The March OPEC Monthly Oil Market Report is out with the February production data. All data is through February 2o18 and is in thousand barrels per day,
C
OPEC crude only production was down 77,000 barrels per day in February but that was after January production had been revised downward 40,000 barrels per day.
It seems most OPEC countries want to say they are producing less than what “secondary sources” say they are producing. Either they are correct or they are cheating on their quota.
Not much happening in Algeria. They just continue their slow decline.
Angola seems to be holding steady.
Ecuador was up less than a thousand bpd in February but their decline continues since their 2015 peak.
Nothing much is happening in Equatorial Guinea.
Gabon is another of those low producers where not much is happening. Don’t know why they joined OPEC. For the prestige I suppose.
Iran is obviously producing flat out since they recovered from sanctions.
Iraq is another country that appears to be producing flat out. their average in 2017 was 4,441 thousand barrels per day. Their February production was only 16,000 barrels per day below that figure.
Kuwait has been holding almost flat since January 2017.
Libya is holding at just under one million barrels per day.
Things seem to be settling down in Nigeria. Their political problems continue but their oil production is holding steady at around 1,800,000 barrels per day.
Qatar peaked in 2008 and has been in a slow decline ever since.
Saudi Arabia is holding steady at about 400,000 barrels per day below their 2017 average.
The UAE increased production in the last quarter of 2016, positioning themselves for the quota cut. Then they cut but they seem to be still cutting. That don’t look good.
Venezuela is still collapsing, politically as well as oil production wise. I see no hope for them.
World oil supply continues to increase slightly. This is all liquids of course.
Russia, currently the world’s leading oil producer, leveled out in May 2017 and has been holding relatively steady since.
The UN refugee commissioner requested that all nations accept Venezuelans as refugees under applicable treaties. This means Venezuelans can flee even without passports and get help.
Good policy.
Nations are quite obsolete.
On a side note:
Trump’s prospective new Secretary of State Mike Pompeo is a drastic improvement on his predecessor .
https://vvattsupwiththat.blogspot.com/
Tillerson, like so many Big Oil men, has bought heavily into the climate alarmist narrative. Perhaps it’s cynicism: part of the “greenwashing” strategy companies like Exxon, Shell, and BP used to try to buy off their environmentalist critics…
Tillerson, in other words, embodies the crony capitalist mentality of the swamp Trump promised to drain. He was never a good pick—as he demonstrated by opposing Trump’s perfectly sensible plan to pull out of the Paris Climate Accord.
Pompeo, we can be sure, is the right man for the job.
Pity the man whose career trajectory carries him from being the legislative right hand of two shrewd Witchita MIT alumni to playing diplomatic secretary to someone unable to deal with Rex Tillerson.
https://oilprice.com/Alternative-Energy/Renewable-Energy/Audi-Unveils-Its-Flying-Smart-Car.html
I’m waiting for the flying semi tractor. You guys in high rises just thought you were safe.
I’m waiting for the flying semi tractor.
You mean something like this? https://www.solarship.com/product/
PRODUCT
Solar Ship Inc. builds aircraft called solarships to service remote areas, most of which have no roads. The solarship is a hybrid aircraft, gaining lift from both buoyant gas and aerodynamics. Its wing-ship design allows for extreme short takeoff and landing (XSTOL), such as in a soccer field. Its design provides a large surface area for solar electric power, allowing long, self- sufficient range. A solarship does not need to be solar powered and can be powered by traditional combustion. However, the goal is to develop a new mode of transportation that does not depend on fossil fuels, roads, or runways. The solarship can access areas where planes, trucks, ships and airships cannot, delivering cargo to the places that are currently cut off from the benefits of the connected world. Each aircraft is designed and built to the requirements of a mission. Currently, there are three initial missions with specific requirements.
https://rbnenergy.com/taxonomy/term/565
Link to some articles regarding oil and gas pipeline take away capacity. I don’t see this hyped up oil production explosion in 2018. If we do, they will be hawking their oil on the side of I20.
The way I think they would do it. Would be to increase production as fast as the could based upon the contracted amount of pipeline space. Then back off until the new pipelines were close to completion. I remember reading one of the larger E&P show and tells, where they stated that some of the increase in rigs would be allocated to only drilling DUCs that would come online in 2019.
If I were a royalty owner in this area, I would be highly ticked off, if they overproduced early resulting in a $20 discount. Surely, they are not that stupid to complete guaranteed losses.
Ron, do you know which countries are responsible for those downward revisions? Amazing by the way that you seemingly are the only one noticing this – mainstream media seems to be overlooking this
Here is the amount each country’s January production was revised. The dots after the numbers were necessary for formatting. So you can see the big downward revisions were Nigeria, Angola and Iran. Iraq was revised upward by 15,000 bpd.
Algeria Angola Ecuador E.Guinea Gabon Iran Iraq
-3 ……. -19 ….. -4 …….. 3 …………. 2 ……….. -11 ….. 15
Kuwait1 Libya Nigeria Qatar Arabia Emirates Venezuela OPEC 14
-1 ……….. 9 … -38 ……..9 …….. -1 ……. -2 …………….. 1 ……..-40
I imagine Iraq and Iran have some undeveloped or underdeveloped fields that could still be invested in eventually. But the rest, flat out producing. Only Venezuela has real enduring potential. But it won’t be decided with until China and the western world fight over the control of Orinoco heavy oil. Its looking like the Permian is the last holdout before oil declines take over again.
I think SA has some undeveloped fields, too. But they are in reserve when Ghawar finally declines. SA has longer oil plans than some fracking companies trying to pump as fast as they can.
With the fracking mindset SA could go to 25 mb/day – by heavy overinvesting and overpumping all fields. But what would be the profit from this? Crashing the oil price, earning no money and after the boom sitting on lots of dept with not much oil left? Great plan.
To get another 15 mmbpd would cost $1 trillion at least, would take five times the current EPIC oil sector capacity and they wouldn’t see any returns for about ten years (assuming they do have that oil to develop, which is doubtful). It’s nothing like US LTO.
George Kaplan –
The useful energy needed to build up for that SA new 15 mmbpd exceeds the total raw energy in the reserve. This might sound untrue and extreme, but read the case of 1905 Britain with easy coal, below, if you have a minute:
In just one year, 1905, 236,128,936 tonnes of coal have been produced in Britain. That volume weighs no less than 4514 Titanic ships, each weigh 52,310 tonne. Over 15% of all that coal went into empowering steam engines draining water and the coal itself from an average depth of 300 feet (heat-joule-vs-gravity @ 2% efficiency lifting for a period of one year).
Another portion of that amount was utilised in propelling ships bringing lubrication-oil necessary to sustain domestic steam engines in motion, from the overseas Nigeria and elsewhere, where palm oil slavery farms have been organised. Another was consumed in animating transportation of the coal produced. The other major field of consumption was the manufacturing of supporting machinery, such as steam engines and the industrial base making them. Given there was around 1 million workers and several tens of thousands of horses directly involved in mining – a strong assumption materialises that no less than 3/4 of the coal produced in 1905 was in fact burned for energy feeding back into the process of mining for that same amount of coal.
Knowing that the 1 million workers and animals were created, sustained, trained and tooled, consuming energies extracted prior to 1905, as well as big part of the infrastructure of water canals and sites – one may safely conclude that most of the energy-surplus out of that amount of 236,128,936 tonnes of coal mined in 1905 has been offset by external energies coming from the energy-saturated eco-system built-up over the decades and centuries earlier, prior to 1905, in the form of science and engineering knowledge and know-how and a social order enforced by a stable and experienced political-economic system.
In 1914 Churchill successfully switched the Royal Navy from coal to oil were not a drop of oil has then been discovered in the country, also Britain has invaded Iraq.
By 1925, the exchange rate of the Sterling against other European currencies has practically stopped any coal exports from Britain.
But has there been any coal left in the country to export after the discussion above has revealed how little the energy returned on the energy invested in mining for ‘easy’ coal: 1 to <=1?
The little energy-return explained has also been demonstrating itself when mining workers in Britain have suffered systemic wage’s decline, the more they mine the poorer they became. How that reconciles with the Terajoules of energy they produced every day, which should’ve been found no less than ‘money-printers’?
If crude oil is analysed by the same method above, one can safely conclude what left of Crude is barely enough to keep the semantics of the show going. If maintaining and repairing the massive legacy world, built to date by fossil fuels, against wear and tear (Entropy) is thought to be done and sustained consuming any remaining reserves, this might be a false assumption.
This far, the severely-depleting crude oil cannot be given, from now on, high-enough market value – it should only be looted.
Somebody has made Churchill & Co knowing about these startling facts about fossil fuels real story – all along – from the long and bitter experience in Britain with Coal: Earth is not an energy playground for humans. Physics rules!
The oil majors would blow up tomorrow if PO was properly understood by the markets, and immediately after that the whole system would implode. Hence USG is content if things keep going for another week, even with no long term Great Plan.
There is no solution, other than starting WW3 and putting the US onto a war economy – this allows the government to direct industry and the labour force into whatever production keeps them in control, and crack down on dissent/disloyalty – FEMA camps, no fuel for cars, no protest movements, etc.
That is why this last few months there has been a massive increase in sabre-rattling and war talk against Russia, China, North Korea, Iran, and the arming of Ukraine and everybody.
Here are the Bakken updates. January is usually a time when there is weather related problems. The number of new wells was only 61 compared to 104 in December. Average number of production days were down a bit for the pre 2015 wells (except 2012) but not as much as last year. For 2015-2017 average number of production days instead increased from December. They were however unusually low in December so its more like they normalized. Overall though for all years together, average number of production days did not change much at all compared to December.
And here is the GOR graph.
Ron, assume you meant Saudi Arabia below their 2016 average, and not 2107.
No, I meant 2017 average. I just transposed the zero and the one. Thanks for the heads up.
Hi Ron,
Also Kuwait 2917 instead of 2017.
Cheers,
Iron
Seeing the chart for Iraq’s exponential increase in oil production since the 2003 War, it comes to mind that without wood and horse supplies, the coal industry in Britain wouldn’t be taking off into its advanced stages where steam engines have taken over horses, steel, rubber and coal over wood.
In just one year, 1905, 236,128,936 tonnes of coal have been produced in Britain. That volume weighs no less than 4514 Titanic ships, each weighs 52,310 tonne.
A recently circulating thesis in thermodynamics inspires that most of that coal have gone to mine for more less accessible coal, or where then all those Titanics have gone? – a demonstration of the fact that most of the coal consumed was burned for energy feeding back into the process of deeper mining for more coal.
https://the-fifth-law.com/pages/press-release
When the world will stop burning easy crude to produce less easy crude? Hope that moment will be comming very soon.
Entropyn
At first pumps used a great deal of the coal that was mined as more efficient mine pumps like this were produced they enabled the access of more difficult coal.
https://www.youtube.com/watch?v=YGoQQCM4SMU
With electric pumps and large cutting machinery most coal did go to homes and power stations.
If you are hoping that cheap oil will run out and therefore the expensive oil will stay in the ground, you will have to wail some time.
http://markets.businessinsider.com/commodities/news/how-much-it-costs-both-saudi-arabia-and-the-us-to-produce-oil-2017-3-1001868041
There is a great deal of easy oil in Saudi Arabia, Russia, Iran, Iraq, U.A.E and other places.
As with coal in the past, technology is making difficult oil cheaper to produce.
We have been burning coal for over 200 years and burn vast amounts now compared to 100 years ago with no end in sight.
https://www.aps.org/units/fps/newsletters/201407/letters.cfm
Too many jobs and products are tired up in oil, it will take a long time to shift to other things.
Peter –
Javon Paradox: Gaps in Energy Audit:
Javon Paradox, when efficiency increases, higher energy consumption materialises, might be resulted from the fact that James Watt’s improvement has practically increased the weight, complexity and size of earlier Newcommon’s steam engine by more than one-fold. That has required significantly more energy expended to produce each engine to the new design.
Each sub-process involved in the mass production of the new engine required substantial embodied coal energies for extending the industrial, social eco-system and platforms involved.
Maintaining all those energy-intensive components against wear and tear required no less energy than building more of them.
Therefore, run-time efficiency is always offset to zero or less by the total energy expended at design and construction time building for that efficiency.
Atmospheric CO2
February 2018
408.35
Up, up, and away!
Entropyn
If you were right no coal would have been delivered to millions of homes over decades.
http://www.oldhouseweb.com/blog/the-history-of-coal-heating/
https://www.azosensors.com/article.aspx?ArticleID=496
and billions of tonnes would not be burned in power stations.
Digging up the coal does NOT take more energy than it contains that is why it is possible to produce millions of tonnes of steal just from coal.
Coal, oil and gas contain vast amounts of energy which enable us to build houses and fly planes. Obviously none of these processes of 100% efficient and much energy is wasted. But there is still a huge net energy gain from extracting oil, coal and gas for other uses.
Peter –
Millions of years of solar and colossal planetary forces stored in fossil fuels are almost now depleted in just 300 years?!
Knowing there is 23000 man/hour in a barrel of crude, and we are consuming 100m barrel a day; That is: 2,300,000,000,000 man/hour a day at our service just from crude (two and a half trillion man/hour a day). That is 328 man/hour per capita of 7 billion population. Add Coal and N. Gas and you understand that no matter how fossil fuels are dense in energy, we burn most of the energy stored in them in the process of extracting and converting fossil fuels into useful energy.
Given the majority on Earth today are hardly consuming any fossil fuels (Africa, many nations in the ME including Iraq, Syria, Yemen, Libya), Central Asia (Afghanistan et al) , many nations in S. America, great deal of Russia, 270 million in India don’t even have electricity, yet alone cars, rural population in West China are hardly using any fossil fuels or private cars) – where all the oil, gas and coal are going everyday?
Britain’s massive coal reserve has been consumed largely to keep the process of mining coal continuous. This far, all what has been built using coal in the country doesn’t come in weight and size to match the weight and size of the total weight of the coal extracted. That includes all machinery, bridges, ships, locomotives, tracks, even if most of these objects were built with the heaviest of metals.
In just one year, 1905, 236,128,936 tonnes of coal have been produced in Britain. That volume weighs no less than 4514 Titanic ships, each weigh 52,310 tonne. Over 15% of all that coal went into empowering steam engines draining water and the coal itself from an average depth of 300 feet (heat-joule-vs-gravity @ 2% efficiency lifting for a period of one year).
Another portion of that amount was utilised in propelling ships bringing lubrication-oil necessary to sustain domestic steam engines in motion, from the overseas Nigeria and elsewhere, where palm oil slavery farms have been organised. Another was consumed in animating transportation of the coal produced. The other major field of consumption was the manufacturing of supporting machinery, such as steam engines and the industrial base making them. Given there was around 1 million workers and several tens of thousands of horses directly involved in mining – a strong assumption materialises that no less than 3/4 of the coal produced in 1905 was in fact burned for energy feeding back into the process of mining for that same amount of coal.
Or, why there were no bridges, machinery and structures built in that year that match in mass (at least) the mass of that coal, even if they were built with the heaviest of metals?
Coal: Unit: Million t/Year. Total: 6,753 million metric tonne/year. Greater than Britain’s 1905 production 28 folds.
China 3,210 (some of the Chinese mines use diesel trucks to move coal to the mine surface driving for 30+ minutes each way)
India 708
United States 683
Australia 509
Indonesia 459
Russia 359
South Africa 250
Germany 177
Poland 131
Kazakhstan 102
Colombia 94
Turkey 71
It is very sad how humans have wasted all the finite and irreplaceable fossil fuels this way – all along!
Which fields do you consider to be easy oil in those named places, and what are the other places that you think have easy oil? What is your definition of “easy oil” – is it a development cost? Why do you think western oil companies are pulling out of Iran and Iraq, and why is there still exploration activity in both countries if there is known easy oil there. Why is Russia active in the Arctic if it has other oil potential? Why is Saudi trying so hard for shale gas and before that pre-salt oil in the Red Sea, and are gradually adding ESPs to all their offshore wells if they have easier oil? I think the cost for security in Iraq is about half the production cost for a barrel of oil – how is that easy?
George Kaplan –
There never was an easy oil in Saudi, Iraq or even in 1850s Pennsylvania!
What happened with each of those is that the surrounding eco-system has accumulated a saturated embodied energy in roads, woods, horses, steel furnaces, robs, knowledge, supporting political and commercial system over hundreds and hundreds of years earlier. That ‘saturated’ embodied energies were expended in digging for the first crude well. When that resulted in coal/oil discovery and production, the extracted crude fed back into the process, taking over and building on past saturated-energy system.
