6 Gb.

                  Of course, there are numerous variables that will impact production, including the rate of development of heavy oil resources and political unrest, but this is what the current trends indicate.

                  *ECI Ratio = Ratio of production to consumption

                  **CNE estimate is: Annual net exports (0.62 Gb/year in 2013) X estimated number of years to zero net exports based on ECI Ratio rate of decline (22 years) X 0.5 (area under a triangle) Less annual net exports in reference year (0.62 Gb)

                  • Jeffrey J. Brown says:

                    When I went through this exercise for estimated post-1995 CNE for the Six Country* Case History, based on the seven year 1995 to 2002 rate of decline in their ECI Ratio, estimated post-1995 CNE were 9.0 Gb. Actual post-1995 CNE were 7.3 Gb.

                    *Six Country Case History: The major net oil exporters that hit or approached zero net exports from 1980 to 2010, excluding China: Indonesia, UK, Egypt, Vietnam, Argentina and Malaysia

                  • Can’t look at Venezuela looking at those ratios. The government is irrational. The current president is a bus driver promoted by Chavez. The head of the National Assembly is a really corrupt former army officer, the whole bunch seems to be run on strings from Havana, but the “ruling class” is a mixture of communists, drug lords, gangsters, and opportunists who engage in big time corruption. What goes on in Venezuela is really bizarre.

                  • Jeffrey J. Brown says:

                    No argument about Chavez, et al, but Peaks Happen, e.g, the North Sea and the Six Country Case History. In any case, as as noted above, absent a change in government policy, I would think that the short to medium term outlook is probably for a faster rate of decline in production.

                    Note that based on the seven year 1997 to 2004 rate of decline in Venezuela’s ECI Ratio, they would have been down to 3.4 in 2013, versus the actual value of 3.1. In other words, Venezuela’s rate of decline decline toward zero net exports accelerated in the 2004 to 2013 time period, versus 1997 to 2004.

                  • Yes but venezuela gives nearly free gas to the population. When I lived there the tip for the gas station attendant was higher than the cost of the tank full of high octane gasoline. The internal consumption data is also fogged up by huge amounts of smuggling into Colombia. Meanwhile their production capacity drops because their policies are irrational. It’s an odd case.

      • Anon says:

        They don’t see why they should subsidize other people. Most of these high cost projects are based in part on the idea of an “OPEC Put” – OPEC will support the price so it doesn’t matter if your production curve makes no sense versus supply/demand. You will still get high prices because OPEC.

        Saudi has decided they’re done with that game and market forces can make someone ELSE cut. Which will be the high cost people, since Saudi has rock-bottom costs and can make money on OIL at any price that will happen. They need to handle their budget differently, but they certainly have the wealth to do that.

      • Ilambiquated says:

        I agree. I see oil producers as the victim here, and OPEC in particular. I’m not an oil man, so I’m not shedding a lot of tears, but that doesn’t change the facts.

  24. Rune Likvern says:

    FOR ALL
    There has always been something about details and devils.

    From the presented trends in LTO extraction, water cut and Gas Oil Ratio (GOR) [for Bakken] there is in my opinion, also some very important information about the drive/drainage mechanisms for shale/tight oil wells.
    1) What does it say about the production management of these wells?

    2) What developments (over several months) [LTO extraction, water cut and GOR] would make a reservoir engineer/geologist watchful?

    Anyone out there that is willing to venture a professional explanation?

    • Mike says:

      Rune Likvern says:

      December 16, 2014 at 6:20 pm

      FOR ALL
      There has always been something about details and devils.

      From the presented trends in LTO extraction, water cut and Gas Oil Ratio (GOR) [for Bakken] there is in my opinion, also some very important information about the drive/drainage mechanisms for shale/tight oil wells.
      1) What does it say about the production management of these wells?
      THERE IS VERY LITTLE ACTUAL PRODUCTION MANAGEMENT OCCURING IN SHALE RESOURSES. VERY LITTLE REGARD IS GIVEN TO PRESSURE MAINTENANCE PRACTICES. THE NATURE OF THE SHALE PLAY IS SUCH THAT SHORT TERM ECONOMICS, AND HOW WELL MANUFACTURING IS FINANCED, DICTATES HOW, AND WHERE WELLS ARE DRILLED, AND HOW THEY ARE SUBSEQUENTLY PRODUCED.

      2) What developments (over several months) [LTO extraction, water cut and GOR] would make a reservoir engineer/geologist watchful?
      IT WILL BE DIFFCULT TO ASSERTAIN GOING FORWARD BECAUSE OF 1.) ABOVE. HAVING SAID THAT, INCREASING GOR, DECLINNING IP’S AND MOST DEFINATELY, INCREASED WOR ARE AN INDICATION OF DEPLETION. WELL DENSITY (SPACING) RELATIVE TO GOR, WOR AND IP’S

      Anyone out there that is willing to venture a professional explanation?

      Reply

      • Rune Likvern says:

        Mike, thanks.

        What wakes my curiosity and interest is the role of the (natural) gas from LTO wells [in the post referred to as the produced (on the surface) GOR].

        In a conventional oil reservoir there may be a combination of drive mechanisms (differential pressure, water drive etc.) and (some) of the dissolved gas, as it becomes gradually released from the oil (as pressure depletes) may rise to the top of the reservoir and help increase the (oil) recovery. Later on the gas cap may be blown down if that is profitable.

        There is no such closure in a LTO well, so the only way for free gas to escape is through the production tubing and the wellhead after which the oil gets stabilized (dissolved and free gas are separated so that the oil meets the transport specification (vapor pressure)) and ditto for gas.

        So as pressure depletes in the rocks, some free gas forms and this free gas will expand on its way to the production tubing. This expansion will affect (push and pull) surrounding liquids (oil and water) in the rock and assist in the extraction (recovery) process. As pressure declines, oil will gradually lose its ability to hold on to dissolved gas and this mechanism (of gas pushing and pulling liquids on its way) will diminish.
        So on the surface I would keep a watchful eye on the trends for the GOR, and if the GOR starts to decline, this would suggest less assistance in the recovery process from the (dissolved) gas.

        Other observations/thoughts?

        • Watcher says:

          A peripheral, related subject was discussed some months ago as regards the content of railcars not being all oil. Vapor pressure addresses the gas portion, but there were other issues of volatile component and indeed metals content and beyond all the regulatory mish mash, the question is simply —

          To what extent is quoted oil production not all oil? Everything in the railcar’s volume is not oil.

          • Check the standard oil sales contract. It usually specifies water, salt, and sediments. I would expect it to be less than 1 % by volume. The hydrocarbon fraction has to meet vapor pressure regulations. The oil price is usually set by an assay. I assume the oils in a region are gathered into a common transport system. Those oil streams with unusual properties feeding into a common gatherer can be subject to quality bank rules (their volumes are adjusted for quality). It’s rare to have metals in light oils. I would worry more about acid content.

        • Mike says:

          Rune, I think you are correct in the description of how critical pressure maintenance is, yes sir. I struggle with the comparison of dense shale to conventional type reservoirs but ultimately reservoir management theory must be similar.

          In that very regard allow me this, please:

          Historically speaking I find some interesting similarity in the manner in which the Eagle Ford and Bakken shale plays are currently being developed to that of very old, famous oil fields developed in the early 1900’s. The “boom’s” of Spindletop, Jennings, Ranger, Midway, East Texas, and Healdton Fields all come to mind, to name a few. In that era low oil prices ($1.25) and rule of capture principles dictated how fast, and how many wells were drilled in a new discovery. Regulatory practices for well spacing and maximum production rates did not exist. Wells were drilled wooden derrick leg to wooden derrick leg and were allowed to flow unrestricted, pretty much wide open. Associated gas was worth nothing and was flared or vented with no regard whatsoever for reservoir pressure maintenance. You got your share before your neighbor 50 feet away could get his share.

          Consequently the ultimate recovery rates in the these early fields were often less than 25% of original oil in place (Texas Bureau of Economic Geology, 1983). Later, slightly higher oil prices and EOR practices revived a lot of these fields and URR went up, yes. Nevertheless, low oil prices and the need for big wells depleted reservoir energy prematurely and eventually lots of oil got left behind, lost forever.

          In the Eagle Ford and Bakken it was not low oil prices, nor rule of capture principles that dictated the pace of development, it was incredibly high decline rates and the Red Queen. Areas of higher oil saturations and GOR were found and those areas were hammered with wells. In the Bakken, many, many BCF’s of gas was flared for lack of infrastructure. These two shale plays truly were developed in the boom mentality, I fear with little regard for long term management of the reservoir, or source bed.

          Indeed, different times, circumstances, types of wells and way different outside influences affecting the development of those fields. Perhaps with the same ultimate outcome, however. Its kinda fun to draw the comparison between then and now. In a way it’s like we have come full circle.

          Mike

          • Rune Likvern says:

            Mike,

            Thanks for sharing your insights and thoughts.
            As I put this post together my mind wandered through whatever I know about fluid (multiphase) flows.

            There is a phenomenon in conventional reservoirs known as fractional flow. And now I speculate about these things for Bakken wells as these ages, but it is far, far too early to conclude on that.

            Fractional flow as phenomenon is; at some (formation) water saturation (say 20%) all which moves is oil (water cut 0%).
            Gradually, as the water saturation increases (in the formation), the water cut (on the surface, as produced) raises rapidly and at some point (say 80% water saturation) only water flows (that is, it may be oil stained brine).
            It is about sizes of molecules, viscosity, permeability, etc. and within these complex issues also the role of dissolved gas.

            I for one has a lot to learn about the flow regimes in Bakken tight oil wells as these age.

        • MBP (ManBearPig) says:

          I would be interested to see how the heavies (C5 and up) differentially come out of solution at different pressures compared to C4 and how that might inhibit flow by plugging porosity in limited perm systems like LTOs.

          • I’ll try to answer this in a technical note I’ll hang somewhere. Your intuition is headed in the wrong direction if the fluids in the reservoir are liquids at initial conditions. You are partially right if the fluids are gas phase at initial conditions. But we need to take into consideration of a bunch of data, and simulate the flows to understand the dynamic pressure regimes. It’s very complex.

  25. Mike says:

    ARE THINGS I WILL BE INTERESTED IN GOING FORWARD. Sorry.

    Mike

  26. aws. says:

    Oil Sands Output Rises as Canadian Crude Falls Below $40

    By Robert Tuttle, Bloomberg, Dec 15, 2014 5:28 PM ET

    A total of 14 new oil sands projects are scheduled to start next year with a combined capacity of 266,240 barrels a day, according to data published by Oilsands Review. That’s 36 percent more than was started in 2014.

    Western Canadian Select fell to $38.81 a barrel at 3:58 p.m. New York time, the lowest since April 2009, according to data compiled by Bloomberg. The grade, which has higher sulfur content than U.S. benchmark West Texas Intermediate, sold at an average $18.78 a-barrel discount in the past year, according to data compiled by Bloomberg.

    While oil sands producers may curtail future development, most existing operations won’t be shut and ones under construction will go ahead because of the investments involved and potential harm to future output, Osuna said.

    Perhaps the price will stay down for longer than we might expect?

    • oldfarmermac says:

      A quarter of a million barrels a day is nothing to sneeze at for sure- but the never ending decline of conventional legacy production of at least four percent annually is still baked in and amounts to about eight or ten times that much.

      The real questions in my mind are basically two- how many projects in the production pipeline world wide are so far along they will be completed next year and maybe the year after even with the price in the basement?

      I know nothing about the oil industry beyond what I read in blogs such as this one and a few books and in the mainstream media but I will hazard a guess that most projects that are more than two to three years from completion are likely to be postponed or scaled back until prices pick up again.

      And will demand pick up again?

      My guess is that the price will not stay down more than a year to two years. Business as usual world wide is not yet necessarily going to the funeral home any time soon and may even get well and enjoy a few years of good health – relative to current conditions.

