The OPEC Monthly Oil Market Report (MOMR) for July 2022 was published recently. The last month reported in most of the OPEC charts that follow is June 2022 and output reported for OPEC nations is crude oil output in thousands of barrels per day (kb/d). In most of the OPEC charts that follow the blue line is monthly output and the red line is the centered twelve month average (CTMA) output.
OPEC output was revised lower in April 2022 by 6 kb/d and May 2022 output was revised down by 26 kb/d compared to last month’s MOMR. The bulk of the June increase in output (68%) was from Saudi Arabia, with smaller increases frpm UAE(39), Iran(31), Kuwait(29), and Angola (27). Libya had a fairly significant decrease of 78 kb/d and Venezuela was down by 14 kb/d.
The chart above compares OPEC crude data from MOMR with OPEC data from the EIA through March 2022, the last few months is an estimate that assumes the average ratio of crude to C+C from April 2021 to March 2022 continues from April to June (this may be incorrect).
In the chart below we have Russian C + C and OPEC crude oil output. Output is almost 4 million barrels per day below the 12 month average peak in 2018 (when world output was at its peak) and it seems likely that further increases in output will be difficult due to problems in Libya and Nigeria along with sanctions on Russia, Iran, and Venezuela.
World liquids supply increased to 99.8 Mb/d in June 2022, 9.6 Mb/d higher than June 2020.
It is highly unlikely that OPEC will be able to meet the call on OPEC of 0ver 30 Mb/d in 2022Q4. 2023Q3, and especially the 32.01 Mb/d of 2023Q4.
OECD stocks from a days of forward supply view in chart above. Currently they are at 90 days (includes government and commercial petroeum stocks) simialer to the low points during the high oil price period from 2011 to 2014 and about 7 days below the 5 year average. Looking at the chart it seems stocks at days of forward supply between 90 and 94 days result in high oil prices, I expect high oil prices (which I define as $80/bo or more in 2021 US$) will continue unless we see a severe recession (which I define as World annual real GDP growth of negative 1% or lower.)
Charts below explore the Nine Nations cooperating with OPEC under the Declaration of Cooperation (DOC) which I call the DOC9. All charts that follow have data ending with March 2022.
Charts below show the 9 countries, in some cases two nations are shown on a single chart. Date Is crude plus condensate (C+C) in kb/d and is from the US EIA.
The chart below shows all of OPEC + using EIA data.
Chart below looks at OPEC+ plus the big 4 non-OPEC + producers, Brazil, Canada, China, and United States from Jan 2010 to Dec 2019, with OLS trend line shown.
Final chart considers World C+C less (OPEC+ plus non-OPEC+ big4) and the OLS trend from Jan 2010 to March 2022.
The annual decline rate is 296 kb/d and the exponential trend is an annual decline rate of 2.67%.
It’s interesting that you included smaller nations like Malaysia. They’re one of those states that have gone from net exports to net imports.
I wonder what the true max output for KSA is. Maybe they still have what it takes to hit 12 Mbpd? And Iran, if sanctions were lifted on their energy and financial sector. Maybe 4 Mbpd?
I think KSA maintenance is the issue. What can KSA maintain?
Seems I have read KSA oil inventory levels are low? Maybe had as much as 300 million BO in storage in 2016 and now down to about 140 million BO in storage? How accurate are KSA inventory data?
Thanks for the post Dennis!
Shallow sand,
You’re welcome.
I imagine the inventory data is accurate. I believe KSA can maintain about 10.5 Mb/d for some time, probably true of present output levels for all of big 5 OPEC producers and Iran could increase to 3500 kb/d if sanctions were removed (an increase of roughly 1000 kb/d.
Not clear if there is potential to expand capacity in the big 5, Iraq has made claims to this effect in the past, bit it does not look like it will happen, especially near term (next 3 years).
Petrodude,
I just decided to give an update on all 22 nations that are a part of the DOC. Chart below shows non OPEC plus producers minus big 4 (top 10 producers not part of OPEC plus) with exponential OLS fit (rather than linear fit to data.) Big4=Brazil, Canada, China, and US.
How much oil remains for the world to produce? Comparing assessment methods, and separating fact from fiction
https://www.sciencedirect.com/science/article/pii/S2666049022000524
Survivalist,
Great find. Thanks.
One shortcoming of the analysis is that it ignores reserve growth and the tendency for HL estimates to grow over time. For example, Campbell and Laherrere estimated conventional oil at 1800 Gb in 1998, now the estimate based on HL is 2500 Gb for conventional oil about 22 years later (it is based on data through 2019 which was available in 2020). So about a 39% increase over the 1998 estimate (End of Cheap Oil). Let’s imagine the estimate grows at a similar rate in the future, say 19% over the next 11 years. If that were correct the URR for conventional oil would be roughly 3000 Gb in 2031. I use a slightly more conservative assumption of 2800 Gb for conventional oil as the end point in 2050, this is 12% growth in conventional URR over a 30 year period (2021 to 2050). This estimate may be quite conservative. Also my URR estimate for all C plus C worldwide is about 2950 Gb vs 3500 Gb in this recent paper for conventional plus unconventional oil. Part of my considerations are economic as well as geological, I expect low demand may be a factor after 2030 which will bring down oil prices. This may leave about 500 Gb of the 3500 Gb in the larger World C plus C URR estimate in the ground (primarily more expensive oil sands, tight oil, ultra deep water, and Arctic oil.)
One shortcoming of the analysis is that it ignores reserve growth
I really don’t think they ignored it at all. (See quoted text below.)
and the tendency for HL estimates to grow over time.
Errrr… I thought that was the very definition of reserve growth.
Thirdly, 1P data for a given year usually include annual revisions and extensions to old fields. Often such oil is in long-discovered fields with long-planned developments but which have recently received sufficient approval to be judged as close to market, and hence be reclassified from 2P to 1P. This process contributes to ‘reserve growth’, particularly if there has been an increase in the price of oil, as 1P reserves are based on the current price of oil while 2P reserves reflect estimated future price. In recent years reserves growth (i.e., revisions and extensions to existing fields, as opposed to finding new fields) has usually been the largest category of oil added to the proved reserves of conventional oil, and is often mistakenly reported by agencies as brand-new oil. In reality, much of this oil was discovered, and also its likely volume assessed accurately, long ago (Campbell and Gilbert, 2017).
SNIP
In these databases, total oil reserves for countries and for the world are generated by aggregation of individual field and project reserves. Importantly, and in marked contrast to the 1P data, 2P estimates are generally backdated. This means that revisions to the estimated oil reserves of a given field (or project in the case of non-conventional oil) are recorded against the year the field was initially discovered, or project initially approved. By contrast, 1P reserves are recorded on a ‘current basis’, i.e., revisions to field size are reported for the date the revision is announced. But recall that much of the apparent ‘reserve growth’ of 1P reserves results simply from 2P reserves being reclassified over time as 1P fields get developed. While both approaches, backdating and current basis, have some merit, the advantage of backdating is that it gives a clear picture of how much oil was actually discovered by a given date, see ‘Backdating is the key’ (Laherrère, 2017).
SNIP
Next we compare our global oil URR estimates with those of others. Table A4.1 in Appendix D, expanded from (Bentley et al., 2020; Bentley, 2015), summarizes a wide range of global oil URR estimates made between 1949 and 2021. As the table shows, and contrary to the general perception, URR estimates for global conventional oil have been remarkably consistent over the seventy years or so since they were first estimated. If greater reliance is placed on URRs based on extrapolation of the global oil discovery trend, rather than on the higher USGS URR estimates which include significant allowance for future ‘reserves growth’, then URR estimates for global conventional oil have grown relatively little, from a range of about 1800–2500 Gb several decades ago to about 2200–2800 Gb today. This paper’s HL-based URR estimate for conventional oil, at 2500 Gb, sits in the middle of the latter range.
Ron,
By using a range of low estimates (from those using HL) to high estimates (from USGS etc) they try to confound the issue.
Let’s take the average of the range of 1800- 2500 Gb estimate from 2 decades ago (2150 Gb) and compare with the average of the range from today (2500 Gb). Note however that the 2500 agb is from Laherrere and others and is better compared with Laherrere’s estimate from 1998 at 1800 Gb,
Note that there are not many credible estimates today of 2200 Gb for conventional oil as defined in this paper that would withstand scrutiny by knowledgeable people. The proper range today would be 2500 to 3000 Gb for conventional oil with an average of 2750 Gb.
Note that Laherrere has consistently maintained that there is no reserve growth for 2P estimates. I showed for the US from 1980 to 2005 this was not the case, 2P reserves grew by 63% or an average annual rate of 1.97% per year. The HL estimate is supposed to account for reserve growth in the future when the estimate is made. Clearly if the estimate was 1800 Gb in 1998 and 2500 Gb in 2022, this is not the case. The 2P best guess engineering estimates have historically underestimated actual 2P reserves, this is just a brute fact. The 1p to 2P argument is not convincing at all. See the technical reserve chart below and note the change from 1998 to 2020 (gray vs green curve). Also note that Laherrere’s estimate for 2P reserves at the end of 2020 was about 720 Gb, higher than the Rystad 2P estimate of about 520 Gb (conventional 2P reserves), by roughly 200 Gb. In my view Laherrere’s estimate is better for World conventional 2P reserves, if we exclude tight oil reserves as well (32 Gb) the conventional 2P reserves are reduced to 690 Gb at the end of 2020. By this estimate discovered conventional 2P reserves at the end of 2020 (this includes cumulative conventional output of 1370 Gb) are about 2060 Gb at the end of 2020. To this we add mean contingent resources and future cumulative discovery (including reserve appreciation) to get to 2500 Gb of conventional oil resources (or 2800 Gb by my estimate).
Thank you, Survivalist, for the link.
But……
Some people believe, the world oil production must follow a Hubbert curve. But they can’t prove that this assumption is correct.
Some people believe, the amount of oil which is and will be found, determines the length of the oil age. A reasonable assumption, but is this assumption correct ? Where is the proof ?
What is with economics, what is with physics ? What is their influence on the oil age ?
I have discussed with Jean Laherrere. Its a pity, but he has no idea about thermodynamics.
I have discussed with Charles Hall. He uses the 2nd law for his arguments, but he has never heard of the “entropy rate balance for control volumes” and he can’t apply it.
The reality is, physics (thermodynamics) will determine the end of the oil age, and the oil production will follow a Seneca cliff, not a Hubbert curve.
The following diagram shows the exergy required to produce oil, calculated using the “entropy rate balance for control volumes”. It is the original HG diagram, converted to SI units.
I have marked the exergy, which remains for the consumer, as a triangle in light green. The triangle is for an efficiency of 69% instead of 71%. The right y-axis is the percentage of exergy relative to thermal energy. It is not only valid for a kg of oil, it is valid for a barrel of oil too.
You know, i prefer to display the oil price in percent of an Barrel of Oil Equivalent (BOE). Some days ago i got the idea, to display the oil price together with the result of the thermodynamic calculation in one diagram. The result is below.
The oil price in BOE (maxima from 2008 to 2020) and the calculated exergy (light green) fit perfectly together. This was a little bit astonishing for me, because no correction factor was necessary.
I believe, this is an excellent proof for the validity of the thermodynamic view.
Berndt,
Thermodynamics is important for the entire World energy system. For individual products, it is of less importance.
When you purchase a product does Thermodynamics figure into your determination of whether to make the purchase? If so you are unusual. The exergy content of a product has no bearing on its price.
Dennis, at least your last sentence is totally wrong.
I can show only german text passages which explain that. In german, the explanation is called Lefsches Theorem. I don’t know an english version of this theorem. German explanation:
http://lt.accb.de/das-lefsche-theorem/1-grundthese-die-entstehung-eines-produktes-aus-rohstoffen-und-e/
In the second part of the text, there is a text passage:
Der Endpreis eines Produktes ist 100% Energie.
The end price of a product is 100% energy.
I’m sure, we both can find examples of products which are not 100% energy. Some of the exceptions are explained in the text. For most products the text passage is valid. Oil is no exception.
Berndt,
Perhaps no bearing is not correct. Do you pay for electricity? I do. What is the exergy content of a GWhr of electricity in Saudi Arabia in the summer? Do you think this is how the price of the electricity is determined? I think not. The exergy content of the good is at most a second order effect on the price of a good. Prices are determined by marginal costs (in dollars).
I see. I should have translated:
Der Endpreis eines Produktes ist 100% Energie
to
The end price of a product is determined to 100% by the energy required for its manufacturing.
Sorry, its too much work for me to translate the whole text of http://lt.accb.de/das-lefsche-theorem/1-grundthese-die-entstehung-eines-produktes-aus-rohstoffen-und-e/
or to search an english equivalent.
Berndt,
Any product can be valued as the amount of some other good using an input output matrix for all products. So we could value something in units of labor hours as in the Labor theory of value, or we could use bananas and hava banana theory of value, or we could use energy and and have an energy theory of value. The choice is entirely arbitrary and proves nothing.
The economy runs on energy. It runs on coal, oil, natural gas renewables. Energy is the main thing. Without energy the economy crashes.
The pricing is done in USD. USD are the medium to assess the value of all things, including energy. The value of USD is garanteed by the US military.
Do you really want to replace the USD with bananas or kauri mussels ? I believe you misunderstand something.
Berndt,
You assert energy is the only thing that matters.
Of course I do not want to use bananas, that would as silly as using energy.
If a system runs on energy, an analysis in terms of energy is the only adequate approach.
Of course, the world runs on energy, nothing could be more obvious than that. Had fossil fuels, ancient sunshine, never been found, the world would still be powered by horses and oxen, with a tiny amount of energy from flowing or falling water.
If fossil fuel had never been found the population of the world would very likely be about one billion people, one-eighth of what it is today.
Of course horses, oxen, and water are all sources of energy. Without them we would still be hunter gatherers, using stone tools and throwing spears at animals for food.
Ron,
Nobody disputes that the world uses energy. It uses matter as well, reducing everything to energy is absurd imho. The world also depends on air, water, soil, and an infinite number of other important things. suggesting one is of primary importance misses the complexity of reality.
Dennis, you completely miss the point. The universe contains only matter and energy, nothing else. Everything is produced from energy, that is absolutely everything. All energy that is consumed on earth, comes from the sun. The sun was the source of all fossil fuels.
Of course, a lot of things are important. But none of these very important things are possible without energy.
Dennis, to confuse bananas with energy is… is…. words fail me.
Ron,
No single thing is of primary importance. Can the economy run without matter? I assert that it cannot.
What makes energy of primary importance? Besides just an assertion that this is true. So far that’s all you have presented.
Ron,
Read some economics, particularly Piero Sraffa (Production of Commodities by Means of Commodities), and you will find that any good can be used as a measure of value. Marxists prefer labor as the measure, some people think energy is the good of choice. My point is that it can be apple pie, capital, or bananas, the choice is entirely arbitrary. There is no objective theory of value that makes any sense, if we can choose any item that pleases us to create the “theory of value”. Mainstream economics moved on from this a long time ago (late ninetheenth century).
The claim that everything can be valued in energy is correct, but is also true of labor, bananas, apple pie, matter, whatever good you choose.
See a summary at
https://en.wikipedia.org/wiki/Piero_Sraffa#Production_of_Commodities_by_Means_of_Commodities
Dennis, you mix something.
1. Products are manufactured using energy. Their value in USD is (approximately) proportional to the value of energy (in USD) consumed for their production.