No easy oil was in Saudi if rigs, tractors, pipes, expertise, ships and many others were not brought from overseas to dig for the first 1930s well. All what was brought into the process has been built with colossal amount of overseas biomass, coal, hydro, solar, time and crude oil. Clearing land in North America was systemic and extensive since Columbus. That has built the seed-capacity to explore crude oil in Pennsylvania later (see archive photos where horses and wood were extensively utilised in crude and coal operations).
Astronomical energies expended in WW I’s war-machine has also contributed into the process, when Britain has accomplished the invasion and control of the Middle East for the Americans to take over later and start produce Saudi oil, peacefully.
In Britain, people were extracting and burning coal since the 1500s and earlier. Newcommons engine came only in 1712. The 200 years in between was a period of energy-saturation build-up. By mid 1800s, forest logging has nearly cleared Europe of all of its forests that have taken ages to create and self-sustain with solar.
There is no such thing as EROI of 1 energy consumed, >1 energy extracted.
It is always 1 energy consumed, much-less than 1 energy-extracted.
Why Russia and others go to the Arctic and even to the moon for fossil fuels?
Oil is found there, saturated energies have earlier been built up, and the will to sacrifice it for negative-value fossil fuels – is dominant.
However, wear and tear (Entropy) will always degrade the eco-system of saturated-energies to the point it loses its effect and advantage (like when roads are destroyed after extensive use. See abandoned oil rigs in Venezuela, Azerbaijan and elsewhere).
The best of our Diesel engines today don’t last for few tens of thousands of hours running continuously unattended, and they cease if not massive fresh energies are poured into maintaining and repairing them. Diesel engine are ones of the most robust and enduring pieces of technologies man has ever made.
The concept of easy and cheap fossil fuels is flawed.
Entropy internal to matter rules.
Very sloppy language.
“No device can generate energy in excess of the total energy put into constructing it”.
Devices do not generate energy, they merely capture it and transform it, any physicist knows that.
Simply explain how a PV panel can transform as much energy in one year as it took to produce it, yet the panel might last 30 to 50 years.
GoneFishing –
According to your belief, if we convert all fossil fuels into PV panels, they will double the energy from those fossil fuels every year over 50 years in the future.
Nature has taken millions of years of colossal sunshine and planetary forces to create fossil fuels.
Do you really think PV panels can double those millions-of-years’ worth of energy every year, even if the sun shines forever?
Your opinion is not that extreme as those who say ‘PV panels double the total energy put into constructing them by 2-15 times every year’, though!
“According to your belief” Not a belief, simple calculations and values from real devices that exist now in the real world.
“According to your belief, if we convert all fossil fuels into PV panels, they will double the energy from those fossil fuels every year over 50 years in the future.”
I said nothing of the kind, that is a completely false representation. I merely asked you to explain the energetics of current PV devices, which you apparently cannot so you make up irrational and erroneous statements.
“Nature has taken millions of years of colossal sunshine and planetary forces to create fossil fuels.
Do you really think PV panels can double those millions-of-years’ worth of energy every year, even if the sun shines forever?”
First of all, fossil fuels only contain an infinitesimally small amount of the energy input to the planet during those many millions of years to create them. They are probably the most inefficient way to store energy that exists, taken in that context.
“PV panels can double the energy of fossil fuels every year? “That one is too irrational to attempt a response.
Since you can’t explain the energetics of a complex device such as a PV panel in terms of the “5th Law”, maybe you can explain simpler devices.
Explain how the energy that goes into making a water wheel is less than the output of energy from that water wheel during it’s lifetime.
Explain a match, a simple chemical device. How does it unleash tremendous amounts of energy, far more than was used to make it? You know, the energy of a burning long, burning coal pile, burning forest? How does that simple device break the “5th Law of Thermodynamics”?
If you can understand a match, you can understand the energetics of PV and other renewable energy devices.
GoneFishing –
Water Wheel: The sum of all the solar energy falling on trees’ leaves added to all planetary energies that pushed water and nutrients into the tree, energies put earlier in making the tools cutting the trees, transporting them, energy in sustaining humans in the process, energy expended in gathering knowledge and design know-how, energies put into the host platform the water wheel is installed and energy it produces converted into useful work – are all ages-taking energies.
The water wheel will fail and disintegrate well before it would endure with a material integrity to match that very long trail of expended energies put earlier into constructing it. If the trees used to make the wheel have taken 30 years to grow, the wheel will well be gone much earlier than that if it set at work continuously without any maintenance and repairs.
This is regardless of the efficiency of the wheel and the energy that set up it in motion is free of charge.
Chemical: The energy generated wouldn’t match all the energies expended in making the vessel/device used to host the reaction, the energy put in knowledge and design, energies in efforts and sustainability of humans including shelters, lights, etc. Then transform the energy produced by that chemical reaction and transfer it to useful energy.
The sum of all this useful energy will never match the total energy put earlier into making the device and harnessing the chemical energy into useful work.
Fossil Fuels are “probably the most inefficient way to store energy that exists“: That’s why all our jumbo jets today are flying with Tesla batteries!
This is no matter how batteries were attempted since 2nd half of the 1800s in coal mines!
Do you think another 100 of burning fossil fuels as there is no tomorrow would improve batteries a bit better?
Humans cannot cheat physics: Nature is a one energy vessel.
Gee, why not follow your line of thinking and go back to the Big Bang. Look how much energy was expended to make all those materials in the universe. How are we ever going to get all that energy out of our devices or even use them to transform energy.
Nothing can be done because the universe is a giant energy sink and most of the energy goes out to empty space.
Have fun getting a following for your pseudo-science. Have fun re-defining the language of science also.
BTW, why do you make fossil fuels a special case?
GoneFishing –
“Nothing can be done because the universe is a giant energy sink… . How are we ever going to get all that energy out of our devices or even use them to transform energy?”
Sunshine-assisted human slavery as never seen before, maybe?
Devices do not generate energy, they merely capture it and transform it, any physicist knows that.
Of course they do! Watch this, it is absolutely amazing… Next time you get a Nigerian email offering you millions of dollars, take the money and invest it in this! You can’t go wrong…
https://www.youtube.com/watch?v=OzOhM4HsIeg
New for 2018 Free Energy Generator 100% Self Runing By Eng Noman Shah Afridi
But if you count all the energy in the creation of the universe and the energy released by all the stars since we are in a huge energy deficit according to some, and can never make any positive energy. That is why civilization has ground to a halt and PV panels are really batteries that suck in energy. Soon time will run backwards and we will get all that energy back as we get reduced to cosmic plasma.
sarc
During the Depression, my mother’s cousins live in Kansas City. In the winter it gets cold there, and they couldn’t afford coal, so the kids went down to the railroad to steal coal from the trains at the depot.
There were guards on the trains to keep the thieves off, so the kids threw rocks at them. The guards responded by throwing lumps of coal at the kids.
It was definitely an exception to this new law of thermodynamics. The rocks just magically turned into lumps f coal.
Mr EntropynEnergy is either just having some fun trolling or else he is so stupid there’s no point in trying to prove him wrong.
He’s like Caelan. Facts mean less than nothing to him, and he understands less than nothing about energy, in theory or as a practical matter.
Talking to him about energy is about as productive as talking to a backwoods Baptist about evolution.
(Note that making fun of the Baptist in public forums is a serious mistake, because he DOES have the right to vote, and nothing pisses him off worse than being ridiculed. Making fun of him is a sure a method of getting him to vote for Trump type politicians. There ARE ways to communicate and work with him, but that’s a subject for the other thread. )
If you can’t dazzle them with your brilliance, you still have a shot at baffling them with your bullshit,right Mr E’n E?
Unfortunately for you, there are no more than a couple of regulars here who are so ill informed as to take you seriously.
The problem, for society as a whole, is that about half of us are so ignorant that any scam artist or huckster who can easily spout big words with confidence is about as apt to be believed as a real expert.
Yeah, he’ll end up on my ignore lists like others who come to this forum with elaborate ideas with a tenuous connection to reality.
There was one guy who I think has been banned at least once here who I believe is bi-polar. He posts in a flurry of mania.
George
Dr Colin Campbell, Matt Simmons and others made it clear that there are various qualities of oil in locations that raise a variety of practical problems.
Orinoco heavy oil is expensive because it is poor in quality. Brazil pre-salt in expensive to produce because it is far offshore and so deep.
onshore and high quality oil such as in Saudi Arabia and Iraq are geologically and practically easy in comparison.
http://graphics.wsj.com/oil-barrel-breakdown/
That is why the costs are so different, easy to produce oil costs a lot less than difficult. Most people understand that, because it is rather basic.
That chart is based on existing production not new greenfield development. Most people understand the difference and recognise they may not know everything instead of trying to be a superior prick all the time.
It’s simply a choice. As a society we can choose to stay (temporarily) with fossil fuel, we could go to nuclear, or we could go with renewables.
Renewables appear to be the cheapest and fastest option. But, fossil fuel investors and employees are fighting desperately to maintain the status quo.
https://wattsupwiththat.com/2018/03/15/mit-report-it-will-take-400-years-to-transform-to-clean-energy/
Two thoughts:
1st, as Caldeira notes, much of the problem goes away when you electrify thermal processes. You don’t need to replace 15 terawatts of ICE transportation power or space heating, with 15TW of electricity – you need about 1/3 of that.
2nd, as he notes: “There’s simply little financial incentive for the energy industry to build at that scale and speed while it has tens of trillions of dollars of sunk costs in the existing system.”
In other words, fossil fuel investors don’t want to lose the money they’ve invested in the current system.
That’s not surprising.
Nick G –
Efficiency and Scale are chicken-and-egg in relation to energy expended in achieving them;
The time has come for humans to understand their size to what they build in relation to scarce finite fossil fuels energy resources.
Ants don’t build host structures that take them to climb very high consuming an amount of energy beyond their capacity to gather food and beyond the endurance of their biological body to life-span (try climbing the stairs of Khalifa’s Tower everyday for few years and all the lower body joints will require replacement).
“…the problem goes away when you electrify thermal processes. You don’t need to replace 15 terawatts of ICE transportation power or space heating, with 15TW of electricity – you need about 1/3 of that…;
Energy required for building devices that are claimed to produce useful energy equal to 15TW but consuming 1/3 of what current 15TW-platforms consume in transportation and heating – is an order of magnitude more than the 2/3 of the energy saved.
James Watt wouldn’t have built a steam turbine first even if he knew how to do it, because the energy needed for building the turbines is so greater than what was needed to build a steam engine.
Has he elected building a turbine anyway, he needed a mountain of James Watt’s steam engines to empower the manufacturing process with.
Building, running and repairing the steam engine at 1% or 2% efficiency to build the turbine, would have consumed much more energy than the useful energy ever produced by the turbine –
before it dies owning to wear and tear (Entropy internal to matter).
Therefore, we went from Newcommon’s engine to Watt’s to high pressure steams and then to steam turbines – in that exact order – low energy to bigger.
Steam turbines have started to emerge only after all vast coal reserves of Britain have already gone!
Nature is a single entangled-energy vessel!
This is it – the time for dreaming of replacing entire transportation, heating systems or others with more efficient platforms is over. The scarce fossil fuels still in the ground are barely enough to run and do repairs against wear and tear of the massive existing legacy system we have built and run with fossil fuels up to this stage in civilisation.
Soon, it’s most likely what goes broken stays broken, never replaced with a new – an observation that has strongly been materlising before the eyes of people since the 1980’s in the war-torn Middle East.
Do you think the US doesn’t have the know-how, desire and capacity to churn Tesla3s in the millions every year replacing ICEs when China has learned how to produce millions of cars annually in record few years – if that saves 2/3 on transportation and heating and refreshes the market with new investments, training, retooling, hope in community and nation revitalisation?
Energy, or the lack it is the hurdle that prevents that dream coming true, even as the ‘last’ big success-story of the outgoing fossil fuel age, sadly and unfortunately.
Nick G –
Consider Nuclear reactor is the boiler driving a steam turbine no different from coal-driven steam turbine. The turbine will fail faster than in coal plants owing to radiation and others.
That’s why Nuclear is no better than coal. In fact, N. plants go offline for maintenance, repairs, which some of them are capital, and refueling – for weeks and months every two years or earlier.
Repairs and refueling, not to mention enrichment, mining, storage and handling – take substantial amount of fossil fuels energy. This far, it exceeds all the useful energy produced by the N. plant since last repair!
The report below clearly demonstrates that ALL energy-generation on Earth is fossil fuel-driven, with no exception – by physics!
According to analysts from Energy Research & Social Science (ERSS), there is an 80% probability of a “serious accident” at one of Ukraine’s nuclear power plants before the year 2020. This is due both to the increased burden on the nuclear plants caused by the widespread shutdowns of Ukraine’s thermal power plants (the raw material they consumed – coal from the Donbass – is in critically short supply) and also because of the severe physical deterioration of their Soviet-era nuclear equipment and the catastrophic underfunding of this industry. link here
Why would radiation reach the turbine?
A large portion of our world energy is in the form of sunlight to plants, renewable energy (solar driven directly and indirectly), and some nuclear and geothermal. There is no law of physics stating that energy must come from fossil fuels. That is by choice and design, not physics.
You forgot sunlight driven wind and moon driven tidal… 😉
Wind was included in solar driven indirectly. The rest is covered by “A large portion of our world energy …” which gives me a pass from listing ever possible energy source.
The point was not to make a list of all possible sources but that ” There is no law of physics stating that energy must come from fossil fuels. That is by choice and design, not physics.”
I know that contravenes the”third law of entrapping a populace” but maybe that law is flawed.
I’m sure you are aware that I’m not a big fan of those that incorrectly equate fossil fuels with energy. Combusting fossil hydrocarbons to produce heat energy, has always struck me as a rather primitive, inefficient and dirty way of doing work…
Only economists and politicians believe that energy independence can be achieved by extracting, refining and burning fossil fuels, I think of them as a form of addictive enslavement.
Fred, how do you like our latest energy villager?
How do I like our latest energy villager?
Wheeeal, dunno quite what to make of him/her…
I’m certainly no nuclear energy expert but I’m pretty sure that the turbine blades are not subjected to exposure of radioactive steam under normal operating conditions.
Someone please correct me if I’m wrong.
And while I’m a big fan of Li-ion batteries and know of some limited applications of electrified small prop planes I gotta admit I wasn’t quite prepared for this comment:
Fossil Fuels are “probably the most inefficient way to store energy that exists“: That’s why all our jumbo jets today are flying with Tesla batteries!
Would love to see how battery powered jets work…
Boomer II –
Because it is nuclear radiation (see documentaries on how workers repairing nuclear turbines take strict measures to reduce the impact on their health from exposure to radiation while inside the nuclear turbine’s room, although the reactor is put idle).
I still don’t see the connection. The reactor heats water into steam that turns the turbine. The water itself shouldn’t be radioactive.
Workers are prudent to take precautions against radiation exposure, but turbines in nuclear power plants shouldn’t have a shortened lifespan because of radiation since they shouldn’t be exposed to radiation.
Boomer II –
What connection you don’t see? The steam coming from the heart of reactor into the turbine and the two installed back to back?
Scrap metals from those turbines are not welcomed into recycling furnaces for re-use, unlike locomotives, say, being radioactive (see relevant documentaries in the public domain).
Boomer II –
Oh! And radioactivity turns any metal brittle over time. Major repairs to the level of replacing N. turbine cases after just few months in operation (quite capital) is not uncommon.
Such an operation is involving massive cranes and supporting gears, sensitive alignment and others, not to mention the workforce involved and shutdown time.
Where are you getting your information?
You realize, don’t you, that aircraft carriers and submarine are powered by nuclear reactors. Their turbines aren’t breaking down after months.
Boomer II –
This is the sort of information off the public domain, I think. In the old Soviet Union, it was very well spread between the commons how N. Subs crews have inhumane working conditions.
The US Navy has nuclear subs and carriers. Not the same working conditions that the Soviets might have had.
Properly built nuclear power plants should be good for at least 40 years according to info I have seen.
Boomer II –
Bravo, well said;
This brings us to square-one:
What has made the US power-machines different from the old Soviet Union’s poor ones?
Energy!
More energy, probably in many orders of magnitude, has been put in the US’s machines which allowed them durability, endurance and robustness: Energy in design, advanced material, precision, logic, complexity, procedures, control, monitoring and so on…
All above are an indication on the tight relation between the useful energy out of an energy-producing device to the total energy put into constructing it!
Has more energy put Fukushima behind barriers that would survive the strongest of tsunamis (which means significantly more energy expended in constructing Fukushima), the machine wouldn’t be that venerable to Entropy turning it in a matter of hours to a waste that requires now incredible fresh energy to clean the mess. This far, fresh energies that exceed all the useful energy generated by the wrecked device since commissioning.