      Cheap oil is a powerful economic stimulant and might be the deciding factor on the economy picking up some steam. If that happens then of course the price will go back up if production remains flat due to depletion and postponed new production.

    • Paulo says:

      My son got a call to return to Oil Sands construction in the New Year. Apparently, some new construction projects are going ahead.

      Being sick of working outside in northern Alberta, he declined. Even when he is working inside the massive buildings are unheated. The only option is to work at QC which is mostly on a computer in an Atco trailer. Either way, good money for unsatisfying work.

      Paulo

    • But production will be lower than it would otherwise have been. I would expect operators to reduce steam injection, this in turn drives down production. In older projects the steam rate is regulated by the gas cost to oil income ratio.

  27. Watcher says:

    Some sort of cratering in Asia. $54.77. Down over a buck.

  28. coffeeguyzz says:

    Mr. Taylor, regarding refrac’ing … Encana has been doing this in the Haynesville, I believe, Console is planning on 200 or so refracs in the Marcellus, and Marathon is starting it in the Bakken. (There are more operations occurring beyond these mentioned.). Marathon’s results were just released with October’s production of 11,000bbl contrasting the pre-refrac output of 1,100bbl/m.
    The potential usage of newer tools/technology such as Baker Hughes Opti Port BHA and NCS Multistage’s tool (which has done several +90 stage fracs prompting record-setting IPs for Whiting in the Bakken) bode well for refrac’ing as the cost savings vs drilling a new well are significant.
    Regarding field pressure declining … Dee Three is drilling one injection well for every three production wells – if I remember correctly – in the Upper Bakken silt in Canada with successful results.

    • Mike says:

      Some of the re-frac’ing attempts I am aware of in the Eagle Ford are disasters. They are being attempted on wells that have not reached payout yet and adds an additional 3- 3 1/2 million dollars to total well costs. At todays prices re-frac’ing will require an additional 125,000-140,000 BO to pay out. In areas of high well density, it is not going to be economical.

      • Sam Taylor says:

        Yeah I’d be worried about communication between wells becoming more common if you expand the frac radius. Also how long does the boost in production last, what’s the decline, how does EUR compare vs well that isn’t refrac’ed.

        I’ve not seen enough data points to call it either way (is there even much data?), but I think it would be healthy to be sceptical.

  29. Political Economist says:

    http://www.eia.gov/pressroom/responses/nature/

    EIA response to the Nature article on shale gas. Any one cares to comment on that?

    • I wrote an earlier critique of this article (“The fracking fallacy”) in this blog a while back. I expressed my opinion about the article, and added that Nature publishing has an editorial policy which leads them to publish distorted information, low quality articles, and very low quality papers. This doesn’t say much for their peer review system. I encourage researchers to avoid the publishing house monopolies, and support legislation to have papers resulting from publicly funded work to be open source. Does this help?

  30. coffeeguyzz says:

    Thanks for the heads up on that, Political Economist. The EIA and BEG people are uber pissed and I do not blame them. I read a synopsis of the Nature article on another site, was VERY surprised at the content presented therein, and ripped into some of the more ridiculous aspects of the UT ‘perspective’ … all the while uneasy as the BEG/UT folks are a thousand times more expert in this field than I will ever be.
    Apparently an agenda-driven work cloaked under the umbrella of impartial, knowledgeable bodies was put forth … to the detriment of truth seekers everywhere.
    I make no bones whatsoever that I am an avid fossil fuel booster who disagrees with a significant portion of views presented/embraced by this site and many of its participants. That said, I continuously seek information that challenges as well as buttresses my views in an ongoing journey with truth being the ultimate goal.
    As an aside, since the EIA people mentioned the Marcellus/Utica distinction in their letter, Range Resources just announced a record-setting 24hr IP of 59 million cubic feet of gas from a just completed Utica well – an absolutely staggering figure.

    • toolpush says:

      What size tubing are they using? I doubt you get that up 3 1/2″. What size is the horizontal section? It is sounding like they are starting to drill “proper” sized holes, as in 8 1/2″ horizontal.

      Just to clarify, I work offshore, and when I see all the small bore holes that are drilled on land, I just have a bit of a hard time getting a handle on things. lol.

      • Mike says:

        Push, a dollar to a donut that is calculated absolute open flow up 5 1/2 in. production casing on the Range well. Mox nix, lets watch the decline on that puppy.

        • toolpush says:

          Mike,

          What am I missing here, down below Coffeeguy is quoting 9000psi well head pressure, in a 6000 ft hole. The thing would blow apart, as that equates to 29lb/gal mud wt???
          These are suppose to be simple wells with minimal casing from what I see, yet to get to any of these formation pressures, would require multiple strings of high casing to cover the pressure gradient.

          • Mike says:

            Mr. Toopush, all I could say when I first read this press release was, yeah, right. I think this high number was nothing but calculated AOF. I would guess that a well like that (typical shale well) would have surface, intermediate (maybe) and 5 1/2″ 20-23 # set from the toe to surface. Pipe can’t be any heavier than that to make the turn, I don’t think. You are precisely correct, with that kind of BHP this string of pipe, and WH, should by all rights be orbiting the earth right now like a long noodle.

            These shale guys can get away with reporting that kind of stuff because they know nobody with any level of savvy pays any attention and nobody is going to call them out on it. It makes the money guys happy.

            Its the ‘ol adage…”let me test that well on day one, give me a variable choke panel, a sharp pencil with a good eraser, and stay in the office; I’ll give you any kind of IP you want.”

            Nice to hear from you.

            Mike

            • toolpush says:

              Thanks Mike,

              I either thought I was going crazy or just realized I had totally misunderstood all my well controlling schooling over the years.

              Coffeeguy,

              Would you like to come back with some clarification, please.

              • Mike says:

                Be safe out there.

                Mike

              • coffeeguyzz says:

                Mike, toolpush, couple of data points about the Rice and Magnum Hunter wells …
                Right this very moment there is an uncontrolled blowout in this area in a MHR well, and has been since Saturday (although two reports as of one hour ago gave conflicting descriptions of it being contained).
                The 46.7 mmcf/d MHR was cased down to 10,828′.
                Other Marcellus wells from this same pad (3, I think) are cased down to 6,150′ and have a FCP of 4,000psi
                The Rice well has produced over 2bcf in its first five months and is reportedly dropping 12psi/d.
                As I can offer little more than what is available on the net, I cannot personally vouch for the accuracy/validity of ANY of the presented data, but we know the preciseness that is supposedly inherent in all USA hydrocarbon production.
                Mike, I have minimal oilfield experience outside the three years I worked on offshore rigs decades ago, but the dovetailing of info from all three monster wells – Range, Rice, and Magnum Hunter leads me to believe this data is eminently credible.
                (You two gentleman – and actually any curious person – may get a “kick” out of a quick reading of the Conasauga shale play development. Talk about pressure …)

                • toolpush says:

                  Coffeeguy,

                  Assuming your 10800 ft is True vertical depth, and not measured depth, then at 9000 psi, we are in a possible 16 ppg zone. High pressure but drillable and workable. But this must be well below the Utica shale which is suppose to be 6-7000 ft deep? In fact going by this diagram, 9000 ft puts you in the Pre-Cambrian.
                  http://geosurvey.ohiodnr.gov/portals/geosurvey/Energy/Utica/UticaShale_WellPrototype_diagram.pdf
                  I will do a little hunting when I get some time

                  • coffeeguyzz says:

                    Push, the depth of the Utica dry gas areas – heading east hundreds of miles and south into WV – ranges down to 15,000 ‘ or so. The MRH well had a true vertical depth of near 11,000’ and a lateral of bout a mile.
                    The link you put up (didn’t yet read it) may focus on the heretofore active shallower, wet gas area to the west. It is all part of the Utica. (There is some geology.com site that offers a great, concise overview of this formation).
                    I will repeat Mike’s admonishment … stay safe, push.

                  • coffeeguyzz says:

                    Final note on the Utica’s economics, push.
                    Stone Energy just announced a 30mmcfd well with 11,350 TVD and an ultra short 3,500’+/- lateral flowing 6,500psi.
                    As these boys refine their techniques, lengthen the laterals, and snatch some Mighty Marcellus gas along the way, it’s lookin’ like ka-ching city.

                  • toolpush says:

                    Coffeeguy,

                    With these deeper depths, things start to make a bit more sense. Even at 6500psi at 11,350 ft would give a 11ppg mw. This is flowing pressure, so it would be higher for shut in. Some nasty wells by the sounds of things and horrible Bromide brines as well.
                    Do you know if they are using sand or ceramic? I don’t think anything would like to live too long down there under those sorts of pressures.
                    The casing designs must also be adjusted for these pressures as well. You cannot run 1000s of vertical feet of open hole without casing it off. In fact with pressure gradients that you are talking about, several strings will be required.

                  • Mike says:

                    Mr. Coffee, I do not know how we got sideways on depths of these Marcellus wells with the big IP’s but, we did, and I stand corrected. As Toolpush says, at those 10-12K ft. depths it makes more sense.

                    Look, I appreciate your enthusiasm for this shale stuff; I like big numbers as much as anybody; I have seen over 200 MMCFPD up close and personal (and out of control), its mother nature and her finest. And its always impressive how my industry can tweak old technology to fit the problem de jour.

                    Big IP’s and FTP aside, in tight oil or tight gas resources its about economics. Well economics dictate the development of the play and its sustainability. At the moment I can’t imagine gas prices in that part of the US are more than 2.75 per MCF. As Push suggests, these bigger Marcellus wells in this over pressured area are likely very, very expensive. The frac’s you mention are 5M per alone; its very hostile country up there from a regulatory/environmental standpoint (no peeing off the rig floor, I guarantee), multiple strings are expensive; you and 6 other people on this blog could retire comfortably on what a 15K PSI tree costs.

                    If these kind of IP’s were coming out of Push’s country, deep Vicksburg, or Frio, they’d have stating power. But these are shale wells and lets face it, by the time folks are popping firecrackers this summer those wells will be producing half of what they are now.

                    So as amped as you are, lets wait to pass judgment on if the Marcellus will put Canada out of the gas business. My bet is no. Those guys are hanging on by a thread up there anyway; this Magnum BO (I have friends on it) is going to piss some more people off, big time. You know how Yankees are about having messes made in their backyards.

                    Mike

                  • coffeeguyzz says:

                    toolpush, I don’t know too much about those specifics (type of proppant and casing configuration), but my understanding is that there is a fair amount of variety with size, amount, and type of proppant even during individual frac jobs. Both Whiting and Continental are saying that hybrid (slickwater/cross linked) fracs seem to work best. The deeper wells are obliged to use the ceramics and – possibly – some are still using bauxite.
                    As per a CEO’s comment awhile back from the company’s Eagle Ford work, they were going to go with more two string casing, implying there are both two and three strings being run at this time. The Bakken not only uses three strings exclusively, I believe, but their “batch” system is pretty neat. A ‘baby’/spud rig comes in and drills/cases several wells on a pad. When the suits decide it is time, a big rig comes in and finishes the group of 3 to 6 wells all at once. The frac spreads arrive and finish the job.

                  • coffeeguyzz says:

                    Mike, your input on this site is much appreciated by me and – I am sure – many others. But you should be aware that you are not the only one posting who has experienced mother nature at her finest in the oil patch.
                    This writer will not forget being rocked out of a deep sleep in the wee hours off Thailand as our rig – the drillship Tainaron – experienced a major blowout drilling that country’s discovery well back in ’76. Stumbling/slipping through deck-covered mud, breathing the fine mud mist that permeated everywhere, we stood by the lifeboats watching the suits clamber aboard the chopper.
                    While far removed in time and place from the poor souls aboard the tragic Piper Alpha, I will always feel a bit of kinship as I worked aboard the Piper A as it was being built back in ’77.
                    While you and I may share hours swapping stories (some of which may be true) while sitting on adjacent barstools, I strive mightily to adhere to verifiable data anytime I post on these forums.
                    The deeper wells in this discussion are the Utica, not the Marcellus.
                    The cost of the Marcellus wells are surprisingly low.
                    Pipelines are not only being built and brought online, existing pipelines are being reversed to ship gas to the southeast and, yes, even Canada.
                    The Pennsylvania folks will have finally arrived when the first Marcellus gas arrives in Houston.