If the world decides to use rubles instead of USD, the above sentences change to:
2. Products are manufactured using energy. Their value in rubles is (approximately) proportional to the value of energy (in rubles) consumed for their production.
If the world decides to use bananas instead of USD, the above sentences change to:
3. Products are manufactured using energy. Their value in bananas is (approximately) proportional to the value of energy (in bananas) consumed for their production.
This is what Sraffa says. It is not important, what is used as a currency.
In each case, energy is used for production, neither USD, nor rubles, nor bananas. USD, rubles, bananas get their strength by the consensus of the world to use them as a currency, and by a strong army/police to ensure, that debt is repayed by borrowers.
“All energy that is consumed on earth, comes from the sun.”
Another form of energy in the ocean is tidal energy. The energy for Earth’s tides comes mostly from the Moon’s gravity and a little from the Sun’s gravity.
The part of the ocean facing the Moon bulges out. The part of the ocean on exactly the opposite side of Earth bulges out too. So as Earth turns, the ocean surface seems to rise and fall. Usually, there are two high tides and two low tides each day. Learn more about tides.
With all that water moving up and down, we ought to be able to capture some of that tidal energy. And we can! We can use tidal energy to supply electricity to our homes and businesses. We can use tidal energy in some places instead of burning coal and oil that contribute to global warming.
Tidal generators (or turbines) work like wind turbines, except it is ocean currents, not wind, that turns them. The spinning turbine is connected to another device that produces electricity.
https://climatekids.nasa.gov/tidal-energy/#:~:text=Another
Geothermal energy is heat that is generated within the Earth. (Geo means “earth,” and thermal means “heat” in Greek.) It is a renewable resource that can be harvested for human use.
About 2,900 kilometers (1,800 miles) below the Earth’s crust, or surface, is the hottest part of our planet: the core. A small portion of the core’s heat comes from the friction and gravitational pull formed when Earth was created more than 4 billion years ago. However, the vast majority of Earth’s heat is constantly generated by the decay of radioactive isotopes, such as potassium-40 and thorium-232.
Isotopes are forms of an element that have a different number of neutrons than regular versions of the element’s atom.
These are all sources of geothermal energy. Their heat can be captured and used directly for heat, or their steam can be used to generate electricity. Geothermal energy can be used to heat structures such as buildings, parking lots, and sidewalks.
https://education.nationalgeographic.org/resource/geothermal-energy
@Dennis
Correct me if I am wrong
E=MC2
means that energy and matter are the same thing when matter is multiplied by the speed of light ^squared.
Energy is of primary importance.
Berndt,
I think you may mean the value of a good is approximately proprtional to the energy embodied in that good. That is not how the value of a good is determined and I am sure there are many products whose relative price bears little relationship to its embodied energy. Just because it could be so, does not make it so.
Note that this is very different from saying the the energy content of a good minus the energy embodied in that good determines its price. Your claim is that because the embodied energy in a barrel of crude has risen to some proportion of the energy content of the barrel of oil will reduce it’s price to zero. If you are going to argue that the price of a good is proportion to its embodied energy (energy content of all inputs to the process as well as the past energy content of all material inputs to the production process) which it is not in general, then that determines the price of the good, the exergy provided by the good itself (say a barrel of oil) would not enter into the equation for determining the price of the product..
Peak avocado,
The equation is more complex than that, but one could also say that it is matter that is of greater importance by a factor of c^2.
See
https://www.britannica.com/video/185388/equation-theory-energy-relativity-mc
for the complete equation for the general case where objects are not at rest.
@Dennis
E=MC2
means they are equal when matter is multiplied by the speed of light squared.
matter needs the multiplier…not energy
Equal means they are the same thing.
The equation is very simple. The implications are profound.
I (very unscientifically) look at matter as really slow energy.
Dennis wrote: What makes energy of primary importance? Besides just an assertion that this is true. So far that’s all you have presented.
Good lord god almighty, how can anyone make such an absurd suggestion as to suggest that energy is not of primary importance. Energy is over half of everything that exists in the universe.
But we don’t have to go to the whole universe to discover the value of energy. Our body converts the hydrogen in carbohydrates and fats in our body to energy. That’s what keeps our body temperaturature to 98.6 degrees F. We burn hydrogen for energy to run our bodies. Energy is not just necessary for life, it is paramount. Your body runs on energy, the entire world runs on energy. Without the expenditure of energy, the world would be a cold dark lifeless place.
You godamn right. I assert that energy is of primary importance. How in holy hell can anyone possibly doubt that assertion?
Ron,
I disagree. Matter is also important, Everything cannot be reduced to one thing (energy).
You have asserted strongly. A claim that energy is abundant (half of everything in the universe) does not make it important, it makes it ubiquitous. Try again.
Of course energy is of prime importance to the whole human engine, the whole engine of life for that matter.
But the mental exercise that Berndt embarks on is a gross simplification, failing to consider all of other important factors that governs outcome in reality.
Factors such biology or genetics, immunology or engineering innovation.
Or politics, human behavior, or the urge to reproduce.
I know there is a great urge t among many to simplify things into simple equations or mathematical relationships. But sorry- its a messy world.
Look no further than oil supply. Geology [or thermodynamics] is only a piece of a multipart puzzle governing oil production. If it was just geology the current situation in Libya would look a little different, as will the ultimately recovered oil from Venezuela.
The chaos of human government and society is just as big a factor in oil production as is ‘net energy/exergy’ considerations.
Dennis, now we have eleminated Sraffa from our discussion.
I recapitulate: For most products, the value of energy used for their production determines their value.
Exceptions from the rule are discussed here: http://lt.accb.de/das-lefsche-theorem/1-grundthese-die-entstehung-eines-produktes-aus-rohstoffen-und-e/
Now we discuss the price of oil, or better, the forces determining the price of oil. Oil is an exception.
1. In the diagram is a line which connects the minima of the oil price between 2016 and 2020. Here we see Lefs rule in effect, When the oil price falls below the value required for production, OPEC cuts the production, and the price stabilizes. The price is always higher than Lefs rule predicts.
2. After 2020, Lefs rule is still determining the oil price. But in addition, the Ukraine war distorts the price. We have to wait until the war ends to separate both effects.
3. From 2008 to 2020 there is a line connecting the oil price maxima. This line is determined by another force: In this period, oil consumer dont’t pay more for the oil than they can earn using the oil. This is a consequence of the thermodynamic effect. And we have a proof for the correctness of the thermodynamics, because the line of maxima fits perfectly to the light green triangle.
4. After 2020, the second force is not recognizable in the price curve of thediagram. But this is not a proof, that the thermodynamics is unvalid. It is a sign, that the world economy is heading toward collapse. Users are forced to pay more for oil, than they can earn with it. Think of my diagrams for car sales.
Peak avocado,
Yes the equation shows the equivalence of matter and energy at rest. If a kg of matter is converted to energy we have a lot of energy would you agree? Roughly 90 E15 Joules. This is how stars produce a lot of energy by converting matter to energy.
If something is abundant its price will be low. If humans could create a workable fusion reactor (so that converting matter to energy was viable) energy scarcity would not be an issue,
The “Exergy” concept needs refining (no pun intended, really). If you can run an oil extraction business 100% on renewables does the Exergy concept still apply? You can spend 100 units of renewables to extract 1 unit of FF, and it still may make sense if the form in (liquid) of the energy extracted has more utility than the fleeting electric form of energy. (yes, I understand that there may be other ways to convert electricity to liquids but that’s not the point here).
There seems to be an unwarranted assumption that the energy dedicated to extracting energy is coming from that same resource, or type of resource. But that does not have to be the case so I think we need to explicitly articulate the assumptions that go into the use of the Exergy concept.
rgds
WP
True Weekendpeak,
and visa versa to your example
You do roughly spend 2units of fossil fuel energy (complete production supply chain from mining to installation)
to generate 30u solar energy
over 30 years
Or, You do spend 12u fossil fuel energy to get 15u corn ethanol energy, or so.
Weekendpeak,
the whole subject is complicated. I have written a book to explain the details. But it is in german language.
https://www.amazon.de/kurze-Endphase-%C3%96lzeitalters-Autoproduktion-Thermodynamik/dp/3347487311/ref=sr_1_1?__mk_de_DE=%C3%85M%C3%85%C5%BD%C3%95%C3%91&keywords=endphase&qid=1639549051&s=books&sr=1-1
No, energy from renewables does not help to solve the problem.
Bernt –
My German is existing but slow. Is it also available in the US market?
grüß Gott
WP
I believe, Amazon delivers worldwide. There are a paper version and an epub version.
Berndt,
There is no viable objective theory of value. Any good can be chosen as the measure of value.
You can assert that energy is the proper measure, Marxists can assert labor is the proper measure. We could also create a banana theory of value which would be equally valid.
The point is that value is subjective, there is no objective theory of value worth persuing because there are as many possible theories as there are goods.
>Insbesondere Energie (meistens elektrischer Strom) aus angeblich “umweltschonenden”, weil “erneuerbaren” Energiemaschinen (Solare Energie, Windkraft ff, meistens also elektrischer Strom) ist zwar weit teurer, als nicht erneuerbare Energie (Öl, Gas, Uran ff), aber eine Erklärung wird von den Ökonomen nicht geliefert.
Right, so it is a theory to explain why renewable energy is more expensive than fossil fuel and “economists can’t explain this”. Unfortunately for the author of this theory, renewable energy is actually cheaper. The whole argument is an attempt to explain why a false claim is true.
Calling it a theorem won’t help. Economist don’t have any more need than anyone else to “explain” counterfactuals.
Berndt,
Can you give me some examples where only energy and no matter is used for producing a good.
One could argue that only matter matters, though such an agrument would be equally silly to the proposal that only energy matters.
Both are important and neither has anything to do with value.
Dennis, this whole discussion is just getting silly. To argue that energy is not of primary importance by siting energy as being just important is absurd beyond belief. And to continue with this line of reasoning is even more absurd. This is my last post on the subject and everyone else should do likewise. To use a Latin phrase, it is: Reducto ad absurdum. You have reduced the entire argument to the absurd.
Ron.
The reductionist argument is the one that says only energy matters, if you are saying that you agree, then the discussion is over. I am not the one reducing everything to energy, my argument is that such reductionist thinking misses the mark by a mile.
Thermodynamics is important, but it is not everything, that is my argument in a nutshell.
i’ve done this discussion with dozens of people. So i know, who can accept my arguments and who will never do it. Dennis, you will never do it.
You miss even the first steps:
1. To accept that the economy runs on exergy, not on money.
2. To accept that the 2nd law is valid, and is always valid.
And there are much more steps.
Berndt,
1. To accept that the economy runs on exergy, not on money.
2. To accept that the 2nd law is valid, and is always valid.
Statement (1) seems to be the premise of bitcoin isn’t it? That it has value because energy is expended in creating it?
I don’t think anyone argues against the validity of the laws of thermodynamics as practised in science and engineering, but trying to shoehorn it into other areas seems to cause problems. I remember a definition of life I heard as a kid “Living creatures are a local and temporary decrease in entropy through enzyme-catalyzed chemical reactions”. The value of living creatures seems to vary a lot and is unrelated to their effect on the entropy of the local universe.
Berndt,
Exergy and energy are different, you posited earlier that goods can be valued in energy, exergy is different and difficult to measure, so it would be a poor definition of value.
Of course the laws of thermodynamics will be followed, you may not be applying them properly.
See for example a post by a professor of mechanical engineering at link below
https://peakoilbarrel.com/on-the-thermodynamic-model-of-oil-extraction-by-the-hills-group/
You believe, SK has been correct ?
I repeat what have done.
A) I took the diagram graph 8 from the report of the HillsGroup.
B) I converted it to SI units and added some beautifications. And i added a light green triangle to emphasize the relevant time and exergy range.
C) I took the Brent price per barrel of the last years and converted the USD to percent of a BOE using
the energy productivity relation.
D) Into the resulting the price diagram i inserted the light green triangle,
And i found, that the calculation from the HG (graph 8) fits perfectly to reality for the period from 2008 to 2020.
This must be a miracle, because SK has shown that the HG report is wrong ? The ten years old diagram can’t be correct, becaus it does not consider the “LAW of Supply and Demand” ?
And my main faults are:
– that i did not consider other aspects than thermodynamics of oil production ?
– that i did not develop a theory of value for energy before doing that?
– i did not believe a professor of engineering ?
– i shoehorned thermodynamics to oil production, thus causing problems ?
Sorry, i’m out.
Fantastic reference. The idea of those 3, discredited (in order of authorship) by a 2002 global peak oil (including unconventionals), a claim that the US drilling industry would no longer be drilling for oil by the year 2000, and a past Secretary of ASPO. Aren’t those the folks that did that nice series of peak oil watching newsletters back whenn Colin and Jean said it was going to happen in 2002…until of course it became embarassing after awhile.
I’ve got to print out and go through to see what they’ve missed, misrepresented, or any other after the fact “adjustments” on their own work.
For the record, if I had ever used Nafeez Ahmed for a reference for ANYTHING in a scientific publication then either A) it wasn’t a scientic publication or B) I’d be fired. Also, count the references by the authors referencing….the authors. And where was Ahlbrandt and the USGS, at LEAST with the old 2000 World Assessment (updated in 2012 or so), not a single reference to those who specialized in this when Hubbert himself was USGS or their work. Can’t have the geologic organization that enabled Hubbert himself fouling the waters of McPeaksters now can we? .
Thank you Survivalist. This thing is undoubtedly going to be absolute gold.
PS: These guys putting “fact from fiction” right up there at the beginning? Someone tell me which is….their stuff? Do THEY know, being the folks cranking it out in some cases decades ago? I mean, can the irony just explode into raucous laughter now?
You’re welcome. I’m glad you liked it.
Somebody on the And Then There’s Physics blog was just commenting today on the number of “fake experts” coming from the ranks of geologists, possibly related to their general aversion to mathematics. So Rulz is likely one of these characters, and scared sh!tless to have his name known. Personally and professionally, I’m fed up with geologists ad geophysicists alike, as they seem to be a most incurious lot. My own suspicion is that the earth sciences is not a good breeding ground for understanding research, mainly because they have ABSOLUTELY NO experience in how to do laboratory controlled experiments, and therefore very little insight into how physics and scientific hypotheses are actually performed.
I’ve presented at several AGU and EGU geophysics meetings and have presented groundbreaking research that would be guaranteed to raise eyebrows and gain interest at any condensed matter physics conference (imho, based on my own background). All sorts of stuff that I started looking at because it seemed so obvious — stuff like the cause of El Ninos, the wobble of the earth, the statistics of oil depletion, etc. Got all that published too, in Mathematical Geoenergy (Wiley/2018) with Dennis as a co-author, and Laherrere doing some of the critical peer-review. He did not rubber-stamp anything and was largely critical (alas he did not cite us in the recent paper). I’d dare Rulz or any of his primitive rock-head colleagues to debunk any of the math. As I said, almost 5 years and no interest either way is embarrassing for an established scientific discipline.
Lions and Tigers and Bears!! You published!! With some maths!!!
RGR once asked Paul, why did your 2008 global peak oil model deliver a wrong answer?
Paul’s answer…because I could not see the future. Now that we are in the future, let me run the same model without correcting for why I just told you I got it wrong and give you another answer.
