Non-OPEC W/O U.S. On Production Plateau

206 thoughts to “Non-OPEC W/O U.S. On Production Plateau”

1. Denise, your optimism is misplaced . Should have been in the earlier post ,but now their is a new post . There is no going back to normal ,normal has left the station .

   https://oilprice.com/Energy/Crude-Oil/Oil-Market-Optimism-Is-Entirely-Misplaced.html

   1. hole in head,

      I agree with that article, basically it says don’t expect high oil prices (above $40/bo) in 2020, but likely oil prices will rise in 2021, I agree.

      A scenario from May, where tight no new tight oil wells are completed and extra heavy oil output is flat, tight oil output falls to 1.5 Mb/d in 2026 in this scenario. World oil output reaches 84 Mb/d in 2026 and 2027. Scenario produced May 17, 2020.

      The extraction rate is for conventional producing oil reserves. Note that in 2019 for the US 4.465 million barrels of oil were produced and producing reserves at the end of 2018 were 28.5 million barrels, extraction rate 4.465/28.5=15.7% for US C C.
      So the World average extraction rate may be able to increase from the 5.6% rate in 2018, the scenario has the extraction rate for World conventional oil rising to 6.1% in 2026, close to the level of 2005.

      

   2. hole in head,

      Dennis Coyne’s name is Dennis, not Denise. Denise is a female name.

      Dennis has pointed this out to you. It would be common courtesy to use his correct name. It would be boorish to continue not to.

2. U.S. Shale Oil Industry May Never Regain Peak

   The biggest-ever shutdown of U.S. shale oil production sets the stage for another historic feat: turning it back on again. But for battered oil stocks, reopening the taps is the tricky part.

   Shut-ins, or the closing off of wells, will hit U.S. production for years to come. So will recent halts in new drilling. The immediate fallout is clear. After hitting a record high of 13.1 million barrels per day as recently as mid-March, total U.S. crude oil production has tumbled to 11 million bpd.

   Some shale oil industry leaders warn of permanent damage. Geology and Wall Street may determine the long-term effects.

   SNIP

   Most of the damage during a well shut-in occurs between 30 and 60 days, he says. The geology of U.S. shale fields makes the wells especially susceptible to damage after prolonged shut-ins.

   Shale is a fine-grained sedimentary rock with very low permeability. That means the liquids and so-called proppants, like sand or ceramics, that are used to crack open shale will remain stuck in the well, causing damage to the rock fractures from which oil normally would flow.

   But EOG’s CEO says that is bullshit.

   “On these shale wells, there’s absolutely no damage when you shut them in and bring them back on for ­— whether it’s two weeks or two months,” Thomas said. “We feel very confident about that.”

   Well, we shall see. However, I do not believe that the “shut-ins” are the major problem. It’s the new wells or lack thereof, that is the problem. Investors have been burned and they will not make that mistake again. There will be far fewer new wells in the future.

   1. Ron.

      EOG ceo really doesn’t know. That is because every well is different.

      There are operational issues out there that predate COVID that will cause more problems restarting shut in wells.

      One is the widespread use of submersible pumps. Another has to do with highly corrosive waters.

      There are many more we have been discussing that are above my pay grade to explain.

      1. Shallow sand,

         From what you have said in the past, many of the shutins will be temporary. Also tight oil wells are often shut in when nearby wells are fracked or for well repairs so there is experience with temporary shut ins. No doubt the EOG ceo is talking about the average well. Most wells will not have problems when they are shut in from what I have read, as long as the shut in period is less than 2 months or so. With proper well prep it could probably be done safely for longer.

         Don’t you shut in some low flow wells each winter?

         1. Dennis.

            I didn’t say all shale wells will have issues.

            We do not use submersible pumps. Those are more likely to have costly issues after shut in than rod pumped wells.

            Also, the wells we shut in do not have highly corrosive water. Thankfully we generally do not have highly corrosive water on any lease. Note, I say generally.

            A well that has highly corrosive water will have issues if it is shut in, with the longer time shut in being worse. The down hole equipment is standing in same for a long time.

            Our wells produce from a highly porous sandstone. Not from a tight shale. I understand that makes a difference also.

            Again, much of this is above my paygrade.

            I will say I have a very good source who says EOG has many down hole issues in the EFS with highly corrosive water and holes where the vertical portion is not very straight. This results in a lot of rod wear and failures.

            Leaving rod worn tubing idle in corrosive water for a few months isn’t a good thing, IMO.

            How long shut in can be a major factor. In 1998-99 a good sized company in our field went under. Many wells were shut in 6 months to over one year. Most experienced down hole failures soon after being re-activated.

            1. Shallow sand,

               Did you say in an earlier comment that a lot of shut in wells have come back online? I might have misunderstood. My guess is that much of the tight oil wells that have been shut in, are unlikely to remain so. This would be particularly true for those wells that have highly corrosive water.

               Based on comments by you and Mr. Shellman, oil production companies are run by highly intelligent individuals. Again I am guessing that they will figure this stuff out. I am not saying there will not be problems, only that they will be managed.

               I am often wrong and know much less than you.

               Is it your expectation that most (say 60% or more) of the shut in tight oil wells will have down hole failures after being shut in for 2 to 3 months?

               Not what I expect, but I would defer to your experience.

               1. Dennis. I wouldn’t say 60%. I don’t have a good estimate. Too many variables. But 60% is likely too high.

                  Keep in mind, however, that a failure of a submersible pump down a 7-10,000’ vertical can cost over $100,000 to repair.

                  I think North Dakota put out some $$ estimates on what it costs to restart a hz well there.

                  In contrast, we started up 28 wells that are on contiguous leases. The wells were shut in four weeks. 4 failed within the first week. About $3,000 to repair them, including down hole equipment. 2 were tubing holes. Two were stuck on the upstroke, and came loose without pulling.

                  Of course, our wells are 1 barrel a day or less of oil, and generally less than 1,000’.

                  I suppose we will see what happens if oil doesn’t trend back lower.

                  Freddy also brings up and issue I have read about and discussed. But I just don’t know enough to comment.

      2. I read some place the propant used in Permian was from local sourses and had low quality. I believe the fractions might get stuck, but that might be solved with refracking I guess.

   2. Ron,

      When oil prices rise to $60/bo or more tight oil might return to 8 Mbpd, my guess is 5 to 6 Mbpd and US output maybe 9.5 Mbpd in 2026 to 2028.

      1. Denis, no doubt things can be fixed and oil production can recover to, say, somewhere near the 2018 peak. I think in these terms even Ron and you could agree.

         But while oil is the single most important foundation of the economy, the economy is not oil. How will all this mess finally play out?

         For now, we can only watch into a very opaque cristal ball. We mitght know a little more in a few months …

         1. Westtexasfanclub,

            I agree we can only guess how the economy will fare in the future. Not sure Ron would agree that production could return to previous peak. I believe he has given me 10:1 odds that the trailing 12 month World C+C peak reached in May 2019 will not be surpassed before Jan 2031. My best guess is about 2028 for the final peak in trailing 12 month World C+C output.

            1. Not sure Ron would agree that production could return to previous peak.

               No, that is just not going to happen. And I am a little shocked that you would based on this statement by you:

               …and US output maybe 9.5 Mbpd in 2026 to 2028.

               Really now? It has been mainly the US that has kept the world from decline. Brazil was up over half a million barrels per day from January 2019 to January 2020. But that surge will not be repeated. OPEC peaked in 2016. Russia has admitted that they are post-peak. And there is little doubt that the vast majority of other producers are in decline. That decline will increase between now and 2028. So where will this huge increase come from Dennis?

               1. Ron,

                  Brazil, Canada, OPEC, Norway. Not a huge increase, just a bit more than 2018. Eventually the World economy will recover, oil prices will rise and output will increase, up to about 2030 or so, after that we may be beyond the peak, peak could occur any time between 2026 and 2033 in my opinion, I think 2026 to 2029 is the best bet, probably 50/50 chance it will be in that Jan 2026 to Dec 2029 time frame, with 25% probability it will be before that interval and a 25% probability it will be later. Depends on a huge number of variables that are not possible for me to predict.

               2. Ron,

                  My scenario near the top of the comments has US tight oil falling from 8 Mb/d at the end of 2019 to about 1.5 Mb/d in 2026. So an estimate that has tight oil at say 6 Mb/d would make it easier to get to a new peak.

               3. My scenario near the top of the comments has US tight oil falling from 8 Mb/d at the end of 2019 to about 1.5 Mb/d in 2026.

                  Jesus H. Christ Dennis, with that kind of a drop on the one nation that has held off peak oil for a decade, you still believe that we are not post-peak.

                  So an estimate that has tight oil at say 6 Mb/d would make it easier to get to a new peak.

                  Easier but not easy at all. If US production falls by 2 million barrels per day there is no way in holy hell with the majority of nations way past peak can make up that difference.

               4. Dennis, from 8mb to 1.6 mb would blow the ship out of the water . It was only the major increase in LTO that had kept the Titanic afloat . Lo and behold ,the ship is taking water and very few noticing it . Tks for this info , missed it in my read earlier .

               5. Ron and hole in head,

                  There is a lot of OPEC oil that has come out of the market from Venezuela, Libya, and Iran. I doubt Venezuela will come back by 2028, but Iran certainly could (just end sanctions) and Libya might resolve at some point before 2028 (probably 50/50 chance imo), Canada can increase, Brazil can increase, and OPEC/Russia cuts can end. Also OPEC has the potential to increase extraction rates.

                  The very conservative tight oil scenario used for my oil shock scenario assumed no new tight oil wells are completed from May 2020 to Jan 2040, not realistic at all in other words.

                  Even in that case a slight increase in World average extraction rates from “conventional” (defined here as C C that is not tight oil or extra heavy oil) producing oil reserves from the 2018 World average level of 5.6% allows a new peak in 2026.

                  The world average extraction rate rises to 6.1% in 2026 in the scenario, note that the US extraction rate in 2019 was 15.7%, and that the World average extraction rate for conventional oil was higher than 6.1% for all years from 1946 to 2001. The lowest annual extraction rate from 1958 to 1987 was 7.8%, the high World conventional oil extraction rate was in 1973 at 12.1% over the 1945 to 2019 time frame.

               6. Ron,

                  OPEC has cut output by 2 Mb/d since the end of 2018, I imagine they can increase output back to that level when oil demand increases after the economic crisis resolves.

                  Canadian output can also increase with higher oil prices, as can Brazilian output. Norway also expects output to increase as Johan Sverdrup ramps up, this may be delayed until oil demand increases, original plan (pre covid19) was to reach their 2009 level of C+C output by 2024.

         2. Dennis, I said somewhere near the peak.

            Let me suggest a window of +– 2mb/d around the 2018 peak.

            Would that be comfortable for both of you?

            1. Westtexasfanclub,

               I think it will be in that window, but believe it highly likely that the current 12 month trailing average peak (about 83.06 Mb/d) will be exceeded in the future, odds about 3:1.

               You are correct that whether a secondary peak is 82.5 Mb/d or 83.5 Mb/d will make little difference in the grand scheme. Your suggestion of a secondary peak somewhere between 81 and 85 Mb/d sounds reasonable to me. I do not presume to know Ron’s position, except that he does not expect future 12 month average output above the recent peak in 2019 (for trailing 12 month average World C+C output).

               1. For most, the important consideration with oil supply is
                  ‘how long can supply stay high enough to avoid fuel based cost restriction on economic activity?’.
                  I don’t pretend to know what that supply level is. Maybe over 80Mb/d [2014 level] ?
                  And secondly, what do we do with that time to prepare for shortfall in affordable supply?

               2. Hickory,

                  In my view a shortage of supply, when it occurs, will lead to higher oil prices and this will accelerate the transition to EVs as EV cost continues to fall, while ICEVs become more expensive to own and operate.