                  • Mike says:

                    I wasn’t swapping war stories with you, pardnor; I was telling you I don’t buy into all the hoopla. These wells are in the Utica, OK; got it. You said Marcellus wells are cheap, what about these temporarily big Utica wells? Show us some economics, then I’ll be impressed; but do what you can to not take all the poop you get from company websites and press releases on face value. We have been thru the shale gas thing before, you know. Besides, I think the topic of the moment is water and GOR in the Bakken.

      • It’s possible to flow 60 MMCFD in 3 1/2 inch tubing (but that test isn’t really what the well will produce). If the average pressures are high enough, the smaller gas volume due to the high pressure allows flow with a reasonable velocity. However, the well pressure drops due to transient effects and depletion. One issue which really bugged me when I was consulting was to see young managers approve buying big iron to get a high rate for a short period of time. Big iron is both expensive and increases risk. The risk issues aren’t properly understood by some engineering managers.

    • Fred Magyar says:

      Apparently an agenda-driven work cloaked under the umbrella of impartial, knowledgeable bodies was put forth … to the detriment of truth seekers everywhere.

      Just curious, would you care to elaborate and specify whose agenda it is and more specifically what exactly that agenda might be?

      I read the full article at http://www.nature.com/news/natural-gas-the-fracking-fallacy-1.16430
      Disclaimer: I think the good folk at the EIA are prone to looking at the world through rose colored glasses!

      Cheers!

      • I didn’t write that comment, but Nature Publishing as a whole appears to have a watermelon agenda. Their Trojan horse is the global warming issue. I would love to get the CIA files on that outfit.

        • Dave Ranning says:

          Nature is the primer peer reviewed publishing place for scientific papers – the kind you check the data and facts.

          I know reality seems to be a leftist plot at times.

          While not a huge fan of the major publishing houses, such as Nature, Science, or Cell, it is where the serious science puts its ideas and data up for review by everyone.

          • Boomer II says:

            I can understand why people have trouble grasping the concept of global warming. The dire consequences are years in the future, so it is hard to get people to change now for a future problem.

            However, there are still reasons to be following the same actions:

            1. Peak oil. As oil becomes hard to get and more expensive, we should be planning for a future where we use less of it.

            2. Pollution. Burning coal is dirty. So we need to do something about it. Either burn less or find a way to make the process cleaner. While we are cleaning it up, we might as well deal with carbon emissions, too.

            3. Natural gas. This is really the only tricky thing. It’s cleaner than coal, so it is already a better option. But should we looking for immediate ways to phase it out because of carbon dioxide in the air or because it might not be the best energy source anyway? That I think is worth talking about no matter what one thinks about temperature predictions. For example, there are places where solar is a better energy source than gas fired power plants because solar can be better localized. The whole concept of centralized power plants sending electricity out over transmission lines could be modified considerably for security, efficiency, and cost reasons.

            • Ilambiquated says:

              If there’s any truth at all to Peak Oil, governments all over the world should be slamming on the brakes of oil consumption at all costs to get their economies shipshape before the crisis hits.

              I learned in driving school it’s better to apply the brakes before you hit the wall.

              Some countries will, some won’t. We don’t exactly know where the wall is, so we don’t know who has made the best bet.

          • Sorry, but in my judgement nature publications can’t be trusted. This is more in areas I know about, or where my education and background allow me to detect flaws. The arguments from authority don’t work very well in my case.

          • sunnnv says:

            (“primer” –> “premier” ???)

            OK – as a subscriber to Nature (and sometimes to Science),
            here’s the deal.

            There are mostly peer reviewed articles,
            BUT
            they also have (up front) articles written by reporters
            (like the one dissed for improperly releasing data in UT’s BEG reply at the EIA’s link above).

            These reporters’ articles are usually some kind of reader’s digest overview and/or what the “meaning” of some piece of science is.

            I haven’t the foggiest why they put them in there, but they do.
            I remember well one in Science that claimed that silicon based PV panels covering a house roof could not supply sufficient electricity to meet the house needs.
            I wrote a nice reply, with references to PVwatts and average house size, etc, that showed this was complete nonsense.
            Science thanked me, but said unfortunately they cannot use my letter.

            So – do NOT confuse the peer reviewed articles with the reporter blah.

        • Fred Magyar says:

          Their Trojan horse is the global warming issue.

          Whiskey, Tango, Foxtrot! Really?! You seriously believe that Nature’s hidden agenda is to push the global warming issue on an unsuspecting populace?

          • No sir. Their aim appears to be to convince people to adopt policies suitable to their political agenda. The science is just a cover to drive us into a posture they want us to have. This is led by a small group at the very top. I discerned their warped approach several years ago, but this came to be my firm conclusion after I read the “false hope” article in Scientific American. I consider that article to be deceitful. Sciam is owned by nature publishing.

            Maybe they are into that Dedevelopment gig that Obama’s science advisor seems to have? Who knows? I know it’s purely political, but when it comes to politics everything goes.

            • Boomer II says:

              The science is just a cover to drive us into a posture they want us to have. This is led by a small group at the very top.

              If only that were the case. Unfortunately there isn’t nearly enough done toward energy and resource conservation, pollution limits, etc.

              There is so much more we could be doing, even without a threat of global warming. If policies were really geared toward global warming, restrictions would be far, far more drastic.

              And if the powers that be wanted to con the public into switching to a different kind of energy, they could conjure up a much more immediate threat than global warming. They could come up with national security issues.

              If global warming is a con to get people to change their ways, it isn’t a particularly good con.

              • Boomer II says:

                In fact, the more I think about it, the more laughable it gets to think so many scientists across the globe are working with some sort of group of governments and businesses conspiring to come up with the concept of global warming to get people to drive less, burn less coal, etc.

                For one, they could have come up with a better idea.

                For another, who do you think these groups of conspirators are that are working together to create a plot that would benefit then and not us? If they want to take all of our money, throw us out of jobs, and wreck the world economy, they seem to be doing a reasonably good job of that anyway with concentration of wealth.

                You honestly think they need to do even more to take over the world?

                • I referred specifically to Nature publishing, not “many scientists”. Once a group of people has the editorial power what scientists publish can be subverted. I’m surprised at how naive some people are.

                  • Dave Ranning says:

                    I can see you don’t spend much time in the scientific publishing world.

                    The amount of papers is astounding, with many outlets.

                  • Boomer II says:

                    No sir. Their aim appears to be to convince people to adopt policies suitable to their political agenda. The science is just a cover to drive us into a posture they want us to have. This is led by a small group at the very top.

                    So you think Nature publishing has an agenda that is different than the larger group of scientists pointing to global warming?

                    What is the Nature agenda?

              • wimbi says:

                Ray Kurzweil says not to worry about energy, at the rate it’s going, solar will beat out everything in COST in the very near future.

                so, no need for deep argument here, just go get what you need that costs less.

                And happens to be universally available and accessible by near anyone.

                I believe Ray, looking on facts as I know them. Puzzles me that any energy guy would say anything different in face of those facts.

                • Which facts? I sense a nearly religious frenzy when it comes to solar power beliefs. We have a solar power industry here in Spain, and it’s an economic wreck.

                • ziphius says:

                  Kurzweil bases his predictions on the “law” of exponential technological progress (eg. Moore’s Law) but . As solar technology improves its’ EROEI will improve somewhat but it can’t keep increasing exponentially and at some point it will plateau and the “cost” of solar won’t decrease any more.

                  • John B says:

                    The cost reduction curve may flatten out at some point in time. But if the cost at that point is cheaper than anything else, that’s all that matters. Solar will have won.

                    Interestingly, M. King Hubbert (the father of Peak Oil) pointed to solar power as a potential replacement for fossil fuels.

                    https://www.youtube.com/watch?v=j6vXHPZ0GQU

                • Ilambiquated says:

                  Ray is a dubious source, but there is no question that the pace of innovation is increasing.

                  Be that as it may, this is my favorite chart on solar prices.

                  You’ll have a hard time explaining to energy people what is about to hit them, because it’s so outside their experience. I’ve spent decades in the computer industry, and there is no floor in sight for solid state tech like PV.

                  • Ilambiquated says:

                    To be more specific about the floor, I predict that the real per watt price of PVs will fall by 95% or more in the next 25 years.

                    This party is just getting started.

                  • ziphius says:

                    If we assume for the sake of argument that solar has an EROEI of about 10:1 now, then a further 95% reduction in the price will result in an increase of 20x, so in 25 years solar will have an EROEI of 200:1. Is that what you’re predicting?

                  • Ulenspiegel says:

                    Z wrote: “have an EROEI of 200:1. Is that what you’re predicting?”

                    A reduction of production costs does not necessarily mean an improvement of EROEI. Therefore, your interpretation of I’s staement is falwty.

                    A general point is, that the modules may become much cheaper, the BOS does not see the same improvements, therefore, the complete system will become cheaper at a much lower rate.

          • Dave Ranning says:

            If anything, they have gone out of their way on caution over global warming.

          • Ray Ramos says:

            The hidden agenda is that global warming or climate change or what have you is a con set up by the global Marxists who use the avenues such as nature to push the propaganda onto the unconvinced masses. the whole thing is marxism run amok, not science as global warming is NOT caused by human activities and global Marxism through the alarmists 4 prerequisites of world domination isn’t going to stop it.

            The Marxists’ agenda: 1. Tax carbon (either directly or indirectly through “cap and trade” schemes) and use the money to expand welfare programs. Those in the USA who support these want to use most of the tax money to “shield the poor from the higher prices” with programs that make more individuals more dependent upon government. (Not tax carbon and use ALL the money to fund a new “Manhattan Project” to find non-carbon forms of energy production and better forms of power distribution.)
            2. Have government make the direct decision about who can and who can’t own and use private transportation. (It is one of the basic tenets of Marxism that if government controls the ability of the populace to move around, then government can prevent revolutions.)
            3. Force everyone (except the “poor”) to pay for “smart” (remote controlled) utility meters so government can decide what the environmental comfort will be and if and how much of these services you can use. (Lest we forget, in Stalinist Russia, a Marxism based regime, the local party boss controlled the valves and fuse boxes in the basements of the Government apartment blocks and anyone that complained about the government found themselves shivering in the dark sometimes without even cold running water.)
            4. Ban or severely tax meat production, especially beef because livestock emit methane which is 20 times as strong a CO2. (Another page of Marxism is that if government can control what and how much food the people get, government can prevent insurrections. Look at North Korea today and Stalin’s Russia in the 60″s.)

            • Nick G says:

              What’s your source for these ideas?

            • Boomer II says:

              Right. And you think all these scientists who believe in global warming are Marxists?

              Come on. If the world could get that organized, we’d have a lot more happening than global warming studies.

              The whole Communist/Marxist thinking is a little outdated, too. You might as well say Satan is taking over the world.

            • John B says:

              If the solution to global warming is renewable energy, how exactly would this further a Marxist agenda?

              Marxists promote centralized control.

              Renewables allow the INDIVIDUAL to produce their own energy. You don’t even have to be connected to the power grid with renewables.

              BTW, Marxism was around long before any global warming theories came out.

            • ezrydermike says:

              You should publish in Nature and get this peer reviewed. That’ll show ’em.

              Groucho

            • Ilambiquated says:

              Mmmmmm love that copypasta blogspam. Well seasoned with kooky sauce. I was almost tempted to read it.

              • ezrydermike says:

                lol! copypasta blogspam!

                Well done! Coffee out of my nose on that one!

            • notanoilman says:

              Dear Troll Header,

              Please send us a better quality of troll.

              NAOM

    • Synapsid says:

      coffee, push, mike,

      You do realize that you’re leaving many of us completely out of the discussion, right?