I have no doubt you do wonderful maths Paul. But if the SEC can figure out why you got it wrong and wrote SEC Rule 156 to spell it out to bone headed bankers and investors, unless you’ve invented a time machine since you told me this, I don’t know how I can help you out of the hole you’ve dug for yourself.
Reservegrowthrulz,
You have never proposed what future oil output would be, that I have seen. Criticizing predictions of the future that are incorrect is pretty lazy, as you can point to every scenario of the future that has ever been put on paper and show every one is wrong.
This statistically what one would expect, choose one (or 10 scenarios) out of an infinite number of possible scenarios of the future and your probability of being correct is exactly zero.
When do you expect World C plus C to peak and at what level of output?
My expectation is about 85 to 87 Mb/d in the 2028-2030 time frame, but in part because I expect oil prices may fall after 2030 as the transition to electric land transport proceeeds and I also assume no severe economic crisis before 2035. If either of these assumptions is incorrect, my scenario will be incorrect.
Many of the incorrect predictions of peak oil assumed unconventional oil output would not be able to ramp up quickly enough to affect global oil supply to any significant degree, that was an incorrect assumption.
Given one of the authors there’s very little about EROI in the paper. That of the new oil now available seems to be getting to levels that are too low to support the level of societal complexity that we have enjoyed for the last 50 to 70 years, and certainly too low to provide the pulse of energy needed to attempt the transition to renewables. The exploration risks (e.g. $100 million plus wells with only 1 in 5 success rates) with smaller rewards from success as the deposits get less attractive to develop might partly explain why the “yet to be discovered” number keeps declining.
Hi George! “…the pulse of energy needed to attempt the transition to renewables…”
It always was a big ask, wasn’t it? To sustain anything like life as we know it, this pulse of energy was having to fund:-
a) full build out of a fully-renewable energy system that was able to be fully self-perpetuating – down to the mines and manufacturing needed for every fragment of the new system – green o-rings, green fibreglass, green concrete, green steel, green electronics etc.
b) the timely construction of climate adaptation systems to cope with the obvious and inevitable issues like climate change and sea level rise (“In my opinion, if emissions follow a business-as-usual scenario, sea level rise of at least two meters is likely this century. Hundreds of millions of people would become refugees. No stable shoreline would be reestablished in any time frame that humanity can conceive.” Hansen: 2008) Prudence would suggest, for example, that spending any money on any infrastructure or development on a site located lower than 100 metres above current high tide will be seen by future generations to be a complete waste of money – only benefiting future dive tourism operators.
My WAG is that we will have affordable access to just enough fossil fuels to create the worst of the expected emission profiles for another decade or so, but not enough fuel will be left to make any meaningful attempt at the necessary mitigations at the requisite scale. Remaining fuel supplies will be used for emergency operations of power plants and essential industries (and warfare, of course). Climate-related matters will be in the can that is kicked down the road by the politicians – and one could not blame them too much as the angry masses at the gate will not be amenable to allocating scarce fuel to long term schemes – they are hungry NOW!
Given that Bernt’s plausible charts show that we have just crossed the cusp of the EROEI line, it would appear that both of these desirable work streams may have missed the boat!
Seneca awaits!
Dennis,
Firstly thank you for the effort, great work.
Secondly, figure 6. I am assuming thats from the BP energy outlook ?
They are predicting 100 million barrels/d oil demand throughout 2023. Regarding q4 2023, opec would require an extra 32 million barrels/d to make up supply for the demand.
You state you think they can’t. Do you think they can make up partial supply for that demand and U.S plus Russia the rest to supply the demand or do you think there will be a supply demand imbalance which will radically increase the price of oil ?
Iron Mike,
You’re welcome.
The figure 6 table is from OPEC MOMR.
I expect demand may be lower due to high oil prices and an economic recession than shown in fig 6 in my post. If not then an oil price spike could occur. Difficult to predict.
Dennis –
For the chart in red, why does it stop at 2020?
Is it safe to say that unconventional oil is limited to US? Or do we need to include Canada? I believe you stated 7% of global production is unconventional? % unconventional oil would be a useful chart…
Does Laherrere‘s recent work impact your estimates at all? Seems that his work does not agree with EIA estimates…and thank you for the update.
Berndt –
Failure of the global economy would certainly result in a Seneca cliff. To say there would be a single cliff seems dubious, but a series of cliffs are inevitable. Thanks for your analysis, it’s eye opening, the gap between what consumers will pay and producers require keeps widening, the world has never seen prolonged diesel prices this high…
My chart below with tons of oil less US and diesel price.
Kengeo,
The pandemic broke the trend established from 2010 to 2019 so I do not include data after Dec 2019. I said about 7% of URR is unconventional (200 Gb unconventional of 3000 Gb total C plus C). In 2019 unconventional was 11.7 Mb/d of 82 Mb/d of C plus C output (about 14%). I just read this most recent estimate. The 2500 Gb conventional URR matches what I find with a Hubbert linearization of conventional oil, but note that the estimate moves higher over time. Chart below uses 10 years of annual data for HL estimates ending in 1997, 2002, 2007, 2012, 2016, and 2019 (first is 1988-1997, last is 2010-2019). The trend of these estimates suggests conventional oil URR may be 2800 Gb for 2020-2029, if the trend from 1997 to 2019 continues.
So I will stick with my estimate of 2800 Gb for conventional oil URR, my analysis does not change. Note that my estimate of unconventional is far lower than Lahererere’s in this paper at 190 Gb vs 500 Gb in his analysis.
Dennis
Nice Job.
Attached is a table which shows the difference between the OPEC 10’s required production and actual. The two biggest misses are from Nigeria and Angola. Iraq surprises at -75 kb/d. SA would only be 17 kb/d short if we believe their direct communication output of 10,646 kb/d. This gap is going to get bigger as we move into July and August when the monthly increases are bumped up by 50%. The 1,058 kb/d output shortage is a big deficit to expect SA, UAE and Kuwait to make up. Not quite sure why Kuwait is left out in most discussions on which countries have spare capacity. They did ramp up in early 2020.
On the subject of the Laherrere, the two middle scenarios make most sense to me, URR of between 3,000 Gb and 3,500 Gb. Between the two of them peak oil is somewhere between now and 2030. What do you think?
I still think by November, December we will know more clearly OPEC’s capabilities and whether the US has accelerated it LTO output over the summer. Russia is the big unknown.
Laherrere Chart
Thanks Ovi.
I doubt output will follow the hubbert curves, but would agree that a 3000 Gb URR makes sense (though I would use 2800 Gb conventional and 200 Gb unconventional based on my own analysis). Up to 2030 or so the 3500 Gb URR scenario looks reasonable, but decline will be steeper than shown in that chart in my view. I think many (including me) think Kuwait will struggle to maintain output more so than the other 4 of the big 5 (KSA, Iraq, UAE, and Iran), but I have been wrong before and chances are very high (roughly 99.99% probability) that I will be wrong in my estimates of the future.
Dennis
Surprised that you include Iraq. With the majors not interested in drilling there due to the poor contract conditions along with security, I think they will begin to struggle to get higher than the output range of 4,500 kb/d to 4,600 kb/d.
Ovi,
I think security may improve, I have read there is a lot of resource to be extracted there, but perhaps I am wrong.
See
https://oilprice.com/Latest-Energy-News/World-News/Iraq-Could-Raise-Oil-Production-Capacity-To-6-Million-Bpd.html
a less optimistic viewpoint from article below
https://www.shafaq.com/en/Economy/Why-Iraq-is-unlikely-to-fulfil-rising-oil-demand
difficult to say.
Dennis
What I have read is more consistent with the second article.
Ovi,
Perhaps Iraq will become less corrupt.
Not likely, but I wonder if it is different in the other big 5 OPEC producers. Perhaps a dictatorship works better in West Asia.
Reuters: Iran signs $40 billion oil and gas agreement with Russia’s Gazprom.
I doubt much of that will happen fast, and if it does it will only go to those who pay in Rial or Rubles!
This chart shows why I gave up a long time ago trying to explain peak oil to people.
Pick your assumption. Pick your peak date.
MIke B,
Here we tend to focus on C plus C, that is the green dashed line in the figure, which shows a secondary peak in 2030 which is a bit lower than the 2018 peak, this assumes output follows a Hubbert curve, which has not been true in the past and might not be true in the future.
As always there will be a peak, but the future is unknowable,
https://www.youtube.com/watch?v=65z2cG0QDRo
Is Russia running out of oil?
I got a recommendation from a financial “influencer” about this DOOMBERG site.
So far been really good.
“When you have to get permission to produce from people that produce nothing”
“Your standard of living is defined by how much energy you get to waste”
“Your standard of living is defined by how much energy you get to waste”
That is a fantastic maxim worth remembering for future reference.
Actually thats pretty silly-
““Your standard of living is defined by how much energy you get to waste”
Its more closely defined by how much energy you can use wisely.
Ex- going to war (wasting energy) often does not contribute to an increase standard of living.
Using energy for personal or national infrastructure is much more likely to.
Remember that Saudi Arabia alone uses over 700,000 barrels of crude daily to power their air conditioning in August. That’s for a country of 35 million people, so a little less than a gallon of crude is burned per day per citizen in that country just to stay cool.
Do we believe these numbers? Do we believe this is sustainable?
https://pbs.twimg.com/media/FYD0Gv-X0AUPoRY.jpg
Too bad there is no sunshine in Arabia. If there was they could use solar on sunny days instead of burning oil.
But actually, the Masdar project showed you you could reduce street temperature by 20C without any energy expenditure at all. But they knew that in Sanaa 1000 years ago.
The problem is that if the only tool you know about is a hammer, everything looks like a nail.
Don’t worry guys it’s going to be fine.😁
https://twitter.com/arabnews/status/1548435603728936961?t=9F5sFqVB0bPsGjOX7IAVvw&s=19
In my experience the limiting process in mature water flood fields, and I think all the main Saudi ones are in that category, is handling the water; and in most cases it is providing the water injection capacity needed to maintain pressure in the fields. This is called volumetric balance – I.e. as much volume must be reinfected as water (usually seawater) as comes out as oil, gas and produced water (with the volumes referred to at reservoir pressures and temperatures) For a water cut of WC this means for each barrel of stock tank oil there has to be one and a bit (say .2) to replace the oil, with the bit needed to replace the gas lost as the oil depressurises, and WC/(1-WC) to replace the water. As water breaks through, and it always does even with the most intelligent completions that allow zones to be selectively shut off or more and more new brownfield wells, this second term can go up quickly (e.g. at 0.1 it’s .11, at .5 it’s 1, at 0.9 it’s 9). Injection pumps are high-pressure, high volume and quite specialised.
In Saudi most injection capacity is in centralised facilities that serve several fields cost billions of dollars and are not easy to incrementally grow (certainly compared to adding a few extra production wells for example). I have seen no news that extra injection facilities have been added so I continue to think Saudi is mainly limited by injection capacity, and as they find it increasingly difficult to control the water cut they will have to reduce oil flow.
Thanks George.
George
I have mentioned this in the past. I once read an article which stated that, at the time, Aramco was pumping 6,900 kb/d of water into Ghawar and recovering 4,600 kb/of oil.
This is a 33% WC and was consistent with the WC numbers being banted around at the time. Now that Ghawar is closer to producing 3,500 kb/d of oil, the water cut is 50%, provided they are still pumping 6,900 kb/d of water. Do you know if the pressured maintained in the field is gradually reduced over time as the water cut increases?
Reservoir pressure needs to br held sufficiently above the bubble point to stop vapour break out anywhere. The same volume is needed to balance whatever the actual reservoir pressure is. Liquids are highly inelastic, there’s a bit of give in the rock structure but if a balance isn’t maintained pressure can fall (or rise) quickly.
George
My question assumed that the pressure was above the bubble point and that there was some leeway in reducing the pressure.
Is a water flood field ever shut down temporarily to let the water oil interface settle down. In other words, does shutting it down temporarily let the water sink and oil rise so that when it is restarted, more oil comes out.
You can have the effects of clogging when the flow stops and heavier parts of the oil can settle down. These parts are lost then, only recoverable perhaps by additional drilling.
Page missing.
was removed from censorship, because I did see it. There were Biden and other Arab leaders and the wording that Saudi Arabia is at the peak of production.
This is dangerous news.
Interesting. FWIW- I often screenshot tweets of significance if I’m concerned they might disappear.
Considerable hand waving about the Biden conversation in KSA.
Started out as “KSA has agreed during negotiations with Biden to increase by 50% the already scheduled production increase for July/August.” This then got revised by media people to try to quantify, while encountering a problem from an announcement in early June prior to the visit, that KSA would increase by 50% an already scheduled increase for July/Aug.
Then . . . it seems to be a KSA agreement to increase production *capacity* by 50% over that planned, and no mention of July/August.
Do we have solid data?
Vaca Muerta news. Pipeline for gas from the field to Buenos Aires contracted. 3 shift schedule has begun. Single pipeline to carry 24 million cubic meters/day. For comparison a single pipeline (of 2) for NordStream I is 27 million cubic meters/day. Nordstream II is not part of these numbers.
Winning bid from Tenaris SA. Subsequent resignations of several ministers in government over corruption in the contract award selection. Some weird and vague talk that lawsuits will result in some extra money being given the losing bidders, but the pipeline schedule won’t be touched by court activity. Completion scheduled March 2024.
The amounts are to replace imports from Bolivia.
This should be in the category of non-partisan observation about us foreign energy policy-
We stake out an oversized position- some of it seemingly rational and some of it more in the category of self-centered and entitled bully.
For example
-the shutdown of the Venezuela oil industry via sanctions because we are unhappy with their political situation and nationalization of the industry, yet
-we tolerate a nationalized and dictatorial oil industry in Saudi Arabia, and
-we tolerate severe corruption in Nigeria as long as ‘our’ majors can operate there, and
-we sanction the heck out of Iran because of their aggressive region power grabbing activities and nuclear bomb project, and
-we sanction heavily the Russian energy industry over their invasion of Ukraine
In sum, our actions have pushed a lot of oil and gas off the market. If we were importers we would surely behave differently. Many of our allies, trading partners, creditors and debtors, are big energy importers. We are certainly contributing to deck reshuffling that will be picking up speed and impact as this decade unfolds.
to be clear
– I see our response to Iranian theocratic regional war making and nuclear bomb program as rational and justified. Then again, I am not a Shia zealot so perhaps I am biased.
– I agree with the push back against Russia expansionism as warranted.
– I note that the internal politics of Venezuela would be of no care to the US if they had allowed our companies to continue operations there unhindered.
Frac Spreads down 6 WoW and down 10 from June 24.
Is this a supply issue problem or just old spreads being taken out of service?
Wish we had better info on which basins they are operational.
Ovi,
Perhaps oil companies are worried about predicted recession and are pulling back? I totally agree that better frac spread information would be useful, probably have to pay big bucks to get it. In the mean time we can get a rough idea what may be going on by looking at rig counts.
For most recent week the horizontal oil rig count in the US is up by 3 to 544 and in Canada it is up by 8 to 115. In Permian basin the horizontal rig count is down by 1 to 330. In New Mexico horizontal oil rigs are down by 1 to 104. Texas was up one horizontal oil rig to 304. Eagle Ford was flat at 60 horizontal oil rigs. Lots of basins in Texas, so some other basin must have seen an increase in horizontal oil rigs besides Permian or Eagle Ford (Granite wash had an increase, but some of this may not be Texas). Williston was flat at 36 horizontal oil rigs and Niobrara was flat at 16 rigs. There were 416 horizontal oil rigs operating in the big 4 tight oil basins (304 Permian, 60 in Eagle Ford, 36 in Bakken, and 16 in Niobrara. In the 3 Woodford basins there were 32 hor oil rigs running and in the “other” basin category there were 61 horizontal oil rigs running. So in any case the big 4 tight oil basins were down by one rig for week ending July 15. About 76% of all horizontal oil rigs in the US were operating in big 4 tight oil basins for we 7/15.