                  If self driving vehicles are ever perfected (10 years away in my view), then costs for TaaS falls and fewer people will choose to own vehicles, most of the miles travelled will be covered by EV robotaxis which drive 80,000 miles per year, so fewer vehicles will be needed to replace the ICE fleet.

                  By 2037 I expect demand for oil to fall below supply due to this effect and oil prices will fall and much of the remaining oil will not be extracted due to lack of demand.

                  Good public policy helps to speed the transition, but even without it economics and the free market may make it happen (though likely less effectively).

3. Thanks for the report is their any reports about oil leases.

   1. Horace

      I do not have access to oil lease data. Perhaps some other participant on this board could provide a source for oil lease info.

   2. Check Texas Railroad Commission production database query for Texas. Other states also have data.

      1. Link to RRC PDQ

         http://webapps.rrc.texas.gov/PDQ/home.do;jsessionid=U9P4OOiTy0AyszCucFkXFrMNmZbw4ELhWo79UUbOexifhH-til6M!-888046471

4. Hi Im from Argentina
   How are you?
   The 1P reserves of Venezuela are 300.000 millon of barrels?
   Whats are real reserves of venezuela according to you?
   Laherrere said XH and covecntional oil are diferent, his projection are depende on U

   1. Mariana,

      Jean Laherrere estimated 175 billion barrels for Venezuala for the URR in October 2018, 75 billion conventional and 100 billion barrels for Orinoco belt (Faja).

      Note that only about 106 billion barrels of 2P reserves remained at the end of 2017, with only 11 billion barrels of conventional and 95 billion barrels of extra heavy Orinoco oil.

      I think Laherrere’s estimate is the best we have.

      See page 134 of link below (35cooilforecast-Oct)

      https://aspofrance.org/2018/10/03/updated-extrapolation-of-oil-past-production-to-forecast-future-production/

   2. Mariana

      Attached is a chart which shows how Venezuela’s reserves grew between 2010 to 2013. I think the growth from 2010 to 2013 were driven by Hugo Chavez’ desire to have the largest reserves. The reserves for 2010 are probably correct. Beyond that? You may want to check this reference for some background.

      https://en.wikipedia.org/wiki/Oil_reserves_in_Venezuela

      

      1. The short story on Venezulan reserves is the jump from 75 Gb to 300 Gb was due to Orinoco extra heavy oil reserves. These are likely overstated by about a factor of 3 for proved reserves, 2P reserves might be about 100 Gb, my expectation is that at most 75 Gb will ever be produced from the Orinoco reserves.

5. I’m long oil. We got the opportunity to by oil as cheap as it’s ever been. I can hold my position 5-6 years or more if needed. I also realize the lows can be revisited. I don’t believe the crash has happened yet. All we’ve seen so far is the panic followed by the response. Then the hope rally.

   When the hope rally has run it’s course. And reality sets in. It’s going to be sell everything. Including US treasuries, and gold.

   And of course the Central Banks will go crazy. But it doesn’t matter what they do or how much they buy. This is and insolvency event that can’t be fixed by more liquidity or more loans. Understand that when a central bank buys a loan or asset backed security. Those loans are just own by the CB’s. The entities that must repay these loans are insolvent without cash flow.

   Because of the way the plumbing of the monetary system works. There has to be economic growth or nobody in the system is solvent. Soon as the first person pays his loan off plus interest there isn’t enough money in the system for anybody else to repay their debt. The constant need for credit creation.

   But it’s not that simple. You can create all the credit and loans you want. But if there is not enough economic activity nobody has the cash flow to service their debts. That is why Covid-19 is the blackest of black swans. It shuts economies down.

   1. I dunno. Japan over the last 20 years seems to be a counter-example: no economic growth, lots of zombie companies, but very few companies taken into bankruptcy.

      If interest rates are zero, there’s no need for the borrower to make interest payments. Companies can keep borrowing to cover expenses, and central banks can continue to buy those loans.

      Perhaps eventually the loans are moved to shell companies with no employees, taken into bankruptcy, the CB writes off the loans (or just keeps it on it’s books without recognizing the loss), and the economy moves forward?

   2. HHH,

      The covid19 crisis will not last forever.

      1. It is going to last one hell of a lot longer than you seem to think it will. And when we recover, if we ever do, it will be a different world.

         This Covid-19 is one hell of a game-changer. And that simple fact has just not sank into the psyche of the average citizen of the world. But it will… it will.

         1. Ron, I have the same gripe with Denise . his forecasts go into 2025 . My question has been how do you get thru 2021,2022,2023,2024 before you arrive at 2025 without witnessing a financial crash that is now baked in with all the wild money printing going on? I am more than sure that Denise is aware of this ( if he wasn^t it would be our miscalculation ) , but he discounts and underestimates the effects of Covid on the worldwide economy which pushes him in the wrong direction . Example let us look at India . Today actual is 50000 infections per day . By September 200000 infections per day . 1% fatality rate is 2000 deaths per day . I am reporting from ground zero . There is now a waiting list at the crematoriums (conventional) where wood is used in New Delhi . What will it be by September ? Now on top off this is the Indo-Chinese border clashes . All resources are being diverted to defense. This is a 2.5 trillion dollar economy that cannot pay the wages of it^s front line healthcare workers that the Supreme Court had to issue directions to settle their dues on threat of imprisonment of senior bureaucrats. This is the 7th largest economy in the world . By the way the top 6 are in an equally big s^^^ . The music is playing ,but the party is over . Ignore this at your peril .

            1. https://www.youtube.com/watch?v=NKvSDYJbNQg
               Why India is in trouble with the Covid virus .
               Why Europe is at a dead end .
               https://www.unz.com/gdurocher/corona-depression-southern-europe-will-never-recover/

               1. Hole in the head. The 2nd article you posted talks about chances of ‘race war’ and refers to some European economies being ‘hobbled’ by thier non-white populations. As a long term lurker on here you finally got me to post.

                  I think that article falls so far below the quality of content folks expect on here it should be removed. It’s depressing to see such idiocy spreading in today’s world.

               2. Olive oil,regret you find the article offensive ,but I did not write it and my objective is to illustrate the structural slowdown in Europe and why growth is not coming back to the world . Too late to delete by me . You can ask the moderators ,if they feel it is inappropriate they are at liberty to delete .

               3. I appreciate your reply, I mean my offence really isn’t here nor there. I agree that growth is looking extremely questionable in Europe, if you can call what we’ve had since ’08 growth. For many europeans real per capita terms growth has been over for some time. The problem with using that article to illustrate the point is that it eschews an analysis of the problem with cheap scapegoating and explicit racism. It derails conversations about energy (which is why we’re here presumably) into something else entirely.

               4. Olive ,growth in EU is looking questionable ? Give me break . With negative growth forecast by the ECB and the IMF ,what are you smoking ? Of course this forum is not about race,color etc and I have an impeccable
                  record of decent behavior . This forum is not about Energy alone . We are in a new world where one has to connect the 3 E which are Energy,Economics and Ecology . Not only that, with the current money printing a new equation is now in play ,this is 3D which is Debt,Deficits and Demographics . All narratives of race,color fail on an empty stomach . Get this straight ^There are no volunteers for starvation^ .
                  Be well and take care ,all of us are in for a tough time ahead .

            2. Hole in the Head

               Denise? Who is Denise? You are either ignorant or provocatively rude. The name is Dennis. Show some respect.

               1. Its been pointed out to him at least 4 times now.
                  Its intentional.

               2. Yes, it’s really easy to insult someone behind a keyboard or an I phone.

                  Bet he wouldn’t do that to someone’s face.

               3. Is it hole in head, or head in hole?

            3. hole in head,

               I expect a severe economic downturn, followed by a recovery. Also the health crisis can be handled with appropriate government action. People around the World just need to look at examples of where things have been done appropriately and where they have been done poorly and demand that their governments take appropriate action.

               Obviously this is easier said than done. The United States is an interesting example where there are essentially 50 different experiments on how to handle this health crisis.

               Smart countries would follow the example of New York State or Germany.

         2. Ron,

            My expectation is 2 to 3 years until World real GDP returns to tne 2019 level. Yes it is different from your expectation and neither of us knows the future.

            I will point out that on oil output most of my estimates of the past have missed the mark on the low side. Perhaps things will be different this time.

            Time will answer the question.

         3. Personally I believe Ron is dead center in the ten ring.

            “This Covid-19 is one hell of a game-changer. And that simple fact has just not sank into the psyche of the average citizen of the world. But it will… it will.”

            But there’s at least some silver lining in every cloud.

            The likelihood of an oil supply shortfall strangling the world economy is now substantially reduced for at least the next two or three years, maybe five or ten years.

            And even though this reprieve is going to be the result of hard times, it won’t stop the electric vehicle industry from growing like grass after heavy spring rains.
            In five years, or ten years for sure, I’m thinking batteries will be cheap enough that for most folks buying an electric car will be a no brainer decision.

            Ditto for a lot of businesses that run light to medium duty trucks and some companies that run heavy duty trucks too.

            We might be able to get along just fine for at least a decade or longer without having to deal with oil prices going well over a hundred bucks and staying there.
            I’m presuming of course that demand doesn’t out run supply before the electric vehicle industry grows up.

      2. One scenario is that virus treatments (monoclonal antibodies, and medications), and effective vaccinations will be available within a year. By the end of 2021, viral drag on the global economy will be much lower, and by the end of 2022 global GDP will be back at 2019 levels (that is 2 1/2 years from now).
         I am not a generally optimistic person when it comes to the affairs of humanity, but this scenario possibility/probability is at least 50% in my guess.
         Until then, mask up if you need to go out in the world.

         There will be multiple monoclonal antibody products available later in this year, and multiple vaccines in the next 6-12 months. It will take time to see which ones work best, and longest.
         For an example of one of more than a dozen monoclonal antibody projects that are under development-
         https://medicalxpress.com/news/2020-06-potent-antibody-cocktail-potential-covid-.html

6. Non-OPEC C+C output minus US C+C output, trailing 12 month average.

   Plateau from Jan 2016 to Mar 2020 (about 5.25 years). From Jan 2012 to Mar 2020 an increasing trend line of about 132 kb/d per year.

   1. Forgot chart

      Note the plateau period was a period of relatively low oil prices on average, the average Brent Price for Jan 2016 to March 2020 was about $58/bo. The Average Brent oil price from Jan 2012 to Dec 2015 was about $93/bo. The price of oil affects output.

      

      1. Naw… See a better chart below.

      2. Dennis

         To get a better idea of the current plateau, one needs to look at a longer production history. Below is the same chart that was posted in the original post but extended back to 2002. My data actually goes back to 1998. The major break in the growth rate of Non-OPEC W/O US occurred in December 2003 at close to 37,650 kb/d. Production rose slowly from there to a new peak in February 2007 as the price of WTI increased. The next peak occurred in Jan-11 at 38, 918 kb/d. Companies had a lot of cash to invest in E&P after WTI went to $140/b in July 2008. I think this was the beginning of the plateau phase of Non-OPEC W/O US. It is interesting to note that December 2021, 39,036 kb/d, is only projected to be 118 kb/d higher than Jan-11, ten years later..

         While I believe we are essentially on a plateau, one could draw a line connecting the peak from Jan 11 to Dec 19. The increase over those 9 years is 900 kb/d or 100 kb/d/yr. However that peak is the result of a confluence of new oil coming on line. Of the 900, contributions from Brazil (126), Canada (163). Norway (202), and the UK (72) totalled 563 in November 2019, which then lead to the peak in December, which was 400 kb/d higher than December 2018

         A more realistic comparison would be to compare Jan 11 to Oct 2021, 39,441 kb/d, essentially 11 years, where the increase is 525 kb/d or closer to 50 kb/d/yr. Regardless how you look at it, Non-OPEC W/O the US is struggling to increase production and as noted above is not in a position to meet increasing world demand, whether demand increases by 500 kb/d/yr or gets back to its more normal 1,000 kb/d/yr.