      • toolpush says:

        Synapsid,

        Sorry about. But I thought you were an oilman? lol.

        To sum up what we discussing, rock is only so strong. There is not much rock down there that can handle a column of mud greater than 20 lb per gal, before it breaks down, or also described as reaching its fracture point.
        So as Coffee was quoting pressures, and I took the depth from Google,I was converting them into lb/gal, and the first one I found to be 29lb/gal. Which equaled impossible. Then Coffee mentioned they were deeper wells, which brought the numbers into the possible category, but expensive and nasty wells.
        As for the flow up 3 1/2 tubing, there is always a limit to what you can push through a certain size pipe. 50-60 mcf/d appeared outside those limits. So it appears they would be running larger size tubing than industry standard, once again increasing costs from the excepted number.

        I hope this clears up a few thing for you, but I see Ron has turned a new page in the book, so onward we must go! lol

        • coffeeguyzz says:

          … what he said, Synapsid. Apologies to all for the tangent.
          Push, I’ll be tracking down the hardware specs and let you know what I found.

        • Synapsid says:

          toolpush, coffee,

          Thanks for the reply. I am a geologist but not an oil geologist. I’m learning a lot here.

  31. oldfarmermac says:

    ”I think the good folk at the EIA are prone to looking at the world through rose colored glasses!”

    I generally think like Fred and in this case I am with him. But the EIA DOES seems to have grown to be quite a bit more realistic recently than it was a few years ago.

    I am not at all politically correct and I am convinced that the scientific establishment is not only pc to some extent these days – extent enough to deny the work of some people who may be doing legit work – I also do not doubt that even NATURE is willing to sort of comb and curry the facts a little to make their case look a little better.

    (I will NOT get into scientific pc here on Ron’s blog.Not the place for it.)

    I doubt there is a truly totally disinterested and entirely neutral organization on the face of this planet when it comes to analyzing complicated issues and presenting conclusions.

    I generally have no trouble seeing an agenda peeking thru when I read an article. Can’t read this one though not having access to NATURE at this time. Of course when there is an agenda it may well be one I agree with. I generally agree with what is printed in Nature.

    • Dennis Coyne says:

      Hi OFM,

      The article can be accessed through the link in Fred’s comment above( I will paste it below, it worked for me and I do not subscribe to Nature). The article is good in my opinion, I have not read the research funded by Sloan, but I have read Hughes work and it seems to agree with the work from the University of Texas. I also agree with Fred that recent EIA scenarios (except possibly their low resource case) tend to be on the optimistic side.

      Link to Nature piece below:

      http://www.nature.com/news/natural-gas-the-fracking-fallacy-1.16430

      • oldfarmermac says:

        I am far far more inclined to go with NATURE and peer review than I am with a bureaucratic agency that is subject to pressure from lots of directions to come up with rosy forecasts.

        BUT I do try to recognize the fact that the scientific establishment is composed of individual naked apes and that a truly dispassionate observer – an alien biologist from another planet- must keep in mind the old cops rule which goes like this.

        HIS STORY.

        HER STORY.

        THE STORY.

        I have been reading science books and articles for over fifty years now and there is NO QEUSTION whatsoever that editors and authors of scientific publications have a way of choosing words and phrasing that tends to increase the impact of the facts on the reader’s mind.

        I have read the rebuttal letter already. I will read the article sometime later and compare the two on relevant points to illustrate my case.

        AND YES -I realize by saying this I am prejudging the NATURE article. I am willing to do this because I am confident the odds are pretty high that even so august a publication as NATURE has put a little lipstick and makeup on the facts to make THEIR case a little more attractive.

        In the end though peer review wins arguments hands down.

        But this argument seems to be more about opinions than facts and peer review may not be all that relevant.

        • ezrydermike says:

          hmmm. Is “THE STORY” the objective reality? How can anyone know the objective reality when all observation is subjective? Including the alien.

          So subjective reality is really just informed opinion

          So is peer review more just a gathering of similar opinions?

          We all carry filters and agendas.

          • oldfarmermac says:

            I am a firm believer that there is such a thing as objective reality as evidenced by the experimental experience of a person who believes otherwise vigorously kicking a large stone with his toes barefooted.

            Such experimenters generally conclude immediately and conclusively that stones and toes are objective realities. Hardly any of them are so skeptical as to repeat this experiment to verify their own or other investigators’ results.

            Every body has a somewhat different SUBJECTIVE reality inside their head.

            Now speaking as a person well educated in the basics (thru sophomore level at least at a real university ) of chemistry, biology and physics with a freshman plus level acquaintance with geology and geography and the math the real math majors take – speaking as such a person- I am a firm believer in anthropogenically forced climate change, our own species population overshoot, potentially catastrophic shortages of such one time gifts of nature such as oil and phosphate rock and pretty much the whole BIBLE OF the DOOMSTERS in general terms.

            I incidentally also took the basic course in conventional economics that economics and business majors took. The reason I have such a broad based background is that agriculture is a composite science and you must have a basic general knowledge of the physical sciences in order to understand what is going on on the farm and in the industry.

            At different times I have firmly believed some of the shall we call it EDITORIALIZING published by some serious scientists – a prime example being infamous book titled THE POPULATION BOMB. The author’s reasoning was perfectly sound but his assumptions regarding birth rates and rates of economic growth world wide turned out to be pretty far off.

            So he was wrong about widespread starvation in the latter part of the twentieth century. I was wrong as well even though as an ag guy I never doubted that from the technical pov producing enough food would be a piece of cake.

            My mistake was believing that there would be no feasible way to PAY for the highways , seed, machinery, chemicals’ and other inputs necessary to grow that much food.

            As it turned out the countries at risk of famine mostly managed to generate enough income to pay for the inputs needed to farm Yankee style and thus feed their fast expanding populations.

            Thus I learned the difference between science and opinion.

            There is a difference between news and editorializing and peer reviewed research papers. Nature and a good many other highly respected publications publish all three.

            Editorializing generally consists of arguments of authority or based on authority. Unfortunately most people have just about zero training in the sciences and are thus unable to distinguish between editorials and actual scientific literature. Knowing that the Earth is round and orbits the sun is not evidence of having any training it the sciences. Knowing that there have been ice ages and warm ages in the past is not evidence of any scientific education.

            If anybody has any trouble understanding what I am getting at another example is knowing that there was a war called WWII that was fought by our parents and grandparents is no indication that a person knows DOO DOO from apple butter when it comes to history.

            Now most of us have to rely on arguments from authority in determining what we believe about a number of important issues.

            I have to rely on the consensus opinion of historians when it comes to huge swathes of history- having no expertise of my own except in certain very limited areas that are hobbies of mine such as CERTAIN ASPECTS of the history of the twentieth century thru WWII.

            I have to rely on the consensus opinion of the medical establishment in respect to the risks and nature of communicable and lifestyle diseases although I do have SOME expertise in this area.

            I have to rely almost entirely on the consensus opinion of the legal authorities when it comes to understanding the letter and the intent of any law not well known to me as a practical matter.

            If I were going to build a large building I would have to rely on the judgement of an engineer or architect as to the safety and feasibility of my proposed design.

            So- arguments from authority may be and quite often are solid valid arguments.

            Now when it comes to an issue such as anthropogenic climate change taken as an example then you have the choice of accepting or rejecting the argument as being scientifically based or being based on authority.

            Given my own background I know enough science to conclude that the argument that anthropogenic climate changes real to conclude for myself that the argument is based on good solid science.

            A person educated in business administration or law would have to take this argument on authority. So would a person whose education is basically confined to economics or finance.A medical doctor would have enough basic physics and chemistry to understand the argument and make up his own mind as to whether the argument is based on science or an argument from authority.

            Now I will editorialize a bit and say that anybody who does not believe in for instance anthropogenically forced climate change lacks sufficient training in the sciences to truly understand the evidence or else they have not bothered to acquaint themselves with said evidence.

            If they understood it they would conclude that forced climate change is real.

            Asking people who do not know any science to distinguish between news, editorials, and peer reviewed research in all included the same issue of the same publication is basically a waste of time.

            But anybody who actually understands the peer review process has no problem understanding why climate scientists are not scam artists.

  32. coffeeguyzz says:

    Push, Mike, don’t have specs on Range’s well other than it was a 5,420 foot lateral frac’d in 32 stages.
    For comparison, Rice’s 41mmcf/d drilled in the Utica this spring had 7k lateral, 40 stages, 32/64 choke with 6,000 psi flowing casing pressure.
    Magnum Hunter’s 46.5mmcf/d well was only 5,300′ long with 22 stages, 32/64 choke, 7,810 psi flowing casing pressure with shut in pressure over 9,000 psi.
    The Rice well produced over 700mmcf its first 60 days.
    Of more significance, perhaps, is the 26mmcf/d IP well that Shell drilled 400 miles northeast in the same Utica formation.
    Should further drilling/production show substantial productive continuity between these points, the Utica may prove to be at/near the top of all time gas formations.
    To be clear, the Utica is distinct from the Marcellus.

    • Dennis Coyne says:

      I wonder if these wells are typical. Just because there are a couple of excellent wells tells us very little.
      We have very little data on Marcellus wells, output has been impressive so far, but eventually the sweet spots will be drilled up and average well EUR will decrease.

      Interesting Presentation by Scott Tinker of BEG at link below:

      http://www.beg.utexas.edu/presentations/presentations/2014_presentations/Schlumberger%20US%20Shale%20Gas%20Options%20and%20Impacts2.pdf

      Chart below is from slide 35, other interesting slides (to me) are slides 31 to 34, presentation is from Sept 22, 2014. Other presentations at link below:

      http://www.beg.utexas.edu/presentations.php

      • coffeeguyzz says:

        Dennis, a great many people are observing and wondering how this will play out.
        The vast majority of Utica wells have been to the western, ‘wetter’ portions of this formation. As operators are just now punching through the Marcellus to the 5/7 thousand foot deeper Utica, the sparse, early results are extremely bullish.
        Virtually never mentioned is the presence of at least two shallower formations, the Upper Devonian and the Huron above much of the Marcellus.

    • toolpush says:

      Coffeeguyzz,

      To me the Marcellus is different from the other shale plays, due to the fact they have been able to continue to produce gas at $2 mcf and increase production, and the Utica seems to be mirroring that position. Where as, up to now at least the other areas have relied on the $100 /barrel of oil to maintain production. But some of your numbers are not adding up too well.
      http://geosurvey.ohiodnr.gov/portals/geosurvey/Energy/Utica/UticaShale_WellPrototype_diagram.pdf

      According to the link, the Utica is at approx 6000ft. 7000psi BHP give 22.4lb/gal mud wt, and 9000psi, gives an incredible 29lb/gal mud wt???

      I realize these are not permeable formations, so well control is not the real issue, but the sloughing shale in the horizontal section sounds like it would be nearly impossible to keep under control? Unless these are deeper wells than the average by a considerable extent, something is wrong.

      • toolpush says:

        I wonder if they had trapped pressure from the frac job? Even then it seems way too high. 29 lb is still going to be above the frac gradient. Just to put it perspective, normal bottom hole pressure at 6000ft would be 2700-3000psi.

        • coffeeguyzz says:

          Hey, push, just saw your posts here now and I think it was clarified up above. The Utica wells in this area are deeper than 10/11,000′. The shallower Marcellus is found here at about 6,000′ and those wells flow at bout 4,000 psi.

  33. Ronald Walter says:

    The State of North Dakota might as well invest in oil futures and prop the price with all that production and oil extraction tax money. Five hundred million will buy one day’s SA production. They can own the oil in the tankers unloading at harbors in Europe and New York. The State of North Dakota could be in the driver’s seat with regard to oil buying and selling. Probably being done now.

  34. Watcher says:

    Mini bounce underway today, up about 2 bux to high 57s low 58s.

    No relevant news I’ve seen.