Frac spreads seem to be plateauing at around 280. Looking back in history I see they were above 500 in June of 2018 and in the high 400s for much of that year. Now they are leveling out at about 200 frac spreads below that point. What does that mean? Well, it obviously means far fewer new wells than we had back then. And with the very high decline rates of shale wells, we need many new wells to keep up. Soooo…???
Ron,
There are fewer wells being completed. Note that frac spreads fell during 2019, but tight oil output continued to increase through Nov 2019. Also keep in mind that the best equipment keeps running and the older stuff is stacked. So the wells completed per frack spread may have increased currently compared to the high point in 2018. In any case tight oil output has been increasing, but slowly due to low completion rate.
Ron,
In June 2018 there were about 2.7 completions per frac spread, in May 2022 about 3.4 completions per frac spead. Of course we don’t know the ratio of tight oil to shale gas frack spreads, but if it is similar to ratio of horizontal oil to gas rigs it has not changed much from June 2018 to May 2022. So more completions per frack spread in May 2022 leading to 800 tight oil completions in May 2022 compared to 1100 completions in June 2022. In Nov 2019 tight oil completions were about 870 about 9% higher than May 2022. Note that from May 2021 to May 2022 the tight oil completion rate increased by 123. If that rate continues we might reach the Nov 2019 rate in 7 months.
Have you noticed the occasional reference to how well productiity (in this case shale gas wells) have improved through time? This would seem to indicate that fewer wells are necessary to either A) maintain consistent overall production by offsetting decline or B) increase overall production.
Found this reference in a weird place (not sure what it has to do with markets), but it appears to make the point.
https://www.eia.gov/naturalgas/weekly/archivenew_ngwu/2022/06_23/
Reservegrowthrulz,
For tight oil wells normalized for lateral length, well productivity has not increased since 2018. On a well basis (completions) you are carrect that productivty per well has increased a bit since 2018, but not very signifivantly, and in some basins it has been flat or falling (Eagle Ford falling, Bakken flat).
I don’t really focus on shale gas, so perhaps there productivity has increased, I don’t know.
So…companies have been able to increase productivity for shale gas wells substantially, but were struck stupid when faced with oil wells? If you were someone else I would immediately go with the odds and begin with a decent insult, but we’ve discussed the level of detail work you’ve done before and you might be one of the few people who actually did it right. So instead of just playing the odds I’ll go run the numbers myself. Pick the formation that you most strongly believe has not improved, the Bakken, Three Forks or Eagleford, and I’ll go verify your claim. Or not.
Kengeo,
Odds are perhaps 20% we have past 50% of all C plus C URR (conventional and unconventional). I expect the URR may be about 3000 Gb and we will reach 50% of URR in 2024. If Laherrere’s recent estimate is correct (URR=3500 Gb), my scenario would reach 50% of that URR in 2032. Typically Laherrere’s estimates are quite conservative, in this case he is more optimistic than me,
Reservgrowthrulz,
Eagle Ford had stalled in 2018 after big improvements up to that point over the 2013 to 2018 period, there has been a slight increase from 2018 to 2020 in 12 month cumulative output from 120 kb in 2018 to 122 kbo in 2019 and then down to 121 kbo in 2020. Bakken wells also improved up to 2018 and then have stalled. Niobrara and Permian basin are still seeing increased productivity since 2018. For Permian this is due to increasing average lateral length, not sure about Niobrara (fewer updates on the staus there).
https://novilabs.com/blog/us-update-through-december-2021/
Reservgrowthrulz,
Much of the increase in shale gas well productivity is due to increasing lateral length. This does nothing for total resources. If we double the lateral length we reduce the number of future wells by a factor of 2.
Also for tight oil wells an increase in lateral length beyond 8500 to 9000 feet reduces EUR per foot of lateral, so we can actually reduce the amount of resource extracted beyond some optimal lateral length.
I don’t follow shale gas closely so I don’t know what lateral length is optimal, perhaps 15000 feet.
Ron – I simply give up on Dennis , it’s like the elections stopped firing in the right sequence, I have no idea what it might take to convince him of the energy crisis that’s happening right this second. I think he subconsciously understands but has some type of internal conflict…butterflies and fairytales for now…
Perhaps Dennis was around when the energy crisis (around the time of the 1979 global peak oil) in America meant rationing. I was around for that, and it left quite an impression, not able to buy gas for the car as a youngster. Nowadays? Didn’t see a single “no gas” sign on a recent 1000 mile trip around the Rockies. So…perhaps we define “crisis” differently. To me, it is visceral, and has happened before, and what we’ve got now is just expensive. Perhaps you live in Sri Lanka, where there are physical shortages? They don’t have much to do with scarcity of product globally, but more like bad government.
Smirk … Laherrere, Bentley, and Hall nailed Sri Lanka as one of the first to be impacted. Not government but the problems of isolated island nations.
https://pbs.twimg.com/media/FX4Z0D8WAAExXHS.jpg
The biggest problem here is the western and chinese corona panic. They got most of their $s from tourism – and this stopped in a week.
That’s an external shock like your neighbor dictator just invades your country.
And for a country that buys it’s fertilizer and oil from tourism money that’s very bad – especially since this country wasn’t one of the richest before.
Laherrere nailed global peak oil in 2002. Or…not. Hall claimed that US oil drilling would cease by the year 2000. Lack of net energy, if you can imagine that. Are you now claiming that if someone, including you, just repeats themselves often enough, then when something vaguely bad happens in terms of a country running out of MONEY (as opposed to oil) celebration should ensue? Smirk indeed. Are you aware of ANY of the history on this topic, or does it not compute because it ain’t maths?
Kengeo,
Energy supply is very tight and prices of fossil fuel energy are very high. Often high prices are the solution to tight energy supply. Perhaps this time will be different. Relative to 1980, this is not a big deal, at least in the US. I was in college at the time and parked my car remotely, I remember buying a locking gas cap because of reports that people were having their gas tanks siphoned.
Note that there is nothing that says my guesses about the future are correct, perhaps oil supply will crash as you foresee. Just because I don’t think it will does not mean I am correct. The basis of my scenario is estimates of World URR in the range of 2500 Gb to 3000 Gb for conventional crude plus condensate. I use the middle of that range, but it could be higher (3000 Gb) or lower (2500 Gb), I doubt it is lower than 2500 Gb (maybe a 10% probability).
Seems to fit with the narrative that marginal oil is now bordering on being too expensive for customers to afford and too cheap for operators to produce.
To a first approximation I should think the number of spreads is proportional to the number of completions that the EIA issue, although that number is only given monthly and is usually revised.
Excellent point George,
Differences in frac spread productivity are likely second order effects. So using completion data gives some insight into where frack spreads are operating.
At current prices oil is starting to get too expensive to flagrantly waste. It’s still reasonably priced if used efficiently.
Counting Remaining Barrels May Not Be A Good Indicator Of Future Supply
Jean also sent me his new paper on Global Oil Reserves, co-authored with Hall & Bentley. I responded to his email to the entire Peak Oil Gmail group. Here is my reply and a chart that seems to be overlooked today… and that is the massive 10-11 mbd of annual production lost each and every year to the average decline rate.
This was an excellent detailed paper that provided a more “Realistic” approach to determining viable reserves and future production profiles. The figure that seems to make the most sense in URR is 2,500 Gb. Not only does the chart (HL of world crude-XH-LTO production from EIA) match up the best with cumulative production, but when we factor in the massive addition of “Global Debt” into the equation, the ultimate global peak is likely circa 2025 /-. The real question is, what will the downside of the global oil production chart look like?
While there are “Other Liquids” of lower quality, the number one source is conventional oil. Why? Well, Canadian oil sands have been economic because they use low-priced natural gas in extracting and processing. However, Canadian oil sands economics will change drastically if and when natural gas prices jump by 3-4 times in the future.
Furthermore, my basic analysis suggests the decline rate of the global oil industry is somewhere between 10-11 mbd per year. Thus, this needs to be offset every year just to keep production flat. And, a large percentage of that 10-11 mbd comes from the U.S. Shale Industry, which saw its 2019 production decline by 47% in one year (with no new wells added after Dec 2019). Also, OECD is now the largest percentage of global oil supply with a much higher annual decline rate vs. OPEC. I have attached a few charts showing my analysis of a more realistic annual decline rate of the world’s oil fields.
Moreover, if we factor in Global Debt, which was $97 trillion in 1997 and is now over $300 trillion, my analysis suggests this debt was used to offset the Falling EROI of energy, especially oil. If you look at some of the LNG WHITE ELEPHANTS, such as Cheniere’s Sabine and Corpus Christi Export Production Terminals, the price tag was over $30 billion, they really aren’t making money. Thus, the LNG Industry economics looks similar to the Shale Energy Industry, which is best described as PONZI ECONOMICS. Thus, a lot of this debt will never be repaid.
Lastly, Nate Hagens, who many here are familiar with, provided this chart on how Debt may influence the oil production profile. By adding GOBS of DEBT, which we have in the past 20-25 years, we have increased the level of production, but have also likely pulled forward production via EOR techniques and with unconventional, unprofitable oil sources. So, while we can COUNT THE BARRELS of these unconventional oil sources until the cows come home, if we tried to produce them, it would likely bankrupt the global economy. The biggest factor that doesn’t seem to be considered in the entire Global Oil Supply-Reserves-Demand equation is Debt. I believe we have grossly underestimated how much the bursting of the massive Global Debt Bubble, and subsequent Asset Values will destroy the ability to produce oil…. thus the ENERGY CLIFF.
steve
Steve,
Yes those decline rate sound scary. The oil industry contiues to drill new wells and makes up for decline in older wells. If everything stopped (no new investiment in new wells) we would see the decline rates you suggest. Do you expect that to happen? This seems exceedingly unlikely (probability equal to zero).
When future cumulative discovery and reserve growth is accounted for the USGS expects at least 3000 Gb of conventional C plus C, my estmate for conventional C plus C is between the Laherrere estimate (2500 Gb) and the USGS estimate(3000 Gb) at 2750 Gb.
See
https://stats.bis.org/statx/srs/table/f1.1
Total credit to non-finacial sector for all economies reported by BIS was 291% of GDP in 2020 (market exchange rates) and 264% for 2021Q4, this is up from 256% in 2019.
Dennis,
In looking at the data from the Geological Survey of Finland, on The Oil From A Critical Raw Material Perspective Report published in 2019, they provided the data for the chart shown below.
As the world has moved to smaller oil fields, the decline rate of these fields is much higher than the older super-large fields, especially the OECD or NON-OPEC oil fields.
This chart shows the increasing annual decline rate of OECD vs. OPEC oil fields.
Actually, my 6% base figure for the Rest Of the World is likely understated because, as you realize, OECD oil production is now the much larger percentage that is likely declining at 15 % PER YEAR!!
Sure, these decline rates are based on NO NEW PRODUCTION, but still, if we understand that when global oil production was at 70 mbd, with more from OPEC, the annual decline rate 20 years ago was probably half at 5.5 mbd. Today because we have increased it to 95-98 mbd, with much more OECD and Shale Oil production, it may actually be closer to 12-13 mbd of declines every year. This is how much has to be replaced.
Lastly, the world found 38 billion barrels of oil (Rystad data) from 2015-2021 by investing $3.4 trillion (Rystad data), but the world consumed a staggering 207 billion barrels. We are now burning 5 barrels of oil for each barrel we find.
Now, add that to a Global Oil Industry that is likely losing 12-13 mbd of production… EACH YEAR.
How long can this PARTY GO ON…LOL??
steve
Steve,
I focus on C plus C about 80 Mb/d in March 2022, off shore production declines fast, onshore production less so (US conventional decline at about 3% per year from some of the smallest fields in the World.)
Dennis,
It doesn’t matter, the world is losing between 12-13 mbd of production EACH & EVERY YEAR. This is just simple mathematics.
And guess what, by focusing just on C plus C, the decline is WORSE… why? Because NGLs decline slower than crude and condensate. With NGLs being 12 mbd of total supply, if we remove them, the Global C & C production annual declines are even larger in percentage terms.
NON-OPEC oil fields are likely declining 15% per year not including Shale Oil, and it represents a larger percentage of oil production vs OPEC.
Why individuals want to ignore this simple factor… it’s beyond me, but that is the world today… the world wants to believe in ENERGY TOOTH FAIRIES & BUSINESS AS USUAL.
steve
The world is not losing 12-13 mmbbl/d through natural decline. If it was, you could point to the new 12-13 mmbbl/d that came online every year to keep production rates as stable as they have been. And you can’t do that, because it isn’t happening.
Cornucopian sources of disinformation are feeding the uneducated masses that there’s enough oil for the next 300 years.
https://twitter.com/WHUT/status/1548938261388836864
Reservegrowthrulz,
Let’s assume the Rystad estimate of 2PC resource (1200 Gb) for the World is correct and assume about 150 Gb of these are unconventional giving us about 1050 Gb of conventional 2PC resources (C includes the mean contingent resources). Of these already discovered resources , if 5 Gb per year moved into the producing PDP (proved developed producing) category from PNP (proved non-producing reserves) that would be about 0.5% of conventional 2PC resources (5/1050), this does not seem unreasonable for the entire World. You are correct that most of us do not have access to the proprietary data to prove this, though we could look at data from US, Norway, and perhaps the UK to see what it looks like there.
For the US if we assume 2P=1.7 times 1P reserves and that 2PC=2 times 2P reserves we find that on average from 2009 to 2019 in the US about 10% of 2PC resources became producing reserves on average. This is far less than my model which has about 2.4% of World conventional resources (assuming Rystad estimate is accurate from July 2022) becoming new proved developed producing reserves in 2021.
Thanks Paul,
So Rystad has roughly 1600 Gb for 2PCX, we consume about 29 Gb per year. That would be enough for 55 years at a constant rate of consumption.
I think clowns who claim 300 years add up everything like Kerogen, crazy estimates of tight oil, maybe NGL, even with the 5000 Gb with about 1600 Gb cumulative production and 3400 Gb of resources left to produce and 36.5 Gb consumed per year would give us 93 years at a constant rate of consumption (which is a bad assumption). Obviously the 300 years is nonsense, suggesting perhaps a 12000 Gb URR, even the 5000 Gb URR seems far too high, I like 3000 Gb for C plus C.
Steve
I think you need to put out a more complete story. While 10 Mb/d number is the gross decline rate, it needs to be pointed out that yearly drilling replaces 9.35 Mb/d of that decline. Without that drilling the World would be in big trouble.
Attached is the latest chart for the Net decline rate for the World W/O the Big 10. Over the last 12 years, the net decline rate has averaged close to 650 kb/d/yr. Note that March2022 production has come back to the decline line. The pandemic decline was not included in the analysis.