         

         1. Thanks Ovi, great chart. I don’t have a lot of faith in the EIA forecasts (nor do I expect any of my scenarios are likely to match the future) so the only change I would make is to leave off the part after March 2020.

            I agree non-OPEC w/o US has been quite flat for at least a decade.

            For Jan 2010 to March 2020 the trend line slope is 98 kb/d/year and for Jan 2004 to March 2020 it is 103 kb/d/year, so yes quite flat.

            We can also look at World w/o US and that slope from Jan 2010 to March 2020 is about 246 kb/d/year, which implies OPEC slope for same period would be 148 kb/d/year.

            For the World over the Jan 2010 to March 2020 period the trend line slope is 964 kb/d/year which implies the slope for the US C+C output trend line would be 718 kb/d/year over the past decade plus 3 months.

            Chart below is zero scaled to show how flat non-OPEC w/o US has been.

            

            1. Dennis

               While my headline was a bit bold, the line inside the text was a little more nuanced, “For all intents and purposes, these Non-OPEC countries are currently on a Seven Year production plateau and are not in a position to meet increasing world oil demand.”

               I think my main point is that when we get back to our new normal and yearly demand begins to increase in the 500 kb/d/yr to 1,000 kb/d/yr range, these non-OPEC countries will not be able to contribute anything or very little to the increasing yearly world demand. At best they may contribute 100 kb/d/yr for a few more years. Hopefully the US and OPEC can share in meeting that demand so that both sides can prosper.

               What is interesting is that there have been significant increases since 2004 from many Non-OPEC countries that have been nullified by decling countries. Using the EIA C+C data, below is a list of countries that have added more than 200 kb/d and declined more than 200 kb/d from 2004 to 2020. These 18 countries net out to adding 2,600 kb/d, which is close to the 2400 kb/d that can be estimated from the posted chart above.

               Over those 16 years, the net additions from the positive countries is 8,725 kb/d. Since the net addition was 2,600 kb/d, the net decline was close to 6,100 kbbls or an average decline rate of 380 kb/d/yr.

               In my January 2020 post, using more detailed analysis, I estimated the decline rate from Non-Opec countries which were in decline to be close to 360 kb/d/yr. Using a steeper part of the same data on the chart, a more recent decline rate of 580 kb/d/yr was estimated. That decline is working 24/7 and the results shown in the above chart confirm how difficult it is to increase production with that level of decline working against increasing production.

               

               1. Well, again, we have no idea what historical output from non-US countries would have been under “counter-factual” scenarios (like the US not being part of the mix). If the US had not ramped up it’s production, prices would have been much higher and other countries might have done very different things.

                  For instance, both Mexico and Venezuela allocate oil revenue first to the government. Low oil prices mean much lower investment in E&P. Oily guys on POB in the past have argued that Mexico has a lot of untapped potential. Also, I read stories about China suggesting that low oil prices have greatly lowered production.

                  So, if prices stayed high for a sustained period we might see substantially higher production from some of these laggards.

               2. Nick g

                  I agree that if the US had continued on it slow decline, we would be in a different world now. I think that we would be in a high price scenario with oil around $125/b. We would know if SA could pump at 12 Mb/d. The world might even be pleading with the US to let those Cdn pipelines be built so Canada could help world supply. Many more possibilities to ponder to take up our time while we reduce our outings to stay safe.

               3. I think that we would be in a high price scenario with oil around $125/b.

                  Yeah. Around 2007 I predicted prices would stay indefinitely in a range of about $100-120 (in 2007 dollars). Boy was I wrong…

               4. You are not the only one wrong on the price .Many on TOD were of the same opinion including me .Matt Simmons was talking of $200 per barrel in those years .

               5. Ovi, Nick, hole in head,

                  I also thought oil prices would remain high back in 2012, I did not really think tight oil could expand as much as it has done.

                  Hard to predict this oil stuff so although I present many oil scenarios for the future, I doubt any of them will be correct, best I might accomplish is to bracket potential future reality with high and low scenarios, though when I tried this in 2012, all scenarios were too low, except a high scenario at 2795 Gb URR (should have called it 2800 Gb), I threw out because I thought it was too optimistic (that was the only scenario a bit higher than reality of 8 total scenarios. See

                  http://oilpeakclimate.blogspot.com/2012/07/further-modeling-for-world-crude-plus.html

                  chart from post below, click on it and a bigger view pops up.

                  

               6. Ovi see my chart down thread where I look at non-OPEC minus Russia, US, Canada, Brazil, and Norway and for Jan 2011 to March 2020 the trend in output is -175 kb/d per year, note that the rate of decline seems correlated with oil prices to some degree with a lag of about a year. I expect in a high oil price environment the decline rate will be lower and in a low oil price environment the rate of decline will be higher.

                  Comment at link below

                  http://peakoilbarrel.com/non-opec-w-o-u-s-on-production-plateau/#comment-705076

7. Dennis, your chart is deceptive. Here is the actual chart. The data is through March 2020. Without Brazil the data is way down. And Norway is the other nation that added to the Non-OPEC total. They, like Brazil, will not have the surge they had in the last few months of this chart. But just remove Brazil from the chart and the 12 month average is declining.

   

   1. As I said,, just remove Brazil from the mix and the trend is down. And that is including the 250 thousand barrel per day from Norway’s Johan Sverdrup which just came online last year.

      If the USA is now in decline, and I believe it is, then non-OPEC is in decline and will decline by several million barrels per day between the high of 2019 and 2028.

      

   2. Ron,

      Bullshit.

      My chart simply charts the 12 month trailing average output over the period indicated.

      I chose the same period presented in Ovi’ chart Jan 2012 to March 2020. You can cherry pick some other period to get a chart to your liking.

      Neither of us knows what future output from Brazil, Norway, or Canada will be.

      1. Dennis,

         Reply below to get a wider post for my chart.

      2. Denise ,you may not know but Ron and me know . Brazil,Norway,Canada and all others are over the hill as far as ^economical^ output of oil is concerned . All countries can pump themselves into bankruptcy just like LTO has done . Welcome to the new future.

         1. hole in head,

            Let’s say for a moment that you are correct and that output is too low at $40/bo to meet World demand for oil.

            What do you think will happen to the price of oil?

            If you have the correct answer, what do you believe would happen to output at the new oil price level?

            What is economical to produce is oil that earns a profit for the company producing it.

            1. My take . I don^t see oil going above $60 per barrel at least in 2020/2021
               on a sustained basis . Spikes like the one we had at minus $37 are possible,
               oil traders have their own formulas to which I am not privy. A spike can be $ 80-90 but that will be a spike only . Oil production will remain curtailed because of a tanking economy worldwide and supply will be controlled by agreements like we have now . Economical price ?? My opinion is $80/90 if we want an increase in output and bring the now marginal oil online .

               1. Hole in head,

                  See 2018, C+C output rose a lot, Brent oil price averaged $71.43/bo that year. I agree prices will be low in 2020, they might rise close to $50 in 2021 which might get oil sands output up. Tight oil needs $60/bo to be profitable imo, perhaps even $65/bo.

               2. 2018 cannot be the study case .2018 the economies of the world were still chugging and there was no Covid 19 . We are in a world ^ upside down^ where past situations and experiences have become irrelevant .

               3. hole in head,

                  I agree during the covid crisis demand for oil will be lower, oil prices will be low, and output will fall to match demand.

                  Where we differ is that you seem to believe this will last forever (or maybe 10 years you have not really been clear), I think by 2025 the crisis will be resolved and the World economy will be back to 2019 output levels (or higher). That is the comparison to 2018, demand is likely to be pushing oil prices higher and tight oil, extra heavy oil, and ultra deep offshore oil will all be profitable to produce.

                  The one thing likely to prevent this is OPEC falling apart and Russia and OPEC producing all out to maximize their shares of the market, in that case oil prices remain low because the market may be oversupplied and in that case the expensive oil might never be produced, or it will be produced later (after 2030).

                  Unclear which scenario will prevail, my guess is $70-$80/bo oil until the World peak in 2027-2029 is apparent (a few years after the peak so maybe in early 2030s). Then oil prices rise to $120/bo until transition to EVs takes pressure off oil market (around 2037).

      3. Dennis,

         We also have no idea what historical output from non-US countries would have been under “counter-factual” scenarios (like the US not being part of the mix). If the US had not ramped up it’s production, prices would have been much higher and other countries might have done very different things.

      4. Dennis/H i H

         Canada is not over the hill. SU and CNQ have oil sands production costs in the $25/b range, when producing at unconstrained levels.

         Canadian output has the potential to keep increasing production if the world/US needs it because oil sands production is a mining operation or a production operation like LTO, except that they don’t have a decline rate. They primarily have a depletion rate. Here is a summary taken from the Canadian Association of Petroleum Producers.

         “The report projects a constrained outlook for Canadian oil production from 2019 to 2035. Although production will increase by 1.27 million barrels per day (b/d) by 2035, that growth rate is about 6% less than CAPP’s 2018 forecast.

         Total annual production is expected to increase by an average of 3% until 2021, then slow to an average growth rate of 1% annually. Oil sands production is expected to reach 4.25 million b/d by 2035 from 2.9 million b/d in 2018 – a growth rate decline of 12% from last year’s forecast.”

         As mentioned in the post, Alberta is currently operating under output constraint orders.

         1. Denise ,incorrect once again . If the oil in Alberta is not finally ending into the gas tank of Laurel and Hardy in Miami its value is nul,nada,shunya,zero (take your pick ) . All on this forum know of the regulatory and political problems that exist regarding the pipelines from Canada to USA . Nothing new . One can wish them away ,but as they say ^ If wishes were horses ,beggars would ride ^ .

            1. Or…they’d take the train. CSX, for example, which has transported quite a lot of Canadian oil…

               1. Nick g , yes it can go by train,but it is an added expense to an already uneconomical oil .Also added insurance costs due to added risk compared to pipelines . We are discussing economic output.

               2. Hole in head,

                  North Dakota tight oil has been shipped by rail for years, some goes by pipe, but when output is near the maximum some of it goes by rail, especially when oil prices are above $60/bo.

               3. That is what I have indicated to Nickg also , however I also remember that there were many explosions in the rail cars and that is why a pipeline is the preferred mode of transport . We are in agreement that pipeline is cheaper than rail .

               4. hole in head,

                  I agree pipelines are safer than rail, but if governments do not allow pipelines, then rail will be used, and it will be more expensive to transport oil in that case. I also agree it takes a long time to construct a new pipeline, high oil prices make such construction more likely.

            2. hole in head,

               If there is a demand for the oil it will be produced, if the US runs short on oil pipelines will be built or the crude will be shipped by rail. The Canadian crude could be shipped to BC and exported to Asia. It is not only Americans that use oil.

               It is you who is incorrect… again. 🙂

               1. Of course oil can be produced but economical oil that is the question . Pipelines will be built ?There does not seem to be any enthusiasm for them right now and since laying a pipeline is a long term project ,well when will they start . My contention is that pipelines will not be built for political and environmental concerns . As to shipping US or Canadian oil to Asia , are the refineries there designed to handle LTO or the heavy tar sands oil ? I don^t know ,but I haven^t heard of any big shipments out of North America destined for Asia . If it has to be produced but production is a lose making operation ,will the USG nationalise the oil industry ? What do you think ?

               2. US lto already goes to Asia pretty sure they can handle extra heavy oil. Pipelines may or may not be built, they are actually safer than rail, but that is up to Canadians and or US citizens.

                  I do not know what will happen, but expect if oil is in short supply then oil prices increase and more expensive oil will be produced.