  35. B says:

    [Governor] Cuomo to Ban Fracking in New York State, Citing Health Risks

    [Excerpt from article]
    The Cuomo administration announced Wednesday that it would ban hydraulic fracturing in New York State, ending years of uncertainty by concluding that the controversial method of extracting gas from deep underground could contaminate the state’s air and water and pose inestimable public-health risks.

    “I cannot support high volume hydraulic fracturing in the great state of New York,” said Howard Zucker, the acting commissioner of health….

    Advocates for fracking have argued that it could bring jobs to economically depressed areas atop the Marcellus Shale, a gigantic subterranean deposit of trapped gas that extends across much of New York State, Pennsylvania and West Virginia.

    But the governor has also faced strong opposition from groups worried about the effects of fracking on the state’s watersheds and aquifers, as well as on tourism and the quality of life in small upstate communities.
    [End of excerpt]

    • This proves New Yorkers are disconnected from reality.

      • Caelan MacIntyre says:

        Disconnected from fracking you mean?

      • Boomer II says:

        This proves New Yorkers are disconnected from reality.

        But it could also mean they see there is no financial necessity at this time to encourage fracking. They may be more connected to reality than some other states.

      • Dave Ranning says:

        Let be honest–all of us here are like the Austrians in 1913 arguing who our next Habsburg Ruler is going to be.

        New Yorkers are no more delusional than most of us.

  36. Watcher says:

    Nope. Respite gone.

    Oil back down to 56.xx

    • Watcher says:

      That’s where it settled. Spiked above 59, and gave it all back. Up about 40 cents. No miracle explosion today.

      • Verwimp says:

        Some people may have thought Cuba would be added on the demand side. So price went up for a moment. Or were there other reasons for the sudden price peak?

        • Watcher says:

          Mostly the FOMC release. It’s not unusual on such days to get huge gyrations in whatever the vehicle du jour may be.

          The one thing we may have zero visibility on is that Cuba off shore oil drilling that was in the news a year or two ago. If there’s new news re that not public . . . . .

      • notanoilman says:

        Have to change your nym to Ticker 🙂

  37. Watcher says:

    The Fed statement is out and is a little . . . or a lot . . . bizarre. News services are running the headline that the “considerable time” language (the delay until a rate increase) was dropped from the FOMC statement — but, but, but, but . . . it wasn’t.

    The considerable time phrase is still there. They changed what paragraph it’s in and the wackos are trying to deduce what this means. The concept of being patient until rates increase has been added.

    There WAS address of oil. It is on their radar screen. The statement was not reassuring to oil’s price. It was something like “the price of oil is transitory”. That was said at $110, $90 and $80 some years ago. I think it’s not on their radar screen yet. Their econometric models haven’t captured the recency of shale’s influence. Very bad news for the industry.

  38. Caelan MacIntyre says:

    Only complete collapse of civilization prevents runaway climate change” ~ Tim Garrett

    “A likely outcome is a last days flurry of grand projects and expensive wars, followed by a collapse in food production and population. So whatever is done to resolve the environmental crisis, we are not going to end up with a capitalist society. For environmental activists, putting environmental outcomes first is just as likely to bring down capitalism as a campaign to end capitalist society. Doing nothing at all is very likely to have the same effect.” ~ Terry Leahy, ‘Checkmate: Why Capitalism Cannot Survive Global Warming’

    Civilization is not and can never be sustainable. This is especially true for industrial civilization…
    Premise Three: Our way of living—industrial civilization—is based on, requires, and would collapse very quickly without persistent and widespread violence.
    Premise Four: Civilization is based on a clearly defined and widely accepted yet often unarticulated hierarchy…” ~ Derrick Jensen

    The twin peaks of oil and government are causally linked: central government’s great era of expansion has been fueled by abundant, cheap liquid fuels
    The third support of Central State expansion was debt, and more broadly, financialization, which includes debt, leverage, and institutionalized incentives for speculation and misallocation of capital…
    The fourth dynamic of Central State expansion is the State’s ontological imperative to expand. The State has only one mode of being, expansion. It has no concept of, or mechanisms for, contraction… This dynamic creates a positive feedback loop (i.e., a death spiral)…”

    So if ‘civilization’, as currently manifest as mostly ‘large-scale centralized crony-capitalist governpimps’, know about the aforementioned, which they likely (to be charitable) do, then what?

    (Consider perhaps 2014’s news items for fun.)

    Essentially, this information, to large scale centralized crony-capitalist governance, would seem a bit like telling a patient that they have terminal cancer unless they cut off their pelvis/lower-bowel, ear-lobes, hair, all their arms and legs and remove all non-essential organs, maybe including one eye, etc..

    4 or 5 questions then would be; how does the patient/crony-capitalist machine react to the information; what do we have left after removal; how functional is it (or is it non-functional); and can the patient(s) successfully operate on themselves such as in the face of having to gut themselves, and in the face of increasing external/internal (layoffs, etc.) unrest in the process and whatever happens afterward to the trimmed/gutted body parts? Anyone like to take a stab?

    I guess it depends, too, on which are more ‘spread out’… Russia, for all its size, seems, economically and militarily, relatively compact compared with the USA.
    Why, there’s even talk, as per sanctions, about Russia doing things for itself and how, historically, it’s kind of used to that anyway.

    There’s probably nothing like being spread so thinly at the peak of oil.

    • Dave Ranning says:

      I think Jensen is a little beyond the analysis here.

      He is right, but we can’t go there yet.

    • James says:

      It’s too late, the cancer has spread everywhere. Even space based laser/radiation treatments, precisely focused, would be incapable of stopping the spread. And why would a cancer want to kill itself in the first place, the growth feels too good for such an out-of-control ape. So we will collapse as the ecosystem body collapses. Have you ever heard of a sustainable cancer that’s intent on infinite growth and metastasis? Good luck.

      • Rita says:

        Last year researcher Mina Bissell showed in experiments that cancer cells revert to normal behaviour when the blood sugar level gets too low. Sugar is the equivalent of fossil fuels, an energy source for the cells. Some cancer lines only slowed the abnormal growth in the lack of sugar. I hope we are the kind of revertable cancer.

  39. Caelan MacIntyre says:

    WRT this thread

    “If OPEC were an effective cartel sharing the market among its members, there would be a long-run equilibrium relationship between each member’s individual production and total OPEC output. This idea is tested using cointegration analysis and some members’ production levels are found to move together with that of the organization in the long-run… The most interesting result is that seven members coordinated their production during the 1982-93 period…

    One would expect a cartel’s output to affect the market price of its product. OPEC, especially, has been accused of exercising market power by deliberately reducing its output in order to raise prices. This causal relationship is empirically tested…

    Overall, the evidence favors coordination among the members, especially during the output rationing era. Most analysts consider that OPEC’s market power eroded during this period. The price collapse of 1986 is seen as a result of OPEC’s failure to manage the quota system. However, our evidence suggests that another explanation is possible: OPEC started to act as a cartel in the 1980s in order to prevent prices from falling further. It is sometimes argued that the high prices of the 1970’s were not the result of collusive behavior of OPEC countries; that prices were too low before 1973-4 and an adjustment was needed. But prices increased much more than necessary and the oil market stagnated. The demand for OPEC oil kept falling as other energy sources were substituted for oil, especially in the industrialized countries, and non-OPEC production continued to increase. Neither the loss of market share nor the prospect of lower demand for its oil in the future was acceptable to OPEC, especially to those members in the Persian Gulf who own the largest reserves in the world. In response, members started acting as a cartel in order to maintain prices. ~ S. Gürcan Gülen

    This is in the 70’s, 80’s and early 90’s. I imagine they’ve gotten better at the game since then, learned a few things/tricks, and at the same time, the rules of the game have been sufficiently modified (and such as considering my previous post)…

    If you have a few kids in a small town at every block corner selling lemonade and more or less controlling the lemonade market; the town needs lemonade and its economic system is built around lemonade, the kids might get some ideas

  40. Watcher says:

    Uh oh.

    http://www.zerohedge.com/news/2014-12-17/wasnt-supposed-happen-7-10-americans-save-spend-gas-tax-cut-bills-not-gifts

    Survey says lower gasoline price won’t result in more purchases or the stuff that is stimulative (aka GDP boost). Looks like paying present bills and maybe try to save it wins the voting. Not even going to pay down credit card bills.

    http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/12/20141217_CBS3.jpg

    There won’t be an offset of shale evisceration.

    • Ilambiquated says:

      The obvious solution is to tax the hell out of gas and spend the proceeds on infrastructure.

    • The FARC terrorists are known to blow up pipelines quite often. But their numbers are way down. They took a hard hit when Raul Reyes’ computer and back up hard drives were captured after his camp was hit by a smart bomb. The rumour is that Reyes’ computers are being milked very slow. They also have a ton of information on Farc sympathizers outside COLOMBIA.

  41. ezrydermike says:

    What if we all realized that we need to conserve our energy usage and to reduce unnecessary consumption…oh never mind.

    http://www.latimes.com/science/sciencenow/la-sci-sn-nasa-satellite-spies-holiday-lights-from-space-20141217-story.html

    • Aws. says:

      My suggestion that lights on the Christmas tree were not needed was not well received. Went without them for a couple of years, but as the kids got older, I have had to cave.

      It is kind of hopeless.

    • Rita says:

      All that artificial light is also increasing cancer, depression, obesity, diabetes etc. rates. After peak oil there will finally be less light pollution.

      • Watcher says:

        Less food pollution, too.

        • Rita says:

          Well, I think climate change is much more dangerous to food production than fossil fuels. Permaculture and relocating to the land may solve most of fossil fuel lack of supply. But the remedies to climate change, at least in the long run, seem much more difficult. So, with or without fossil fuels there will be less food.

          • Nick G says:

            Permaculture and relocating to the land may solve most of fossil fuel lack of supply.

            Those are unrealistic. Electric transportation, biofuels and synthetic fuels would work just fine.

            Climate Change is far more dangerous than Peak Oil. Oddly enough, the same strategies would work for both. But, PO is far easier to fix given the lag times for the effects of GHGs.

            • Rita says:

              I would add peri-urban agriculture to the list. All those abondoned suburbs may be replaced with agricultural land. I read that Shanghai has developed peri-urban agriculture. Some of the city dwellers relocate to the countryside, some relocate to the city center. The cities become smaller and denser.With some depavement and creative thinking even urban agriculture can bring additional food.

              • Nick G says:

                But why would the suburbs be abandoned?

                A Nissan Leaf is the cheapest vehicle on the road to own and operate (with the tax credit!), and it’ll get you to any job within 40 miles (and 80 miles, if you can charge at work). A Chevy Volt is among the cheapest vehicles, and it’ll take you anywhere.

                I don’t see the suburbs being abandoned.

                • Nick G says:

                  oops – that should be “*without* the tax credit!.

                  With the tax credits it’s insanely cheap.

                  In Georgia you can buy a Leaf for about $17k – then you’ve got the $20k in lifetime fuel savings on top of that…

                  • Verwimp says:

                    Please be aware of the fact Rita looks at things from an Albanian point of view (That is right, Rita?) Which is extremely interesting, since Albania has (from my Western European view, apologies if that is wrong) almost completely missed post WW2 development. After the fall of the Iron Curtain things improves with some ups and downs, but Albania still has a GDP/capita of only 20% of the USA GDP/Capita. Apart from the development of some cities still almost 50% of the population works on the field. According to Wikipedia 63% of household expenditures go to domestic farm products. That is all very sustainable. When the USA and the EU have collapsed, Albania still works. That makes Albania a very interesting case to me.

                • Caelan MacIntyre says:

                  Yes, your Nissan Leaf-blowers will get you to your wage-slave positions so that you can turn your tax-tricks with your johns for your governpimps to in part pay for the roadkill highways you drive on. Meanwhile, where are the kids?