I think that we will know where the world is with regard to Peakoil more clearly by November/December. By that point, we will know if OPEC is tapped out. In Figure 5 above, OPEC IS required to produce 30.46 Mb/d in Q4-22. This is close to 1.7 Mb/d more than OPEC produced in June. The majority will have to come from SA (500 kb/d), UAE (300 kb/) and Kuwait (200kb/d). The sum of those numbers in brackets is still 700 kb/d short. There is a possibility that the World will know by Sept/Oct if OPEC has hit its limit. Appreciate that by August, SA is committed to producing 11,004 kb/d. The September OPEC report will report August production and it will be interesting to see where all of OPEC is.
What are odds that SA will be able to sustain that level for six months or more?
Ovi,
Yes… I get it. I do have two eyeballs and realize the world “CONTINUES” to replace the annual decline rates. However, the important FACTOR that I am trying to share is that the Global Annual Decline Rate has been increasing significantly over the past 2-3 decades, especially with increasing the production level and bringing on smaller fields that decline faster.
This is the RED QUEEN SYNDROME at work.
So, yes… the world’s oil industry is busy as a BEE replacing the 12-13 mbd per year, but before Shale came into the picture, it was only replacing about 6-7 mbd per year. Now, you add the increased production and shale losing 4 mbd a year, plus NGL losses, it begins to add up.
Thus, this will become INCREASINGLY IMPOSSIBLE to offset these declines because we are running the world at 100 mbd, or my analogy… a car at 100 MPH. If you run a car that fast for a long period… it begins to break down and wheels blow out.
steve
At least you picked people who know…something….why aren’t you touting Bedford Hill, like when you said the shale plays were played out back in 2014? Did he not pass muster after it turns out that neither he, nor you, knew anything about the longevity of this kind of development 8 years ago?
In the interest of getting both sides of the argument, do you have projections for US oil production showing something different than those that post here?
It seems to me the USA is the only major producer with the motivation to increase oil production in order to decrease oil prices.
Several have analyzed this closely. I read Mike’s blog and he has made several good posts on this.
It seems to me that US growth will need to come from the Permian Basin. Although the other major shale basins are very relevant, they don’t appear capable of significantly increasing oil production at this time.
Then we look at the Permian Basin. Basically six counties in the Midland Basin and six in the Delaware. They already have a lot of wells. True there are many benches, but some aren’t as good as others.
New Mexico seems to be the big growth area now. But just parts of Eddy and Lea counties are responsible for almost all of New Mexico’s production.
Give me your bullish production case for the Permian. And, if you think another basin(s) will add significant barrels also address that.
I’ll add, Texas total production still needs to add about 400k to get back to it’s pre-COVID peak. Do you see that happening?
Should we also factor in maybe most companies in the Permian have gotten smarter. 2015-16 tamped down production some, but Permian producers ignored price signals in 2017-2019 and brought too many wells online.
Maybe oil production in US won’t grow so fast because the shale firms have finally gotten smart, like us stripper folks argued they should 2015-19?
Shallow sand,
Is it smart not to increase oil output when oil prices are high? If oil prices start to fall around 2030 to 2035 as I suspect due to World demand for oil falling faster than World supply of oil, then the “smart” tight oil companies that have ramped up very slowly will have missed their window of opportunuty as oil prices will fall to a level where it is no linger profitable to drill and complete new wells. The resource will indeed be saved for future generations, in fact much of it might never be produced. Good for the environment, but not so good for investors in these oil companies. A lot of money may be left on the table.
Dennis.
KSA announced it will get to capacity of a little over 13 million bopd by 2027 and not more, based upon an oil price story I just read today.
As about 1/4 of world oil demand is light transport, do you think that the remaining 3/4 of oil demand is going to be transitioned in our lifetimes?
I am more concerned about collapse of oil prices due to economic collapse than because of energy transition. The oil industry has already greatly ramped down CAPEX in anticipation of light transport transition, hasn’t it?
My time frame isn’t that many decades. My primary concern is leaving a plugging fund for my heirs. My secondary concern is the labor and materials available to keep our wells going.
Of course, all of this could change on a dime. I do think you and I agree that despite best efforts, future oil supply, demand and prices are tough.
Right now, I don’t see a rush to produce because oil will be left in the ground. I’ve always doubted that, although very low oil prices 2015-2020 have made me question by beliefs.
I don’t know where the stat that 1/4 of crude oil goes for road transport comes from.
It is much higher than that
For 2022 the road transport sector OECD countries used 68.1% of crude production.
https://www.statista.com/statistics/307194/top-oil-consuming-sectors-worldwide/
2015-
“The Energy Information Administration has released data showing that the transportation of people and goods accounts for about 25 percent of all energy consumption in the world and that passenger transportation, in particular light-duty vehicles, accounts for most transportation energy consumption. Light-duty vehicles alone consume more than all freight modes of transportation, such as heavy trucks, marine and rail.”
note the big difference ‘all energy’ vs ‘crude oil’
Shallow sand,
I have a different estimate of light transport. First, I focus on crude plus condensate as that is the important ingredient for fuels that are liquid at standard temperature and pressure (25 C and 1 atm). So take C plus C at about 79 Mbpd in 2021, I have land transport demand at about 60 Mb/d or 75% of the total and split about 50/50 between light transport and heavy duty trucks (over 6 tons GVW). My expectation is that heavy duty trucks will also be electrified starting in 2024 with short haul trucks and gradually moving to long haul (or with long haul trucks replaced with electrified trains or some combo of the two). Note that is takes until 2050 in my scenario for land transport demand for crude to fall to less than 2 Mb/d. There will still be demand from water transport, farms, air transport etc, but only about 31 Mb/d in my scenario in 2050. Output could be much higher than this if oil prices were high, but oil supply will be more than demand at a high oil price (say $90/bo in 2021 US$) so oil prices will fall to balance the market. My expectation is that oil price will be around $30/bo in 2050 and new tight oil wells, new oil sands projects, new ultra deep water offshore projects, and Arctic oil projects will no longer be viable. As to the 30 Mb/d of other oil demand, my scenario assumes this still exists in 2078 and I will have died at least 18 years earlier if I stay healthy (unknowable).
Short answer no I do not expect demand foe oil to fall to zero in my lifetime, but I expect tight oil output probably will be close to zero. My best guess scenario only goes to April 2053 for US tight oil and output is 13 kbopd. I don’t expect a lot of tight oil output from the rest of the World, though some is produced in Canada (350 kb/d in 2013) and Argentina’s Vaca Muerta.
Shallow,
I’ll take a stab at it…
First, I follow the work of Goehring & Rozencwajg. They published their Q1 2022 Report titled, The Gas Crisis Coming To America. If you haven’t read it, I highly recommend it.
Secondly, they break down the number of total drilling locations in each field, using the Barnett and Fayetteville as examples. Once a shale field drills and completes roughly half of its total drilling locations and proven reserves, the field peaks.
According to their analysis and my own analysis, U.S. Shale Oil production will likely peak within the next year, as the Permain will reach 50% of its drilling locations. However, U.S. Shale Gas production will likely peak sometime in 2025.
So, there you go. If this analysis is wrong, anyone can come back in here and tell me… I TOLD YOU SO. But, even if the data is a bit off on the number of remaining drilling locations, the ultimate peak may be postponed by a year or so at the most.
Lastly, the industry is now revealing that it is REFRACKING wells. LOL. This is a HOOT-N-ANNIE. Why? Because they have been refracking wells for years and if you think the decline rate of a newly completed shale well is horrible, you should see the decline rate of a Refracked well.
ONE LAST HORRIBLE FACTOID:
In 2008, U.S. Conventional Natgas production was 82% of supply. However, as of April 2022, it now accounts for a lousy 18.6% of the supply. When U.S. shale gas production peaks… watch as U.S. LNG Exports FALL OFF A CLIFF and the LNG WHITE ELEPHANTS go bankrupt in spades.
steve
Steve,
I think your drilling location information is wrong, there ar likely to be at least 100 thousand horizontal tight oil wells deilled in the Permian basin, my best guess is 104 thousand wells and this assumes only the best benches in the Permian are utilized. It also assumes an average of about 275 acres per well for remaining wells (9500 foot lateral spaced at 1320 feet or 4 wells per section width). Under my scenario the Permian basin peaks in 2029 or 2030 at 7600 to 8500 kb/d (depends upon whether crude pipeline apacity out of the Permian basin is expanded beyond the current level of about 7600 kb/d.)
Dennis.
Do you have a breakdown by county of where these future wells will be drilled?
Shallow sand,
No not by county, but by formation. and sub basin.
So I have in the Midland basin wells completed in the Spraberry and Wolfcamp and in the Delaware basin wells completed in the Wolfcamp and Bonespring. Most of these wells would be completed in the core areas of each basin.
For Wolfcamp midland I have 28434 wells completed after Dec 2018.
Wolfcamp Delaware has 34452 wells completed after Dec 2018.
Spraberry has 8808 wells completed after Dec 2018.
Bonespring has 11268 wells completed after Dec 2018.
I have spearate well profiles for each of these formations (with a separate well profile for Wolfcamp Midland and Wolfcamp Delaware wells and a separate profile for 2019 and 2020 for each of the 4 (so 8 well profile in all) for earlier wells (prior to Jan 2019) the entire Permian basin is lumped together with an average well for each year from 2013 to 2018 and a single well profile for 2010 to 2012 wells. I used the maps shown on Mike Shellman’s blog to estimate the area of the core areas of the Midland and Delaware. I assume after Dec 2018 the average well has a 9500 foot lateral and wells are spaced 1320 feet apart except in Spraberry where I use 1760 foot spacing. I assume 2 benches are used throughout most of the Wolfcamp (both Midland and Delaware) and one bench in the Bonespring and one in the Spraberry so about three benches on average in the core areas. About 83,000 wells are completed in my scenario after Dec 2018 with 20790 wells completed from Jan 2010 to Dec 2018. Total horizontal tight oil wells completed about 103,500 in Permian basin after Dec 2009. It is about 288 acres per well and 3 benches per acre so 103500/3 times 288 acres or about 9.9 million acres or 15469 square miles. The Permian basin is about 86,000 square miles, I have have wells being drilled in 18% of the total area of the Permian basin, the other 72% is the goat pasture a very knowledgeable oil man often jokes about.
Dennis,
While we can GUESS how many drilling locations are remaining, the EIA shows remaining Shale Reserves at 19.6 Gb with 11.8 Gb from the Permian. Of course, they may revalue some reserves due to higher prices, but regardless… it won’t change the overall situation all that much.
As of 2021, the total cumulative shale oil production from these top shale fields is 19 Gb, with 19+ Gb remaining.
I’d imagine the KNEE-JERK reaction I will get is that….. “HEY, STEVE… they can prove up more reserves.” Really? Well, we will see.
So, I stick by this chart here.
I could be off 1-2 years, but that will likely be it.
steve
Srsrocco,
The 2P tight oil reserves are likely about 35 Gb and more reserves will be added over time. My expectation is a URR of about 74 Gb for US tight oil. About 22.7 Gb of tight oil has been produced through May 2022 so adding 2P reserves gets us to about 58 Gb and I expect another 16 Gb of 2P reserves will be added over the next 15 years or so.
As a producer in the Permian as long as two years ago, we were beginning to see the effects of lower bottom hole pressure on the number of locations left to drill “economically” in the Delaware basin. Even at the current oil price and with increasing costs, the rates of return are really not that appealing. We are still expecting only 2.5 times the money invested. In a traditional sense, we never drilled development wells that didn’t have the potential to make back at least three times your money undiscounted. There are so many excellent posts on this site and everything I have seen and read does strongly suggest that we are in deep trouble in terms of energy supply. The advent of the futures market in pricing oil has destroyed much of the stability of the hydrocarbon producing industry. The volatility has wreaked havoc on the infrastructure and service side of the business. None of my vendors have the appetite for expansion nor is the money available through traditional Private Equity for the time being. The ESG bullshit thrust upon the sustainable capitalism investing mantra all but destroyed the ability of the upstream industry to continue to expand. Minus $30 per barrel of oil was so destructive and never reflected to the true cost of finding and producing oil and gas. I believe the higher price of oil is here to stay for a while as each barrel including those produced by Shallow Sand is necessary to supply the energy needs over the next few years. Perhaps when the future’s market oil treats oil as a commodity that is scarce, depleting and cannot be grown again, we will begin to see a more stable supply of oil & gas. In the meantime, we should be doing everything possible to bring on additional sources of energy including windmills, solar, nuclear and hydro.
Norway, as the big oil extractor they are, has been quite clever regarding Swedish wind vs. their own hydro, so the flow of electricity has been going back and forth for quite a while, with prices mostly in norwegian advantage. I.e buy cheap, sell high… But if they can sell me some fuel later, that´s OK… For reference:
https://www.nordpoolgroup.com/en/Market-data1/Power-system-data/Exchange1/ALL/Hourly111/?view=table
Check out July 17 as a good example.
LTO.
Thank you for your posts including this one!
Who ever would have thought that after three months we would still be waiting on two 25 pumping units? We are advised they are sitting somewhere in Texas waiting on a trucking company to haul them North.
Who would have ever thought our supply stores would only have 1,000’ of salta tubing and 0’ of seal-tite tubing for a field that has over 1 million feet of injection wells, such that the state is routinely granting extensions for injection well repair work due to “no equipment available?” Likewise, who would have thought it would take weeks to get a simple buck booster for the electrical system for an injection plant. Or that less than ten workover rigs would be running in a field with 2,500 production wells and over 1,000 injection wells. Or that the only drilling going on would be out of casing inventory operators built during 2015-2020, and that once those wells are drilled, no more will be until there is any casing to even be had, let alone the few joints available are priced at over 10x pre-COVID levels? Let alone that oil has been around $100? Or that the only reason these can even be drilled at all is the owner of the rig is drilling on his own leases.
Another driller here who has five drilling rigs has 3 in the field, but only the labor for 2, and they kind of go back and forth in a patch work pattern.
A young guy here leased some land earlier this year, one year term. He’s now negotiating and extension because he can’t get them drilled till 2023 at the earliest.
We could probably plug out our field at a huge profit, if we could only find the labor, rigs and cement to do it! Isn’t that just insane!
We haven’t seen this EVER in 40 years. I’m amazed that production is growing in the Permian, I think all the oilfield labor must have moved there?
Gotta thing this whole thing is pretty much being held together by duct tape and bailing wire!
Thanks Shallow sand,
Amazing that we cannot seem to get things in gear as far as labor and supply chains, not sure if government stepping in to help would make things better or worse, but it seems at least local governments should be asking if there is something they could do to help.
Maybe the bigger companies bought up all the steel tubing etc?
There are a fair number of rigs running in the US so something is happening.
Crude oil market ‘screaming’ tightness as demand continues to top supply
U.S. crude oil closed the week below $100/bbl for the first time since April, pushed down by recession fears, a stronger dollar and mounting COVID-19 cases in China, but continued physical market tightness suggests the drop may be overblown.
Goldman Sachs said this week that the physical oil market (NYSEARCA:USO) is still “screaming that it’s very, very tight,” with physical Brent crude trading at a record premium over futures showing that tightness persists at current price levels.
Any extra supplies that OPEC might provide would be a mere “transient” solution that fails to resolve the overriding issue of under-investment across energy markets, the bank said.
Exclusive: Saudi Arabia doubles second-quarter Russian fuel oil imports for power generation
MOSCOW/LONDON/DUBAI, July 15 (Reuters) – Saudi Arabia, the world’s largest oil exporter, more than doubled the amount of Russian fuel oil it imported in the second quarter to feed power stations to meet summer cooling demand and free up the kingdom’s own crude for export, data showed and traders said.