Because 99% of all above are fossil fuels-driven, one understands why fossil fuels are critical and where all the Terra-joules we are getting from them by the hour are dissipating and vanishing in waste:
Also see: “The Entropy Law and the Economic Process“
Radiation reaches the turbine only in the case of leaks in the steam lines inside the steam generator. If such leaks occur to the extent they threaten to cause problems with any other equipment, the reactor is shut down for maintenance work, and the leaks are fixed.
I fixed some myself…… personally, back when I worked maintenance in the biz. Paid about six or seven times, on an annual basis, what I earned as a teacher, which had a hell of a lot to do with my giving up teaching, lol.
E’nE is full of shit up to his nose.
He does get something right at least once, apparently by accident. Nukes in countries that are in desperate economic condition are apt to be poorly maintained, and maintenance delayed too long, and so the risk of an accident is greatly increased.
OFM –
Once a turbine is contaminated, it may continue in service until entirely replaced. It may get some repairs prior to a full replacement, which leaves the turbine radioactive for the period.
“..Paid about six or seven times, on an annual basis..” – also owning to very likely risks of excess exposure to radioactivity.
This is a public knowledge, everywhere, I think.
I will donate ten bucks to the charity of his choice to anybody who can point out a case of a turbine being replaced because it was contaminated.
As has often been pointed out, just about anything and every thing on this planet is radioactive to some extent……. as you will find if you subject it to testing to the limits of sensitivity.
It’s true that people who do hot work pick up some exposure. So do the people who fly a lot at high altitudes, or live where there’s radon, or work in the medical imaging field.
The standards are tightened up for allowable exposure from time to time. So
And your personal records follow you from job to job in the industry….. forever.
A friend of mine had an auto accident in the late eighties, who worked in the industry with me. The hospital shot a bunch of xrays without out even asking him. SOP.
Because he told the Health Physics team about these xrays, the next time he wanted to work, he was not allowed to do any hot work for the next three years, because this would have put him past the established limits of exposure for that length of time.
OFM –
“….anybody who can point out a case of a turbine being replaced because it was contaminated“..
This is what I could understand reading and listening to documentaries: steam turbines at n. plants are expected to run contaminated.
There are more references that mention radiation makes the strongest of metals and materials more susceptible to failure. Add to that heat and rotation, a turbine wouldn’t have easier service life in n. plants than in coal power plants.
Add all the extra energy expended in handling n. plant potentially radiated components, and one can calculate the net useful energy out of any n. machine.
Taming n. power to be convertible to useful electricity seems quite different from detonating n. devices in a split second done for destruction – where all the universe comes to help with gravity bringing everything to waste (Hiroshima) – an objective that a bikies group-size force has managed to achieve recently turning cities to ruins in the Middle East in the last few years, using no more than light weapons and RPGs(Riqqa, Mosul).
See any structure that is control-demolished coming down in seconds. Now, rebuild that structure again – and all the gravity in the universe comes against you asking for Energy!
Wärtsilä has built for Jordan a power plant of more then 500MW put in a cluster of ICEs using heavy fuel oil in the desert. Bringing up and shutting down the plant claimed to take minutes. The system is quite modular and it can be scaled up to >1G in a matter of weeks. A 20% out of the waste heat can be converted to useful energy using ORC, potentially.
Countless similar power stations can be found everywhere.
One wishes Wärtsilä customise their flagship heavy duty ICEs to run with the light-oil out of shale oil fracked wells, without the need to get the new fuel processed any further blending it with other crudes, avoiding a host of costly energy processes that may erode the net energy in the extracted liquid.
It’s over 40 years since I worked on nuclear power but I think they had two or even three barriers between the core and the turbines: there’s primary cooling, which has up to four redundant circuits, then maybe a secondary heat transfer circuit, and then the steam circuit. Maybe different for boiling water reactors?
OFM –
http://www.natgeotv.com/in/worlds-toughest-fixes/videos/going-nuclear
Also, the full-length of the documentary allows more information on how readings on radioactivity inside the turbine room is being done…
Technology costs energy just to exist. So it may be cheaper to extract oil , but there is additional hidden energy cost in the system. That’s why, despite more technology, today’s civilization consumes more energy, than in the past. And when civilization’s energy dissipation rate slows, technology will disappear accordingly.
ktos said “That’s why, despite more technology, today’s civilization consumes more energy, than in the past”
Consider that we have a much larger population now and that much of the “more technology” actually is intended to use energy to gain a desired change or effect that society needs or wants.
“And when civilization’s energy dissipation rate slows, technology will disappear accordingly.” When civilizations energy dissipation rate gets lower it will have transitioned to more efficient and sustainable technology and systems. We are seeing this change now, with the advent of cars that are four to five times more efficient than ICE cars and need no fossil fuels to travel. PV and wind produce energy directly from the source (sunlight and sunlight driven wind) with no need for fossil fuel or any local energy source.
GoneFishing –
“…When civilizations energy dissipation rate gets lower it will have transitioned to more efficient and sustainable technology and systems….”;
Here you may watch a community that transitions to more efficient and sustainable technology and systems (Iraq has lost its power grid to the 2003 War, never recovered since. Shortages in natural gas supplies, price rising, are severe and chronic. Iraq exports 5+ mbpd of crude, consumes as much as what mainly keeps the oil drilling, pumping stations and export port hub running).
PV panels hardly work under this intense solar radiation, if at all. They become deeply ‘grilled’ down to their core matter, and useless after few summer seasons – although many claim they last for 50 years working just as fine.
Good transition! God forbid it comes close to where one lives…
https://www.youtube.com/watch?v=92i6KtPto7U
What is that, an electric heat grid under the pan? Very funny.
You saying that the ground temperature is 300C and boils oil?
Maybe you should inform the Saudi’s who are installing solar or all those people in Arizona (same latitude as Iran), quick run around warning them that their panels melted down already.
https://en.wikipedia.org/wiki/Solar_power_in_Arizona
You are full of shit. God forbid anyone listen to you.
GoneFishing-
There is a plethora of these cooking-under-the-sun demonstration videos (below few more samples).
See videos on grid-size solar panel projects in the ME: they do exist but try and also watch documentaries on how energy-intensive cleaning them every morning is. Given the lowered efficiency due to extreme heat, cleaning will consume the rest of the power generated, likely.
Grid-size solar panel projects are Money transactions, too, not just about energy, mind you!
Whether they work or cost more energy than what they produce, there is ‘always’ fossil fuels to offset, thankfully!
Cleaning:
https://www.youtube.com/watch?v=rWtukrV1xNQ
https://www.youtube.com/watch?v=y8rIXjOPZ8w
Cooking:
https://www.youtube.com/watch?v=wbZa0y6QTFA
https://www.youtube.com/watch?v=odV6bRZdaD0
https://www.youtube.com/watch?v=lz85G5XzuAc
UAE had some major planned maintenance, but why didn’t they just turn on their “spare capacity”?
4 months of maintenance culminating in January?
No, just the most recent drop, so it should come back. We shall see.
The drop was quite small. So that suggests that they did turn on spare capacity if it was major maintenance. The months before that looks more like natural decline.
https://www.chron.com/business/energy/article/Chevron-Phillips-Chemical-launches-Baytown-ethane-12746845.php
There was some discussion on ethane in the previous post. The first new cracker for many years actually started up on Monday (1.5 million tons of ethylene per year).
(article doesn’t say if all that is in US.)
https://www.energyvoice.com/oilandgas/166231/no-room-oil-statoils-new-name-equinor/
Statoil is becoming Equinor (no state or oil in name, Norway’s in there, don’t know about Equi).
IEA OMR: https://www.iea.org/oilmarketreport/omrpublic/
Supply is forecasted to grow but demand grows even more. Comparing the demand/supply chart with previous month it looks as they assume lower surplus (stock build) in 1Q and greater deficit in 2Q, 3Q and 4Q.
Some quotes:
“OECD commercial stocks rose in January for the first time in seven months to reach 2 871 mb. However, the 18 mb increase was only half the usual level. The surplus to the five-year averaged fell to 53 mb. Cushing crude stocks reached their lowest level in three years.”
“Global refining throughput in 1Q18 slowed from 4Q17’s record levels by 0.9 mb/d. It will ramp up to a new record in 2Q18 at 81.8 mb/d. We assume refining throughput will only partially meet the seasonal demand increase, with inventories filling the gap.”
“…we highlighted how in 2017 discoveries of new resources fell to a record low of only 4 bn barrels while 36 bn barrels were actually produced. We also pointed out that in 2018 investment spending is likely to grow only by 6% having barely increased at all in 2017. To 2020, production increases from non-OPEC countries are by themselves enough to meet demand growth. After that time, the pace of growth from these countries is less certain, and the market might well need the supplies currently being held off the market by leading producers.”
Lights starting a little, although it is nowhere near twilight illumination, yet. At $60 up til now, the growth in the US will almost all have to come from the Permian. With pipeline constraints capping that near 800k, or less, for 2018. Or less, is because the 800k is oil pipelines, there already there with gas pipeline constraints. May get another 200k bpd from the Bakken and Eagle Ford if prices will support it. 2019 will remove a lot of the constraints, but that’s next year. I can’t figure where they expect the other half million barrels per day to come from, worldwide? Canada is facing what the Permian will, if they overproduce. Discounts of $30 for transportation problems. Brazil better start humping to get that oil out. Much more than 3k bpd that came in January. This report is going to become more amusing as the year progresses.
Next year shale oil has to deliver 2 mb/day more oil than now to keep in the timeline – can the pipelines then deliver this? And 2020 3 mb/day to stay at the forecasts. When they stall now, they have to be even faster next year.
They have about 3 million barrels of pipeline capacity in the hopper, even now. Whether it gets to that point, or not, is the unanswered question. They won’t be built until they have sufficient contracts already in place. They are just in the planning stage, yet. Speeding it up, as they go. For instance, one 450k pipeline project originally expected to go online by early 2019, is now expected by the beginning of the fourth quarter 2018. There are still limits on how fast they can build. Texas is huge, so the distances are very long.
When they say “We assume refining throughput will only partially meet the seasonal demand increase, with inventories filling the gap.” what does that mean? Aren’t they supposed to analyse the figures, not just assume? And are they assuming both insufficient seasonal refining and sufficient stocks (presumably of product)?
Storage is low and falling faster (or filling slower) than before and with no floating reserve – SPR to be released?
I still can’t see where the 2019 production comes from, if not the Permian (and I can’t see how exponential growth from a high starting point is possible there), and the downside risk from any geopolitical upset or major lost time incidents are growing. Venezuela could easily go to nearly zero in 2019, and UK, Norway, Mexico, most of Asia-Pacific (especially China) will likely lose more combined in 2019 than this year. Something that no-one has even properly considered is going to happen.
Norway will probably be flat to slight increase going forward. Sverdrup start up plus fairly aggressive growth plans by smaller operators… but it won’t be enough
“Aggressive growth plans by smaller operators” – yes (AkerBP, Lundin comes to my mind) but plans are not by themselves enough to grow production. Limited success in Barents Sea, so far. Do you know of projects that will enable growth from now on?
Equinor (Statoil) are involved in most of the projects that matters. Including Johan Sverdrup ph1 (440kbd) which is expected to start production in 4Q 2019 – ramping up in 4Q will not compensate for decline and enable growth in 2019. The other projects that I know of are much smaller Martin Linge ~40kbd (Equinor) has experienced major delays and is currently expected to come on line in the first half of 2019, Trestakk (Equinor main operator, Åsgard tieback) ~20kbd, Oda ~35kbd?.
Many years until Johan Sverdrup ph2 and Johan Castberg will ramp up.
There are some redevelopments planned – Snorre, Heidrun, Njord, Ekofisk – which will likely hold up some decline. On the other side the biggest oil producer at the moment is Troll and that will come of line pretty fast from 2020, as they are going to start production from the gas cap soon after.
My point was that those countries combined will decline faster (UK is growing at the moment and will then be declining, possibly quickly because Buzzard can’t keep on plateau for ever and there are definite signs of rapid water breakthrough for it and Golden Eagle now).
Yes, but Njord is the biggest of the four and is scheduled late 2020 (I think), Snorre the year after. My interpretation (perhaps I have mistaken) is remaining projects will mainly compensate for legacy decline, not grow production (I expect Norway’s production to decline gently until late 2019/early 2020).
An overview of projects can be found at: http://www.npd.no/en/news/News/2018/The-Shelf-2017/3-Development-and-operations/
That is why it is entertaining to follow this story while it unfolds. Our high point of exports has been right around 2 million barrels a day. Probably pretty close to max, right now. Some say 3 million, but if that was so, I am sure we would have seen it climb close to that, at some week, surely. Corpus is planning on expansion, but that is a while to go. 2020, maybe? It does not compute. Nothing the EIA or IEA makes sense. They even underestimated demand last year, I don’t see the drop in floating inventory covered in any of the “analysis”. They are beginning to point the finger more at Venezuela. So when the fit hits the shan, they will blame all the problems on them, and not extremely faulty logic?
when the fit hits the shan
I saw that used nicely in a Zelazny novel.
US SPR has only been used as a respond to short term problems. I think the decision is up to the president (and the current one is a bit unpredictable…) but I can´t see what good it would make to use it when the problem is long term and structural. There is also a free rider problem too, it would benefit other countries as much as the US.
Btw. I´m starting to feel a bit worry. I though that we would either be in a recession by now (reducing demand) or see higher prices that reduce demand and incentive efficiency and more upstream investment. Instead we face a sleep walking situation with low prices, high demand and stock drawdowns. It´s insane!
Good observation regarding the “sleep walking situation” where there seems to be no notice or concern of low prices, high demand and inventory draw downs.
Almost a mirror-image of what we saw from 2013 up to the price crash when we had HIGH prices, INCREASING production and BUILDING inventories.
No one took notice until the numbers were grossly out of hand and then the market woke up and crashed.
I wonder how far down the rabbit hole we will go this time until the market takes notice and prices go ballistic….again….
Nobody was that fearful, at first, when prices plunged. Everyone was talking about a rebound for about a year. So, I suspect that will happen on the uptick, also. Denial will reign when it’s starts going up for, at least, a year. Everyone has been listening to nothing, except the Permian for two years. Gonna be hard to shut that song out.
In 2014 the market thought that OPEC will cut. Now, maybe the market thinks, that in case, OPEC will increase extraction rate?
Yes, that is part of the thinking. Do the charts above indicate they have 1.8 million to dump back into the market? At this point, there should no longer be any more “cuts”. Super spikes will not be beneficial to users or producers. The longer they delay in announcing their exit, the longer the expectation will be that the supply will exceed demand, even if the rest of the worlds inventories are circling the drain. It’s having the opposite end effect of what the Saudis want. Announce it now, and the market will have sufficient time to adjust when they float their IPO. Wait, and the market will go down expecting them to flood the market. Maybe.
Jeff
I can only agree with your post and I feel exactly the same way. I think the consequences of peak oil are so sobering that denial is a big part of keeping the party go on until it can not continue. And that, in my view, would not last past 2019. The US shale production would hit the wall figuratively speaking, and I suspect some major countries in the Middle East are not up to the challenge to increase oil production (no evidence, who knows anything about the black box SA by the way).
That does not mean that oil production will fall steeply in the future if enough investments in unstable countries by western standards can be scaled up, and investments probably will be scaled up. But I do think peak oil finally may have arrived in 2019-2020, and the argument why not enough investments will be made in oil is that many enough of key people realise that a transition to renewables is needed, even if it will be painful. And that the lower EROI of oil investments is part of the reason (and also why the focus for IOCs turn toward natural gas going forward).
I happen by coincidence to live in a country that can actually cope with a renewable transition, due to an aboundance of hydro power and wind power potential compared to population (Norway). I am still uncomfortable with the signals in the market; the realisation of peak oil is all too clear (just look at what the IOCs are doing). A major transition must happen, and since political leaders want to keep the party going too long, a major crisis will come and it will be very uncomfortable and ignite the needed changes in energy policies.
I am actually concerned that there will be winners and losers among countries in this transition and that it will breed major conflicts in parts of the world; more than we have been used to in the recent peaceful period. Reducing standard of living will not be a quiet process.
“Reducing standard of living will not be a quiet process.”
Indeed.
I believe the fear of this is why so-called president trump was elected. A large portion of his vote was cast by those who are fairly ignorant and think this schmuck might help them stave off the decline they are experiencing.
“Something that no-one has even properly considered is going to happen.” Yup. That usually upsets all of my speculation.
Well, 2019 increases to equate demand, I can’t even begin to imagine where it comes from. Still trying to figure out how supply will come within one million barrels of demand for 2018.
Hi Guym,
If supply is short, oil prices will rise until the level of oil falls until they are equal.