                  “Fukushima Radiation Contaminated Cars And Steel From Japan Being Refused And Shipped Back By Multiple Countries” ~ agreenroad.blogspot.ca

                  Perhaps the added electric cars on the apparently increasingly-frail electrical grid systems will hasten and increase the need for repairs, upgrades and maintenance and thus, tax-pimping and wage-slave-position-lock-in…

                  Guy: “I can’t just quit my job, honey, I have car and mortgage payments… What will the kids eat?”
                  Girl: “True, baby… And as we’re both wage-slaving and outsourcing the raising of our own kids to strangers and institutions, how will we even have enough time and inclination to acquire the knowledge to consider growing a garden on our bankster-owned rabbit-hutch condo’s balcony…” (starts to cry…)

                  Anyone reading this want to take a guess at that cultural permanence level? I’m thinking it’s way below 0.

                  “I also think Nick is too optimistic, but I think he nicely balances the pessimism of others.” ~ Dennis Coyne

                  Takes a sip of coffee, looks at Dennis quizzically… finally asks, “You think?”

                  • Nick G says:

                    Don’t forget the “nicely balances the pessimism of others”.

                    Again, though, you haven’t presented any evidence that EVs are bad.

                    You’ve simply clarified that you don’t like our current economy. Well, a lot of people would agree that this is the worst of economies…except for all the others.

                    Seriously – can you point to any examples of the kind of non-violent, non-hierarchical, non-industrial utopia you’re talking about?

                    “In 1978 the anthropologist Carol Ember calculated that 90 percent of hunter-gatherer societies are known to engage in warfare, and 64 percent wage war at least once every two years. Even the 90 percent may be an underestimate, because anthropologists often cannot study a tribe long enough to measure outbreaks that occur every decade or so (imagine an anthropologist studying the peaceful Europeans between 1918 and 1938). In 1972 another anthropologist, W.T. Dival, investigated 99 groups of hunter-gatherers from 37 cultures, and found that 68 were at war at the time, 20 had been at war five to twenty-five years before, and all the others reported warfare in the more distant past. Based on these and other ethnographic surveys, Donald Brown includes that conflict, rape, revenge, jealously, dominance, and male coalitional violence as human universals.

                    – Steven Pinker, The Blank Slate, Page 57.

                    Amazonian tribal warfare sheds light on modern violence, anthropologist says

                    In the tribal societies of the Amazon forest, violent conflict accounted for 30 percent of all deaths before contact with Europeans, according to a recent study by University of Missouri anthropologist Robert Walker. Understanding the reasons behind those altercations in the Amazon sheds light on the instinctual motivations that continue to drive human groups to violence, as well as the ways culture influences the intensity and frequency of violence.

                    http://phys.org/news/2012-10-amazonian-tribal-warfare-modern-violence.html

                    http://www.theoildrum.com/node/9535/921528

                  • Ilambiquated says:

                    Yes, your Nissan Leaf-blowers will get you to your wage-slave positions so that you can turn your tax-tricks with your johns for your governpimps to in part pay for the roadkill highways you drive on.

                    Pol Pot believed you could get people to act against their own interests if you heavily propagandized them. He thought he could run the economy on that principle.

                    Didn’t work though. Electric cars are an intrinsically better technology. They are still a little still a little expensive, but will probably continue to spread.

                    I guess name calling could stop them for a while. Superstition certainly aided the spread of ebola in West Africa, and the communist boogeyman still seems to be hiding under every bed in America as well.

                  • Nick G says:

                    Look at Edmunds.com – the 5 year cost of a Leaf is lower than anything else.

                • John B says:

                  I don’t buy the “end of suburbia” theory either.

                  A single family home has the potential for solar water heating, PV, geothermal heat pumps, rainwater harvesting, and maybe even an ethanol still in the backyard.

                • thrig says:

                  Typical blinkered nonsesense. Suburbs will be (and have already been) abandoned, depending on their location, how wealthy their residents are (check out where poverty has moved to), how big they are on correcting design blunders from the 50s, whether to adapt, migrate, or die, most notably now various second ring suburbs pondering how to match their tax receipts to their costs. Probably not horizontally–oh, you’re stuck in traffic? That’s a crying shame. Maybe they should widen the roads? Heh heh. Over on the (sane) engineering front, Charles Marohn of Strong Towns has made some nice points on the fiscal stability (nope) and road safety (not) of what has passed for community building in America over the last few decades. As for abandoned, besides the obvious Roman ones and the simply delightful hubris that ours won’t revisit theirs, I believe Mythbusters shot a few episodes in a suburb let go by the miltary (“creepy”, the description) and in another case put a cannonball into a minivan, the sprawl having gotten out back behind the former boonie that was the munitions test range.

                  Though, one must admit, cul-de-sacs do have some sort of a timeless charm…

                  http://nathanielhood.com/2014/10/13/a-suburban-engagement/

                  • Nick G says:

                    The point is: they’re not being abandoned because of peak oil.

                  • Caelan MacIntyre says:

                    I’ll embellish one of thrig’s points by the last link:
                    The dehumanizing factors/scale of/developments around the car to the exclusion of the human. Not that I think some people– even on here– will notice, or want to notice stuff like that.

            • Caelan MacIntyre says:

              Permaculture essentially means ‘permanent culture’, so whatever might be permanent will be carefully, democratically considered. So, if— and that’s a big if– such things as electric transportation, biofuels, etc., are likely to contribute to cultural/ecosystem permanence, they will be considered.
              I would add that permaculture has to do with real, pure, participatory democracy as well, since all the technology and activities in the world without ethics will likely limit the permanence of a culture. Insofar as losing control is a concern with regard to overcomplexity, so too is it a concern with undemocracy.
              With regard to that as well as realism and balance, myopic preoccupations such as with such things as electric transportation and biofuels, etc. will not solve ecosystem issues alone, and may exacerbate them.
              Permaculture endeavors to look at things in part from a broad, holistic, long-term, protracted-observational, nature/systemic viewpoint.

              • Nick G says:

                Who can argue with the idea that holistic, long-term thinking is a good idea?

                I don’t see any specific evidence that EVs aren’t a good idea.

                • Caelan MacIntyre says:

                  “I don’t see any specific evidence that EVs aren’t a good idea.” ~ Nick G

                  Many people ‘don’t see evidence’.

                • Verwimp says:

                  EV’s are a BAU-light phenomenon. BAU-light won’t work. It’s an illusion that distracts attention from the magnitude of changes that are upon us. BAU-light believers will be the most disappointed ones.

                  • Caelan MacIntyre says:

                    God I hope so.

                  • Nick G says:

                    Well, they’ll certainly address the effects of Peak Oil on the suburbs.

                    They’d be a big part of addressing Climate Change, if we used them in time.

                    What else are you thinking about??

                  • Nick G says:

                    God I hope so.

                    Yeah, I’m getting the impression that you’re part of the very small minority that really is hoping for collapse.

                    Whoa!

                  • Verwimp says:

                    @ nick (since we seem to be running out of space to reply directly). To be honest: I may be part of that very small minority that really is hoping for collapse. Seriously. I say that because of the ‘overshoot’-idea. If it is indeed the case we are in overshoot (which I believe is true – this, to me, is a believe: I am an ordinary engineer, well informed, open minded, but not a specialist on earth sciences.) then the sooner the collapse arrives, the better. When the collapse occurs sooner, the consequences will be less. So hoping for a soon collapse is a positive way to look at things. Please give us a chance to rebuild society in a sustainable way post (little)collapse, instead of postponing the inevitable. When we postpone collapse further and further, we all end up in the ‘Olduvai Gorge’. You see?
                    So that’s my problem with EV’s and other BAU-light phenomena: People investing in that sort of things are the people that are aware of the fact our society faces troubles. But they, unfortunately, do not face the consequences, becouse they are misleaded. If they were not misleaded, the critical mass of people aware of the problems AND the consequences would be reached soon (or reached already). We will need that critical mass to prevent Tahrir Square scenes, Pearl Squere scenes, Maidan Square scenes et cetera. Once you get that kind of scenes everything might be over in a week or two. I don’t want that.

                  • Rita says:

                    Hello Verimp,

                    I am replying here to your comment above. Yes I come from Albania :-). We are more sustainable, but we still may suffer more because we are at the bottom of the social hierarchical structure. EU is integrating us, we have 6 billion EUR in loans. We will probably sell our assets to creditors, give our income for interest payment. If war begins we have no military capacities compared to the neighbours. So, I am not sure who will suffer more from peak oil, the agricultural societies like us, or the most industrialised ones.

                  • Nick G says:

                    Verwimp,

                    I don’t think that’s realistic. First of all, Climate Change is our big problem. If we fix that, the rest of our problems aren’t nearly serious enough to cause collapse. And, EVs, heat pumps, passive houses etc are indeed solutions to CO2 emissions.

                    2nd, I’m not sure what you mean by a “small” or “lesser” collapse. The kind of collapse that would be needed to essentially eliminate CO2 emissions would be catastrophic.

                    3rd, I really can’t see any way that kind of collapse is going to happen soon – financial collapses don’t cause that, because financial systems can be fixed. If too much credit is the problem, a thorough program of bankruptcies will indeed fix that, and set the stage for a continuation of BAU.

                    In short, continued progress towards better and cleaner tech is the only solution to our problems. Call it a growth paradox, if you like, but we’re like a shark that must keep swimming or die.

                • Caelan MacIntyre says:

                  Another concern about an increasing number of electrical vehicles (EV’s) on the road, aside from the fact that they may increase the likelihood of fundamentally-undemocratic elite/State wage/tax-slavery controls and/or lock-ins, is that they might also increase the necessity/dependency on large-scale centralized power, such as nuclear. And, indeed, we just recently saw Putin sign-off on nuclear for India. That’s nuclear power/waste in the southern hemisphere and in a place like India.

                  The elite/State is, largely, all about centralized power, so this stands to reason. But what the elite/State is also about, and that many don’t seem to grasp, despite increasing evidence, is our worst nightmare…

                  “Putin Pledges Oil, Weapons and Nuclear Power for Modi in India” ~ Bloomberg.com

                  Oil, weapons and nuclear power… Roll that around in your heads for a few moments…

                  • Nick G says:

                    Nah.

                    EVs work very, very nicely with decentralized power, like solar.They’re not dependent on centralized power, though they’ll work with it just fine.

                    Just talk to Wimbi.

                  • Caelan MacIntyre says:

                    So cute little solar recharging stations and little Leaf-blowers beneath them and all’s fine with the world– stairways to Mars; take-home moonbeams in a jar?

                    Looks like collapse will happen not because some imaginary small minority wish it per se, but because some others do without realizing it– in part because of compartmentalized perspectives and short-sightedness.

                    Also, speaking of compartments, I responded out of this thread on the bottom because it tends to get squashed.

                  • Ilambiquated says:

                    Centralized power provision is probably doomed. It can’t compete on price (at the margin) against renewables, and the wild swings in renewable output destroy the whole baseload concept that utilities build their business models on.

  42. Watcher says:

    WTI down 15 pennies to $56.32 in Singapore. Everything else is flat post FOMC that was arrayed to be profoundly confusing and ambiguous, and carefully crafted so. The message being taken, whether it was there or not, is that the recent upheavals of various things — oil, Russia, HY bond smash, and a few % decline in the S&P — aren’t deemed important. Simply that. It drove the S&P up 2%, with half of that very late in the day as the engines were biased by the wire services.

    The “transitory” language from Yellen suggests what pretty much anyone would conclude. It would be a helluva lot better philosophically, practically and politically to not have to do a bailout.

    Thus they will lean on the hopes for a sudden and quick elevation of oil price. That would solve all problems (and how weird is that for society).

    If it doesn’t happen, that’s a problem for the future. Other than September 2012, when the QE3 bazooka was fired in the absence of any evidence of data collapse, the Fed doesn’t have much of a history of front running economic events. So maybe this choice on the committee’s part is what tradition dictates.