                  I think it highly unlikely that the World recession lasts more than 2 years and that World read GDP recovers to the 2019 level by 2025 at the latest, about 75% probability.

               3. Yes, I know that LTO goes to Asia but not huge quantities . I am aware that India purchased a tanker load in January but that was a political buy to please Trump who was on a visit . Nothing big after that . The promised off take by China under the now dead trade deal has not materialised . Just thinking , if the price levels continue to be in the below $ 45 for let us say till 2022 ,will not the industry disintegrate or let us say unravel ? Then if and when supply is short we may not have enough support industries or skilled and experienced personel around to ramp up production . What is your view on this ?

               4. hole in head,

                  That could potentially be a problem, it depends on how long oil prices remain low. The oil industry has been through many booms and busts, things may proceed as in the past, or not, we just do not know. Eventually if oil prices rise high enough, somebody finds a way to produce the stuff to satisfy as much demand as possible at the prevailing price of oil. I do not expect that basic mechanism to change. The details of how much is produced at any point in the future is impossible to predict precisely imo.

               5. DC,

                  China has refineries that are built to handle sour heavy crude. I believe this stems from China’s former policy of lending Venezuela lots of money with the loans to be paid back in crude.

               6. Synapsid,

                  They might have some capacity to refine tight oil, note that I said Asia, which is more than just China, pretty sure the Chinese refineries will be able to handle Canada’s extra heavy oil as the US Gulf coast refineries had been using Venezuelan oil, but can refine the Canadian extra heavy as well. If US tight remains at about 5 Mb/d instead of 8 Mb/d, most of it can be refined in the US and very little would need to be exported.

            3. Denise? You need to go to the ophthalmologist. Or brain surgeon.

               It is Dennis.

               1. Advice taken . 😉

         2. Ovi,

            Does the 2019 forecast (if covid19 crisis had not occurred) from Canadian Association of Petroleum Producers seem reasonable to you?

            https://www.capp.ca/resources/crude-oil-forecast/

            1. Dennis, it sounds reasonable to me. And honestly, it wasn’t all that great.

               The report projects a constrained outlook for Canadian oil production from 2019 to 2035. Although production will increase by 1.27 million barrels per day (b/d) by 2035, that growth rate is about 6% less than CAPP’s 2018 forecast.

               An increase of 1.77 million barrels per day over 16 years is nothing to write home about. But the virus crisis has thrown a monkey wrench into even that. We know the rest of the world, with the possible exception of Brazil, will decline many times that number…. over those 16 years.

               So now we know. Canada will not save us from peak oil.

   3. Ron,

      We could just remove all the nations with increasing output. Then we get declining output. 😉

      1. Dennis, we don’t need to do that, we have a declining output.

         1. Ron,

            Yes over a very short two year period that is true. Over 7 years, not so much. But if we take out all nations that have had increasing output over those 7 years, we increase the chance that the remaining nations will, as a group have a decline in output.

            1. Ron,

               Chart below has non-OPEC minus US, Russia, Canada, Brazil, and Norway. Trend line from right click on data in chart in excel then choose trendline and show equation on chart in options. From Jan 2011 to March 2020 the trend is a decrease of 175 kb/d per year.

               

            2. 3 charts below for non-OPEC C+C minus US, Russia, Canada, Brazil, and Norway C+C output, the first period is the mostly rising/and/or high oil price period from 2004 to 2014, the second is the period of mostly falling/and or low oil prices from 2015 to 2017 and the third is the period of somewhat high prices (relative to 2015 to 2017) from 2018 to March 2020. The decline rates change with the general change in the oil price environment.

               

            3. second chart

               

            4. third chart

               A lot of change in decline rate from -85 kb/d per year in first chart to -636 kb/d per year in second, to -52 kb/d per year in third chart.

               Average Brent price from Jan 2004 to Dec 2014 (first chart) was $81.70/bo for the average monthly price. For the period from Jan 2015 to Dec 2017 the average monthly Brent price was $50.05/bo. The average monthly Brent price was $65.79/bo for the Jan 2018 to March 2020 period. Price may have influence the decline rate to some degree, though this is one of many factors and perhaps not the major reason for the change in the slope of the decline curve for this group of non-OPEC nations.

               

8. What would it take to stop the economic effects of the virus?

   A vaccine? It’s going to have to be something as effective as smallpox’s vaccine. Some 30 or 40% effective vaccine is not going to close the deal and most flu vaccines are about 30 to 40% effective, even when there’s a good match to the current virus mutation. If the mutation departs the match effectiveness drops to 10%. That’s not going to persuade anybody to get on airplanes. It’s going to take a smallpox level of effectiveness.

   A treatment? HIV is controlled with the current treatment. People generally don’t die. That would be an acceptable treatment. Even if it’s an ongoing requirement like a pill per week, people would accept that and old folks would start spending again. But if you don’t have that, and have that within the next year, it’s hard to see how wars don’t start getting underway.

   Way too many people extrapolate money and trading and interest rates to extremes. The world does not work that way. When the situation gets truly extreme bullets start to enter skulls. If a price of something is unacceptable, kill whoever has the item and take it, and then devote 10 or 15 minutes to deciding how it was a moral thing to do and sleep just fine.

   The same will evolve with oil. It will be made to flow with bullets if that’s what’s required.

   1. Flu and corona virus are a comparison of apples and oranges, the corona virus hits an immunologically naive population, there is no pressure to change, in case of flu it is different.

      ATM a vaccine seems possible, but will be available in larger amounts in summer 2021 earliest.

9. Ron, Bullshit.

   My chart simply charts the 12 month trailing average output over the period indicated.

   I have no problem with your chart Dennis, it’s your trend-line that is totally deceptive.

   I chose the same period presented in Ovi’ chart Jan 2012 to March 2020. You can cherry pick some other period to get a chart to your liking.

   Dennis, Deeper bullshit! If you go back far enough then every nation on earth has an increasing average. The last seven years, 2013 through 2019 is the best fit to get an idea of what a nation is doing right now. That is not cherry picking.

   Neither of us knows what future output from Brazil, Norway, or Canada will be.

   We may not know exactly what their output will be but we can make a very educated guess. We know that the vast majority of nations already in decline will continue to decline. I just did a quick count using the EIA’s world production data. 99 nations are currently producing any oil. Of those 99 nations, looking at December 2015 March 2020, 58 nations are in decline, 16 showed no change, (less than 500 bpd change), and 25 increased production. So declining nations outnumber increasing nations 2.3 to 1. Those 16 that held steady will soon slip into decline.

   What we do know Dennis is that the declining nations will continue to decline and every year more nations will slip into decline.

   The below chart is Norway for the last 7 years. (The data is through March.) They were in steep decline before Johan Sverdrup came online late last year. But obviously they will soon slip back into decline. You say we do not know that. Bullshit. We do know that.

   

   1. Ron,

      You know what will happen (due to clairvoyance no doubt), I make no such claim.

      We are in agreement that World oil output will peak at some point in time. The timing of that peak we do not agree on, perhaps we can agree on that.

      On the 7 year thing, nothing magic about 7 years in my opinion, I simply chose 8 years, as Ovi had done and fit a trend line. I think it unlikely that the trend will continue, it is clear from the chart that the 12 month trailing average has not followed the trend line.

      I try not to state the obvious.

      1. Ron,

         Here is the chart for trailing 12 month average output for non-OPEC C+C minus US C+C for April 2013 to March 2020 (exactly 7 years). Hopefully this is not too “deceptive”.

         About a 127 kb/d per year average increase in output over that 7 year period.

         

         1. No Dennis, it is totally deceptive to anyone who does not know what you are trying to do. Oil production, from the world or from any nation or group of nations, does not follow a seven-year trend line. Can you imagine anyone asking: What does Norway’s production look like? Answer: I have no idea until I look at their seven-year trend line.

            Even a one-year trend line can turn immediately. But a seven-year trend line?

            Really Dennis, give me a break.

            1. Ron

               I guess I give the readers of this blog more credit for their intelligence.

               It is obvious to any intelligent reader that the trend line is not likely to continue.

               I often leave the obvious unstated. It might deceive a 5 year old, of below average intelligence. 😉

               1. I think I give them far more credit than you do. I know and they know trend lines are always deceptive so I never draw them. What’s the point?

               2. Ron,

                  You miss the point. To an intelligent observer they are not deceptive at all in my opinion. How do we know output is “flat”? I look at the slope of the trend line, that is the best way to evaluate the “flatness” of any period of output, end of story. If you think not, just ignore the “deceptive” trend line.

               3. I really don’t think I am the one that misses the point. A trend line depends on how many years you include in the trend. That Dennis, is what makes it totally fucking useless. You can show almost any trend you wish by including or excluding years of production from your trend line.

                  You accused me of cherry-picking when I wished to show only five years in my trend. Well now, just what the heck were you doing by picking eight years for your trend line?

                  Dennis, the people can see the trend without any straight line whatsoever. Give people a little credit if you will.

               4. Ron,

                  You said in an earlier comment it should be 7 years, I had chosen 8 years, Ovi actually prefers a longer trend of 8 years from 2011 to 2020 or perhaps even longer from 2004 to 2020, now you seem to like 5 years.

                  Whatever.

                  Chart below has non-OPEC w/o US,
                  output trend is an increase of 107 kb/d each year over the most recent 5 years.

                  Chart is zero scaled so trend line slope does not appear very steep.

                  Click on chart for larger view.

                  

               5. Ron,

                  One cannot determine the trend very well from just looking at the chart, it will depend on the vertical scale, and so forth. It is much easier in my view to simply note the slope of the trend line. The trend line just does a simple least squares fit through a set of data points and gives us the slope and y-intercept of the line. Of course it depends on what data set is chosen, just as the chart only shows the data you decide to include. Whatever is the deception you imagine, I cannot fathom.

                  Maybe posting a chart is deceptive?

                  On the cherry picking, one can pick the data that gives the appearance they like. Why did you choose only 5 years, what is special about 5 years? I could now claim that if 8 years is too long, maybe 5 years is also too long as well, maybe we should use 3 years so we can see the recent trend.

               6. You said in an earlier comment it should be 7 years,…

                  Well, I checked back and I cannot find anywhere where I said it should be seven years. I currently use charts for OPEC going back 15 years. But otherwise, I use 7-year charts. I do not use trendlines at all. So I have no recommendation whatsoever for the number of years for trendlines.

                  Trendlines are a total waste of time. They are only used to give the trendline drawers bias of what is happening. It is far better just to show the monthly numbers and sometimes a 12-month average. That way the reader can draw his/her own conclusions. Most are capable of doing that.

               7. Ron,

                  Quote from an earlier comment (the deeper bullshit comment):

                  If you go back far enough then every nation on earth has an increasing average. The last seven years, 2013 through 2019 is the best fit to get an idea of what a nation is doing right now. That is not cherry picking.

                  You also seem to misunderstand that I do not draw the trend line, it is done by excel and is simply based on the data set chosen.

                  There is no more bias than the choice of data set, which occurs every time you post a chart. So that’s why I don’t understand how it could be deceptive, but it may be a lack of understanding on your part about what an ordinary least squares linear fit is.

                  See https://en.wikipedia.org/wiki/Linear_least_squares

                  A nice property of ordinary least squares estimates is that they are unbiased as long as errors in the estimates are random. In short, in most cases the ordinary least squares estimate (which is what the trend line is) will be unbiased.

               8. Ron,

                  Here is a nonOPEC w/o US for past 3 years.

                  

            2. Also Ovi claimed output for nonOPEC wo US had been flat for many years, maybe almost a decade. So the trend line was a test of that claim, a rise of only 130 kb/d is indeed pretty flat a rise of only 0.3% per year.

               Just as you prefer the chart was not zero based to better show changes in output. A zero based chart would be quite flat.