Russia has been selling fuel at discounted prices after international sanctions over its invasion of Ukraine left it with fewer buyers. Moscow calls the war in Ukraine a “special military operation”.
The increased sales of fuel oil, used in power generation, to Saudi Arabia show the challenge that U.S. President Joe Biden faces as his administration seeks to isolate Russia and cut its energy export revenues.
While many countries have banned or discouraged purchases from Russia, China, India and several African and Middle Eastern nations have increased imports.
Biden was on Friday visiting Saudi Arabia and was expected to seek an increase in oil supply to global markets from the kingdom to help to lower oil prices that have aggravated inflation worldwide.
There is little spare capacity for Saudi and others to increase production in the short term. Saudi Arabia has also maintained its cooperation with Russia in the alliance of global producers known as OPEC+. The two are the de facto leaders of respectively OPEC and non-OPEC producers in that group.
Data obtained by Reuters through Refinitiv Eikon ship tracking showed Saudi Arabia imported 647,000 tonnes (48,000 barrels per day) of fuel oil from Russia via Russian and Estonian ports in April-June this year. That was up from 320,000 tonnes in the same period a year ago.
Saudi is importing cheap fuel oil from Russia to power its very hungry electricity demand while exporting its oil at a much higher price. Saudi has a limited production capacity so every extra dollar they can squeeze out of every barrel they do porduce helps power their ever growing population and energy demand.
I guess it does make sense for Saudi to import cheap fuel while at the same time export expensive oil. How long can this go on before Russia realizes that they’re essentially wasting a precious resource.
Wonder if the Saudi’s are paying with dollars for that Russian oil?
I think traders are going to try to rally US stock markets since they are way oversold currently. Might see some dollar weakness associated with this.
Might mean a short term rally in oil prices. Since risk on sometimes lifts all boats.
But it also means FED will have to get more aggressive with rate hikes.
I think once these oversold conditions correct themselves either through a rally or sideways price action in US stock markets . Then we will see another downturn and lower lows. And dollar will resume its upward trend.
I expect oil prices to go down but not in a straight line.
When you look at the Eurodollar futures curve what are you looking at? Eurodollar futures is basically hedges against risk.
And what those hedges are currently saying is within 6 months
FED will be cutting interest rates quite aggressively.
What has to happen for the FED to do a complete 180? What ever that is won’t be good for the price of oil.
Eurodollar curve is way more inverted than it was leading into 2008 btw.
Might be quite a twist of the ELM model…
(not that it helps in the big picture)
https://www.bloomberg.com/news/articles/2022-07-17/sasol-outage-means-all-south-african-oil-refineries-are-now-shut
SASOL shuts down South African Oil Refineries
Canada’s oilsands look into use of nuclear power as ‘net zero changes everything’
CALGARY – The pressing global need to slash emissions in the face of a growing climate crisis is driving renewed interest in nuclear power — and few places more sothan in Canada’s oilsands.
While the idea of using nuclear power to replace the fossil fuels burned in oilsands production has been bandied about for years, some experts say the reality could be just a decade or so away. On paper, at least, there is more potential to deploy small modular reactor (SMR) technology in the oilsands region of Alberta than anywhere else in the country.
“Without a doubt the oilsands is the biggest market for small modular reactors in Canada,“ said John Gorman, president and chief executive of the Canadian Nuclear Association. ”It’s something that some companies are very actively looking at.“
Not a bad idea considering that Canada’s oilsands use one third of all the natural gas consumed in Canada.
I recall that Peace River Alberta considered this several years ago, and it got NIMBY’d pretty good. Memory could be foggy.
Canada is currently using huge amounts of natural gas to process the oilsands, right ?
There are no gas pipeline projects for using this NG for “normal” usage ?
Do you mean that there’s no spare pipeline capacity to transport the natural gas that would be saved if you stopped using it for the oil sands? If there is indeed a lack of pipeline capacity, you could simply extract the natural gas at a slower rate, thereby extending the life of the fields.
OPEC Exports
Amazing, OPEC is exporting about seven million barrels per day in July 2022 than they were in July 2018. Of course, they are producing about 2.5 million bp/d less than they were in July 2018. But that still leaves a 4.5 million barrel per day gap. Why? Is July 2022 that much hotter than July 2018 causing higher crude consumption for electricity? The latest news was that Saudi was importing Russian oil to burn in their boilers. That should mean more oil for export, at least for Saudi Arabia.
Or maybe OPEC is exaggerating their current production?
Perhaps but the MOMR’s “secondary sources” do not depend on OPEC’s direct communication. Perhaps the August MOMR will show a dramatic decrease in OPEC production. However, July is only half over. They could recover somewhat in the second half of July.
I suspect that the growth in OPEC’s production is just about over. I also suspect that the growth in World oil production is just about over. I think we will have the answer to both those questions by the end of the year, if not sooner.
Ron I agree OPEC growth may be done over the near term (next 3 years), for the rest of the World I think you are wrong, but I agree we will know better in 6 to 12 months. It may be that a recession drops oil prices and then you would likely be correct, if the recession is severe. I think the odds are low maybe 1 in 3 this will be the case.
Frugal,
The output data comes from secondary sources. So unless there is some grand conspiricy, the answer would be negative.
Maybe you’re right — it is more difficult to exaggerate production than reserves.
Russian Exports
Supply Demand Balance for 2022
Dennis – I’m a completely broken record. Pick the URR, odds are we’ve exceeded 50% 2 – 12 years ago…
Not 5-10 years in the future…
Denial. …
Anger. …
Bargaining. …
Depression. …
Acceptance.
Kengeo,
Odds are the URR will be 3000 to 3500 Gb, if we pick 3250 Gb (average of those estimates), the cumulative World C plus C output reaches 50% in 2028 for my best guess scenario as of Juny 2022.
Dennis,
Whether these numbers are accurate or not is immaterial as it relates to the lack of infrastructure currently plaguing the service side of the Upstream oil and gas business. As mentioned in Shallow Sands’ post up above, the service side of the business is in deep trouble in terms of capital (human or financial). We are having ridiculous “wait” times just to secure an ordinary workover rig as well as Drilling Rigs, and necessary equipment. For the time being, the golden goose is not producing any more eggs and we are getting pretty hungry. Your charts may well be accurate if and only if skilled labor and a lot more money moves back into the Upstream industry domestically and worldwide.
Thanks LTO Survivor,
I imagine that if things don’t improve as far as labor and material supply we will see oil prices continue to rise (perhaps to $140 or $150 per barrel). Eventually prices for labor and maerials increases bringing on greater supply of both and the log jam may break. In the mean time high prices will lead to demand destruction and slower economic growth. Eventually I expect the market will sort things, probably over the next year or 2. My charts will likely be wrong as they have been in the past.
George above-
“the new oil now available seems to be getting to levels that are too low to support the level of societal complexity that we have enjoyed for the last 50 to 70 years, and certainly too low to provide the pulse of energy needed to attempt the transition to renewables”
Question/comment-
Have you seen credible analysis of the energy required to “attempt’ a transition towards renewables?
[note that energy payback times for photovoltaics have been measured in the 1-3 yr timeframe depending on how sunny the location deployed, with major PV manufacturer panels having over 85% residual output at 25 years- “Panasonic provides 25-year power warranties that guarantee their panels will still produce at least 90.76% of their original output”]
When you say ‘attempt’, I argue that a strong attempt can and will be made. Just how far that attempt can get is debatable and in large part is dependent on the collective mental and physical effort made. I see the energy requirement as a much lesser challenge, since energy could be diverted from many other uses if it was seen as an imperative task. So far, only a relatively limp attempt has been made by the men of the world.
Other challenges may prove more insurmountable, such as failure to raise sufficient capital and failure of the global integrated economic/supply systems to remain functional.
My guess is that as oil, and then coal, and then gas enter the inevitable production decline phase that there will be more fragmentation of the integrated global economy, a reshuffling of alliances and trading partnerships, a very heterogeneous decline in fossil fuel availability, and a very heterogeneous pattern of residual available energy generation/production. And with that the great expansion of the worlds ‘middle class’ will begin to reverse- in a very heterogeneous distribution.
Some places will have much more energy/capita than others, and if they preserve a civil society and learn to live within their means [less frivolously] they will have much greater prospects than others.
The net energy equation for capital deployed to global solar and wind energy is much more favorable than for capital deployed in any other energy producing sector, a trend in which the advantage became clearcut and growing by year 2017-roughly.
Assertion
– the cryptocurrency industry consumes far more energy than is utilized for the ‘energy transition attempt’, with the transition ‘attempt’ being very strongly net energy positive, of course.
Cryptocurrencies are digital derivatives of the depreciating paper currencies (that are printed & debased constantly) that they are derived from & have a negative interest rate from the massive electricity & infrastructure costs that support them. They basically are a ponzi scheme – see vid – https://youtu.be/0AAUrMuMPlo
I’m personally pro all forms of energy & have had solar energy (solar hot water & photovoltaic) on my house for 41 years. The solar hot water works fantastically & the photovoltaic panels work very well too. The solar hot water provides 65% of my hot water & my solar electric panels provide 70% of my electricity (grid connected). Even though I am pro solar energy it has a low EROEI compared to other forms of energy contrary to what you stated. We need to go nuclear power in the future in a big way due to its energy density and can provide constant base load, But we must be open minded and develop all forms of energy & of course continue to search for more petroleum too because it is needed to develop & service all forms of energy & provides the necessary chemicals and materials needed for everything in life.
Question for Dennis, and anyone else who feels like chipping in: The USA oil production, boosted by shale production, is clearly increasing. Russia, on the other hand, due to not just sanctions, but also due to geology, is clearly declining. The question:
Which wil have the greatest effect, the USA increase or the Russian decrease. That is, will “USA + Russi Oil Production” increase or decrease? We are measuring from the last data presented as of March 2022, which is shown in the chart below.
Dennis, and anyone else who has an opinion, please post your opinion below.
Ron,
US output will increase over the next several years mostly due to tight oil, I think Russia will decline by less than US increases, eventually hostilities may end in Ukraine, unclear what happens if that point is reached.
I have an opinion. But that is all it is.
I am going with what Mike Shellman thinks.
https://www.oilystuffblog.com/forumstuff/forum-stuff/still-dumb-after-all-these-weeks
“Draining the SPR to export to China, is the single stupidest oil policy I have EVER seen in my 60 of 71 years of paying attention. “
That happens when a political party wants to get reelected. The draining is not because of a supply emergency, but to keep prices lower. For that, it doesn’t matter where the oil goes.
And TINA (there is no alternative) for the progressives. The woke enviromental part of the party won’t like a “drill baby drill” program, but wants to scrap all fossil production. Private cars are suspect, single family homes, too – the most green progressives here have this on their agenda. People should live in appartments like Hong Kong (or the good old time with socialistic building programms, there’s a lot of nostalgia in our progressives).
And here the same – we have frackable nat gas ressources here for 30 year supply (enough time to ramp up alternative or nuclear or both), but fracking is the pure evil, as is atomic power. It’s more ideologically correct to buy the gas from dictatorships as Katar.
Let’s see if one long cold dark and very expensive winter will change this a bit – at least in a few.
Eluenspiegel, many of us here in the US consider China a threat to our long term national security, so yes… it does matter where US oil exports go and many of us in the US think exporting our medium gravity, medium sour oil savings from the “STRATEGIC” Petroleum Reserve, otherwise usable in US refineries, borders on treason; to China, aiding and abetting the enemy. We have been exporting tight oil from Texas to China for many years (starting with Trump), this in the face of coalition building efforts between it, Russia and the KSA to secure long term oil sources in that part of the hemisphere. The US is not part of this coalition. Biden’s “visit” with bin Salman this weekend was an obvious indication that we are now alienating all potential sources of crude oil imports required in the future.
The use of American tight oil and tight gas, our LAST remaining hydrocarbon resources (now depleting rapidly) as a foreign policy tool is stupid beyond words. We do not have it to spare and we will wish someday, soon, we had all those oil and gas exports back in the ground, available to Americans. The benefit of all oil exports from the US, TO the US consumer, amounts to a few pennies per gallon of gasoline, at best. Let’s talk about US oil exports in 5 years when the Wolfcamp is dried up like a raisin and OPEC won’t give the US the time of day.
I agree with you 100% regarding the anti-oil, progressive faction; they want hydrocarbons gone anyway they can make that happen, including not drilling for the stuff, and exporting as much of it as possible, as fast as possible. Those that think we won’t need hydrocarbons in a decade because of a complete, economically successful transition to renewables…live in a bouncing beach ball.
Yes, as I said – politically games. That includes stupid beyond words if it gives a short political boost.
We have the discussion here to close our last atomic power plant in a winter where perhaps? Russia gas will be cut to 0. Nobody wants to provoce the hardcore greens.
It’s the same government that now wants to introduce permanent mask mandate for all indoor spaces from October till April – to combat the flu! and corona. Yes, we now need masks for the flu because it breaks down our health system. And restrictions for indoor spaces for events. The teacher union wants masks for all, even the smallest kids, even starting August. Don’t like to see faces. People should stay home always and watch TV.
And please no fracking.
So, that’s our government and yours gives gifts to China.
PS: I don’t like Trump.
We are hellbent on exporting all the natural gas we can too, another decision we will come to regret.
https://oilprice.com/Energy/Energy-General/The-Companies-Taking-Advantage-Of-Americas-LNG-Boom.html
Stephen Hren,
Does flaring the natural gas make more sense to you? That is what was happening to Permian natural gas before we had the pipelines and LNG export capacity to export the gas to our allies in Europe.
Free trade makes sense.
Dennis-
I suspect we are exporting, or plan to export,
far more than ‘flared’ gas.
“The volume of U.S. natural gas that was reported as vented and flared reached its highest average annual level of 1.28 billion cubic feet per day (Bcf/d) in 2018, according to the U.S. Energy Information Administration’s (EIA) Natural Gas Annual, which contains updated data about vented and flared natural gas. In 2018, the percentage of U.S. natural gas that was vented and flared increased to 1.25% of gross withdrawals, up from 0.84% the previous year. Two states, North Dakota and Texas, accounted for 1.1 Bcf/d, or 82% of the reported U.S. vented and flared natural gas.”
Opinion-
Free trade is nice, but not always the smartest use of nations scarce resources. Sometimes government policy needs to restrict/regulate the capitalist tendency toward ‘boom’ expansion in order to avoid bust .
I think the nat gas exportation is an example of this.
The energy will be needed at home indefinitely, despite the loss of export earnings currently.
I know this is not the recipe for current maximal GDP, but that is not the only goal.
I also acknowledge that if all countries apply this kind of thinking
that a much smaller global economy will result…rapidly.
Some gradual middle path is likely the wise one.
Does flaring the natural gas make more sense to you?
Dennis, it’s all about economics. A pipeline must be laid to each individual well to a feeder line which other wells tie into. If it is more economical to do that than flare the gas, then they will do that. They must weigh what they would get for the gas versus the cost of the pipeline. Whichever is more economical.
There was a point in 2018 or so where there was not enough pipeline capacity for natural gas out of the Permian basin and the excess was flared. Now it moves to the Gulf coast and is exported. The US has quite a bit of natural gas, probably more than is needed as we continue to develop wind and solar resources. Government intervention is sometimes best, we could stop approving new LNG facilities, not fair to investors to shut down existing projects. Changing rules in the middle of the game is unfair in my view.