  43. canabuck says:

    re: fracking water.
    If LTO is producing about 3 Mbbl/day, and the water cut is 35% or more, then that means over 1 million bbl/day of frack-water has to be disposed of. Can this much water really be pumped down 10,000 ft. and actually stay there for 100’s of years?
    I think not. So, that means that a lot of people will be drinking or plants will be watered with this stuff for a long, long time to come.
    I wonder how toxic this stuff is if diluted a billion times?

    • Watcher says:

      Why can’t it stay down at 10,000 feet if that’s where it came up from?

    • toolpush says:

      Canabuck,

      It may surprise you to hear, but all sorts of things are injected into disposal wells. In places like the North Sea and Sakhalin, nothing is allowed over the side. So all the well bore cuttings, old mud, even excess cement is pumped down a certified disposal well. PS add sugar to cement, and it does not go off. How to upset your neighbour in one easy step?
      You may ask where does it all go, as there are not big caverns down there waiting to be filled. But pumped at high enough pressure all formation fracture, so just as in fraccing a Bakken oil well, and filling the fractures with sand, then a disposal well picks a weak deep formation and all the solids are liquefied and pumped into the created fractures.
      This pumping goes on until the pump pressure required get too high, and a new disposal well is required. One well will last several years, before it is “full”.
      Clear liquids, with no undissolved solids are so much easier to deal with, just pump it into a deep permeable formation, and it will stay there for a very long time.

      • canabuck says:

        Thanks for the explanation. But Heinberg says that the target leakage rates from these disposal wells is around 2% per decade, and that the real leakage rate may be 5-7% per decade. With 9000 wells in North Dakota, even 0.2% per year is 18 well-leaks per year. (I’m guessing that there is a disposal well for every frac-oil well. )
        So, this stuff is going to leak into the environment one way or another.

        ken.

  44. ezrydermike says:

    hmmm…just more wacko conspiracy stuff?

    “Here’s what’s happening: Washington has persuaded the Saudis to flood the market with oil to push down prices, decimate Russia’s economy, and reduce Moscow’s resistance to further NATO encirclement and the spreading of US military bases across Central Asia. The US-Saudi scheme has slashed oil prices by nearly a half since they hit their peak in June. The sharp decline in prices has burst the bubble in high-yield debt which has increased the turbulence in the credit markets while pushing global equities into a tailspin. Even so, the roiled markets and spreading contagion have not deterred Washington from pursuing its reckless plan, a plan which uses Riyadh’s stooge-regime to prosecute Washington’s global resource war.”

    http://www.counterpunch.org/2014/12/16/the-oil-coup/

    • ezrydermike says:

      Here’s a brief summary from an article by F. William Engdahl titled “The Secret Stupid Saudi-US Deal on Syria:

      http://www.boilingfrogspost.com/2014/10/24/the-secret-stupid-saudi-us-deal-on-syria/

      • Nick G says:

        I’m amused at the idea that the Arab Spring was a CIA plot, and that the Muslim Brotherhood is a puppet of the CIA agent.

    • Jeffrey J. Brown says:

      Washington has persuaded the Saudis to flood the market with oil . . .

      A continuing reminder that Saudi net oil exports have been below their 2005 annual rate of 9.1 mbpd (total petroleum liquids + other liquids) for eight straight years, through 2013 (a pattern which presumably continued in 2014), even as annual Brent crude oil prices rose from $55 in 2005 to the $110 range for 2011 to 2013 inclusive. In contrast, Saudi net exports rose from 7.1 mbpd in 2002 to 9.1 mbpd in 2005, as annual Brent crude oil prices rose from $25 in 2002 to $55 in 2005.

      However, I assume that Saudi domestic demand is lower during the fourth and first quarters, which would free up more oil for export during the seasonal lows for Saudi domestic demand, and the Saudis can certainly unilaterally cut their asking prices for oil.

      • ezrydermike says:

        The Counterpunch article missed that flooding statement….from the Engdahl piece….

        “..the kingdom of Saudi Arabia, has been flooding the market with deep discounted oil, triggering a price war within OPEC… The Saudis are targeting sales to Asia for the discounts and in particular, its major Asian customer, China where it is reportedly offering its crude for a mere $50 to $60 a barrel rather than the earlier price of around $100. That Saudi financial discounting operation in turn is by all appearance being coordinated with a US Treasury financial warfare operation, via its Office of Terrorism and Financial Intelligence, in cooperation with a handful of inside players on Wall Street who control oil derivatives trading. The result is a market panic that is gaining momentum daily. China is quite happy to buy the cheap oil, but her close allies, Russia and Iran, are being hit severely…”

      • Verwimp says:

        My interpretation is: The USA itself is the root cause. As has happened many times before, when a chance to gain money (in this case: from fracking) appeared on the horizon, anyone went for it. As soon as possible, as fast as possible, as hard as possible like there is no tomorrow. And suddenly there is overproduction, or another limit whatsoever. Than the boom goes bust and everybody is surprised. Than somebody else gets the blaim.

        • Watcher says:

          Story last night of the Ruble/Renminbi currency swap being activated.

          The Ruble-is-Crashing story is actually a Dollar-is-Spiking story. The Renminbi ostensibly is tied, but apparently only if they feel like it, because the currency swap is 35 billion.

  45. Ronald Walter says:

    Visiting and spending time at this spot to gain some perspective:

    http://www.theoildrum.com/node/9954#comments_top

    • Watcher says:

      550 is a lot.

      • toolpush says:

        Watcher,

        550 rigs is approx 25% of working rigs. Oasis, one of the few companies that have come out with revised drilling plan for next year, are cutting their rig count by 60%! And of the companies that are currently counting their pennies in the back room, and coming up short? When do they announce they are bankrupt? They will be cutting their drilling plans by 100%.
        A 550 drop in rig count, makes for a nice headline. Gets attention but not too alarming. I get the feeling that number will be ratcheted up over time, just as the oil price going down has been ratcheted down from $80 to $70 to $60 and it keeps on going.

        I can’t be totally sure about land rigs, but offshore rigs what ever the contract term is, normally has a 30 day notice period, and obviously you must leave the well in a cased condition. So, if there was a decision day when everyone decided to stop drilling. Lets Thanks Giving, or the day after. Add 30 days and round a few more to allow current wells to be completed. 30 days will take you to 27 Dec, so the first two weeks of January by my guesses will see the main reaction of the Thank Giving day oil price fall.
        We won’t have long to wait, to find out.

        • Watcher says:

          Nod. These 2015 budgets can also be delayed to late 2015. Report a less than catastrophic decline, knowing you’re holding off to the last minute, and then maybe revise the budget downward.

  46. Ronald Walter says:

    http://www.theoildrum.com/files/TABLE%201%202013%20AND%202014%20PRODUCTION%20FORECASTS.png

    Forecast didn’t fall short, the mechanism seems to work.

    https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf

    The daily production continues 1.1 mbpd to the right for another 1.5 years:

    http://www.theoildrum.com/files/FIG03%20SIMULATION%20WITH%20THE%20NDIC%20WELL%20FEB13.PNG

    4918 Bakkens wells in November of 2012.

    8620 Bakken wells in October of 2014.

    An increase of 3702 wells in 24 months. The additional 702 wells must be the reason for the increase above the forecast. If there were 425 bpd average, the extra 300,000 bpd would fit the forecast, albeit 1.1 mpd, not the .82 mpd. The plateau for the moment, a likely decline is imminent with the price of oil at a low and approaching the nadir.

    • Watcher says:

      I’m seeing further crash today at $54.71. Maybe that’s the nadir and will stay there several years, as it did north of 95.

      • nNgass says:

        Several years? This is a careless mumbling without giving analysis for this uttering. Who, for example, are the producers that can produce oil for that refienery gate amount? Sunk cost recovery, taxes, transport, profit, sand and chemical cost, water disposal, etc., will be responsible to generate a well head price of perhaps $21.03.

        • Watcher says:

          Whaa? Why is that bothersome? Oil was south of $55 from 1990 to about 2005. That’s less than 10 years ago. What’s the big deal? Remember, this is all post shale destruction.

          Once shale is destroyed, you want to keep it destroyed, if you are KSA and Russia, so you just price at $54 (or $70 if you compute hysteresis). If others want more, shrug and keep your price at $54 (or 70). What buyer will demand to pay more? In fact, if you say, well that’s only 25% of global supply from those two so once it’s bought the price will go up for the rest.

          Nope. Then you get into the world of selective bidding. The USA wants some of that $54 oil (remember, imports will be going back to 10 mbpd with shale’s destruction) and they come to the table. China bids LOWER than the US, and Russia says SOLD and smiles at the higher US bidder as they ship the oil to China for less money.

          Then you get into editorials talking about these artificially low prices means the US keeps its oil underground and uses everyone else’s. Maybe. Unless they won’t sell to the US. At all. Then the US is forced to produce its shale oil at a loss.

          Which may work fine in the new normal. To date, there is no evidence printing money causes a country to starve.

          • Watcher says:

            Oh btw sportsfans, that touched on the lower price is UNAMBIGUOUSLY POSITIVE FOR AMERICA narrative.

            Nope. Shale gets destroyed without a bailout (all logical analysis presupposes no bailout, as soon as there is a bailout we acknowledge money has no meaning so we can’t do analysis). Therefore, the country loses 3.5ish mbpd of domestic production.

            That has to be imported and that ain’t free. So we have this $300/year in people’s pockets that is supposed to fuel GDP. We drain the value of paying $55/b for 3.5 mbpd draining out of the country and decrease GDP. And that’s before the effects of loss of GDP from shale activity in general.

            UNAMBIGUOUSLY POSITIVE is absurd.

  47. Watcher says:

    The US S&P has risen 90 points (almost 5%) in 48 hours while oil was plunging another 4% to settle at $54.11. And yes, sportsfans, $54.11 makes even less shale drilling viable, assuming there was any left that claimed to be.

    HYG has followed the S&P. That’s like lenders saying . . . we don’t care if we don’t get the loan repaid. We can sell the paper to someone else for a profit and that someone else will be the one who doesn’t get paid back — and somehow that someone else hasn’t figured out there will be a bagholder and it will be them. They still buy the paper.

    Which is most odd. Beyond odd.

    It’s almost as if the someone else doesn’t care if he is a bagholder. Maybe it’s a she and she has decided whatever it takes to keep the HY loans available to shale is the imperative.

  48. E Auden says:

    Regulatory capture in Texas oil patch.

    http://books.insideclimatenews.org/fired

  49. Watcher says:

    Comstock Resources, Inc. (“Comstock” or the “Company”) (NYSE:CRK) announced that it has budgeted $307 million in 2015 for its drilling and completion activities.

    In response to low oil prices, the Company plans to suspend its oil directed drilling activity in its Eagle Ford shale properties in South and East Texas and in the Tuscaloosa Marine shale in Mississippi. Comstock has released its rig in the Tuscaloosa Marine shale and will postpone its drilling activity there until oil prices improve.

    Going thru it, it looks like they will complete a handful of Eagle Ford wells last month and this month and that will be it for 2015. Shutting down all drilling.

  50. Caelan MacIntyre says:

    “Don’t forget the ‘nicely balances the pessimism of others’.” ~ Nick G

    Unsure what brand of ‘balance’ this ‘nicely balances the pessimism of others’ is, but driving around in Nissan Leaf-blowers on all kinds of potentially-terrifying assumptions and lock-in possibilities– most of which are already done deals– and kind of crapping on permaculture to boot as unrealistic seems more like some kind of contempt for the human species and planet as a whole. Or something.
    Makes me think of sweet-talkin’, Nobel Peace-Prize winnin’, Brand Obama, while he or his marrionette-masters continue to perform the grisly work of those (maybe one-and-the-same) in previous office terms.

    “You’ve simply clarified that you don’t like our current economy. Well, a lot of people would agree that this is the worst of economies…except for all the others…
    Seriously – can you point to any examples of the kind of non-violent, non-hierarchical, non-industrial utopia you’re talking about?” ~ Nick G

    Sounds like a false dilemma fallacy.
    Can we please at least make ongoing attempts at seeing beyond what is or was? Beyond our Toyota Priapus? Thanks!