               1. Zero based charts make almost never any sense.
                  If you really want to be “pure” it should then also go on the X axis from either 0 BC or the start of the universe. Every chart would be a dot.
                  The idea behind a chart is to tease information out of data and zero basing may or may not add, but most of it time it won’t.

               2. Weekend peak,

                  On the vertical axis, it shows the “flatness” more, if that is what wants to demonstrate, everyone is different, rather than subjectively determining the trend over the period shown in a chart, I prefer an OLS estimate of the linear trend in the data shown. Generally an infinite range on either axis is not very useful.

      2. We are in agreement that World oil output will peak at some point in time.
         Am I missing something, but isn’t that in the rear view mirror, fading fast?
         November 2018

         1. High trekker

            There have been many peaks in the past that have been exceeded in future years.

            In 2026 to 2032 the May 2019 peak for trailing 12 month World C+C output is very likely to be exceeded imo.

            Perhaps the peak has been passed permanently, I would not bet on that. It is essentially a bet that the World economy will not recover to the 2019 level of real GDP in the next 15 years. A bet that has very long odds.

            1. A bet that has very long odds.
               That is where we differ.
               We shall see.

               1. Yes we will.

                  If you are confident you could make a lot of money shorting the S&P 500. My guess is that you are not that confident, or prefer to not be shirtless. 🙂

               2. I’m in my 70’s, and quite comfortable economically.
                  Got some lucky rolls of the dice, I guess.
                  No need to do anything with the S&P 500.
                  I’m just interested —
                  But, good luck

               3. No bets by me either, though I do think if one is invested in the stock market, long on either S&P 500 or total stock market index is probably the safest long term strategy.

                  If one expects a long term crash, perhaps land or real estate 400 feet or more above sea level would be a better investment.

         2. Hightrekker,

            World C C trailing 12 month average Jan 1974 to Jan 2020, I count 11 peaks over that period nearly one every 4 years on average, though 8 of 11 were from 1998 to 2019(one every 2.75 years on average.) There may be more peaks in the future.

            

   2. I don’t know what oil prices will be in the future Ron, that will affect every nation’s output and the timing of when their output declines, in addition war, disease, political developments, and natural disasters will also affect oil output.

      I do not know the extent or timing of any of these future events.

      Let me know what they are and I will develop a scenario. 😉

10. Shale oil production may take years to recover, despite a short-term uptick

    HOUSTON (Bloomberg) –As oil prices tick up to $40 a barrel following a pandemic-induced plunge, there’s a sense the shale industry is snapping back to life with Continental Resources Inc., EOG Resources Inc. and Parsley Energy Inc. all saying they’re restarting closed wells.

    But top industry forecasters are painting a far darker picture. The reopenings, they say, will do little to bring new growth to an industry being increasingly starved of cash by Wall Street after a decade of excess. Even before the pandemic, investors were demanding companies spend no more than they earn. Now, that’s become a major barrier to future growth.

    Looking out 18 months, U.S. output will still be around 16% below its peak in February, according to an average of surveys from the IEA, Genscape, Enervus, Rystad and IHS Markit. It will probably be at least 2023 before the U.S. again hits its record close to 13 million barrels a day.

    “Nothing is going to be in the money,” said Bernadette Johnson, vice president of strategic analytics at Enverus, a data and research firm. At current crude prices in New York, she added, “very few new wells are being brought on line.”

    That’s about one-fourth of the article. Very good read.

    1. Ron I agree, the article is pretty good. Some parts are a bit overly optimistic as in this last part of the piece:

       Even at $40 a barrel, the outlook for new wells is not good. While costs for the best parts of the Permian Basin break even below this level, the bulk of U.S. shale does not. In any case, most shale producers are busy conserving cash to repay their debts.

       The big unknown, of course, is the price of oil. If prices rise to $50 a barrel, producers may be encouraged to start adding rigs again and drilling new wells, according to IHS. At that point, output could gain quickly, but even Rystad, the most bullish forecaster, doesn’t see the U.S. returning to the February peak before 2023.

       The next level would be the big one. At $60 to $65 a barrel, the U.S. still has the capacity to add 1 million barrels a day for “a very long time,” said Johnson at Enverus.

       The big question is how shale producers win back the trust of Wall Street to provide them with the money to do so. “They have the firepower to grow again but not the financing,” said Raoul LeBlanc, an analyst at IHS. “That trust will take some time to win back.”

       Especially the send to last paragraph is not correct. At $60-$65, tight oil might return to 8 Mb/d in 2028, but I doubt they will find the cash financing needed at that price. I think that price level might get them to 5 or 6 Mb/d by 2026 or so, but I doubt they get back to 8 Mb/d for US tight oil at $65/bo or less.

11. Chesapeake Energy, a Shale Pioneer, Files for Bankruptcy Protection

    The company helped turn the United States into a gas exporter but became known for an illegal scheme to suppress the price of oil and gas leases.

    HOUSTON — Chesapeake Energy, a pioneer in extracting natural gas from shale rock across the country, filed for bankruptcy protection on Sunday, unable to overcome a mountain of debt that became unsustainable after a decade of stubbornly low gas prices.

    The company helped convert the United States from a natural gas importer into a major exporter under the swashbuckling leadership of Aubrey McClendon, a company co-founder and former chief executive.

    https://www.nytimes.com/2020/06/28/business/economy/chesapeake-energy-bankruptcy.html

12. Nat gas price @ historical lows and inventory close to 5 year high for this time of year.
    https://americanoilman.homestead.com/GasStorageGraph.html

13. I don’t understand why everyone is bickering about absolute production numbers. Isn’t what really matter the “net energy” produced, meaning energy out per unit of energy in, or similar type of measure? I suppose if we assume that the ratio is constant then production numbers matter, but hypothetically a world desperate for oil could keep production levels at all time high as long as the ratio is >1. Yet we’d be in trouble long before then. What am I missing?

    1. Peak aware,

       Net energy is really only important on a societal level, so we need to look at net energy for all forms of energy, there are not very good numbers for net energy, it is a complex measurement problem, and different authors get different answers in their analyses.

       Basically net energy is unknown, it is and interesting theoretical discussion, but the data is lacking.

       1. makes sense, thank you.

       2. Yeah, I can’t think of any cases where net energy analysis has really given new information.

          One of the most commonly discussed cases is ethanol, but your comment applies to that as well. Another way of putting it in the case of ethanol: what’s important is liquid fuel return on liquid fuel invested, which is about 5:1.

          1. Nick,

             But the fact remains if one is concerned with a shortage of energy, corn ethanol does very little except line the pockets of large agribusiness, it is very poor policy to subsidize or mandate ethanol production imo.

             1. Dennis is dead on.
                If we were to spend even half of what we spend on moonshine on improving the fuel efficiency of new cars and trucks, we would be way better off……. without even stopping to consider the unnecessary faster destruction of our one time gift of nature farm lands.

    2. Peak aware, yes, net energy is vital. Right now we boost end use energy by using several sources of energy input in the case of oil. Oil products are really a composite of all our forms of energy. As long as we have an excess of energy sources, that works nicely. Bio-ethanol is another composite energy source. They all depend on each other, some more than others, just to get to be produced and to market. Once the demand for energy outstrips the rate of energy accumulation it reduces energy reserves. That can be fatal if allowed to continue. The complacency instilled by the fact that humans have more tools than other animals to acquire food and energy can also be fatal. Complex systems tend to hide their problems and are highly interdependent (weakest link and critical system problem). This means the likelihood of unseen or ignored realities can produce catastrophic failures.

       It is obvious that global energy is on a downslope of net energy. None of the energy systems can operate without large subsidies, both physical and financial. The energy system would collapse without all those subsidies, thus a large portion of the population would not have much access.

       Dr. Charles Hall did a lot of work, produced papers and books on the subject. He covered systems down to their sources, not just at the end use or the particular product.

       Also try this one: http://www.roperld.com/science/minerals/EROEIFossilFuels.htm

       Dr. Hall giving a lecture on the subject:
       https://www.youtube.com/watch?v=teDqDyvnTxc&feature=emb_logo

       1. Great, thanks for the links. Bookmarked for later.

       2. It is obvious that global energy is on a downslope of net energy.

          Well, it does look like fossil fuel is getting more expensive and it’s EROEI (net energy) is falling. On the other hand, your link at roperld.com provides a chart near the bottom that says that renewable have much higher EROEI than FF, and that their EROEI is only getting better with time. The chart dates from 2011: renewables are much cheaper now, so they got that right.

          So…FF is declining in value. Renewables are improving…

          1. Well Nick, those bars have arrows in them. Appears to be a gradient over time, in other words possible future projections much as we see a lot of on this site. I would take those with a grain of salt.

             Hall has shown that in order to have a high level of civilization (some disgressionary spending, art, culture, etc.) there needs to be a minimum of 14:1 real EROI. For comparison, primitive agriculture has an EROI of 10:1 to 50:1. Modern industrial agriculture is a huge energy sink <<1.

             The other fallacy in energy considerations is the time factor. All of what we do is supported by past energy expenditures, some from over a century ago. That confounds the calculations, giving them and artificial boost. What is the energy cost of new energy and production sources? How much of our energy do we have to invest in obtaining and using energy minus the energy of the past (very important in when energy growth is slowing and energy quality is reducing).

             A real EROI takes into account all the support systems needed to produce energy, not just the energy from mine to production/installation. The best paper I found for PV showed an EROI of about 10:1. However that did not include all the energies outside of the industry needed to support, build, maintain etc. Once those systems are included, the EROI drops even further. So even an improvement of 50 percent would not be enough.

             Quality of energy is critical also. Wind power and solar power are low quality energy sources. They are intermittent and highly variable at several time scales. They are not directly capable of being stored. All that means other systems have to be built to improve the quality and/or the systems have to be overbuilt to compensate. It also greatly reduces the efficiency of the system. That destroys the economics and the overall net energy of the system.

             Oil and gas along with coal are storable and of higher quality energy, as well as controllable rate of production.

             PV and wind power are not even at the pilot plant stage. They are fully subsidized by fossil fuels which are subsidized by the economy and the environment.
             So, when all is said and done, the level of civilization support from PV and wind power is probably much lower than what we experience today. They also, so far, cannot produce themselves without fossil fuels and lots of other technologies that may be unsupportable in an all renewable/sustainable society. The idea of producing high tech power systems means having a high tech civilization to produce and support those systems.

             We live in a world that is degrading itself quickly, throwing away the future to have it's now. Sort of like burning your furniture then parts of your house to stay warm in the winter. Eventually one ends up with no house, no fuel and freeze to death the next winter.

             We have already found out the problems of building a civilization upon high quality, dense energy sources of limited availability. Building a new shaky framework of high tech energy sources of lower quality in the hope of maintaining and growing high tech industrial civilization may not be possible, or more importantly, a waste of time, materials and effort. One more downhill path to nowhere.

             1. GF,

                It’s hard to know where to start, with so many unrealistic ideas thrown out at once. So, here are 2 questions:

                1) A basic one: if wind and solar are subsidized by fossil fuels, was oil subsidized by biofuel because horses hauled oil to market for the first 50 years of it’s history (1860-1910)?

                2) If you were in charge of public policy, what policies would you implement?

                1. Unrealistic ideas? Getting nasty already. Typical. Just watch the video, then read Hall’s papers and books. You might gain an understanding beyond your typical cornucopian parochial analysis. Not going further into your typical tar baby argument scenario. Do some actual research without cherry picking.

                2. GF fails the Nick G purity test; not a ‘buy-and-hold-fanboi’; not a believer in ‘renewables’, and I use that term lightly, being the savior of humanity.