For the past couple of years oil prices have risen at about $12/year (slope of trend line of average 5 week Brent oil price over the Feb 2016 to Feb 2018 period.) The recent 5 week average was about $63/b in Feb 2018 so perhaps we might see $75/b by the end of 2018 to balance supply and demand for oil on World markets. At that oil price several LTO plays might be profitable on a cash forward basis and might see increased investment and completion rates.
Since one of the major uses of oil is transportation, demand for oil could fall over the next decade due to increasing efficiency and replacement by EV vehicles.
I think a price surge in oil now will be it’s death knell as far as consumers are concerned. It will be extremely tough to get rid of older SUV’s in five years and real giveaways in ten unless the price of oil stays low. Americans may be slow to take on change now, but when it comes to their pocketbooks many will smarten up fast and think of reasons other than “green” ones to buy into the renewable/EV sectors.
How about the crazy idea that cheaper Chinese EV’s will enter the US market within five years? It happened with Germany, Japan, Korea so why not China?
gone fishing,
I agree eventually (maybe 2040 or so) EVs may reduce oil demand and cause an over supply of oil, but between 2018 and 2040 oil supply may be short and oil prices may rise, the higher prices will have two effects, it will accelerate the move to EVs and it may reduce the rate of decline of oil output after the peak until demand for oil starts to decline faster than the decline in oil supply, at that point oil prices will fall (my guess around 2040-2050).
I was thinking of all EV’s plus additional increased efficiency in ICE’s. All EV’s will include two wheelers which are popular in much of the densely populated world, three wheelers, cars, trucks, buses and trains.
The big markets are going to be in China, India and the developing countries. Many will not look like or be conventional cars as westerners view them, but they will use little or no liquid fuel unless that country has access to a lot of it’s own.
gone fishing,
Agree 100%, it will be hybrids, plugin hybrids, smaller vehicles, and expanded public transport in densely populated areas, also ride sharing, and better urban design allowing more walking and biking. Higher oil prices will accelerate the transition and those high prices will arrive within 2 to 5 years ($100/b or more).
Hello
How are you?
Mr Ron Patterson or Someone else
When will the peak of natural gas of Bolivia?
Which was the gas production in Bolivia in 2016 and 2017?
Hi Cecilia,
In 2016 Bolivia produced 19.7 billion cubic meters (BCM) of natural gas, peak so far was 2014 at 21 BCM. Cumulative production from 1972 to 2016 was 294 BCM, proved reserves at the end of 2016 were 280 BCM, that’s all the information I have, data from
https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
There is this in the news, but I don’t know anything about it…
LA PAZ, March 15, 2018 – Bolivia is preparing to announce that it has major shale resources, international media reported on Thursday.
No further details were provided in the report, though Sanchez also cited recent studies according to which the Madre de Dios River Basin holds 340 bcm-3.4 tcm (12-120 tcf) of gas and up to 40 billion barrels of oil.
https://www.theoilandgasyear.com/news/bolivia-eyes-own-vaca-muerta-report/
The Madre de Dios basin is located in Peru, Bolivia and Brazil. My guess is the Permian may have a viable “shale”, it has gas and oil shows, and in Peru it has a high carbonate content (what I call a hot lime).
is the 40 Gb estimate in the right ballpark? Say within 10
Gb or 30-50 Gb.
Assume your July 2016 oil price forecast is roughly correct.
Who the hell makes your headlines on oil price?
Outstanding. RRC in changeup mode. Checked statewide to see if it was posted early. Surprise, a few of the operators are posted. No way to tell now, on final preliminary numbers on the statewide query for awhile. Might have to wait until they post the summary on the main site. Instead of them posting everything at one time, now it just dribbles in.
For folks who keep an eye on the natgas world, the just-released (March 13, 2018) presentation from CNX – formerly Consol – contains some potentially bombshell information.
As one of the few operators continuing to drill Deep Utica wells in Pennsylvania, their results are being watched by many.
They are now claiming over 1,000 Utica wells will be drilled east and northeast of Pittsburgh with expected EURs of 3.5 Bcf/1,000′ lateral … essentially 25 Bcf for a 7,000 foot well.
What this means, if their projections are correct, is that the Utica is, indeed, as big as the Marcellus.
“Moving lower for the 3rd day in a row, CNX finished Tuesday at 16.25 tanking $0.87 (-5.08%) on high volume. This is the biggest single day loss in over a month. Today’s closing price of 16.25 marks the lowest close since February 28th. The bears were in full control today, moving the market lower throughout the whole session. Closing below Monday’s low at 17.06, the share confirms its breakout through the previous session’s low having traded $0.89 below it intraday. Ending with a weak close near the low of the day sets a bearish note for the next session.”
https://techniquant.com/reports/stock-cnx-daily-technical-report-for-2018-03-13/
Pretty tough to sell buckets of sea water down at the beach.
Day after EQT announced IP results of the most successful shale well of all time – the Scotts Run – their stock dropped 7%.
Speculation was that the enormous amount of new gas (from the Utica) would hurt suppliers due to the abundance.
And that was the point of my posting.
If people think the Marcellus is huge, Appalachian Basin potential just skyrocketed.
In a PS, XTO just drilled/completed 2 Deep Utica wells in this general area – east/northeast of Pittsburgh in Indiana and Jefferson counties.
Should they prove successful, it will further expand the footprint of this already massive (Utica) formation.
Reserves are a function of price. The majority of shale gas wells at these prices LOSE money. And I am not basing this on their company presentations. I have seen the AFE’s, JIB’s and LOE’s.
The production results of the Shale producers is NOT an engineering miracle or technology driven, it is a function of their creditors suspending the laws of economics.
ETA: anytime you see the phrases IRR or EBITDA in one of these companies presentation, just realize they are losing money. At some point, ANY company that has as many rigs running as these companies do, should be able to drill their wells out of cash flow. They can’t, because they LOSE money.
Now, now, Reno; you are an actual oily person, you cannot say those sorts of things. Perception is far more fun that realization; it makes for never ending speculation. Shale (oil and gas) exists, therefore it is: 1P to 4P Power Point reserves will all come out of the ground, somehow, someway. Debt, costs, lack of profitability, market constraints, water, Mother Nature etc. etc….none of that is important. Its a all just a miracle.
I’d like to hear from you now and then, sir: https://twitter.com/oilystuffblog/status/974083737112793088
Debt, costs, lack of profitability, market constraints, water, Mother Nature etc. etc….none of that is important. Its a all just a miracle.
That sure seems to be the way a lot of people navigate through life in general at this particular juncture in human history. And to be clear, I’m not just talking about USians. I have traveled far and wide in this world and have found that much like fish being unaware of water, most humans are unaware of the economic and political operating systems within which they live out their lives. Though that would be a separate dissertation.
First a short disclaimer, while I still read the petroleum section posts and comments, I very rarely comment myself these days. The main reason being that much of the discussion seems to completely ignore the main points of the excerpt that I have italicized at the begining of this comment. There seems to be very little understanding of what I like to characterize as a fundamental truth, that all economic and political systems are subsidiaries of ‘Ecosystems Inc.’ That would be another dissertation on the profound logical flaws and blind spots of classical neoliberal economic theory, it’s origins and how we got to where we are today.
The fact of the matter is that the entire global economic system basically operates on the premise that ecosystem services are an externality that can be safely ignored. Personally I think that is a dangerous delusion, witness the ample scientific evidence that we are currently in the throes of a quickly accelerating mass extinction event. The underlying causes of which are complex and multifaceted but have a large component caused by anthropogenic release of CO2 from buring fossil fuels. You can not argue with the logarithmic scale of pH.
What for example is the cost of destroying the world’s coral reef ecosystems? Well the brilliant economists at Deloitte Access Economics have recently valued the Great Barrier Reef at A$56 billion, with an economic contribution of A$6.4 billion per year. Forgive me for finding that assesment, laughable. Another dissertation would be in order here.
The bottom line here is that that most in the oil industry still takes ecosystem services for granted. This is a massive subsidy and bailout that society can ill afford to continue funding. The bill is fast coming due and it is way past time to start doing full cost accounting.
Perhaps a starting point for the necessary discussion might be educating the public at large as to what ecosystem services are and how they impact the well being of all of humanity.
https://www.sciencedirect.com/science/article/pii/S0959378017303540
Since the Millennium Ecosystem Assessment, ecosystem service science has made much progress in framing core concepts and approaches, but there is still debate around the notion of cultural services, and a growing consensus that ecosystem use and ecosystem service use should be clearly differentiated. Part of the debate resides in the fact that the most significant sources of conflict around natural resource management arise from the multiple managements (uses) of ecosystems, rather than from the multiple uses of ecosystem services.
If the ecosystem approach or the ecosystem service paradigm are to be implemented at national levels, there is an urgent need to disentangle what are often semantic issues, revise the notion of cultural services, and more broadly, practically define the less tangible ecosystem services on which we depend. This is a critical step to identifying suitable ways to manage trade-offs and promote adaptive management.
Cheers!
I am troubled by policy from the White House that doesn’t even meet the level of short term business sense. Some of what the administration is doing is even hurting the industries it is supposedly trying to help.
So the global ecosystem is WAY beyond their capacity to grasp.
So the global ecosystem is WAY beyond their capacity to grasp.
Oh, I fully agree! My point doesn’t include the total clusterfuck that is the current administration. I have never seen a group of such incompetent clowns. By comparison, a three stooges skit comes across as an erudite professorial presentation. I fully expect them to be a only a very short lived blip in the pages of history… Though the damage they wreak on the reputation of our country may take quite a while to mend.
Thanks! I’ll file that in the drawer of excellent comments. I think one of the reasons we’ll have a hard time nurturing the ecosystems is the inertia. Will Mother nature care if we manage to shut down 500 coal plants? Not much is my guess. She will be very grim at the negotiating table – not saying much at all – or if anything – I’d like more – What have you done for me lately?
You gentlemen are correct regarding the economic realities of these plays.
At $21 million+ for some of the Deep Utica wells, the returns may never be there.
CNX is hoping for $14 million per as it co-develops with the shallower Marcellus, a striking departure from all the other AB operators.
Again, the economics are not the salient point in my posting.
What CNX and, possibly, XTO with their 2 Deep Uticas coming online in Central Pennsylvania shortly, are showing the world is that there is recoverable gas in Pennsylvania that may be measurable in the thousands of trillions of cubic feet.
Furthermore, the physics – along with the massive size – of gas recovery versus oil greatly favors gas over oil in the coming decades.
If the economics are not there as you say, then the gas is not recoverable. That is the whole point of reserves. Reserves are not what you can book on a piece of paper. Or what you can produce without regard to profit. They are what actually comes out of the ground and can make a return. End of story. If the wells can not make money, then they should not be drilled. And I am talking about all costs. Acreage, LOE, overhead, interest costs, etc. Apply to that well and give me a date at which payout occurs. Actually, I think that one metric would clear everything up. All a company need provide is a date that each of their wells payout, after allocating EVERY cost associated with that well. Give me that number and I can tell you if these wells have the reserves they claim.
There is undoubtedly lots of gas in place. I am as sure of this as I am sure that it can not be recovered at these prices. These companies need to manage their production better or sell out now. Quit drilling alternate unit wells. Drill on appropriate spacing as opposed to touting PUDs and reserves. Drill wells like you are using your money. These simple steps would make these companies profitable, and might ultimately prove your thoughts on these shale plays correct.
Mike,
Love your sight and check in daily.
RT
My thoughts are as significant as yours in these matters … not particularly important as it is neither you nor I spending the hundreds of billions of dollars in the finding and extracting of these unconventional hydrocarbons.
Your concerns regarding the economics, especially profitability, are greatly warranted, yet the fact remains that production – especially in the HIGHLY impactful matter of Utica recoverability – continues apace.
The present 27 Bcfd output from the AB will be 35 +/- Bcfd this time next year regardless of HH, regardless if Exco is bankrupt or Travis Peak just sold out.
The fact that the Appalachian Basin is on the cusp of being recognized as the largest source of recoverable natgas on the planet is a momentous event.
People, especially those in the oil and gas industry who decline to accept this do so to their own detriment.
interest doesnt sleep. And what can’t go on forever will not.
People who refuse to account for profitability and economics of these wells do so to their own detriment. I am not telling you what to believe or not to believe, but if you want to discuss reserves, and not include the economics, that is wrong.
I gave you real easy benchmarks for discussing profitability of these wells. Which will tell you if the reserves mean anything. Dismissing it is your blind spot. It has gone beyond ignorance of the subject to willful misrepresentation.
So I will say it one more time. Reserves are a function of price. Higher price. Higher reserves. and until these companies begin to drill and produce these properties at a profit, then geology and reserves are irrelevant. The only thing that matters at that point is the willingness of the creditors to suspend the laws of economics.
Yes, of course that is all crucial for the ongoing viability of what these guys are doing. (And, additionally, affecting the global hydrocarbon industry).
The fact that that I focus on operations does not imply I downplay the economic impact.
As a long time self employed business owner, I am familiar with the nuts and bolts of revenue in/revenue out.
Back of the envelope numbers from CNX … 1,000 Deep Utica wells in Central Pennsylvania (practically virgin area up till now) …
Investment of $1.5 billion.
Gross revenue at $3/HH and 25 Bcf EUR each gives over $7 billion.
Bests me if any of those variables come to pass, but the fact that they, CNX, – possibly joined by XTO – are plunging in is no small matter.
Reno. In 2015 I was one of the many who posted here questioning whether the wells can payout within a reasonable period of time, which I think we settled on being somewhere between 36 and 60 months, given the high decline rates.
The only place I have seen payout statements on shale wells is on the auction site Energynet.com. Many mineral owners in the Bakken went non-consent, only to get burned when prices crashed. So, realizing wells will never reach payout, small non-consents have flooded that site trying to sell those interests.
I am positive every public company has the payout information on each well, down to the penny. Yet none have, nor ever will, share those with the public. Shale proponents say, “Why should they, that is proprietary?” My response is payout is THE metric the industry has used for many decades. Shale is the first to make practically no mention of it.
Furthermore, I now notice that companies are not touting well costs. I am sure that is because well costs have risen greatly since hitting bottom in 2016.
Sure, oil prices have risen, but so have costs.
I think deep down, we US producers knew shale would keep on drilling despite economics as long as it could.
OPEC did not understand US permissive BK laws and creative financing vehicles. They assumed shale would slow down if it didn’t make money. But it took such low prices to slow shale, that it badly damaged the rest of the industry around the world.
I continue to hope that shale doesn’t ruin the recent price rally. After 3 years of having basically a joke of an income statement, we are back to something real again. It isn’t really enough for us to try to get back to drilling much, but it is ok.
For the shale proponents, I find they are usually very political. To me, owning WI, it is not a political question, it is an economic question.
My hope is oil will hang around here until US hits “peak shale oil”. We shall see.
I feel bad for US conventional gas producers. I have some connection to the Hugoton Gas Field Area. Low gas prices have decimated it. It has been in survival mode for several years now.
One major problem in the Hugoton Field Area is that prices have been so low that severance tax collected has fallen of a cliff. To make up the difference, real estate taxes have skyrocketed.
As consumers benefit from low prices, there is little that can be done. Shale oil will just be produced at little to no profits, until the peak is hit. Then prices will rise as US has several hundred thousand “shale stripper wells” that might actually be profitable at $90+ WTI.
Shallow
Re: the Hugoton conventional producers …
One of the reasons I post the ongoing situations in this ‘shale’ arena is for people to evaluate the data.
Same reason, actually, that I read the posts/sources from commentators so I can research and disregard or accept conclusions derived therein.
Your ongoing input on the long term operational challenges regarding strippers prompts me to recognize the obstacles shale operators face 10/20 years down the road.
Daunting, to put it mildly (although the rejuvenating/refracking is selectively more rewarding than many think).
Right now, operators in the AB are drilling – spud to TD – 20 to 25 thousand foot wells in 2 weeks time, positioning the drill bit close to 100% of the time on targets smaller than a constipated gnat’s asshole, fracturing 50 to 80 stages in the most carbon-rich areas, stimulating WAY more reservoir in HIGHLY controlled (vertical and horizontal) zones with diverters to produce way more product than even 2 years ago.
All verifiable fact.
Future strip pricing – along with the ridiculously low HH this past winter – indicate what the serious money players think regarding production in future years.
Whether one loves/hates/is indifferent to these realities, that’s just the way it is.
coffeeguyzz
1000 wells times 15 million per well is
15 billion dollars.
A realistic estimate for the average well might be 12 BCF which is 12,000,000 MCF (where M=1000). Let’s sat the net is $1.5/ MCF, so $18 million per well on a 15 million investment, only a 20% ROI over the life of the well, not great and operating costs, transport, royalties and taxes probably make the net income much less than $1.5/ MCF, the net has to be $1.25/MCF just to break even (ROI=0).
Dennis
This whole Utica formation, particularly the so called Deep Utica in Pennsylvania, is an enormously significant factor in US hydrocarbon projections.