If we want to compensate the companies for lost income, perhaps it would be fair. We also would piss off allies, not really a good look for US.
Peak Avocado,
I agree utilizing the SPR is dumb. It would also be a dumb move to stop US oil exports imo. In April 2022 about 6% of US crude oil exports went to China (195 kb/d of 3239 kb/d based on EIA data).
Note that stopping US exports of crude oil would take 3.2 Mb/d out of the World market and the US does not have refinery capacity to handle this type of crude oil.
Does anybody have an estimate of what would happen to the World price for crude oil if World supply went from 80 Mb/d to 77 Mb/d? My rough guess is that Brent goes to about $160/bo or higher and the price of US imports tend to track the Brent price so this hurts American consumers. It also hurts US tight oil producers if output decreases to 4500 kb/d (this is the amount that US refineries can handle.)
We have to export our crude. We don’t have enough refining capacity in the US to handle the LTO and we haven’t built a new refinery in decades. We are not even allowed to export our LTO to the East Coast due to the Jones Act.
While China and India focus on providing “any” type of energy to their huge populations, we worry about climate change. While climate change is extremely important, survival may be important in the short term.
The hubris of the United States and the MSM is appalling and could even be considered as treasonous. We should be doing everything possible to conserve energy including mass transit and focusing on building nuclear power plants and everything else possible. In the meantime we encourage our allies to sanction Russia while we beg the Saudi’s who are aiding Russia through their fuel oil acquisitions. If this all wasn’t true, we would think this is purely fiction.
We don’t “have” to export 70% of Permian tight oil production; it’s remaining development should be regulated (thru TRRC mandated spacing between wells and/or well densities per acre) at rates commensurate with what American refineries CAN absorb…starting yesterday. Its a contradiction in terms to be concerned about pressure depletion, falling well productivity, rising GOR/WOR, accelerating decline rates, well interference (horizontally and vertically) and increasing D&C and OPEX costs, as I am, but be OK with exporting 3.6MM BOPD of our remaining resource wealth to foreign countries. Respectfully, that makes NO sense to me. Conservation INCLUDES limiting exports.
We can’t use our nations tight oil all at once, but we WILL be able to use it eventually. Tight oil is our last hope for long term energy security; it represents our children’s oily savings account.
America’s oil needs to STAY in America.
I think you give US progressives way more power than they actually have. They are in my opinion less than 25% of the population and 0% of decision makers in the oil business whether it is upstream, midstream, or downstream where nearly all the decisions are made about where oil is marketed. One can disagree with the decision to release oil from the strategic reserve but where the oil ultimately finds a home is not the decision of the government but private companies. My understanding of how the sale of SPR oil occurs is that it is sold to the highest bidder and then as the capitalist system in the US operates in spades the purchaser can then resell it to anyone in the world. And since oil is somewhat fungible it should theoretically increase the global supply. So it may be the wrong decision for the US as a whole but US oil companies have had the right to export crude oil for the last few years and who they sell too is not influenced by the rhetoric of progressives or others but by the income the sale produces.
The current high price of gasoline does not impact as many progressives as poorer people on the bottom of the income ladder and most of them are not progressives. So
the only way in a capitalist system to reduce prices is to increase the supply or reduce demand. But other than controlling the SPR, the US government has little control on where oil or oil derivatives are sold or what the sale price is. Maybe the US needs to set up a National Oil Company like Saudi Arabia and control who and at what price gets oil from the US but until that happens (like never) then it seems a bit over the top to accuse the US government (or Democrats or progressives) of treason because some of the oil released from the SPR found it way to China or Europe. Democrats are so inept that they cannot even get a significant bill on increasing renewable energy through Congress even while controlling both houses so I don’t think the US is about to be taken over by progressives (or socialists or communists).
Heyzeus. I am not accusing the Federal government of treason, I simply implied I consider the draining of America’s strategic petroleum reserve for exports to China as not very “strategic” and something ‘akin’ to treasonous. China is not a US ally and the decision to release SPR crude IS 100% on the current administration. It’s wasn’t a “little bit” of COVID China sent us and its not a “little bit” of US intelligence they are continuously trying to steal, so it matters little whether its one, one gallon paint bucket of Wolfcamp oil or 6% of total exports; that’s irrelevant.
At to who, exactly, is responsible for how much, and where non-SPR exports go; it is indeed a decision made by private enterprise and who offers the most money. Got it. Regardless, Permian tight oil is the last of our country’s sovereign oil resource wealth that we WILL wish we had back someday very soon. 1.3G BO of exports every year is not chump change. As a producer, and someone who knows exactly where his crude oil goes, and what its used for, who would NOT allow his oil to be exported, regardless of price, I’d prefer government stay completely out of my business. But we’re past that now, and somebody, anybody that makes policy needs to stand upright and put country, and our kids, first.
Mike,
You must be wrong because I agree with you. Using the SPR does not make sense.
As far as not exporting US oil, it will hurt both US oil producers and US consumers. Perhaps better regulation by the RRC is in order, I will leave that to people like you who know far more than me.
Pay now, or pay later, Dennis. The American public needs a big dose of $7 gasoline to wake the fuck up. Better that than $12 later, which is exactly where we are headed. Let the Permian Basin tight oil industry eat fish heads; it’s our kids future I am worried about.
Besides, less barrels, higher prices, more FCF, less debt (which has only been reduced <20% so far in 2022, BTW!), less well interference, some BHP might be restored long term and that equates to better well quality, R&D catches up to development rates which might equate to improved extraction technology, slower development rates equal less stress on supply and services, costs go down, water disposal and water recycling improves, fewer earthquakes, more water to flush the toilets with in Odessa, refineries get caught up to more light oil absorption…in the long run everybody benefits to slower tight oil development except a handful of highly paid hands, royalty owners and overpaid CEO's. It's a no-brainer on the axing exports thing. Slow the number of drilling permits to equate to US refinery absorption and the 3.6MM BOPD of tight oil exports is gone in 8 months, thru natural decline.
But that takes forethought, the ability to think past next week and a little short term pain for long term gain. So relax, nobody has the balls for that….it will NEVER happen. For the record, folks that worry about future oil supply but are fearful of oil exports being curbed or hypocrites. Or they're making money from exports.
We are a path to drain America, first, when 10 years ago we should have taken the higher road. Now we are on a mission from God. I can only make people stop and think about how utterly short-sighted that is, nothing more.
That is also true. Tell that to the banks who still have a lot of Shale related debt on their books.
What would be the downside to USA drilling 2,500 wells per year in the Permian instead of 5,000?
Higher short term oil and gasoline prices.
The current administration wanted fewer new wells until prices went up and same severely crimped it’s future election prospects.
Tough to think of a quicker and harder flip flop than Biden Administration on oil and gas.
Maybe rapidly increasing interest rates will hammer the economy enough to reduce demand short term to lower oil and gas (and other commodity) prices?
But how is the USA (and for that matter all other countries) that have racked up huge national debts, going to pay all of that interest? By issuing more debt?
Actually, yes. If you want to get really depressed, read the latest CBO projections. US interest expense on national debt is projected to triple from 2022-2032. It only gets worse after that.
Drilling only half the wells will cement 7$+ gas for the next decade.
But it will move things – people with much money will go electric cars, people with less money will buy a smaller car with better mileage and use a ride sharing app to go to work – and people in towns will take the bus more often.
Market economy can get efficient (in spite of what the green say, they only want a socialistic super nanny state), but there needs to be price pressure.
Here I hope for a little bit of chaos (not a big clash) in the winter – perhaps we can then get our own gas instead of making kowtow before all dictators. There is enough for a few decades – but we have to import the fracking pumps. At the moment this is not possible.
It’s the situation we have here, as when your ecological left would be in government the last 12 years and all Permian drilling would be forbidden. Going on kowtow to Saudi Arabia & co every month.
The US does have states that are as large as countries in Europe where there cannot be a shale boom. Those are New York, California and Illinois.
New York is the biggie, as it borders Pennsylvania’s Marcellus. Outright ban.
California and Illinois both probably don’t have the resource anyway, and haven’t done an outright ban, but it’s not happening in either state anytime soon.
Shallow sand,
2500 wells per year would be 50000 wells in 20 years.
If oil prices go down to $50/b or less due to transition to electric transport by that time, there will be 30,000 wells that not be completed because they won’t be profitable. That’s about 12 Gb of oil left in the ground.
Good for climate, bad for oil producers imo.
LTO Survivor,
I agree the oil is exported due to lack of refinery capacity. For those that want to save the oil for the future, after 2035 when oil prices fall to under $50/bo, all the tight oil that has not been developed will remain in the ground forever as it will never be profitable to produce.
That’s a great idea from an environmental perspective, but may well result in Mike’s proposed $7/gallon for gasoline. I don’t see much chance of that happening. We could restrict exports to China and any other nations we don’t trust and only export oil to close allies (NATO and other OECD nations perhaps). That might be a more viable solution if it doesn’t violate international trade agreements.
Per Mike’s comments on energy security and our exporting LTO. :
When we do go to war we will jumping through our asses to convert refineries to handle LTO. This IS a national security issue and should be part of a bigger plan.
Pooty Poot is tickled pink watching us ship out the LTO, knowing we will soon be another Germany/beggar.
We can stop exports, just need to get conservatives to agree that government intervention that leads to higher gasoline prices is a winning strategy.
Good luck with that.
Ron –
Several posts ago I presented a variety of info that suggests that there have been a number of peaks in different places between ~2000 and present. The estimates of URR that Dennis consistently refers to, which go well beyond 2P, have the tendency to be on the (very) high side. 2P is the only way to do a “best” estimate for URR. All of this being said, we have 20 years of peak oil in the rearview…below is an updated figure from UK Energy Research Centre (2009). Fitting the curves seems to produce a peak in 2016 (excluding US). The US has such a small amount of oil that it really has limited effect on the rest of the world. I also think Dennis is way off on decline rate, but that’s another discussion…
More importantly, the country with the most oil (Saudi Arabia) has gone on the record to say they are maxed out as of next 1-2 years…if that’s not peak oil then what is????
Ron would like to think that US output will increase but Texas paints a very different picture…
The BP 2020 report shows that peak oil is here to stay as well…they just got creative and called it something else “demand”…gotta love their marketing. When a seller has a demand problem they focus on supply…but if the problem is supply they can flip the script and talk about demand and ways to reduce it.
In the growth environment 80’s and 90’s it was like a game of musical chairs we only 2 people playing and thousands of chairs. On the declining side 2030’s to 2040’s it’s going to be thousands of people (countries) all looking to sit in 2 chairs (oil production, especially exportation will be coming from very few countries).
Colin Campbell presented this exact situation in his work between 2000-2012…I’ll post a graphic from his 2012 presentation that is still very accurate 10 years later…
Campbells 2012 graphic…
From Campbell’s 2010 book. Regular Oil and Gas
Thanks, I always like that chart. The interesting thing I notice is the overlaid actual production rises much steeper than any of the smoothed URR paths right up to OPEC constraining production in the 70s. The plots are extended to match the post-OPEC slope, not the earlier rapid rise (TRRC notwithstanding).
But the decline won’t be “managed” by any cartell will it? I seems to me decline will be not at the OPEC-managed rate but at the 1950-70 rate at best.
Pops,
The decline rate tends to be less steep, US conventional onshore output has decreased at about 3% per year. Note that the cartel kept oil prices high so demand decreased, that is the reason production grew more slowly, perhaps in the future demand decreases by 7% per year, I hope it does from an environmental perspective, but I am not that much of an optimist. If my optimistic EV transition scenario plays out (low odds maybe 1 in 3) we get an average rate of oil demand decline of 5.6% from 2041 to 2050, that is about as steep as it might get, but in reality demand will be higher and decline in oil output will be 3 to 4% (assuming some transition to EVs occurs).
Decline has been less steep because there were still discoveries being made and new fields exploited and old filled in.
But without that replacement the curve steepens. Sort of the point of peak oil.
But yes, my point is exactly that OPEC suppressed demand after 1970, so any curve should then be fitted to the prior unhampered growth.
Pops,
The curve is mostly based on Annual production and cumulative production. Note that the Hubbert curve is above actual output from 1870 to 1940 and then below from 1950 to 1979. Cumulative production matches actual in 2010 or so.
We could create a hypothetical scenario wher output grows at 7% until 5 years before peak, but it would not tell us much.
Output was about 57 Mbpd in 1973, if output had continued to grow at 7% per year for 20 years we would have been at 222 Mbpd in 1993, instead we were at about 65 Mbpd.
Under the hypothetical we might have seen the 7% decline you envision.
Not the world we live in.
Pops,
Below I create a hypothetical scenario wher the increse in World output over the 1963 to 1972 period (just over 1000 kb/d each year) continues into the future and then use HL to find the URR and a Hubbert curve. Below I show a chart with this hypothetical Hubbert curve compared to actual World Output through 2019. The hypothetical model has almost 700 Gb more cumulative production by 2019 and decline is indeed very steep (almost 6% per year by 2070). Because we have not followed that path, things will likely be very different. The hypothetical scenario has a URR of 3084 Gb and peaks in 2008 at 48.7 Gb per year (actual output in 2008 was 27.2 Gb per year and in 2018 it was 30.3 Gb/year. Cumulative output at the peak for the hypothetical scenario was 1554 at the end of 2008 and actual cumulative output was 1066 Gb.
Pops,
Chart below gives two hypothetical scenarios. The one will peak output of 48 Gb per year assumes production had continued at the 1963 to 1972 rate of increase ( about 1 Mb/d each year and then fits a hubbert curve to that hypothetical (URR is about 3080 gb). The second hypothetical assumes actual output from 1960 to 2021 is followed (results in a Hubbert curve around 3000 Gb) and a hubbert curve is fit to that, but I use my own scenario up to 30 Gb per year then assume a plateau is maintained until we get the the cumulative output of the first hypothetical when it falls to about 30 Gb, then I use my shock model to use reasonable extraction rates (less than 12.2% as in 1972) to see how far the plateau can be maintained. The decline rate is similar to the first hypothetical scenario (48 Gb/year max) at about 6% per year.
My best guess scenario is shown for comparison (maximum decline rate around 3% per year).
In my view, my best guess scenario is most reasonable. the only way we get to 6% decline is either an extended plateau in output or a crash in demand. Note that vertical axis on the chart is World C plus C output in Gb per year.
Thanks Dennis. Your hypothetical plateau is just what I was describing.
OPEC constriction, various efficiency mandates and fuel switching actions abbreviated the exponential increase of the period prior to 1970-ish. Instead there is a long low 1% slope since then— you could describe it as a near plateau in fact.
Because of those constraints, a curve can’t be fitted to any point after those initial embargoes and the repricing at that time and be expected to predict anything. That was my point.
Your guess for URR is as good as any. But like Laherrere shows, conventional and tar/ x heavy, etc. have different curves. Conventional oil, the fast rising flavor from prior to, say 1990, will fall as fast as it rose, maybe faster, if Hubbert is near correct. But when it’s gone, what’s left won’t be as cooperative.
We will drop of the plateau fast because we will have overshot the curve in addition to “pulling production forward” using borrowed money. All the way down to whatever tail of combined small curves of tar, x-heavy, deep, arctic, LTO, food -fuel, and whatever else burns.
I think it entirely possible we are *now* on the extended plateau, burning the last of the fast producing giants. The downslope will necessarily be much steeper at first as the conventional giants decline at the rate they grew. Evidence from Rystad, announcements from KSA, RU and on and on are saying the max is about in. And that is when almost everyone still has reason to lie and exaggerate!