                3. GF,

                   I’ve been reading Hall’s work for 15 years. I don’t think it supports what you’re saying. Anyway…

                   You’ve said what you don’t support. What do you support? If you were in charge of public policy, what policies would you implement

                4. For those interested in what Dr. Hall actually has to say on the subject of EROI, start listening to his seminar at 28 minutes. He discusses PV at 33 minutes. It’s so low that even if it doubled, it would still be too low.

                   https://www.youtube.com/watch?v=teDqDyvnTxc&feature=emb_logo

                5. Hi GF,

                   I’ve read a fair amount of Hall’s work, but probably not even half as much as you have.

                   There’s no question whatsoever concerning his professional qualifications.

                   But in terms of renewable electricity generated by wind and solar power, I’m thinking he’s WAY past his expiration date.

                   I don’t know which year he calculated the numbers you mention at the thirty three minute mark, but the video is dated 2017.

                   Everything I’m reading these days seems to indicate that the wind and solar electrical energy pay back is EXCELLENT and fast, in real world terms.

                   Lets not forget that comparing fossil fuel energy IN, when we lose half of it running power plants and sixty to eighty percent of it running internal combustion engines, to electricity, which runs motors at ninety percent or better efficiency, is misleading as hell.

                   If his numbers are from say 2015 or so, the cost of wind and solar power most likely HAS fallen by half or more since then, lol.

14. Hello, I am an occasional reader on this site.
    I don’t understand how total world C+C noted as around 83-84kbpd can be true as the demand is usually noted at around 100kbpd. Or at least that’s what I got from the BP report.
    84 vs 100 – which of these numbers is right? Can someone shed some light?
    Thanks,
    Sabyam

    1. Sabyam, the BP report is crude oil, condensate, Natural gas plant liquids, and other liquids. Here on this site, we usually report report crude condensate only.

       The EIA reports it this way for March 2020:

       World
       Production
       Total petroleum and other liquids (Mb/d) …. 100,518
       Crude oil, NGPL, and other liquids (Mb/d) …. 97,998
       Crude oil including lease condensate (Mb/d) …. 82,308
       NGPL (Mb/d) …. 12,089
       Other liquids (Mb/d) …. 3,601
       Refinery processing gain (Mb/d) …. 2,520

       The top line includes C plus C, NGPLs, other liquids, and refinery process gain.
       The second line is all these except refinery process gain.
       The third line is crude plus condensate only.

       I think what BP reports is the second line. I do not think they report refinery process gain as production.

       Note: OPEC reports crude only. They do not report condensate.

    2. Sabyam,

       Note C C output was 83 million barrels per day in 2018, rather than 83 kb/d (83000 barrels per day).

       A number often reported is “total liquids” output in barrels which includes biofuel, natural gas liquids, gas to liquid, coal to liquid, and refinery gains. A problem with that number is that it includes different types of liquids with different energy content, also much of the NGL is liquid petroleum gases (propane, butane, etc.) which is not all that relevant as oil is mainly used as a transport fuel (gasoline/petrol, diesel/gasoil, bunker fuel/residual oil, and jet fuel/kerosene), the total of those numbers is fairly similar to C C output, see oil-regional consumption tab in BP spreadsheet.

       Also if you convert 2019 output in exajoules to barrels of oil equivalent (use numbers from approximate conversion factors tab of BP stats) you get 86.43 Mb/d for average 2019 “oil consumption” (note that biofuels are excluded from this estimate but CTL and GTL is included) NGLs are included.

       Using regional consumption in 2019 if we deduct ethane and LPG from the total for the World we get 84.7 Mb/d.

       From EIA we have following annual production numbers in kb/d.

       In my opinion C C output is the crucial number as that is where we get the gasoline, diesel, jet fuel, and bunker fuel.

       Link to EIA data below

       https://www.eia.gov/international/data/world

       In chart below (Mb/d) is a strange American convention where Mb means 1000 barrels, everywhere else in the World this would be written (kb/d).

       Also note that consumption is sometimes higher than production if oil from stocks is being consumed, we don’t have very up to date consumption numbers, except annually from BP.

       

    3. Hello,

       World C+C means crude+condensate. But there are other liquids that are accounted for “oil” in general like LNG and Biofuels. The EIA also take account of refinery gains in the production (1 barrel of oil makes more than 1 barrel of products)

       The BP report take account of LNG for the production numbers, but doesn’t take account of the biofuels.

       Usually, you just have to read the notes to understand what they account for production or consumption. Like this one in the BP report for consumption:

       “Notes: Differences between these world consumption figures and world production statistics are accounted for by stock changes, consumption of non-petroleum additives and substitute fuels”

       We don’t have the exact consumption of C+C… Because demand is not about oil, but the products refined.

       1. Tita

          LNG is liquified Natural Gas which actually is liquid methane, CH4. It is methane cooled to close to -160 F to get it into a liquid state at atmospheric pressure. It is not considered to be oil.

          Note that LNG is different than Natural Gas Plant Liquids (NGPLs) which are gases such as propane, butane and pentane which are extracted from the raw natural gas in a processing plant. Again cooling is used the extract these gases from the raw natural gas. They are then stored in medium pressure tanks and they remain liquid under pressure at normal temperatures.

          1. @OVI

             Thank you for the correction… I always mess around the acronyms in my head.

       2. global biofuel about 2Mbpd.
          usa comprises about 1/2, just over 1Mbpd corn ethanol as of 2019

       3. Refineries have an input. It can be measured. Crude consumption can be known, somewhat.

          1. Watcher this crude input data for refineries is hard to find at the World level.

15. An alternate point of view , possible, since now the market has switched to a ^buyers market^ and also power politics is involved .
    https://www.zerohedge.com/energy/will-china-forming-oil-buying-cartel-end-petrodollar

16. This comes in after BP wrote of $17.5 billion a fortnight ago . Of course they do it for the climate , so gallant.
    https://www.reuters.com/article/us-shell-outlook/shell-to-take-up-to-22-billion-writedown-after-climate-review-idUSKBN2410OQ

17. Many thanks Ron, Dennis and Tita!
    Appreciate it

    I have another question. We know that airlines are not going to recover anytime soon. So jet fuel, which is about 5-6% of total production is going to be produced in excess – if the output ratios are maintained. We all agree that diesel, gasoline etc will see increasing demand from here on. Can we arrive at a situation in the near future where we are short of diesel/gasoline but have so much jet fuel that we have run out of space to store it. Or will refineries adjust their production ratios to reduce the quantity of jet fuel which seems to be the more rational/likely scenario. But even then, refineries will have limits to their capability to reduce jet fuel production. What will happen in that situation? I think jet fuel is going to be mixed with diesel/gasoline (not that it will make trucks fly :-)). But even after all this, will we have a disbalanced situation, say in a couple of years, where airline traffic is still down we have just run out of space to store jet fuel and don’t know what to do with it but road traffic has recovered completely which means that gasoline/diesel demand is back up to 2019 levels (or more)?

    1. sabyam,

       The amount of jet fuel produced can be adjusted so that more diesel is produced and less jet fuel, the ratios are not fixed.

       1. But is there a limit to the adjustment? Maybe most refineries, except the most complex ones, can’t do a run where jet fuel produced is zero. Do we know? Thanks

          1. Sabyam, it is not that difficult. Jet fuel is basically kerosene, very close to diesel. Refineries would have no problem making more diesel instead of jet fuel.

18. Frack spread count down to 70 for w/e 6/26/2020 from 78 previous week and down from 379 frac spreads 52 weeks earlier.

    See minute 27 to 28 of video below, but the whole discussion is excellent imo.

    https://www.youtube.com/watch?v=3kVR2cVX_as

    Screen shot from 27:30 of video below.

    

    1. Horizontal oil rig count for 4 tight oil basins, Permian, Eagle Ford, Williston, and DJ-Niobrara.

       Rig count 152 down from 155 previous week and 547 52 weeks ago.

       From one year ago horizontal oil rigs for 4 biggest basins down by a factor of 3.6. Total frack spreads (oil and natural gas for all basins) down by a factor of 5.4 from one year ago.

       Note that Ovi’s chart looks at all oil rigs in the US (horizontal, directional and vertical) in all basins, my chart considers the largest 4 tight oil basins. Note that for all horizontal oil rigs in the US the count was 166 for w/e 6/26 down from 170 the previous week and down from 689 rigs 52 weeks earlier.
       Another way to look at this is to consider all basins except the Permian, Eagle Ford, Bakken and Niobrara. Fifty-two weeks ago the count was 145 in these other basins and for the most recent week reported it was 14 horizontal oil rigs, a decrease by a factor of 10.4 in other tight oil basins (not including the big 4).

       One year ago the big 4 tight oil basins accounted for about 79% of all horizontal oil rigs in the US, for the most recent week it was 92%.

       

19. We have discussed a Biden win and a House and Senate sweep regarding a fracking ban and an offshore drilling ban.

    Another Biden plan is to impose a 15% income tax on GAAP earnings.

    This would be a huge hit to US shale. As I have posted many times, companies such as Pioneer Natural Resources have posted GAAP earnings, yet have paid no income tax. This is because the companies overestimate reserves, which decreases GAAP cost depletion. However, because the companies always spend more CAPEX than income, and are permitted to deduct most of the CAPEX for income tax purposes in the year incurred, they pay zero income tax.

    I wonder what Biden will do about net operating loss carryforwards.

    I can’t tell if Biden will be bullish or bearish for stripper well operators. It seems bullish, but I suspect percentage depletion will disappear and methane rules will come back into play.

    If Biden policies drive the price of oil up over $75 WTI sustained, I would say bullish regardless.

    1. Shallow sand,

       Difficult to get policies enacted, so presidential promises often remain just that and die in the Senate.

       Probably not a lot of significant changes will occur. McConnell is a very effective at blocking most policies, usually 41 Senators is enough to do it. Very doubtful Republican Senators will fall below 41 in the near future. Maybe in 2040.

       1. As someone who is not a US citizen but follows US politics closely since it has a worldwide effect, I am thinking that from a population of 300 million + are there no better candidates than Trump and Biden ? What happened ? I was a one time fan of USA, but now thoroughly disappointed with what is happening . This is a choice between ^Dumb and Dumber^ .Best of luck but ,but and but ,what can I say ?
          P.S : Request no response to this . Have no wish to enter into a political discourse .Treat is a rant from a ^ disappointed optimist^ as I have already stated that I was a onetime fan of USA .

          1. hole in head,

             I used to be a fan as well. Canada will need to build a wall. 🙂

          2. hint:
             “If voting changed anything, they’d make it illegal. ”
             –Emma Goldman.

             (on a minor level, small steps– not going to challenge capitalism)

20. The filibuster will die, and if DC and Puerto Rico become states, that math gets even easier: the Democrats will have a natural advantage. It would break the political deadlock and overcome some of the issues with the electoral college.

    I see the two things as being tied together: the GOP is a monster that must be killed, and prevented from rising again.

    Poison. Stake through the heart. Burn it. Crush it with a steam roller. Bury it and salt the earth. And not just one of those things: all of them.

    I doubt they will take my advice on overkill, but I do hope that Trump gets impeached (so he can’t run again) and that his Tax Return subpoena is enforced so the various court cases against him go forward. And Barr and all the other cronies? Trial and jail.

    And after that, tax Shale as Shallow suggests. (Finally came back on topic… : ) )

    1. Lloyd.

       The shale companies are actually losing money hand over fist and should not be paying income taxes.

       However, in order to get investor money, they juice GAAP earnings by understating cost depletion.

       Here is an example:

       They claim a $10 million well will produce 1 million BOE. So for every BOE produced, they deduct $10.

       In reality, the well will produce 500K BOE over its life. So they should be deducting $20 for every BOE produced.

       If half of the BOE is oil and half is gas and NGLs, and they are getting $35 for oil and $7 for gas and NGL BOE’s, they are clearing $21 per BOE, when the deduction per BOE should be $20 instead of $10.