Suggest you check out page 38 of the recent CNX presentation to glimpse the expected production profile of the Utica-targeted Aikens wells (5M & 5J) which have just come online in this area.
To be brief, these wells have initial pressures in the 8,000/9,000 psi range which is choked back for 12 to 18 months (expected, doesn’t always work that way).
As such, the early year(s) provide a very high percentage of overall output.
Scotts Run 14.5 Bcf 30 months (3,200 foot lateral).
Gaut 10.5 Bcf in 26 months.
Range has 1 of 3 successful Deep Utica and EQT a few as well.
If the Aikens, Rich Hill and Marchand wells prove effective, CNX will be batting about 100%
.
While I do not claim to know how this will play out, I will say again that CNX is now telling the world that they feel the Utica will be as productive as the Marcellus.
I don’t put much stock in what companies say in their investor presentations.
Boom
Despite the rah rah tone in presentations, a huge amount of informative data is frequently included. Supplemented by other sources, an observer can learn a lot.
For instance, page 29 on the CNX presentation shows 3 readings on the hydrocarbon presence in 3 separate wells, including the Marchand.
Huge.
Now, an individual who says he lives 5 miles away just posted on a landowner/royalty owner site that the flaring-testing on Marchand is 5 days on and still sounds like a jet engine.
Anyone who has heard that sound, 5 miles off, no less, knows what that means.
Boomer, I’m telling you, man; economics and debt and overproduction and WH prices that suck don’t mean squat to the “believers.” They have drunk of the holy-water; nothing can dissuade them, not even 1.2:1 ROI’s over 20 years that equates to o.oo9% annual ROR’s. Its personal. Its exciting. Its a “hobby” promoting the last of America’s hydrocarbon resource extraction as fast as it can be extracted. The more BCF’s per month, the more fun it is.
NOTHING anyone can say makes a difference. Its like writing to a cedar fence post and being disappointed there is no response.
But what is the point in touting more gas to investors and as a result driving down the price for the industry?
And that’s why I also wonder why anyone would want to come to this forum and talk about huge supplies. These companies are hurting themselves and the industry as a whole by encouraging the perception that there are unlimited supplies.
Because on some level, I believe, there is money to be made day trading E&P stocks and some people, clearly, are able to dissociate productivity from profitability. There are tens of thousands of folks like this on Seeking Alpha and in the investment world. I liken talking up the shale thing to chumming with dead bait.
And there are Americans who believe that we can actually become energy independent, that the unconventional shale phenomena is only now coming into its own, under the tutelage of the current president, who is set on unleashing America’s energy “might” on the rest of the world with no regulations and tax cuts (that only benefit the profitable, by the way). The shale thing didn’t work under the tutelage of the last wank either, at $140 a barrel, but that hardly matters. Like everything else in our society, the façade of hydrocarbon abundance is now entirely…political.
$21M dollar Utica wells don’t suddenly become $15M dollar wells just because an investor presentation says so. No resource play is so perfectly homogenous and wonderful that one can drill a half dozen wells in a big block of acreage and declare they then have 1000 locations to drill. 1000 wells x $15M is $15B, not $1.5B. CNX received only $2.60 per mcf in 2017, not $3.00. Net after royalty and production costs, that is about $1.40 per mcf. The investor pep rally says each of those wells will make 25 BCF, like clock work. Reno is right; divide that by half. Multiply 12 BCF x $1.40 and ask yourself, would you risk $15M to earn $16.8M over 20 years? Nobody would…not using their own money.
Nobody in this entire shale gig has any real skin in the game. Its all kind of…fake.
Mr. Roughneck
Just wrote a point by point response to your comment, lost it, won’t redo.
In a nutshell …
I have no financial interest in these companies, industries or stock market in general.
Scotts Run and Gaut cost about $30 million each. Science projects.
Cost reduction will be from familiarity, repeatability, best practices along with sharing Marcellus infrastructure.
Surprisingly, CNX plans on a dual system gathering plan to maximize 8,500 psi FCP from Utica.
1,000 wells is from Central PA only. Southwest PA Utica will be almost 700 more.
The 150 year history of this company combined with the hundreds of thousands of wells drilled over the decades in this region has provided vast geologic data from which to draw.
Anyone with the slightest familiarity with the Marcellus realizes how vast it is.
These recent production numbers from CNX (Aikens, Marchand, and other Deep Utica wells) are early stage proofs that the West Virginia University study claiming the Utica is comparable to the Marcellus may well be accurate.
The math error of $15 billion cost extends to the correct return being $75 billion.
Coffee, myself and every conventional producer in America is well aware of the resource potential in the App Basin. We are also aware, as is the entire rest of the world, I assure you, that extracting these unconventional gas resources are economically marginal, at best, at WH prices of less than $4. Given the fiscal irresponsibility of operators in the App Basin, its massive and growing debt, the amount of associated gas from shale oil basins that is bottled up and being flared, takeaway issues, pipeline sentiment, frac’ing sentiment, trade wars, LNG projects being undertaken throughout the world…that $4 gas will be a long time coming. Until that happens more debt will be accrued and will require even higher gas prices in the future to remedy, same as shale oil.
I gave you a good, simple example of what a 12 BCF well, costing $15M to drill and complete, will make in its life cycle at current prices. A CD earns a better return. Hope is not a tactic.
I respect your passion for what you believe in. I think you are representative of many American’s and how they feel about their hydrocarbon future, how easily it is to be swayed by propaganda, how absolutely determined they are not to consider facts or data. It is insightful, sir. My industry, sadly, has unfortunately taken advantage of people like yourself for a long time.
Its a dangerous game you play, preaching abundance. Always better in the end to conserve, to save for the future, and pass that inheritance along to our children.
coffeeguyzz,
you often claim you lose your long response, don’t put in too many links, or none in a long post. Also compose in a word processor and then it is not lost.
Dennis
Thanks, but I am too computer challenged (and not especially motivated) to post any links.
Coming from the Old/Ancient School of the Journey being the better part of any Quest, I feel individuals benefit more from their own curiosity and efforts, particularly in this age of Google.
It is this tablet with the swiping/tapping/ throwing it the fuck out the window actions that give me problems.
BTW, the 100 Billion cubic feet that I mentioned below from the Bishop pad in 39 months is the energy equivalent of more than 17 million barrels of oil.
Again, one pad.
This is very significant to oil producers as the encroachment on oil applications from natgas hardware/processes – think transportation – is strongly favoring gas in the coming years.
All this natural gas will be soaked up by China anyhow. They want to replace coal fast to clean the air – there will be no gas left for cars and trucks. At least in the short / medium term.
coffeguyzz,
if your tablet has a word processor, then use it for long comments. Then copy and paste to peak oil barrel, it’s not that difficult.
.
Natural gas requires a lot of infrastructure to be viable for transportation, works well for electricity though. It would be great if it replaced all the coal power plants in the World. When natural gas peaks (in 2030-2040) the expensive natural gas will be replaced with wind, solar, hydro, and nuclear power.
I read this in that long paper Ron Patterson just posted a link to.
“Marcellus basin is huge, but the sweet spots are concentrated in two areas and no drilling in
between: its potential is likely to be poor!”
https://aspofrance.files.wordpress.com/2018/03/lahall19march.pdf
Boom
If one goes to Enno’s site and pulls up the Cumulative Ranking tab, and goes through several of the fringier counties like Armstrong, Clarion, Clearfield, heck, even Centre and Somerset (WAY out in Bumfuck Egyptville), one can see surprisingly productive numbers from archaically designed wells.
Biggest reasons for lack of development include minimal takeaway pipelines, low gas pricing, and not having the stupendous productivity of the NEPA/SWPA counties.
There exists a surprisingly large number of 1 to 5 billion cubic foot producers in these overlooked areas.
The big ‘hole’ in the Pittsburgh region clearly displays the productive acreage the 750 square mile Allegheny county does not presently develop.
The Utica received virtually no mention in that report, either.
$1.40/mcf. There are 1 million mcf per bcf.
So $14 million per bcf.
So, $168 million per well over 20 years at 12 BCF EUR..
Maybe that number is too high, but it looks like you dropped some zeros going from mcf to mmcf to bcf.
If I’m missing something feel free to correct me, but using your numbers whuch taje into account royalty and costs, then yes, I would assume most investors would be willing to 10x their money in 20 years, especially if the bulk of the return was achieved in 3.
Hopefully the gas wells coffee is referring to will actually produce what he has stated
Look at how the following equities have fared since gas prices completely collapsed in 2014:
Range Resources
Chesapeake
Southwestern Energy
Cabot
EQT
Eclipse
Rex Energy
CNX
Exco
If there are Appalachian gas producers that have been a good investment since gas prices collapsed due to gas overproduction, I have missed them.
SS
Pennsylvania just released January production data yesterday and I was skimming through some profiles.
The recent (2017) wells have some astonishing numbers. Producing one billion cubic foot a month in the early going is no big deal, and flowing 20 million/day for several months seems to be fairly common.
But you are correct pointing out the financial stress these guys are experiencing. More bankruptcies and/or consolidation seems inevitable.
One corollary to this, however, is that producing gas from the AB will severely affect competitors all across the globe.
These guys are popping in 12,000’/17,000′ wells routinely now that are throwing off 5 to 8 billion plus first year online.
One 10 well pad with 39 month average age just passed 100 Bcf mark … the Bishop pad from Cabot.
One pad. Ten wells. Just over 3 years. One hundred billion cubic feet.
That’s a heck of a lot of marshmallow cookin’.
I make no case either way. Coffee was quoting 25 BCF @ $3.00 I believe, and then Mike came in and said 12BCF @ $1.50. I’m not using Coffee’s numbers, I’m using Mike’s and just pointing out that he seemed to be off by an order of magnitude on his cash flow assumption. So lets see what it would take to actually kill drilling:
Cut EUR in half again to 6 BCF @ $1.50then = $84 million.
Cut it in Half again to 3 BCF = $42 Million.
Finally, cut the price in half to $0.70 = $21 Million
So a 3 BCF well pays, in theory, though at $3 BCF and $0.70 you’re definitely getting into territory where I wouldn’t risk my cash.
Now, I don’t think the wells payout as easily today primarily because from what I have seen, these guys are getting <$0.50 per MCF owing to takeaway capacity issues. I think at one point Chesapeake's pipeline contracts were so bad they were actually paying to produce their own gas. Obviously that doesn't pay.
Also, don't ever quote stock prices as proof of an economic argument. The Dot Com bubble and GFC should have taught you the folly inherent in that, unless you believe the Banks deserved their valuations in the fall of 2007. If companies can be overvalued, they can be undervalued, and the market can stay irrational for a long long time.
Again, I'm not making the case that they aren't overproducing, and I don't doubt the industry would be healthier with $4 gas and restraint on their part, I'm just showing how some of the areas, using numbers provided by skeptics on this board ( not company presentations) seem to make money at todays prices, unless they are getting screwed by pipelines.
Tim, because I think the shale industry is unprofitable, or lies about its EUR’s, or is using too much fresh water in W. Texas, or that exporting our last remaining hydrocarbon resources away to China is a grave mistake, I believe you have accused me of not even being in the oil business. Fact is I’ve been drilling natural gas wells for 40 years. If a stinking Marcellus well cost $8M and earned $168M, even I’d be living in Pennsylvania drilling that crap.
M=1,000
1,000,000 mcf (BCF) x $1.40= $1,400,000.00
https://answers.yahoo.com/question/index?qid=20130626130309AAJqlts
http://www.kylesconverter.com/volume/billion-cubic-feet-to-million-cubic-feet
https://sciencing.com/convert-bcf-mcf-8684930.html:
“Enter the value in BCF into a calculator. For example, if the value is 12.56 billion cubic feet, enter 12.56.
Multiply the value from Step 1 by one million. The result is the value expressed in thousands of cubic feet, or MCF. For example, 12.56 BCF x 1,000,000 = 12,560,000 MCF
12,560,000 MCF X $1.40/MCF = $17,584,000.00
Shale gas economics suck. Longer laterals and stuffing them full of more sand costs more money. Productivity is not the same as profitability. Much of that stuff up there has been produced for less than 80 cents per mcf.
I know its hard to believe that people do such stupid stuff when they’re spending other peoples money, but, they do. Nobody in this shale gig has anything vested, really. When it crashes, or America is running on empty, the people that cheerlead for it, that made soooooooo much money from it, will have all fled, with big shit eating grins on their faces.
Mike,
There is reality out there on the web but not a lot. Nick Cunningham, whose stuff I’ve found worthwhile, said yesterday, in an article on OilPrice.com about ongoing hedging, that “The bank [Goldman Sachs] estimates that many shale companies may be able to balance their books with WTI at $56.50. Because WTI is currently trading at just above $60, that suggests that many shale drillers could post positive cash flow this year, essentially for the first time.”
It was the reality in that last part of the last sentence that brought tears to my eyes. (snif)
Syn, I like Nick too. Higher well productivity is definitely resulting in steeper decline rates and will require MORE expensive wells just for reserve replacement; forget the growth stuff, I think it is going to get harder to maintain, particularly as sweet spot depletion sets in. Do you think there will be enough free cash flow to maintain reserves, meet demands made by investors for reducing debt, overcome market restraints, water problems (it is dry in W. Texas and we are headed for a horrible summer)? There are $80B of debt maturities coming up in early 2019, and interest rates are going up; will there be enough so called, “profit” to be able to restructure all that debt and kick the can down the road longer? I don’t think things are going to get better with slightly higher prices, I think they will get worse, financially.
People don’t realize how badly the shale industry has pissed down its pants leg accruing all the debt that it has in the past. Folks overlook it, as though debt is a good thing, as long as it is not their debt. Is it all so important to America that we should just forgive all that debt, do you think? I know a smart fella who believes “shalefare” is the biggest redistribution of wealth in economic history. If you are a royalty owner, or a CEO on a big reserve bonus plan, you have hit a lick….being the middle man. Everybody is benefiting from this thing…for the moment. It won’t be for long.
Hi Mike.
No, I don’t think there’ll be enough free cash flow to do much of anything. I was just tickled to see one of the biggest scariest banks saying in public that the shale industry isn’t paying for itself.
Not that that will usher in the Kingdom. Still, even the Wall Street Journal said a couple of weeks ago that the debt load on the shale patch is $265 billion. The information is out there, just not being paid attention to in any meaningful way.
Time for more port.
You are right of course. How about a good tequila instead, Texas style?
Boomer
I have no way of knowing what motivates executives of these companies to do what they do, but it would be more than reasonable to suspect they are trying to maximize the value of their individual companies.
Certainly, their legally binding fiduciary duty would prompt this.
As such, the ‘dog and pony shows’, aka investor presentations, can take on comical tones as each CEO touts his outfit as ‘the Best there is’.
In this CNX presentation, the 117 pager was very different from most I have ever read. The emphasis seemed on why the company’s actions would prompt investors to value them over their competitors.
Indicating vast amounts of gas recoverable at – what they claim – economic conditions, would put them in a comparatively favorable light.
When you say anyone coming to this forum talking about huge supplies, Boomer, this is all publically available information that a couple of mouse clicks can easily display.
Should you feel better not being aware of this stuff, you would – at a minimum – be woefully unaware of why the US is now producing the vast quantities of hydrocarbons it presently, verifiably is.
Let’s just say I am skeptical of investor presentations. I am interested in how much gas and oil will be produced, but what companies tell investors I discount heavily.
The executives are trying to boost their personal bonuses which are tied to production increases.
Why would the Bass and Yates families sell out their shale acreage? Those families have been involved in oil and gas for a century.
The answer is the capital costs are incredibly high compared to the potential returns.
Two family fortunes built on exploration for and production of oil and gas.
I have said it many times, money will not be made off the oil and gas production as long as supply grows faster than demand.
Look at East Texas in 1930. Hard to make money on 10 cent per barrel oil back in those days, even on 3,000’ vertical gushers drilled and completed by men who were being paid primarily in beans and cornbread.
Maybe they can point out they’ll do well because they can make a profit even if prices are low, because each well produces a lot of gas? A 10 MMCFD stream at $2 per mcf is $20k per day, $7 million per year.
Somewhere up above there was talk of millions of years of sunshine embedding its energy in fossil fuels. What was probably intended was maybe 20 years of sunshine and millions of years of pressure and core temperature underground to embed energy in fossil fuels.
This has always seems shaky to me because of the attenuation of sunshine at Jupiter and Saturn orbital radius, and there’s a lot of methane out there.
Methane isn’t oil. Some hydrates may be abiotic but oil is formed in particular places where land sediment has been washed on top of dead phytoplankton blooms (e.g. at large river outlets or between continental plates as they started to split), and for millions of years. All oil contains clear biomarkers showing its biological origins.