    Historical examples, whether sound/true or not, actually make my point. That we are in a pickle or pickles of our own makings since then and probably earlier, and if we can’t think beyond that, beyond our blinders, then we risk much more than what our ancestors had to deal with on a comparative Eden.

    • Nick G says:

      Your point seems to be that we can do much better.

      I agree.

      So, why are you criticizing incremental improvements, like EVs??

      The perfect is the enemy of the good.

      • Caelan MacIntyre says:

        “Your point seems to be that we can do much better.

        I agree.

        So, why are you criticizing incremental improvements, like EVs??” ~ Nick G

        EV’s, like many things, rely on an unethical, corrupt, hierarchical system on many levels, and it is, of course, killing the planet.
        So any and all reasons for EV’s or anything else– any other human undertaking– need to be ethical and relatively non-hierarchical/direct-democratic or they are doomed to fail, even if it takes generations for that to happen.

        So the fundamental problem for all our problems is not technological, but social.

        For those who might be considered pessimistic, it may be because they are aware of the problem of status/hierarchy, which seems to occupy a blurry line between ethics and instinct/natural behavior… King, bishop, knight, pawn, soldier, general, haves, have-nots, black, white, parasite, owner, renter, president, cop, trainee, manager, lumpenproletariat, captain, director, peasant… all a little bit or a lot of a status-based mindfuck that taps natural, instinctual forms…
        And it’s something we are going to have to get around and work out and have others be made aware of if we have a chance beyond outright…

        Collapse Au Naturel.

        Failing that, it is unlikely that such things as EV’s or Jacque Fresco’s Venus Project are going to save us, except to help determine and demonstrate our place in the social hierarchy on the way down.

        By the way, the queen is a glorified welfare queen… and…

        “People who dismiss the unemployed and dependent as ‘parasites’ fail to understand economics and parasitism. A successful parasite is one that is not recognized by its host, one that can make its host work for it without appearing as a burden. Such is the ruling class in a capitalistic society.”
        ~ Jason Read

        …So people seem to be catching on, if slowly, sometimes subconsciously. The rise of the neo-tribe maybe? Who knows. Time will tell. There may be a paradox or two to be had yet.

        “Insisting on calling the car with a funny name you heard online is just a tell that you aren’t thinking clearly on the topic. It’s a form of self hypnosis.” ~ Ilambiquated

        I came up with the ‘funny names’ myself and think they fit.
        Nissan’s Leaf-blower and Toyota’s Priapus.

        “Let our Priapus %#&@ you over!”
        “Think your blower blows? Wait ’till you try ours!”

        BTW, and since we’re on about speaking clearly on a topic, I have yet to see an ad for a car stuck for hours in traffic, with roadkill behind it, or upside down with a few smashed/burned-out cars and dead people in and around it.

        • Boomer II says:

          EV’s, like many things, rely on an unethical, corrupt, hierarchical system on many levels, and it is, of course, killing the planet.

          The problem, as I see it, is that changing the social and economic global systems will take longer than dealing with the effects of climate change and peak oil.

          Therefore, I think the economic impact of resource loss and damage due to climate will not be distributed equally. Some groups of people will do better and survive better than others. And as the impact falls unequally, some groups of people will likely die and among those who are left, some will likely see their lifestyles (and consumption) severely downsized.

          Both you and the extreme peak oil doomers seem to envision a total and equal collapse everywhere. I don’t see indications of that. I don’t think everyone will falter equally or at the same time. And as some disappear, that leaves more for those who are left.

          • Caelan MacIntyre says:

            Sure, I see it as playing out fractally, and suspect that we will survive as a species if we don’t run into some kind of runaway/’high-crunch’, global anomalous event involving, say, a series of nuclear power/waste-related disasters; a severe runaway greenhouse effect; or an oceans-wide anoxic event… at least something that might be arthropod-crushing-worthy.
            Now, if we could beat the odds that yet crushed 50% of the arthropods, that would be a cause for celebration!

        • Nick G says:

          EV’s, like many things, rely on an unethical, corrupt, hierarchical system on many levels, and it is, of course, killing the planet.

          How do EVs rely on the current system? Why can’t they also be produced by an ethical, egalitarian system??

          • Caelan MacIntyre says:

            Maybe talk to Fresco, but it’s more than a sea-change, Nick, and time’s-a-ticking…

            The human species– as you helped me point out— has its problems that go back aways and its work cut out for it, to put it very mildly. And, again, with less and less time left to turn things around.

            In other words, not only does it have to deal with the externals like climate change, soil despoilment, ocean acidification and systems’ setups, but also its internals, like preoccupations of status that its systems are modeled around! Good luck with that.

            And that’s pretty much precisely why many of us are realistically pessimistic.

            We may manage to survive, but it seems highly unrealistic to think that it will be anything remotely resembling Fresco’s kind of vision… Might be nice, though… real democracy, flying cars, housekeeping/shopping robots, and shiny happy people holding hands and singing and engaging in personal leisure pursuits all day and birds and old-growth-forest-framed sunsets… We’d get to eat our cake and have it too…

    • Ilambiquated says:

      Insisting on calling the car with a funny name you heard online is just a tell that you aren’t thinking clearly on the topic. It’s a form of self hypnosis.

  51. Caelan MacIntyre says:

    This is just so precious:

    ‘Cut Loose the Shackles of the Past’: US and Cuba Announce a New Dawn in Diplomatic Relations

    After ages of sanctions against old Soviet ally, Cuba, US suddenly wants to ‘make friends’, and in its own neighborhood no less. Aww, isn’t that adorable? What a delightfully-pleasant surprise. With friends like you…

    Oh the possibilities…

    • John B says:

      I doubt if Congress will want to “make friends”.

      http://blogs.wsj.com/washwire/2014/12/18/how-congress-could-stymie-obamas-cuba-plan/

      The bigger story on Cuba, is how much longer Venezuela can keep propping up the Castro regime, with the recent drop in oil prices.

      • Caelan MacIntyre says:

        Cuba is local.
        It also has good medical and agro knowledge and experience, as well as of course Latin/South American ties.
        I am looking at sociogeopolitical events in part through a Managed Contraction perspective.
        I wonder what kind of rioters newly-unemployed folks from oil companies might make… especially perhaps the ones that actually work, hands-on, with the equipment.
        I just scanned something about the US governpimps putting social-survey blimps overhead of some regions.

        • Caelan MacIntyre says:

          …Cuba is a bit of a poster-child for local resilience.

        • John B says:

          You don’t see Americans crossing the ocean on rafts, trying to get into Cuba.

          • aws. says:

            not yet!

          • Caelan MacIntyre says:

            Your comment reminds me of one of those grocery-checkout-line tabloid headers.

            • John B says:

              Yes, Cuba is your Communist utopia realized. Of course you would never move there. You would rather stay in Capitalist Canada (because Capitalism is so much better really eh?)

              • Caelan MacIntyre says:

                You seem to be reading too much into my comments on Cuba. Take off, ay? ;P

    • I was born in Cuba. If you are interested in my perspective look up “Cabo Caballo Ernesto Kambo” using a search engine. It’s in English 🙂

  52. Watcher says:

    http://www.zerohedge.com/news/2014-12-18/its-huge-crisis-uk-oil-industry-close-collapse-people-are-being-laid

    “It’s A Huge Crisis” – The UK Oil Industry Is “Close To Collapse, People Are Being Laid Off”

    “It’s almost impossible to make money at these oil prices”, Mr Allan, who is a director of Premier Oil in addition to chairing Brindex, told the BBC. “It’s a huge crisis. This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that’s painful for our staff, painful for companies and painful for the country.”

    A ***LOT*** has changed in the less than 10 years since oil was this price and such Apocalyptic quotes were nowhere to be found.

    • Ves says:

      my feeling is that big oil majors know that price of oil is not coming back in near future. they have to know otherwise they would ride this correction without huge layoffs.

      • Watcher says:

        Could be. They were slashing CapEx starting this past January. Looking REALLY smart right now.

  53. Henry says:

    ‘Hottest Year On Record’ Sees Record-High Sea Ice Coverage

    Climate scientists are saying 2014 is on track to be the hottest year on record, but it’s also been a record year for global sea ice coverage.

    Global sea ice coverage hit the highest coverage since 1988 during December 2014 — the fourth highest global sea ice extent ever recorded for that time. Most of this has come from huge expansions of Antarctic sea ice during the South Pole’s winter, but scientists have recently acknowledged that Arctic sea ice is looking more stable than was previously thought.

    • Boomer II says:

      So if the scientists say sea ice is increasing, they are believable. But if they say the globe is warming, they aren’t believable.

      • ezrydermike says:

        Those crazy scientists, they’re talking crazy.

        I means, who are you going to believe, the recent tripe from The Daily Caller, or the volumes of rigorous peer reviewed scientific literature generated over the last 30+ years.

        Besides, all these scientists are Marxist and they have an agenda and it’s run amok.

        Chico

        • Caelan MacIntyre says:

          Even so, there’s also something about the issue of ice thickness, which has apparently been thinning out, and maybe the added fresh water from all that melting volume beneath as well as glacial runoff.
          In any case, as I’ve often suggested, the burning of fossil fuels over the past 150 years or so is how much; what is that the equivalent of, relative to the geological blink-of-an-eye; and what effects is it going to have? None or negligible seems highly unlikely.

      • Sea ice is increasing around Antarctica, decreasing in the Arctic. This increases albedo a teensy bit. The earth is warming, climate models overstate the amount of warming, and quite a few scientists are very political and distort the data. The worst I’ve noticed is Dr. Mann. But some of his friends are quite hard to trust. This is a complex subject, very political, with a very polarized blogosphere. And it’s used by amateurs as an excuse to hurl insults. So it’s not something one can discuss without getting in trouble.

      • Boomer II says:

        For those trolls who don’t want to read the article.

        When discussing the Arctic sea ice death spiral, contrarians also invariably change the subject to the modest increase in Antarctic sea ice extent. That increase is happening despite the warming of the Antarctic region, with a variety of contributing factors (changes in the ozone layer, winds, and ocean salinity due to precipitation and collapsing Antarctic land ice, for example). However, the Arctic has lost 10 times more ice than the Antarctic has gained.

        But of course, those measuring the Arctic ice are Marxists. Only scientists measuring the Antarctic ice can be trusted.

        • If you cut out the snide tone, you may actually have a fruitful discussion one if these days.

          • Boomer II says:

            If you cut out the snide tone, you may actually have a fruitful discussion one if these days.

            The trolls I am referring to are the people or machines who jump into discussions here and on other sites whenever there is a mention of climate change. They aren’t participating other than that. I wasn’t referring to you because you are here to talk about oil issues.

            I view the “trolls” as propagandizing.

            While I believe the scientists who warn of global warming, I think can address many of the same issues by focusing on peak oil, pollution, alternative energy technology, and such. There are economic and social reasons to consider changes to our energy generation and consumption.

            We know oil will run out. We know that coal can be very dirty. We know that centralized energy production and transmission can encourage concentration of political and economic power. We know energy generation using resources not widely found in most countries can lead to wars. And so on.

            • Boomer II says:

              Sorry. I didn’t close the italics code.

              This is what I was quoting.

              If you cut out the snide tone, you may actually have a fruitful discussion one if these days.

              This is what I was saying:

              The trolls I am referring to are the people or machines who jump into discussions here and on other sites whenever there is a mention of climate change. They aren’t participating other than that. I wasn’t referring to you because you are here to talk about oil issues.

              I view the “trolls” as propagandizing.

              While I believe the scientists who warn of global warming, I think can address many of the same issues by focusing on peak oil, pollution, alternative energy technology, and such. There are economic and social reasons to consider changes to our energy generation and consumption.

              We know oil will run out. We know that coal can be very dirty. We know that centralized energy production and transmission can encourage concentration of political and economic power. We know energy generation using resources not widely found in most countries can lead to wars. And so on.

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