       Add in $7 per BOE of LOE, $3 per BOE for G & A, and then more for gathering, transportation, land, seismic and interest, they are really losing a load now, and still losing at $50 WTI.

       So, this new tax policy might stop shale from exaggerating reserves, as there would be a financial penalty for doing so.

       1. SS, you are so right . You and Mike Shellman are the guys I look to as real oil men who have an ear to the ground , so sad to see you good guys getting screwed by stupid laws .However don^t expect anything that will be off assistance to you small time drillers whether Humpty is elected or Dumpty is elected .With sympathies, for that is all I can offer . Be well and take care these are tough time for you and Mike S .

          1. Hole, thanks for this. I mean that; I am flattered. And you are right, economists don’t know jack about well economics or corporate finance. My favorite numbnut economist, an MIT grad, no less, is Mike Lynch. About oil and gas, my Lab is way smarter than than that dickhead.

             At $30 we are good in my camp and celebrated 35 years of all being together just yesterday…still going strong. America needs America’s oil.

             Anyway, thanks again. Come see us sometime over at oilystuffblog.com.

             1. Thanks and no thanks . Just stating facts . I also visit your blog but lurk around ,not commenting . Quality stuff just like you .As to economist I have already commented that their job is to make astrology look respectable . On Mike Lynch,I could not have put it better . Keep plugging and take care .

             2. Mike,

                Good to hear you are doing ok. Happy 4th.

    2. I hate to come back to the political discussion ,but I think in the USA on the ballot paper instead of the names should be ^Dumb ,Dumber and Dumbest ^ . I will make a bet that the people will choose dumbest .Why ? Junk food ,junk TV,junk schooling ,junk media all is nothing but junk .So disheartening ,but I better stop before I breakdown .

    3. I can’t say what having the Democrats in charge in DC again will mean to the oil industry, other than that the D’s aren’t dumb enough to strangle the economy by doing anything that will result in a major oil price spike.

       Tighter regulations on drilling, tighter regs on flaring, tighter rules on worker safety, yes, all this sort of thing is a given….. but how much will these changes cost? Ten bucks a barrel maybe?

       In any case those of us still around in ten or fifteen years will know. The Republicans will be out of power, by and large, after the twenty thirty two elections, if not sooner.

       The cultural base that holds the R party together will be pretty much history by then, because it a HUGE portion of it consists of older poorly educated white people such as most of my older relatives and neighbors.

       Once this voting block is gone, and it will be , for the most part, in another twelve years or so, and it’s place taken by younger voters and especially by younger women, the political landscape is going to change dramatically.

       My personal guess is that it would be a good thing to get OUT of the oil business, as an investor, before that happens.

       Incentives for electric vehicles, subsidies for mass transit, and tough energy efficiency standards economy wide are likely to be the new reality.

       But we’re still going to be using probably half as much oil, nationally, twenty years from now, as we do today, because we will still have many tens of millions of legacy machines that run on oil. Some of them will be shiny new ones.

       So any older guys in the business probably won’t have any trouble finding work until they hit their own retirement age.

21. Looking at EIA monthly data, it appears that the stripper wells took it on the chin in April.

    The following states were at or equal to lows going back to the first reported year, being 1980:

    Illinois
    Indiana
    Michigan
    Nebraska
    South Dakota
    Alabama
    Arkansas
    Louisiana
    Mississippi
    California

    These states all have in common the fact that they are not “shale” states.

    Kansas got close to the lows of 1998-99, but not quite there yet. I think it’s coming though, maybe even in May.

    Alaska had one of its lowest “non-maintenance” months.

    Offshore California was down to just 6K BOPD.

    EIA has April at 12.061 million BOPD.

    The shale states and US GOM are just so important to overall US production. Take out TX, ND, NM, CO, WY and GOM and there was just 1.413 million BOPD in 4/2020 from the remaining states and offshore, with Alaska and California responsible for the bulk of that.

    Everyone here seems confident that Biden and the Dems can’t get the job done to end shale and offshore drilling. I assume that is because most here are for the Biden and are worried that this rhetoric will help Trump.

    I contend that the US voter in general only looks at the price of gasoline. He or she does not look into supply/ demand or other factors. Just like there are many issues I know little about in depth.

    Gasoline is low, and likely will be on Election Day. So ending fracking and offshore won’t resonate like it would if gasoline were $4 across the US.

    Shale and GOM are both high decline. No new shale or GOM wells from 6/1/21 to 6/1/25 puts us where Dennis?

    1. shallow sand,

       I don’t have a model for GOM so I won’t venture a guess, but SouthLaGeo or George Kaplan might be able to answer that question. We could also extrapolate from the Katrina episode when new well completions might have been quite low.

       For tight oil, if we assume no tight oil wells are completed after April 2020 to Jan 2025, we get the scenario below. (The 28 Gb URR assumes no tight oil wells are ever completed in the US after April 2020).

       Note that I believe this scenario is highly unlikely, perhaps a 1% probability of US tight oil following this type of scenario.

       

       1. Regarding the GOM, I think it is very unlikely we will see no development drilling until 6/1/25, as per SS’s comment above. (Actually, there currently is some development drilling still going on – Shell and Enven in particular). I could see limited development drilling stretching out til early 2022. Though, if it were to extend until 2025, then the GOM would certainly be in a world of hurt.
          GOM April production numbers are pretty much in line with previous numbers, 1.9 MMBOPD as per the EIA, but we won’t start seeing the impact of limited new development drilling until the 3rd quarter at the earliest.
          Exploration drilling is also not happening as much. This, though, gets back to the issue that has been brought up before regarding the industry’s poor exploration performance going at least as far back as the last down turn that started in late 2014 – is poor exploration performance the result of overall lack of exploration drilling, or the result of lack of big opportunities? Many think it is the former; I think it is just as much the latter. The northern GOM is a pretty mature basin from an exploration standpoint. Unless some new trend gets uncovered (and attempts are being made, or at least considered, to do that), exploration results will be mediocre at best.
          What is the likely impact of a Biden administration on the GOM? I won’t comment too much but, I think there would be way too much pushback to any notion to eliminate drilling. What they could do is reduce the frequency of offshore lease sales, and re-institute some of the tighter drilling regulations that Trump reversed.

          1. SouthLAGeo,

             Thank you for the insight. How much effect do you think the policies in your last sentence would affect GOM output? My guess is very little, but you would know much better than me.

             1. I think you’re right. Area wide lease sales get a fair bit of press, but most of the leases being acquired have already been owned, and dropped, numerous times. The prospects on these leases have either never been drilled because they didn’t compete in the operator’s portfolio, or they have been drilled and resulted in either dry holes or non-economic discoveries. Recent updates in seismic data quality may highlight some new prospect on some of these leases, especially as industry tries to expand some of the subsalt trends. So, having fewer/less frequent lease sales, in my opinion, wouldn’t move the needle on ultimate GOM EUR.
                An increase in drilling regulations will probably just result in slightly higher drilling costs, but, again, not move the needle too much. If a well becomes uneconomic to drill because of these slightly higher drilling costs, it probably shouldn’t get drilled in the first place.

                1. SouthLaGeo,

                   Thanks your insight is invaluable.

       2. A more realistic tight oil scenario where tight oil well completions increase gradually from 2021 to 2025 to roughly the 2017 average completion rate of about 800 wells per month.

          

          1. Using the tight oil scenario above (URR=70 Gb) a revised shock model below (the previous model used the unrealistically low tight oil scenario).

             

    2. “Everyone here seems confident that Biden and the Dems can’t get the job done to end shale and offshore drilling. I assume that is because most here are for the Biden and are worried that this rhetoric will help Trump. ”

       I have a different take on that.
       While you may see or hear a lot of press about “democrats wanting to ban fracking”, I just don’t think it reflects the majority thinking of the party or their voters. Its a vocal minority who get the press. But most are pretty pragmatic, and understand that it is naive to think that you could just turn off the energy spigot.
       On the other hand, I do think it is accurate to think that large majority of Calif voters would be strongly against any new offshore drilling along the west coast. There is a bad history of spill/leakage, and they understand there just isn’t predicted to be all that much oil go after.
       Hi risk for low reward. I agree.

       1. Hickory. You may very well be correct.

          I think everyone flocked to Biden because the far left, although extremely loud, is not all that big.

          However, those not living near the food and fuel don’t give it much thought. I know that from discussions with highly intelligent people who are convinced that we can get off fossil fuels in 10 years or less. People on this board, who are much more versed on the topic think that.

          Heck, both Obama in 2016 and Trump recently have bragged about how great it is having gasoline below $2 and oil below $30.

          The industry is not understood in most political circles. It’s importance has become much less as we have “100 years of gas” and unlimited supplies of Permian shale.

          If you don’t believe me, look at recent polling on fracking. More are opposed than for. But a lot don’t know and a lot say it isn’t an important issue in the 2020 election.

          1. Shallow sand,

             Peak oil is not on the radar screen of most voters. Since late 2014 gasoline prices have been pretty low. That is the limit of most people’s view of oil, what is the price at the pump.

             I think most voters don’t know what the frak is a frac.

             😉

          2. “However, those not living near the food and fuel don’t give it much thought.”

             Yes indeed Shallow Sand. So true about many issues.
             And yes, Biden was selected because he was the most solid moderate candidate in the field.

             The US house just released its big 547 page action plan on climate policy, which can be seen as a reflection of the democratic party’s overall thinking on these matters, and which will likely form the core of longterm energy policy over the next decade.
             “The 547-page staff report from the House Select Committee on the Climate Crisis outlines a plan for the U.S. power sector to reach net-zero carbon emissions by 2040, allowing an economy-wide reduction through building, transportation and industrial electrification by 2050. Notably, the report does not call for an end to natural gas fracking or even explicitly call for an end to coal-fired power, and it leaves the door open for carbon capture technology and nuclear power to play a role in a net zero-carbon grid…”

             Here is an article on this bill from a utility news website-
             https://www.utilitydive.com/news/house-democrats-release-sweeping-climate-proposal-calling-for-net-zero-us-e/580830/

             And the proposal itself-
             https://climatecrisis.house.gov/sites/climatecrisis.house.gov/files/Climate Crisis Action Plan.pdf

             1. Thanks Hickory,

                Unfortunately bills formulated along these lines are likely to die in the Senate. I am not optimistic that either DC or Puerto Rico will ever become states due to Republican opposition.

                Unfortunately most old white guys don’t see this as important, we need more women and minorities in the Senate, and perhaps a lower age, maybe then things might change, maybe require retirement from the Senate at 75 or something (or even age 70).

                Alternative link to report

                https://climatecrisis.house.gov/report

                1. True, but next year I think there is considerably chance that major elements of this ‘position paper’ will form the basis of the energy policy bill that will be signed into law by President Biden.

                2. Hickory,

                   I hope you are correct, I think there may be significant weakening of the proposed policy measures in a House Senate compromise bill. A measure that has the approval of 60 Senators will be needed and their are not many moderate Republican Senators who remain in the Senate, so politically it is an uphill battle, perhaps it will happen, I think the odds are 2:1 against any significant legislation being enacted, but hope I am proven incorrect.

                3. Hi Lloyd,

                   Predicting politics is like predicting peak oil, lol.
                   We can’t know for sure WHEN, but peak oil is a given, sooner or later.

                   I’m thinking that in the near future, the cozy relationship the oil industry has historically enjoyed with the political establishment, for the last CENTURY, is going to turn into one hell of nasty divorce, lol.

                   I can’t say when, with any precision, but in politics, demographics are destiny, and the hard core of the Republican Party infantry consists mostly of hard up, poorly educated old white people down South, people who grew up in a different era, historically, culturally, economically, and politically.