One of the guys from some time ago made a compelling point that were there an abiotic mechanism for oil creation, it would not matter. It still only is found, regardless of how it got there, in certain rock structure traps, which have become rare.
OTOH methane is indeed methane and the chemical C – H bonds release energy when oxidized no matter where it comes from.
The committee found accounts linked to the Internet Research Agency (IRA), a Russian troll farm, published 9,097 social media posts from 2015 to 2017 targeting energy policies and projects. Thirteen Russians connected to IRA were indicted by special counsel Robert Mueller.
“The IRA targeted pipelines, fossil fuels, climate change, and other divisive issues to influence public policy in the U.S.,” the House committee found.
For years, Republicans and energy industry experts have worried Russian money was being used to undermine U.S. energy policy.
Intelligence officials confirmed in early 2017 in a declassified report on election meddling that the state-owned media outlet Russia Today (RT) ran “anti-fracking programming, highlighting environmental issues and the impacts on public health.”
The House committee began the investigation in 2017 and asked Treasury Secretary Steve Mnuchin to investigate whether or not Russians were using an offshore Bermuda-based law firm to funnel money to U.S. environmental groups.
Lawmakers asked Mnuchin to investigate whether or not the U.S.-based environmental group, the Sea Change Foundation, took $23 million from a Bermuda-based shell company with ties to Russian oligarchs in 2010 and 2011.
Sea Change gave millions to U.S.-based environmental groups, including the Natural Resources Defense Council, the Sierra Club and the League of Conservation Voters. All of those groups oppose hydraulic fracturing.
http://dailycaller.com/2018/03/16/russian-campaign-to-undermine-american-energy/?utm_source=site-share
They probably backed 350.org and their fight to stop Keystone XL. I would also expect the Chavez/Maduro regimes to have been funneling money into USA politics. They put money in the open to help far left politicians, including the Kennedy that’s still in politics.
Coffee I found your “debate ” upthread interesting. Once again you are right. It is important that the areas are explored and delineated so that realistic estimates of our reserves can be counted on. The current profit profile of doing so is of secondary importance to the much bigger picture.
What the US is now doing to HUGE, we are showing the world, not only can you NOT compete with US militarily, but in a potential energy starved/restricted future, the US economic engine can continue to grow faster and stronger fueled by domestic energy supplies unlike the other larger economies like the EU, Japan and of course China. That is a big advantage going forward. Big picture seems to escape most here, but while some may wish to live work and invest in windmill economies most will not. And those that do will always be at a distinct disadvantage.
Well TT
AS an independent producer yourself, you should know that drilling a handful of wells does not confirm 1000 locations on your acreage block.
And there is plenty of production history that shows the EUR’s touted by the companies are not accurate. What I have read and seen is that while these wells are huge. They lose money. That is not debatable. This ride will last as long as the creditors want it to. Production, as big as it may be, is not driving this car.
Once again, TT gets political.
I get that, but I will say there are ZERO producers that I spoke to in 2015-17 who were happy that the US was showing its Energy Dominance by over producing US shale oil and gas.
That is just like I have not heard one farmer happy that US has over produced grain to prove to the rest of the world it’s Food Dominance.
I am far from some liberal tree hugger. But anytime me, or any other producer complains about shale overproduction, we are immediately painted with that brush.
I cannot believe an actual oil producer would say that economics do not matter in relation to US Energy Dominance. That sounds much more like Washington Think Tank Talk.
I will follow up with another thought.
If the most important thing about producing shale is what TT stated above, then why are we:
Discussing drawing down our SPR, instead of filling it and expanding it?
Developing it in a manner that is very haphazard with little regard for spacing which might increase ultimate recovery?
Exporting both oil and natural gas, rather than conserving it so we will have a great advantage over other countries for many decades, instead of for maybe one or two?
It is interesting that shale brings out nationalistic rhetoric, but those speaking in these terms have no long term plan.
There are highly regarded energy consulting firms that say US shale oil production will peak in the 2020’s. That is really not too far into the future.
If it is in our country’s interest to be a major oil producer for many decades, shouldn’t we be managing the resource in a reasonable way?
This has been done before in the USA, why can’t we do it again?
Final thought.
Some say since our production is the stripper variety, that we just don’t understand shale and how it should be developed.
I agree, when it comes to what it takes to drill and operate a 20,000’ hz wellbore, I know little.
What I do know is what our goal has been in oil, and that is to earn income over a long period of time. We could hire 10 rigs and drill up the rest of our locations in a couple years and borrow the money to do it, and greatly increase production, but that makes no business sense.
Oil wells need to be paid for out of their own cash flow. This hasn’t changed.
Drill Baby Drill
This is a political issue and I agree with you at this point it’s being poorly managed. This is no time to be drawing down the SPR and flooding the market with shale oil. This all seems short sighted to me. The transition away from fossil fuel is going to be a long hard slog. The idea of making America an energy exporter is fools gold. Looking a gift horse in the mouth is a Trojan horse. But then again, this is America in the 21st century.
Yes, we should. Unlocking unconventional shale resources in America is an amazing accomplishment and might have proven vital to our long term hydrocarbon future. Instead it has been grossly mismanaged and someday very soon there will be none left to extract in America, no matter how much money is thrown at it. When that day comes the world that we are now trying to distance ourselves from, or ‘dominate,’ will have us by the huevos, again, and the price of oil and natural gas will be whatever they want it to be.
Hi SS,
Politics and oil are joined as Siamese twins as a practical matter.
Here’s the deal, in a nutshell. Incumbents generally win, and they are even MORE likely to win when economic times are good. The R’s are in power, and they are perfectly willing to do anything and everything they can to keep oil cheap considering the upcoming elections.
Even drawing down the SPR is not off limits.
Nobody in Washington sees any personal profit in investigating the matter of billions being loaned to the oil and gas biz which apparently cannot be repaid. So it’s not being investigated, and won’t be, until after the shit hits the fan.
At that point, it’s rather likely that both parties will bitch like hell in public about whose fault it is, while working together to bail out the banks and other corporations and various rich donors who enable them to stay in office. The bill will be loaded onto the backs of working taxpayers, as usual.
This is not an IF question, it’s a WHEN question.
I don’t pretend to know when, but my personal wild ass guess is within the next five years, maybe ten at the outside.
There are various ways to stimulate the economy short term, with the recently passed big tax cuts for the investor class being the prime example. Unfortunately most or all of them do more harm than good, over the long term.
It’s easy to run up the credit cards, life is good that way……. until you hit the limits of the cards. After that……….
Haha, so the justification of shale is just pissing contest, ecology and economics be damned.
If America’s military is so great, why can’t the country win any wars? And if tight oil is so wonderful, why is the country a huge net importer of oil?
“Energy dominance” sounds kinda kinky.
Well, how about this?
U.S. Energy Secretary Rick Perry says moving from fossil fuels to renewables is “immoral”
http://www.desdemonadespair.net/2018/03/us-energy-secretary-rick-perry-says.html
Or should we say the King, rather than energy dominance? Because, in the land of the blind, the one eyed man is King? Even if the one eye is coated in cataracts.
And conveniently, it means nothing, so you can brag about it without being called out for lying.
Reprint from OP.com – Now cocktail conversation @ investor conferences?
“The dirty secret of U.S. shale oil is not many people want it,” Bill Barnes of Pisgah Partners, an energy project development consultancy, told the FT.
https://www.zerohedge.com/news/2018-03-16/us-shales-dirty-big-secret
Old article while LTO had a higher API than now.
https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/oil%20and%20gas/pdfs/797317%20implications%20of%20light%20tight%20oil%20growth.ashx
Pipeline stocks down because of tax changes.
https://www.bloomberg.com/news/articles/2018-03-15/pipeline-stocks-plunge-after-ferc-kills-key-income-tax-allowance
There are wikis for the Western Interior Seaway, the source of US oil somewhat Cretacious. Here’s a pic:
https://upload.wikimedia.org/wikipedia/commons/2/25/Cretaceous_seaway.png
Anyone have a similar pic for Russia?
Posted before, oil pipeline constraints in the Permian:
https://seekingalpha.com/amp/article/4155197-permian-takeaway-capacity-issue-watch
Gas takeaway constraints in the Permian.
https://www.platts.com/latest-news/natural-gas/denver/analysis-permian-gas-production-surge-faces-looming-21583692
Both are immediate concerns if the target of 1.3 million from IEA is to be considered. Which I don’t. But if we consider a 800k increase, the gas is still a problem, immediately. Both will be relieved by next year. Making this year far short of IEA projections. IMO. For the future, they want the oil as 3 miilion barrel expansion projects are in the hopper. But no final decision on the gas? ?
Hi Guym,
The trend for Permian shale gas increase for the past year has been about 1.5 BCF per year while LTO output has increased about 650 kb/d in the past 12 months in the Permian basin. There’s about 2.3 BCF of excess natural gas capacity in the Permian according to the Platts article so for 2018 if growth is like the past 12 months natural gas takeaway capacity should be adequate. This assumes the Permian continues to grow at 650 kb/d and the rest of US LTO continues at 350 kb/d (as has been the case for the past 12 months). If your 800 kb/d estimate for US LTO increased output in 2018 is correct, natural gas should not be a problem in 2018 for the Permian basin.
I was comparing it to the 1.3 million estimate of the IEA. And, as the EIA and IEA seem to think 2019 increase will be much the same, I do see that as a problem to their estimates. If production goes to 1.3 million in 2018, and another 1 million in 2019, they will be hawking sales of oil and gas along I-20.
If it has total capacity of 8.5, and only 14% left, that is 1.19 according to the article. That is not plenty for 2018.
The article said takeaway was at 73% of capacity, so 27% of 8.5 is 2.3 BCF/d.
From Platts piece:
Currently, Permian Basin production takeaway capacity is estimated at just over 8.5 Bcf/d, with approximately 73% of that volume being utilized.
I don’t believe the IEA estimate, but a US LTO increase of 1 million barrels per day in 2018 seems possible (same rate of increase as 2017),
I thought you said more capacity was coming online in 2019, so that was less likely to be a problem, (maybe that’s oil pipeline capacity.) If there is no expansion of natural gas takeaway capacity in 2019, then there will be a shortage at that time and LTO output would be restricted due to lack of natural gas pipeline capacity. Looks like 1.98 BCF/d of new pipeline by Oct 2019. So if output continues increasing at the same rate, then June 2019 may be when constraints are apparent until the new capacity comes online in October.
If you read a paragraph down, the pipelines also incorporate the Anadarko, which has it increased to 86%. That’s 14% not used, unless my reading comprehension has degraded considerably. That extra capacity will not be online until Oct 2019. And, at the time, that’s all that has FID, yet. Plus, as you read the article, that is now, and during the summer months it slows down even further. That is not only my conclusion from just reading this article. Per Mark Papa, if you haven’t bought into space currently, the pipeline shortage is coming soon.
Hi Guym,
That’s a demand thing, prices will just drop and the total pipeline capacity will be utilized. The eastbound capacity is underutilized in winter (due to less demand), in summer it goes up due to higher electricity and power plant demand for natural gas. Never been to Texas, but I think you guys use some AC in the summer, no?
If one buys the IEA estimates, (I don’t) then pipeline capacity would be inadequate.
If one believes Permian output will continue to increase at the average rate of the past 12 months (650 kb/c and 1.4 BCF/d), then they may squeak by.
This assumes the EIA estimates for Permian LTO and shale gas output are approximately correct.
More natural gas pipeline capacity may be needed in 2020, if the rate of increase in the Permian continues beyond 2019 (I believe it may slow down by 2021 or 2022 and peak in 2023 or 2024).
We do use AC, a lot. Have a nuclear reactor within 50 miles of me, and a shitpot of windmills, too. My AC does not work worth a shit with gas. I respect your opinion, but I believe Papa has a tad more experience.
Guym,
No natural gas is used to produce electricity in Texas?
Surprising.
Just using the data from the article. Demand will not be an issue. Capacity is 8.5 BCF/d, output 5.7 BCF/d.
Those are the facts.
I see now. You are using the “effective capacity” estimate of 86%.
If lack of gas pipeline is going to shutdown LTO output, the gas will be transported and drive prices down where there is excess supply. The lack of “demand” for the gas will just drop the price of gas and the total capacity of the pipeline (8.5 BCF/d) will be utilized. So in my view the 73% number is the one to use.
Also according to EIA data Permian shale gas output in Jan was 5.68 BCF/d, which is about 67% of the 8.5 BCF/d pipeline capacity.
So we have shale gas output increasing by about 1.5 BCF/d each year and 2.8 BCF/d of excess capacity so if the rate of increase of the past 12 months continues (with 650 kb/d increase in Permian LTO output), there may barely be enough natural gas pipeline capacity if the Gulf Coast Express pipeline becomes operational in Oct 2019 as planned.
Read the last paragraph in the article. These guys are talking to the producers to get the oil shipped out. If he says the Permian production is “tiring”, he probably has a basis.
https://oilprice.com/Energy/Crude-Oil/Trafigura-Leads-The-US-Oil-Export-Boom.html
But I am having trouble fitting your argument into physical space. You said if you drop the demand it will lower the price. I think you mean if you raise the supply, it will drop the price. So, are you saying if we lower the price, it will create more demand, sucking more out of the pipe? I am not certain that would be true. Your argument that a drop in demand will create less in the pipeline is counterintuitive. Ok, now I see, you are saying it will decrease the price, and therefore demand will increase. Ya really think that’s the way it would happen? Electric companies give notice to all their customers that as of next week, because of the cheap gas, their electric bills will now be half price, so use up that electricity? And the power grid fails soon thereafter. I really don’t think power companies are set up that way. Many electric customers have contract prices, and I’ll bet damn few of those contracts pass on savings to customers. Never see it on my bill, anyway.
I know it is March, so it’s too early for the people up North to relate to gas use for anything but heating, right now. However, in Texas, we are already running the AC during the day. Gas use, other than deep winter, is primarily for electricity, gas stoves and water heaters.
You said if you drop the demand it will lower the price. I think you mean if you raise the supply, it will drop the price. So, are you saying if we lower the price, it will create more demand, sucking more out of the pipe?
Oh goddammit man, it’s the law of supply and demand. It’s just not that hard to understand.
True: If the demand drops then the price will drop. Less demand creates a glut so the price drops. That’s just common sense.
True: If you raise the supply the price will drop. More oil means a glut and lower price. More just fucking common sense.
True: If you lower the price the demand will rise. More fucking common sense. No, it will not create more oil. But the price dropped because the demand was low. Lowering the price will bring back that demand.
Goddammit man, it’s just not that hard to understand.
Hey, I am sorry for the beligerance but I am on my fourth toddy right now and I just can’t understand how something so fucking simple can seem so complicated to some people.
Thanks for your insight on the gas (not oil) pipelines. When it happened in Canada, they had to pay the customers to take it.
Hi Guym,
The point is that excess supply drops the price. The first article from Platts says demand is too low because the Permian is competing with Anadarko supply. I contend the gas will be shipped regardless of demand, creating excess supply which will drive prices down. The producers of electricity sell on wholesale markets and their price will be more competitive with lower natural gas prices so a larger share of output will come from natural gas producers.
For those at home, they pay whatever price they have contracted, though these can be changed as contracts are renewed especially with large industrial and commercial customers.
I agree the residential market is relatively fixed.
Eia has a different count than Texas:
http://www.rrc.state.tx.us/media/41515/permianbasin_totalnaturalgas_perday.pdf
And that is the yearly average, so Platts can’t be far off on their estimate.
Guym,
The EIA estimate is for shale gas from the Permian in Jan 2018, no doubt there is some conventional gas as well, I don’t have data on that.
If we use RRC data we have 8.5 BCF/d minus 6.1 BCF/d, so an extra 2.4 BCF/d. Note that the increase from 2016 to 2017 was only about 0.6 BCF/d, if that rate of increase continued there would be enough capacity for 2018-2021.
The RRC data may be too low however, Platts suggested 7.2 BCF/d from Permian, that would leave 1.3 BCF/d of capacity, from RRC data from 2013 to 2016, Permian output rose by about 0.8 BCF/d on average, so again if those rates of increase continue capacity might suffice for about 18 months so capacity might squeak by.
The problem is we don’t have very good data.
One possible way to estimate is to take EIA statewide data and find % of RRC reported natural gas from Permian basin. Then multiply that % times EIA estimate for a guess at Permian natural gas output.
Using that method Permian natural gas was 30.67% of total Texas natural gas output in Dec 2017 according to RRC PDQ data, EIA has TX nat gas at 22.7 BCF/d so 22.7 times 30.7%=6.95 BCF/d for Permian output in Dec 2017.
A similar exercise for Dec 2016 and June 2017 suggests Permian natural gas output has been increasing by about 1.6 BCF/d for the past year.
You are correct based on these numbers that natural gas pipeline capacity will be short by Dec 2018, if the 2017 rate of increase in Permian natural gas output continues throughout 2018.
6.95 BCF/d+1.6 BCF/d= 8.55 BCF/d which is over the pipeline capacity of 8.5 BCF/d.
You are correct, natural gas pipeline capacity is likely to be a problem in the Permian basin by the end of 2018, if the 2017 rate of increase in natural gas output continues in 2018.
Per your comment above, thanks. That’s all I was saying. Indications are that it may be a problem if it ramps up too fast. I think compounding the problem recently, is the gas percentage being completed in the Delaware Basin. Plus, Anadarko is going nuts completing in their Alpine High area, which is mostly gas and condensates. Why? I have no idea. agree we do not have good current data, just RRC from last year. I have read it a couple of other articles where they state it is way higher than expected, but as of now, I have no other real data.
While the supply side of the IEA estimate is really messed up, the demand side is equally flawed:
https://seekingalpha.com/amp/article/4156909-iea-oil-market-report-oecd-storage-builds-far
Factor in declines plus a new hawk in the State Department and we will have a really bullish case for oil the second half. And that is for 2018. Maybe a price increase for 2018 and 2019 will dampen demand. It should. A price spike would also encourage more production, but I would still see 2019 as being squeezed for any increase in inventory.
So….
How much will diesel fuel cost this fall?
Anybody willing to hazard a guess?
I’m going to need an extra couple of thousand gallons.Maybe I ought to buy it now. I have storage.
I can guess a supply shortage, but I can not guess price. That is determined by the talking heads. Suppose there was a obvious coming shortage, and OPEC said they were going to exit the “cut”. That would not affect supply that much, but for months the talking heads would be crying about a coming surplus for months. Price for awhile is unpredictable. Or, volatile.
OFM,
If I were hedging for physical storage of diesel for autumn this year, I’d buy half my requirement now.
My view is that oil price is tending to rise, so WTI at $70+ in September wouldn’t surprise me.
Fernando thinks crude will be $80/b for the 2018 average price and his “model” had $63/b for the 2017 average price, its a linear rise to 2019, so do the math to figure end of 2018 (about $89/b), maybe $85/b in the fall. Look back at spot prices for diesel in the past when crude was $85/b to make a guess.
Based on the data in Nov 2010 Brent was about $85/b and diesel was $2.37/gal.
Best guess I can make, likely to be wrong.
Data at EIA under liquids, prices, spot.
Well, something is increasing:
https://lh3.googleusercontent.com/-9KEjTlInr4w/Wq1FXIzEI8I/AAAAAAAAn9Y/AJkGSvb2PQY3f7CJdqo431EL8n1_adRJQCHMYCw/image%255B11%255D?imgmax=800
I will try to put my understanding of the second half 2018 in logical perspective. 2019 looks as bad as 2018, but let’s look at the second half of 2018. Latest revision by IEA shows a net draw on inventory levels for OECD by the end of 2018. Assumptions are for a 1.5 million increase in demand over 2017. A 1.3 million increase in production from the US, and a .5 million increase from mostly Canada and Brazil. Note, they say their projections may be upset with a fall in Venezuela production. Vast understatement. They assume OPEC will continue their “cut” into 2019. Which is assured, because Saudis want the Aramco offering to happen when oil price is north of $80 a barrel.
IEA:
https://www.iea.org/oilmarketreport/omrpublic/
First, let’s look at demand. They are .2 million barrels off of last year’s demand, and .3 million barrels off of 2018 demand, making a net of .5 million barrels:
https://seekingalpha.com/article/4156909-iea-oil-market-report-oecd-storage-builds-far
As for the increase in production from Canada and Brazil. The Canadians have a huge pipeline constraint that will last for a good while. Their oil now has a discount to WTI of almost $31 a barrel. No huge increase here. In January, Brazil increased production by 3 thousand barrels a day. Yeah, don’t see the .5 million barrels happening.
Ok, let’s look at the 1.3 million increase from the US. First of all, we have completion restraints, temporary sand shortages, and personnel and driver constraints which make this estimate doubtful. But we have oil pipeline constraints for the Permian, which makes anything over 800k bpd extremely unreasonable.
https://seekingalpha.com/article/4155197-permian-takeaway-capacity-issue-watch
If that was not bad enough, we are already against the wall on gas pipeline restraints. Note these gas pipeline constraints make further increases as both EIA and IEA project, impossible. Of course, the oil companies can always pay the pipelines to take their gas to get FID status.
https://www.platts.com/latest-news/natural-gas/denver/analysis-permian-gas-production-surge-faces-looming-21583692
It’s very entertaining to watch this slow moving train wreck in progress. Last month, IEA warned that we may be looking at a new glut. This month, they are already hedging that it may develop worse than the small deficit they are now projecting. Of that, we are assured.
The sole expansion gas pipeline in the works is the Kinder Morgan Gulf Express due online Oct 2019. That is the only one, so far. Pending regulatory approval. With an increase in pipe costs, no doubt.
Kinder Morgan has fallen on bad times. It’s not clear how they are going to clean up their situation. There is talk of dividend increases, but that’s after the . dividend cut done some time ago.
Or, if you want to really scratch your head, you can ponder exactly how the following article fits into known logic.
https://oilprice.com/Energy/Energy-General/Oil-Markets-Should-Fear-A-Demand-Shortage.html
There is no denying that this person is capable of independent thought. Reminds me a lot of Burns and Allen.
Guym,
That’s Gail Tverberg. Her comments aren’t rated very highly by the community at this site, I believe.
I dunno. I confess I read the occasional tabloid to expand my mind. Does the lack of single family construction affect oil demand, and leave families homeless? Stay tuned in for the next series. And a shortage of supply will make prices go down. Original.
I confess, I read her blog. But agree, need to subtract a few levels, and confine your analysis.
She is also a Jesus Freak.
Ok, found the blog. It is obvious she is not in it for the money (like a shorter). God bless her.
Tverberg has a canned message that sells well enough that she is probably making a living from it.
Ask her a real question, and she’s helpless and hopeless. I know, I saw here at a conference doing her canned presentation a few years back.
I can’t remember what I asked her, but any high school science student could have asked the same simple question. She froze up and was utterly incapable of a coherent answer.
She doesn’t like me——
I bring up the wrong points.
But agree OFM, pretty challenged.
Norwegian Drilling Capex – Statistics Norway – million Norwegian krone
Spending on drilling for exploration and field development declined following the fall in oil prices
But spending on drilling for existing fields that were already on stream has held up
Field Development https://pbs.twimg.com/media/DYmNjQMXcAYsZ0n.jpg
Fields on Stream https://pbs.twimg.com/media/DYmNllgW4AY_mgB.jpg
How giving gas and oil companies in Oklahoma tax breaks has left the state with insufficient funds to run it.
“Since 2009, more than two dozen state agencies have seen their budgets slashed by more than 30 percent. The cuts have been especially painful in public schools, where funding has dipped since 2015, even though enrollment has climbed by about 10,000 students statewide.”
https://apnews.com/f058811fa1fb4bf68a34e3c243a14a6f
Boomer. Take a look at the Oklahoma Energy Producers Alliance.
Shale is getting the tax break, and between that and “well bashing” that destroys conventional wells as a result of big Hz well fracks, a rift has arisen between shale and conventional producers.
A rift also exists with regard to school funding. Stripper producers are local people and are interested in school funding. Shale producers not so much.
Thanks for the background info.
I’m reviewing my portfolio and to be honest I am uncomfortable with owning Tullow stock as Kenya seems to be a bit of a basket case and I’d rather not be funding a company with operations in Kenya.
Can anyone recommend any oil companies that are not evil and have a potential upside?
Significant upside, not evil in anyway. Gee, don’t know of any. But if there are some, I’m sure they could hold a conference in a telephone booth.
Suncor, cenovus, cnrl
Weland-Yutani or Tyrell look good for the long term.
“Building Better Worlds!”
“It takes 2500 shale wells to produce what 60 Iraqi conventional wells can do the same” (reddit):
This is a loud and clear call to GM, Ford, GE, Wärtsilä and all other major ICEs and turbine developers to come up with an innovative version of their power house engines that consume shale oil unmodified, straight from the fracking well into the car/truck/airplane fuel tank. That would save a lot of energy transporting, refining and blending the new fuel and a host of other energy-intensive choreography morphing shale oil supplies into classic gasoline.
Equally good, if the new fuel is made self-empowering the high pressure very energy-intensive fracking pumps, which would make the fracking process more efficient.
Efficiency of the new engine/turbine run by shale oil ‘as is’ is not a show stopper as the useful energy any ‘heat-engine’ will ever produce wouldn’t exceed the total energy put into constructing it, as a recently circulating thesis inspires: https://the-fifth-law.com/pages/press-release
Given the sheer number of shale oil wells being concentrated in few regions, if procedures and casual facilities are developed to allow end customers fill their cars and trucks parking not far from the shale oil wellhead, that would be ideal, especially if the prices are cut sensibly, sparing customers expenses compared to if they have had fueled their vehicles with classic gasoline.
On the other hand, what the locals have noticed is that the more Iraq exports crude oil (currently 5+mbpd) the more basic urban services become unavailable, such as street garbage collection. The video below allows a hint on the years-long problem. Local bloggers funnily joked, when exports soon reach 11 or 15 mbpd, all Basrah (main hub of oil export in the country) residents will long be gone!
https://www.youtube.com/watch?v=5zBRieTII3k (sorry, narration is not in English).
E’n E,
Hang in here, friend.
A little comic relief in a forum such as this one is welcome once in a while. 😉
“This is a loud and clear call to GM, Ford, GE, Wärtsilä and all other major ICEs and turbine developers to come up with an innovative version of their power house engines that consume shale oil unmodified, straight from the fracking well into the car/truck/airplane fuel tank”
The width and depth of your ignorance is nothing less than astounding.
I assume the result would be trashed modern cars, consistency of modern fuels taken for granted.
Longtimber, OFM –
The article makes it as clear as mud, no less confusing than any of the unsolved mysteries since 1963, although it is unfolding before our eyes by the day, every day;
– Exotic liquids frack shale oil take energy to make, carefully handle and transport
– Liberating shale oil from rocks takes energy in drilling, high pressure pumping and many others
– Shale oil formations are 100[0]s feet deep in the ground (must be much lower than the aquifer)
– It takes energy to lift liquids from that depth to the surface
– These processes consume gold-grade diesels that have already made their journey in the past from deep in the ground, somewhere in the world, up to being put in fuel tanks of machinery, which took an amount of energy no less than the energy in the diesel burned itself (likely much more, offset by extracting more fossil fuels – as a recently circulating thesis inspires)
– The article states shale oil can only be used to make ‘poor gasoline’ or itself is ‘poor gasoline’, though(?)
– This substance must be higher in energy value than all the gold-grade diesels consumed to bring it to existence, including energies consumed in making all the machinery utilised, and sustaining humans involved, plus covering for wear and tear and repairs
– Yet, it is a ‘poor gasoline’ or it makes ‘poor gasoline’
– One may argue, this is fine, because the volume of the ‘poor gasoline’ extracted is greater than the diesel consumed, offsetting high energy for greater volume of lower-energy
– However, pushing and lifting weight, any weight, requires fixed amount of calculable energy – by physics
– Regardless of the type of fuel consumed in that push-and-lift (using diesel or others), the energy required to achieve that amount of psychical work is a given
– Now, how it is a ‘poor gasoline’ extracted by gold-diesel, pushing, lifting, transporting and refining it done with diesel, all governed by the same laws of gravity, yet it remains a higher energy-value than all the energy put into the process of extracting it up to putting it in fuel tanks of end consumers?
Is shale oil an alchemy process? Is shale oil a no-fuel but a psychological-financial instrument and tool that consumes classic crude oil far more than any energy it ever produces – as the article drags readers to interpret the description given to shale oil?
The article concludes: “As you can see, it is a complex problem. It reflects the fundamental premise of Peak Oil—namely, that we have run out of cheap oil“.
There never was a cheap oil, n. gas or coal since Newcommon’s steam engine back in 1712, but the primitive, poor and cheap collective humans consciousness that has sacrificed in just 300 years indispensable, once-only, millions of years-worth of perfectly-stored, incredibly-dense vast energy reserve – thinking of it – just an easily replaceable cheap commodity!
“but the primitive, poor and cheap collective humans consciousness that has sacrificed in just 300 years indispensable, once-only, millions of years-worth of perfectly-stored, incredibly-dense vast energy reserve ”
You really are clueless about energy traps. You say vast amounts of renewable energy distributed across the earth won’t work. Yet the limited, hard to get at and earth changing/polluting fossil materials that have led civilization into a population/energy trap you tout as indispensable.
Maybe you should back up your claims with more than rhetoric, let’s see some scientific studies, some data, some actual facts.
“Now, how it is a ‘poor gasoline’ extracted by gold-diesel, pushing, lifting, transporting and refining it done with diesel, all governed by the same laws of gravity, yet it remains a higher energy-value than all the energy put into the process of extracting it up to putting it in fuel tanks of end consumers?”
Refineries run on electricity, natural gas, and coal.
The amount of energy used for the whole process is about 40 percent of the energy output. That is how one gets positive energy in a flow system. Then the energy efficiency of the vehicle is about 20 percent so the end amount of applied energy to move a vehicle down the road is 12 percent of the original stored energy. Still positive, but a bit pathetic.
In the end 88 percent of the energy of oil to gasoline to wheels is wasted, except people made money all the way and pollution was given as a free bonus across the landscape.
We now have much better ways to do transportation without oil.
GoneFishing –
From where all the energy will be coming for your “vast amounts of renewable energy distributed across the earth“?
Classic fossil fuels, again?
Duhh, the sun. That great fusion furnace in the sky. Around here it’s 4kWh/m2/day.
Yes, thats round about 10 barrels of oil every day per acre.
You can’t get all, but that’s about the potential.
And there are areas where acres are very very cheap, because there “grow” only rocks.
Yep, no doubt about it,
E’n E is a truly first class bullshit artist.
I would need to fire up my big yellow digging machine to even THINK about keeping up with him.
Might need an even bigger one. Mine is only eight tons.
But it is true that there’s still some room to improve the fuel efficiency of internal combustion engines, especially if materials engineers can come up with some new stuff that’s affordable and will last at higher temperatures….. say ceramic pistons and cylinders and such.
And I don’t personally see any real reason why we couldn’t buy a hundred mpg car within the next three or four years…… if any of the larger companies would commit to building a small low powered light weight two seater, fore and aft oriented.
Hell, I probably build such a car myself, if I had the money and access to a good machine shop with a couple of good machinists to help. I could get most of the parts right off a shelf someplace, including ALL the really hard parts, such as suspension, wheels, bearings, brakes, engine, transmission, battery, etc. All I would have to do is match them up and build a framework to mount them, and wrap it in aerodynamically correct sheet metal or fiberglass.
Nobody is willing to build such a car, because they’re afraid it won’t sell. They’re probably right about that.
VW built some experimental cars this way that got over two hundred mpg.
OFM –
“But it is true that there’s still some room to improve the fuel efficiency of internal combustion engines, especially if materials engineers can come up with some new stuff that’s affordable and will last at higher temperatures….. say ceramic pistons and cylinders and such…”
To construct an ICE with an increased efficiency up to 80%, much more Energy would be needed to be expended in design, retooling, training, testing, iterations, etc, and that all is far MORE fossil fuels added to each copy of the new design, entirely wiping out any efficiency gained.
Why humans cannot create a human (or even an insect or a bacteria) from scratch? Because they need an equal amount of all the energy expended by nature allocated earlier to create humans. It is clearly that hundreds of millions-of-years-worth of solar stored in fossil fuels wasn’t enough to enable humans to create a human before most of fossil fuels are now gone – an indication that what has created humans is much more energy-intensive than all what in fossil fuels, and has taken much more longer than the 100 millions years of stored solar in coal, n.gas and crude.
A new Boeing takes very long years from a concept to first commercial flight. Doesn’t Boeing or Airbus know how to build an airplane or they have not built a few before? Adding efficiency takes more Energy and Time in an order of magnitude than less efficient designs.
Browse online carefully and you’ll find that cranking mechanical power into rotational energy has actually been invented and documented hundreds of years earlier than James Watt. Yet, Watt and his earlier company of engineers needed time and energy until Watt arrived at his new design – and that was all only after most of the forests of Europe became cut and loads of Coal dug up, too.
A buying-and-selling mindset is different from an Energy orientated mentality. Energy is decided by physics, Buying-and-selling is Marketing, psychology, economics, geopolitics and social Darwinism.
Whether big, small, EV or a 96 wheeler, it won’t produce useful energy in excess of the total energy put into constructing it – and that is fossil fuels!.