                   These people are starting to die off, and the die off proceed faster year after year. There aren’t many left of the generation that actually fought WWII, and any older “boomer” will tell you he hears about a funeral among his acquaintances damned near every month.

                   These people can’t help being who they are, given that they (to channel HRC and her ghost writer) “were shaped by the village that they grew up in. ”

                   But their kids, to some extent, and their grandkids, to a truly major extent, are different. That’s why states such as NC , Florida, and Texas are turning purple and or blue, with Virginia gone blue already.

                   Other southern states and midwestern states will follow, but in most cases it will take a little longer.

                   My personal guess is that it will take “only ” about three more election cycles for the USA to regain its political sanity, including the upcoming fall election. Eight to twelve years from now, we will have Western European style energy policies, environmental policies, etc.

                   So…. my guess is that the Democrats will control Washington starting in January, and that we can expect somewhat more rational energy and conservation policies to be put into effect starting next year. State level D control will follow in at least half a dozen currently red states within the next eight years.

                   The kids being hauled to Sunday School these days are playing space alien and dinosaur games on their pocket computers in the back seats of their parents’ cars. Damned few of them will grow up believing the world was created in seven days, etc. Black and Latino cops, teachers, and politicians are getting to be quite common down south except in some of the smaller towns where the SAME politicians and cops have been in control for the last generation or longer. The grave worms will soon have the last of them, and the incoming new generation of politicians and cops grew up in the era of integrated schools and business.

                   If I had any money in the oil biz, I would be getting it out.

    3. shallow sand,

       For April 2020 GOM output was 1915 kb/d and tight oil output was 7102 kb/d for a total of 9017 kb/d, so the rest of US output was 3044 kb/d.

       I took a quick look at the impact of the Macondo blowout (I mistakenly referred to Hurricane Katrina earlier) and the Federal Moratorium on new drilling in 2010. From Aug 2010 to July 2011 Fed GOM C C output fell from 1555 kb/d to 1211 kb/d. The trend in the data for those 12 months was an annual decline rate of 25.5%, with likely very few wells completed over that period.

       If we assumed a 25% annual decline rate in Fed GOM output from a 2020 level of 1900 kb/d, we would be at about 450 kb/d in 2025. My guess is this is a conservative estimate, actual decline rates might be higher than 25% per year, but I would defer to others with greater knowledge.

       Chart below has a one year period from 2010-2011 for Federal GOM output in kb/d.

       

       1. Another case of a disaster on an offshore platform was the Piper Alpha disaster in July 1988. In the year after this, when I assume few wells were completed in the UK North Sea, UK output fell at an annual rate of 39%. So it is possible GOM output might fall anywhere between 25 and 39% per year if no new wells were completed. For the UK North Sea output fell by 7.6%/year on average from 2002 to 2010, a period where new wells continued to be drilled, so a minimum estimate of perhaps 15% decline per year with no new development seems reasonable, perhaps 20%+/-5% might be a good guess. SouthLaGeo’s guess would be better on what decline rates we might see with no new wells completed (even though he believes such a scenario is improbable.)

22. Meanwhile Venezuela continues to fall off the map. June production down to 422K/day, lowest in 75 years. One can only imagine what kind of hell is happening down there. They are falling in a hole from which they may genuinely never recover as a major oil player.

    https://oilprice.com/Energy/Crude-Oil/Venezuelas-Oil-Production-Continues-To-Plummet.html

    1. Venezuela will cease to exist by year end. Venezuelan culture will only exist in Miami. Very sad

       1. That was said 5 years ago.
          We shall see

23. From https://aspofrance.org/2020/07/02/lunion-europeenne-risque-desubir-des-contraintes-fortessur-les-approvisionnementspetroliers-dici-a-2030-une-analyse-de-the-shift-project-juin-2020/

    To have visibility on future oil availability, it is essential to have access to a good database of the petroleum industry taking into account proven and probable reserves, detailed field by field. The great merit of this study by The Shift Project is to have acquired an access license – generally very expensive – to one of the three world reference databases, that of Rystad Energy, widely used by industry and the International Energy Agency. Using mostly inaccessible data in the public domain, The Shift Project was able to conduct a The Shift Project was able to conduct a prudential analysis of the risk relating to the sustainability of future oil supplies to the European Union.

    His conclusion is that severe constraints on world oil production are likely to be exerted directly or indirectly on the EU during the 2020 decade, and that they seem inexorable beyond 2030. Rystad indeed sees a cap of world oil production around 2025, then the entry into decline after 2035. Consequently, the stake of the “peak oil” constitutes a strong reason which is added to the climatic constraint to undertake urgent planning of the exit of oil.

    In view of its gravity, the problem of the “peak oil” here posed remains for the time being radically under-documented and poorly understood, writes The Shift Project, indicating for example that the word “oil” does not appear once in the roadmap sent to energy commissioner Kadri Simson in December 2019 by the new president of the European Commission, Ursula von der Leyen. Any forward-looking government should explore the valuable data from these private databases, the cost of access being within the reach of any State in the Union. But none have done it, according to The Shift Project, which describes as a scandal and a promise of catastrophe the fact that it was he, a modest think tank, who began to do this work and this twelve years after crossing the conventional oil peak, a fact still largely overlooked by most politicians. The Shift Project also raises the question of the central role of the IEA in the energy visibility of European states, wondering where are the prudential counter-analyzes of the member states of the European Union, the first world political entity importing oil before China and the United States, whose own oil sources are paltry and declining, and which is surrounded by nation states whose stability is jeopardized by the decline of the oil windfall, such as Algeria.

    In short, an unprecedented study on the precariousness of oil in Europe, the urgency to anticipate peak oil and to accelerate the energy transition.

    1. Thanks for the info.

       It makes me think that the headline in this post is very close to being correct. The only new field I am aware of now is in Guyana and XOM says they will reach output of 750 kb/d by 2025. In the meantime decline of 400 kb/d/yr to 500 kb/d/yr will be working 24/7.

       1. Ovi,

          It is likely that in a high oil price environment (above $65/bo) the decline rate of non-OPEC w/o US may be less steep, more like 100 kbo/d. Eventually we will see a final peak in oil output, but Canadian, Brazilian, and Norwegian output, along with increases in OPEC output may keep World C+C output rising with a final peak in 2026-2030, in my view. Much will depend on demand, if scenarios that posit that World oil demand never returns to the 2018 level are correct, then the peak is behind us. For me those low oil demand scenarios have perhaps a 33% probability.

24. Oil demand to return to pre-pandemic levels by 2022, Goldman says, but unlikely to peak this decade

    Key Points
    In a research note published Thursday, analysts at Goldman Sachs estimated global oil demand would decline by 8% in 2020, rebound by 6% in 2021 and “fully recover” to pre-coronavirus levels by 2022.

    It comes after oil prices staged a dramatic recovery in the three months through to June, notching their best quarterly performance in 30 years.

    Over the long term, analysts at the U.S. investment bank said they now believed oil demand would not peak before 2030.

    Of course, they are talking peak demand, not peak supply. The current paradigm is that supply will never peak but demand will. That is, they believe there will be plenty of cheap oil left in the ground when consumption peaks and begins to decline. I don’t believe that but as I said, it is the current belief among economists around the world.

    1. Ron, the job of the economists is to make astrology look respectable . Fret not .:-)

    2. Outside China, all consumption recovery apparent is non organic. Meaning it’s happening from govt, not capitalism.

       There are big growth numbers to be quoted, but none of them will be Y/Y. Goldman may be expecting another $4T in stimulus next year, regardless of who wins. I doubt 2022 works even with stim.

       Might want to game in a war China/India. That would take consumption down more.

25. Gulf Oil Producer Oman Is Quickly Running Out Of Options
    https://oilprice.com/Energy/Energy-General/Gulf-Oil-Producer-Oman-Is-Quickly-Running-Out-Of-Options.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+oilpricecom+(Oil+Price.com+Daily+News+Update)

26. Citigroup: Oil Will Never Return To $100

    Crude oil prices are unlikely to return to three-digit levels ever again, Citigroup commodity analysts said in a note, as quoted by Bloomberg.

    The idea of oil at $100 or higher, “has far more fantasy than reality at its heart,” the Citi analysts wrote, adding that over the long term, $45 per barrel of Brent was a far more likely oil price scenario than $60 a barrel.

    In more pessimistic news, the Citi analysts said, “Oil product demand growth will falter significantly, change its contours and never return to pre-covid-19 rates of growth.”

    They are not alone in this view of oil product demand after the pandemic erased close to a third of global oil demand at its height. This demand has yet to recover, and many doubt it will recover fully to pre-pandemic levels.

    Meanwhile, there are threats from supply, too. Saudi Arabia appears to have threatened fellow OPEC members that it will start a price war again if they don’t do more to fall within their production quota under the OPEC+ agreement aiming to remove 9.7 million bpd from the global supply until the end of this month.

    Even though OPEC’s production last month fell to the lowest in 30 years, this may not be enough to spur a stronger recovery in oil prices. As a result, OPEC delegates told the Wall Street Journal that the cartel’s leader in all but name had told laggards it would open the taps if they didn’t fall in line.

    Speaking of supply, Citi’s analysts noted in their forecast that with lower production costs generally, production would begin returning at levels of about $45 a barrel, which further made strong price rises even in the longer term unlikely.

    Meanwhile, oil prices are again on the decline despite EIA’s inventory report, which estimated a sizeable drop in crude oil last week. The decline was driven by rekindled fears of a resurgence in Covid-19 cases, especially in the United States.

    By Irina Slav for Oilprice.com

    1. Interesting.
       I can think of just three reasons why oil price would not climb well above $100 in this decade, in the face of depletion-
       1. Global prolonged economic contraction, with demand never recovering to pre-covid levels. This scenario assumes that no Covid treatment or vaccine arises, or the virus mutates to a more dangerous form, or something along those lines. Or that a second crises follows on the heels of Covid- A second bigger crises such as a debt fueled financial system meltdown with long-term/permanent economic damage, for example.
       2. The world economy continues to grow, along with the growth of its 7.8B people (to be about 9.7B by 2050), but somehow all those people find enough energy elsewhere. Such as from the sun, or the wind, in-situ coal gasification, the atom, or some such thing.
       3. All the countries with oil resources that are under production constraint currently, including Venezuela, Libya, Iran, Canada, are able to come back on-line in full swing.

       Personally, I don’t rank any of these scenarios as highly probable.
       Perhaps I am underestimating the ability of the world to keep up oil production after peak with a very long tail of continual production, and perhaps discounting the speed at which transportation will become primarily electric.

       1. Hickory,

          A fourth possibility is that a combination of all your three scenarios comes to pass.

          So a slow economic recovery, with some transition to electric transport, with OPEC fearing stranded assets and raising production enough to keep oil prices under $70/bo.

          I am not saying this specific scenario s likely to play out, but my guess is that there are a number of possible variations on this theme, that make the odds about even that the Brent oil price (I am thinking 12 month average oil price) remains under $80/bo in 2020 US$ until peak supply is reached in 2026-2029, then oil prices are likely to rise (once the peak is apparent about 2-3 years after it has occurred and we have seen a 3% to 4% decline in C+C output.) At that point oil prices rise to $120/b over several years until further transition to electric transport reduces World demand to less than World supply, then oil prices start to fall and OPEC/Russia produce all out trying to steal market share, the glut drives higher cost producers from the market, so no further ultra deep offshore, tight oil, or extra heavy resources get developed due to a crash in oil prices and an oil glut that favors only the lowest cost producers.

          Electric transport will be so cheap at that point that only the cheapest oil will be able to compete.

27. A new Petroleum thread has been posted.

    http://peakoilbarrel.com/us-oil-decline-accelerates-in-april/

    A new Open thread Non-Petroleum has been posted

    http://peakoilbarrel.com/open-thread-non-petroleum-july-3-2020/

Comments are closed.