Even normal compact and small cars don’t sell good – so there will be almost no market for even smaller cars.
People buy SUVs, pickup trucks or fast big sedans – that’s why a Tesla sells better than some smaller electric cars.
Engine improvements get eaten up by more luxury, and bigger cars. And, last but not least, more security equipment as air bags, crash zones, door improvements.
Small Diesel cars with about 60 mpg I have driven 20 years ago. They weightes much less than a ton in these days – impossible today.
So – first smaller cars, then less speeding on interstates – and only third engine improvements.
I don’t know why US cars need so much fuel – and not even only US cars, but all cars sold in the USA.
On our vacation trip through the whole West of the USA we had a Toyota Corolla. A medium big car for Europeans. And we used about 7-8 litres per 100 KM, driving 90% Highways at the given speed limits. Which are very slow for German standard.
My car here would use 4-5 litres with such an relaxed driving style – a Ford Focus. Even an US car, but other engines and customizing (much harder sporty suspension, I can handle this car on winding mountain streets where the US car already would be uncontrollable).
Yankees will buy smaller cars once it’s NECESSARY to do so because gasoline and diesel fuel prices go high enough, or because of rationing.
We have a dysfunctional government in more ways than one. One of those ways is that our federal regulations involving safety and pollution are such that people here who want European models can’t buy them.
Sometimes it pays not to get RELIGIOUS about your political and environmental convictions.
I’m no expert, but I believe we would be far better off with the somewhat higher nitrogen oxide emissions, etc, of European cars, and their FAR LOWER emissions of CO2.
Then there’s the question of how we pay for so much oil… in terms of military expenses, depletion of our own remaining reserves, etc.
But there’s a day coming when we will buy very small, very light two seater fore and aft cars…….. UNLESS larger electric cars get to be cheap enough to stop it happening.
Depletion never sleeps.
I just received this from Jean Laherrere. Click on the PDF link. There are some really interesting predictions here:
Jean Laherrere
dear all
The paper “Forecasts for US oil and gas production » was written in association with Charlie Hall in view of a presentation in New Orleans on 21 March at ACS conference “M. King Hubbert: Is He Relevant?”
https://aspofrance.files.wordpress.com/2018/03/lahall19march.pdf
Many graphs showing EIA-AEO data for each shale play obtained by Mason Inman from EIA (not available in AEO report)
comments will be appreciated
I think this paper will be presented in New Orleans on 21 March at ACS conference.
Basically, US LTO production peaking this year or next with some solid analysis or at least considers sweet spot exhaustion.
I think it is closer to reality than EIA projections, but I think it errs towards too low. Probably, if oil price stays as is, and the sweet spots were where the future oil would come from, it would not be too far off. However, I don’t think that’s the way it will play out. I am mainly looking at the Eagle Ford, as I am not that sure of what the Permian is really capable of, nor am I that familiar with the Bakken. But, I do know that if oil goes to $100, which it will in the not too distant future, there are large areas of that have EUR within the 200 to 300k range, that are largely being ignored, right now. It would take a lot more wells to get it out, but it would, at least, slow the decline they depict. For awhile, not very long, surely. That may be true for the Bakken, too. The Permian, I am not sure of, but I have my doubts based upon what I am looking up. I think Mark Pappa is probably right, when he says it is not the “big bad wolf” everyone assumes.
Yet another disturbance in the oil Force. Restriction of Capital?
https://www.zerohedge.com/news/2018-03-19/aramco-kills-offshore-ipo-will-only-offer-shares-domestically
That got a little bit more splash than it deserved. The Saudis said the shares will list on the KSA Exchange. They did not say they were no longer pursuing other venues. In fact, they said they were, but that they would not provide an ongoing progress narrative.
It has been noted here before that the IPO might restrict to sovereign wealth funds. KSA has one. After the shares are owned by a sovereign wealth fund it can sell them on whatever exchange lists the relevant CUSIP.
But no question it would be hilarious to IPO Saudi Aramco with essentially the KSA sovereign wealth fund as the underwriter.
Guym,
Agree Pappa is probably right and also that Laherrere estimates are probably too low, I agree with Laherrere that the EIA’s AEO 2018 projections are very optimistic, probably by a factor of 2, perhaps more (in terms of overall URR for shale gas and LTO).
I got a bit lost with the total gas estimate: 1000 Tcf remaining but only 140 in shale – where’s all the rest?
The remaining oil estimates are similar in order to those from recent EIA estimates. He also explains well why the reserves seem to swing so much (i.e. 5Gb upward revision countered by 5 Gb downwar in 32 Gb total in the 2017 estimates as the total volume that can be drained is not really known and few tight oil wells has yet run out to end of life.
I think the reason that logistics functions are symmetric is because the crowding function is N squared, I’m not sure if that extrapolates to random Brownian motion as he suggests, but maybe it does. To me it is better explained if there is a large open area and expansion is possible in all directions. If there is more a narrow, linear area or maybe 3D expansion in different horizons then the function would be skewed (i.e. N to the power n, as in a generalised Verhulst equation).
Hi George,
The total US gas URR estimate may be from a Hubbert Linearization for all US natural gas output. See figure on page 9 which shows HL for nat gas at URR of about 2100 TCF and then he adds his 250 TCF for shale gas to get 2350 TCF, then he rounds to two sig figs to get 2400 TCF. Or that’s my interpretation.
I think Laherrere’s estimates are too low. Hubbert Linearization does not give very accurate predictions early in the life of an oil producing region. Shale gas and LTO URR in the US are both likely to be far greater, at least 40 Gb (95% probability it will be at least this high) for US LTO and at least 500 TCF of shale gas (also 95% probability it will be at least this high).
I agree that the EIA’s AEO 2018 is too optimistic.
Note that on several of the charts the vertical axis is labelled aP/CP % which I believe stands for annual production divided by cumulative production in percentage terms.
The actual data is monthly production divided by cumulative production, so for a rough estimate of aP/CP needs to be multiplied by 12 to get the annual production rate.
For US LTO, Jan 2018 monthly production multiplied by 12 (to get an annual rate) divided by cumulative production gives an aP/CP % of 16%.
For comparison, an HL for US C+C from 1864-1870 (when aP/CP % was 16%)would have given a URR estimate of 90 million barrels for the US. As of 2009 about 200 billion barrels of C+C had been produced by the US.
Hubbert Linearization can give very unreliable estimates when aP/CP % is over 8 % as is currently the case for both US shale gas and US LTO.
Looking at the latest ND DMR numbers the prospects outside the Bakken core area seem to be shrinking. There were six wildcats last year with only one success, which was in Golden Valley. The numbers of wells in the non core counties are falling or flat. Divide county was the fifth largest producer but is in clear decline with almost no new wells. McKenzie seems still to be seeing a slightly growing proportion of activity at the expense Dunn, Mountrail and Williams.
Eagle Ford will be interesting given the very low remaining reserves and the rapid fall off shown, so there should be fast feed back to the predictions. Enno Peter’s site shows it in clear decline and the recent plateau period was only because of a big increase from pre 2017 wells – I’d guess that is mostly acceleration rather than capture and will lead to faster decline in the future. Spuds per month have dropped from the 50s to single figures in the last 6 months. DUCs dropped from 954 to 605 in the year to November, and at recent completion vs spud rates might all be gone by the end of summer. I guess the oil/gas and vertical/horizontal mix makes trends complicated but at the moment at least, from these numbers, things are much closer to Laherrere’s estimates than even the previous, most pessimistic predictions.
I think the Barnett shale performance and it’s agreement with the more pessimistic previous predictions is also telling, and with little impact there from recent price increases that I can make out.
Forgot the chart:
Good analysis. I agree, there is no doubt the Eagle Ford is in decline. The biggest holder of core area, EOG, is concentrating a lot of their activities in the Yates acquisition area within Permian’s Loving County with low lying fruit. Tapping their purported 2000 core well inventory in the Eagle Ford to keep up production. There are probably a lot of those DUCs that are dead DUCs. Some of the Permian’s increase will be offset by Eagle Ford decreases.
Hi Guym,
The question is what happens when oil prices rise to $100/b in 2020.
I believe you have said that at higher prices there is some life left in the Eagle ford. I agree. The EIA estimate is too high, but likewise the Laherrere estimate is too low for the Eagle Ford by almost a factor of 2.
Does a 3 Gb URR for the Eagle Ford seem reasonable to you?
I think David Hughes estimate is far more reasonable (7.8 Gb crude plus condensate URR) in Drilling Deeper. Hughes assumes total wells drilled will be about 35,000. As of November shaleprofile.com has 19,876 wells drilled in the Eagle Ford, RRC has 18,085 oil and gas wells on schedule in Eagle Ford, the difference is that shaleprofile includes Austin chalk and some conventional wells in the “Eagle Ford” region, RRC counts wells differently. Of these wells only about 12,219 are “oil” wells in the RRC count. If we assume 200 kb per well on average, that’s about 2.4 Gb of oil from wells completed to date. Typically there has been another 20% of liquids from condensate so 2.4/.8= 3 Gb of crude plus condensate, simply with wells drilled to date.
Let’s say half of the total wells that will be completed are now completed and that average EUR for the remaining wells falls to 150 kb.
12,200*0.15=1.8 Gb/0.8=2.2 Gb+3 Gb=5.2 Gb. Also note that 2016 wells look like they will have an average EUR of about 250 kb, I have used an EUR estimate of 200 kb for 2011-2017 wells and 150 kb for wells completed in the future so the estimate is quite conservative.
I would say 5.2 to 7.8 Gb is a reasonable URR estimate for the Eagle Ford (roughly a 90% probability URR will fall in this range), with a best guess of 6.5 Gb (F50).
There probably is more. However, I just see a slower decline from this point on. I really don’t think we will have to wait until 2020 for $100 oil. Next year, at the latest.
Art Berman had some tweets on EF production yesterday: https://twitter.com/aeberman12/status/976054891461382145 Inital production was higher in 2017 than 2016 but much steeper decline rate. 2017 wells produce less after only a few months.
I think the decline rates have not changed that much. The appearance is there, because Texas only reports oil by lease, and there are multiple wells per lease, some older. There are less wells.
No. It is clear higher productivity in the EF is resulting in steeper decline rates, which in turn requires more expensive wells just to maintain reserve replacement and further erodes economics and finances. As an indication of depletion and over saturation of sweet spots, GOR is increasing, liquids declining. Using individual well test reporting (G-10’s) it is possible to track that even on multiple well leases. A typical EF well now being drilled requires 265K BO to reach payout; they’re not making it. The bloom is off the EF bush. BHP and PXD are bailing; others will follow.
Mike,
Correct that currently EF drilling does not make sense, oil prices will rise to $100/b by 2020, what EUR is needed at $100/b?
EIA numbers for November for Asia-Oceania producers with y-o-y twelve month running average change in parentheses. Overall they seem to be losing about 350 kbpd per year, but probably have had more new production in the last two years than is due in the next two, so this might accelerate.
Colombia had a big drop in February due to some pipeline disruptions from local demonstrations and sabotage. Their target for 2018 is 840 kbpd average, and they are just above that so far.
Oman production has been meeting their NOPEC commitments but I think this may be hiding a decline. All their recent increase has been from EOR on mature, heavy oil fields (they use steam, polymer and soluble gas). November showed a drop that may be maintenance related, but if so did they start any of their offline capacity to compensate? If they do start to decline it could accelerate quite quickly, i.e. at least like the 2005 decline before the EOR developments started. They have nothing major in the way of new oil available and are concentrating on gas development and some renewables to replace gas heating for the steam based EOR field.
(figures from EIA: https://www.eia.gov/beta/international/data/browser/#/?pa=00000000000000000000000000000000002&f=M&c=ruvvvvvfvtvnvv1urvvvvfvvvvvvfvvvou20evvvvvvvvvnvvuvo&ct=0&tl_id=5-M&vs=INTL.57-1-VNM-TBPD.M~~INTL.57-1-OMN-TBPD.M~~INTL.57-1-MYS-TBPD.M~~INTL.57-1-IDN-TBPD.M~~INTL.57-1-IND-TBPD.M~~INTL.57-1-THA-TBPD.M~~INTL.57-1-AUS-TBPD.M~~INTL.57-1-CHN-TBPD.M~~&vo=0&v=T&start=199401&end=201711)
By Jodi the Saudi stock draw has accelerated in the last couple of months (and A/C season start is only a couple of months away).
George, what is the meaning of primary and secondary in the Jodi graph?
Primary is crude (unprocessed), secondary is products.
Thanks!
Any withdrawal rate higher than 300k bpd will be unsustainable for more than about 1 year. Assuming an annual withdrawal of 110 million barrels will bring storages down somewhere near minimum requirements for normal operations including having a buffer towards domestic peak demand in the summer.
Oil and GAs UK is the industry cheer leader for the UK North Sea. The 2018 business outlook is here:
https://oilandgasuk.co.uk/businessoutlook-2/
To me this doesn’t look good. OGUK usually start at awsome and work upwards for any future projections, but they are scraping the barrel a bit here: 12 to 16 project FIDs possible this year for oil and gas combined, with 400 mmbbls of reserves (25 to 30 mmbbls per project, and probably adding only 50 kboepd overall). A couple of these are redevelopments, most of the rest tie-backs and with a couple of short term leases on existing FPSOs. And after these the lack of exploratory recent success would suggest the numbers would decline quite quickly in the following years, except for maybe one or two major projects if there are discoveries. I’d guess Wood (now with Amec/FW), Petrofac, Worley Parsons (are they with MacDermott now) will have to contract further in the next few years, and the subsea suppliers are going to sea more mergers and takeovers as well.
March 20, 2018 – Petróleo Brasileiro S.A.
February’s average oil production (includes NGLs) in the country was 2.08 million barrels per day (bpd), 1.0% lower than the volume produced in January.
http://www.investidorpetrobras.com.br/en/press-releases/oil-and-natural-gas-production-february-3
(Average production in Brazil in 2017 was 2154 kb/day)
Chart on Twitter: https://pbs.twimg.com/media/DYxHzqdX4AIeNds.jpg
It seems that Petrobras has reduced investments too much after the corruption scandale. They have ambitions to increase investments to 60 billion USD in the 2018-2022 period, but it takes time to do more exploration, well development and infrastructure improvements. This is exactly what Petrobras say they will be doing and also speed up the process (more investments). To follow the rig count can be a way to measure if they succeed with that. They need about 30 rigs to facilitate growth and exploration like they want to, most likely 2019 will be a year of growth since the reserves in the Libra area are substantial. For 2018 I am not sure there will be much growth at all because of the lag time to increase activity, maybe a very small increase.
https://oilprice.com/Energy/Crude-Oil/Brazils-Coming-Oil-Boom-Will-Weigh-On-Oil-Prices.html
Brazil – Petrobras estimate that their oil production will increase +0.5 million barrels per day in 2018. And looking at their chart, all of their 2018 & 2019 projects are nearly ready.
Chart on Twitter: https://pbs.twimg.com/media/DY0N225WsAA1zzm.jpg
http://www.petrobras.com.br/en/about-us/strategy/business-and-management-plan/
Thanks for the information. Will be interesting to see how Petrobras implements this.
The capacity of the projects that Petrobas have coming online in 2018 is far larger than their estimated increase in oil production. I don’t know why, I guess they are allowing for natural declines, divestments, delays etc
2016 September – Petrobas say that the industry average oil production decline rate for deep water is 12% (their Campos Basin is 9%)
https://pbs.twimg.com/media/C30KynwWYAA1yUI.jpg
I think there are three limits:
1) They have to drill the wells, which are very complicated (through salt for a lot of them) and deep, and hence expensive and slow. They cancelled a few drilling rig construction contracts in 2015. Ramp up for these 10 FPSOs might be pretty slow, and the deliveries are backloaded for the second half of the year, so most will ramp up through next year and later.
2) The Santos FPSOs that were commissioned over the last ten years are starting to come off their plateaus, and the Campos basin water cut is accelerating, so overall decline rates, both relative and absolute, are going to increase quickly.
3) Bringing that amount of new projects on-line in such a short time, in a company stressed with large debt problems, public scrutiny and most of the previous upper management in gaol, is unlikely to go easily. Problems with logistics, training, management competency, funding and cash flow, etc. are sure to show up as general inefficiency or, a worse case, major lost time incidents.
Petrobras project delays – 3 of those projects listed for 2018 have been delayed/deferred from 2017
2017 project list https://pbs.twimg.com/media/DY1trYNW0AAAZRW.jpg
New posts
GOM by George Kaplan
http://peakoilbarrel.com/gom-production-2017-summary/
and Open Thread Non-Petroleum
http://peakoilbarrel.com/open-thread-non-petroleum-march-21-2018/