But of course I’m no authority on anything but my own opinion, so YMMV… LOL
Pops,
I don’t think the plateau happens because there won’t be that much demand for crude oil. High oil prices will speed up the transition to electric transport. Demand falls below supply and lot of technically recoverable resources do not get produced including tight oil, extra heavy oil. Arctic oil, and ultra deep water offshore oil.
Dennis, Pops has his theory, you have yours, and I have mine. We all differ. I think you are way, way, overestimating demand destruction and are underestimating supply destruction by an equal amount.
There is just no way, in my estimation, that demand will fall faster than supply. Of course, there will be demand destruction, but not because of renewable energy and electric cars. It will be because of high oil prices. When people cannot afford to drive or fly because of high oil prices, they will quit driving and flying. Of course, people will have to drive to work and to the grocery store. But they will carpool to work and try to get everything they need from the grocery store in one trip every few weeks.
Ron,
Yes there are different opinions on this. EV sales have been growing at close to 40% per year since 2015. I agree oil prices will be quite high from 2022 to 2030 or so (perhaps longer). Do you think high oil prices id likely to decrease or increase the rate of adoption of EVs? I have made the conservative assumption that there will be little change in the rate of adoption of EVs. Sometimes us old folks are not able to see how quickly things can change, I remember a few years ago when I thought “those iphones are stupid, I would never pay for one of those”. In a sense I was right, everyone in my family except me owns an iphone, I have a Samsumg smartphone, essentially the same thing.
Have you ever driven a Tesla? You might see things differently if you did,
Dennis, I thought you understood something I have stated, on this blog, many times: I am very pro-renewables, I am very pro-electric cars. But I don’t live on hopeum Dennis. I know they will not arrive fast enough to stave off the very serious problems of the collapse of crude oil.
No, I have never driven a Tesla, but my grandson owns one and I have ridden in it. I loved it. I don’t know what on earth you mean when you say I might see things differently. What on earth did you mean by that. I am already rooting for renewable energy and electric cars. How would driving a Tesla change that?
Dennis, my argument is that you, and all the other cornucopians, should just face reality. Stop living in a dream world. Renewables are a great thing, a great idea, but they will not save us from the terrible fate that awaits us because we have vastly overpopulated the world and have gone through all our natural resources like a drunken sailor going through his rich uncle’s inheritance.
Ron,
Sometimes seeing how good something is changes one’s view of how quickly things might change, but each of us is different in how we think the future will play out.
If the take up of EVs proceeds as I envision over the next 10 years or so, then demand for crude plus condensate will fall below the supply available at an oil price of $100/bo in 2021 US$.
You believe this cannot happen, I believe you are wrong. Time will reveal which of us is correct. Note that you have recently said my scenarios for oil output are looking more reasonable, nmy expecration is that demand for C plus C will be less than these “somewhat reasonable” scenarios by 2035, due to the transition to electric land transport.
Though demand destruction may play a role as well especially for the poor. In OECD nations, ICEVs will quickly become like horses in the 1920s and 1930s, some may cling to them and the very wealthy will continue to be able to afford them if they choose to do so, but most will move on to EVs as they will be better and cheaper to own. Eventually as autonomous cars become a reality, many people will just use robotaxis, all of which will be EVs. This replaces ICEVs at about 4 times the rate of privately owned vehicles, this occurs about 15 to 20 years in the future.
This replaces ICEVs at about 4 times the rate of privately owned vehicles, this occurs about 15 to 20 years in the future.
In 15 to 20 years we will be deep in the throws of the energy crisis. World oil porduction will be dropping like a rock and what EV are around will not be affordable to the general public because of the severe economic depression caused by the lack of crude oil available to the world.
But your prediction really pisses me off. That is because I will be long dead by that time and I will not be around to say: I told you so! 😫
I too am very pro renewable. The difference between smartphone penetration and renewables, BEVs, massive electrification, etc is there was not an entire political party (including enough or the other party) paid to fight tooth and nail to prevent implementation.
Transition requires a mass effort, a significant portion of the citizenry reject the premise.
Pops,
High energy prices for a few years may change people’s perspective. Particularly OPEC not being able to meet demand. That might be a wake up call that is much needed.
I expect that by 2032 (10 years from now) we will see oil prices start to fall due in part demand destruction due to lack of affordability and transition to electric land transport.
Few years ago, with just 34 million of population, KSA was in danger of overtaking Japan (pop 125M) as the #4 oil consumer in the world behind US, China and India.
To reinforce their imagery of sustainable claptrap hyper green perspective, they fought off the gains (theirs) and losses (Japan) and managed to stay quietly at #5.
Well, that is over. They are now, with 34 million population, the 4th largest oil consumer in the world at 3.595 mbpd. Japan faded to 3.34 mbpd. That’s now #6, not #5. Russia is at 3.407 mbpd.
When you consider that something like 70% of their tap water is desalinated with oil (or gas), understandable
Great explanation by Campbell on reserve growth simply being a result of underreported fields as well as exaggerated opec fields…
Video – https://m.youtube.com/watch?v=7t4sri3YQoU
I would wager that there’s almost no chance URR is greater than 2,500…this should work out to peak oil date of around 2015, which matches the 2016 global peak (excluding US).
Kengeo,
Yes that is what reserve growth is, increased knowledge of the fields leads to better estimates of reserves. The “underreported fields” are fields that were once thought not be producible and were classified as such. Increased knowledge and improved technology changes these estimates over time.
Campbell and Laherrrere claimed that engineering best estimates should lead to as many downward revisions as upward revisions, but an engineer 30 years ago could not accurately predict future oil prices, technology and what would be learned by petroleum engineers about the oil field over the future 30 years. Thus we see historically that there are more upward revisions to reserve estimates (2P estimates) than downward revisions. This was simply a mistake on the part of Campbell and Laherrere.
More than just a mistake. A big chunk of the ball game. The USGS had identified reserve growth as the most important research needed related to future resource estimates by the mid-90’s, and mentioned just that. Before Colin and Jean declared 2002 global peak oil because they couldn’t be bothered to pay attention to, you know, geologists. It was my username by 2005 because it didn’t take but some rudimentary calculations to understand the scale of the issue when it comes to global estimates. So if run of the mill data analyst types knew its importance 17 years ago now (Nansen Saleri wrote it up in JPT back around the same time for crying out loud) , what the hell is taking Happy McDoomsters so long to figure out that there is a dog, and it is wagging that discovery tail, and if you don’t account for the dog rather than the tail, it is egg on face for McPeaksters for as long as they want to play the game.
Exactly, watch the video.
Past mistakes can’t be factors for projecting continued “growth” into the future. One time monkey-business by the cartel also should not be projected. Do you have recent reserve growth data that indicates otherwise, say 2005 to present?
Dennis,
Colin Campbell does not cite the reasons that you cite for reserve growth in
NOPEC. He says companies were penalized by the SEC for over reporting
reserves, but they were not penalized for under reporting. He then says that
it made good business sense for companies in NOPEC to under report reserves
because then they had reserves they could pull out in case there was some
problem.
Because OPEC quotas are an increasing function of reserves, the opposite became
true of OPEC: OPEC members had an economic incentive to over report
reserves. So Campbell expects OPEC reserves to shrink rather than grow as
they did in NOPEC.
Schinzy – Thank you for attempting to spoon feed Dennis, while the thought did cross my mind at this point I think he is actively aware of the true situation but for some reason doesn’t want to admit it.
Kengeo,
I don’t agree with Campbell. In the US companies report 1P reserves, the 2P reserves typically are not reported publicly. Using UK data (where both 1P and 2P reserves are reported) I found that 2P reserves are about 1.7 times 1P reserves.
See
https://peakoilbarrel.com/us-oil-reserve-growth-2/
US 2P reserves grew by 63% from 1980 to 2005, using the approximation outlined above.
Claims that there is no reserve growth is not correct in my opinion. The USGS agrees.
Dennis the claim is that there will not be reserve growth for OPEC because their motives were vastly different. You don’t address this concern in your reply.
Stephen, obviously it is correct that OPEC cannot possibly have reserve growth unless they grow in the same manner they have grown in the last 40 years. That is all OPEC reserve growth came from nothing more than someone just writing them down with a pencil. Their motives were to get their production quota as high as possible. That is what is meant by “their motives were vastly different.”
We will eventually know what OPEC reserves were only when they are all gone. But we will never know what they are. OPEC reserves always grow, they never decline. The more they produce, the more they have to produce later.
OPEC claimed reserves
OPEC says its reserves were, as of 2021, 1,242.82 billion barrels, 80.4% of the total world reserves. They say that Non-OPEC reserves were, in 2021, 303.25 billion barrels, 19.6% of total world reserves.
What is really amazing is that there are people on this planet who actually belived that shit.
Note. On their site, linkde above. They dropped the first 3 from Non-OPEC reserves. It reads 03.25 when it should read 303.25.
Stephen,
Laherrere has stated that OPEC conventional reserves are overstated by about 300 Gb, this seems about right. One way to estimate iscto look at proved reserves for OPEC in 1980, then multiply by 1.7 to get 2P reserves and then estimate reserve growth. When I do this for conventional OPEC reserves, the number reported by BP seems reasonable, if we assume reported reserves are 2P reserves rather than proved.
Ron,
The reserves for OPEC can be determined with some simple math. OPEC started increasing reserves in 1984, up to that point the reported 1P reserves were likely fairly accurate so in 1983 they were reported as 465 Gb. Let us assume that like UK OPEC 2P reserves are about 1.7 times 1P reserves. So 2P reserves would be 465 Gb times 1.7 which is equal to 790 Gb. Let’s say the OPEC reserves grew by 63% over 25 years just as they did in the US. So 790 times 1.63 is equal to 1288 Gb as of 2008 excluding Orinoco belt (unconventional oil). According to BP OPEC conventional reserves were 1161 Gb in 2008, so OPEC reserve growth was somewhat less than in the US (about 47% over 25 years rather than the US level of 63% over 25 years). From 2008 to 2020 OPEC reserves grew by another 4%, if we assume there were no new discoveries in all 13 OPEC members over that 12 year period.
As long as we properly account for the fact that OPEC reserves are likely to be 2P reserves rather thn proved reserves, the numbers make sense for conventional resources. Non OPEC 2P conventional oil reserves are about 530 Gb at the end of 2020 and total World conventional 2P reserves at the end of 2020 would be 1741 Gb, cumulative conventional output at the end of 2020 was about 1370 Gb, suggesting a World conventional C plus C URR of 3110 Gb, if we assume no future reserve growth. If we added my estimate of 200 Gb for unconventional oil URR we would be at 3300 Gb.
There does seem to be inflated reserves somewhere relative to my URR estimate of about 3000 Gb for all types of C plus C, by perhaps 300 Gb. It is also possible that my estimate is too pessimistic as some very pessimistic people have started to call my scenarios “realistic”. For now I will stick with my 3000 Gb guess, but as in the past it may be too low, especially considering the recent Laherrere et al estimate of 3500 Gb for World C plus C URR.
Great article from 2018 Jean Laherrere:
https://www.resilience.org/stories/2018-12-05/thoughts-on-the-future-of-world-oil-production/
Take note of 5% decline rate expected for world:
Hopefully prices stay above $100 for next 12 months so we can get a clear picture…
Kengeo, the 5 % decline rate relates to the part of the curve at the tail end. So the decline rate moves progressively from zero at the peak toward 5% at the end. So it will be about 2% by 2030.
Seppo – That definitely doesn’t sound right and is contrary to Laherrere’s analysis. Take a look at Angola or Algeria and see if that statement works…decline should accelerate in first couple years then hit max and taper back off…
Kengeo,
The 5% assumption is an oversimplification of Laherrere’s analysis, he predicts 2.5% to 3.5% decline in World output.
Chart is from page 19 of document linked below
https://aspofrance.org/2018/10/03/updated-extrapolation-of-oil-past-production-to-forecast-future-production/
Kengeo,
The number I quoted is for the entire world. The actual number for the long term decline is about 4.04%, the peak date is 2020.3 with the range from 2019.3 to 2020.9. The ultimate is 2877 with a range of 2793 to 2963 obtained with a 95% confidence interval.
The long term decline rate at Norway is about 13% a year. The smaller the oil province the higher the decline rate for conventional oil.
But, after checking my calculations the decline rate at 2030 is about 1.2% as this figure shows.
Seppo,
When we do a Hubbert curve for World conventional oil with URR of 2508 Gb based on an HL, the maximum decline rate through 2288 is 4.13% (peak year 2015, and y intercept is 0.0421295.
Dennis, see the post above. But I think that the world will be in greater chaos by 2030 than it already is, so I expect a Seneca Cliff and faster decline. But those still alive then will be able to see what the situation is. Reading the actuarial tables, I am not expected to live until 2030. But they are based on conditional probability so every year healthy and alive pushes the final date further to the future. Kind of like Zeno’s paradox.
Seppo,
I see things differently, but there are many possible futures. What will be is not known imo.
You may be correct. I certainly expect challenging times ahead. Political problems are difficult to predict.
Seppo,
What level of World C plus C decline do you expect? How do you define a Seneca cliff?
I base my thinking on how the world is developing right now. Although the causes of the riots and demonstrations in the world over the last few years have had different origins such as black lives matter and covid restrictions, the newer ones, such as the push to new environmental regulations in Sri Lanka and The Netherlands, as well as the ongoing one in Ecuador, and those developing as a result of the war in Ukraine, all point to a world in chaos as energy scarcity develops, as the Yellow Vests in France, showed. I cannot see but these increasing in frequency and violence as time goes on.
It is fools errand to try to quantify this by a assigning a number to the decline rate. There are just too many moving parts.
In addition to the model calculations, I try also to collect anecdotal evidence. One such is the Saudi Foreign minister telling the correspondent in Davos, that SA cannot increase the production rapidly. Similarly Biden was told that they are planning to increase the production to 13 million by 2027. I doubt that they will ever achieve this. but this is just a guess. In the meantime the production in about 85% of the giant and supergiant fields are declining at the rate that requires anywhere from 2 to 3.5 million barrels of oil daily.
The Saudis will produce extra until the US elections in November probably from storage. That was the deal of Biden’s visit. But then… they will excuse themselves from the scene due to “deteriorating economic conditions “…
The Saudis will produce extra until the US elections in November probably from storage. That was the deal of Biden’s visit.
Sorry, Stephen, I am a bit shocked to see such a silly conspiracy theory coming from you. The Saudis don’t give a flying fuck about the US elections and will do nothing to please Biden. The Saudis will do what is in the Crown Prince’s best interest and that has nothing to do with Biden.
What they are doing is producing every barrel of oil they can possibly produce and will continue to do so as long as prices are high. But don’t expect that to be very much more than they are producing right now. They are already producing flat out.
Ron, a quid pro quo hardly counts as a conspiracy theory. Biden called the Saudis a pariah after the Kashoggi killing, and MBS was pissed. Biden ate crow with his visit to KSA (which pissed off much of his base). The Saudis will repay him to the extent they can (which I agree is not much but they do have significant oil in storage).
More cherry-picking Dennis:
Here’s what he writes in the article linked above (and below), seems crystal clear to me:
“It is likely that in the coming years world oil production will decline (at around 5 percent per year) and that LTO will decline more sharply. This will come as a shock because it is contrary to the official forecasts, which see oil production rising up to 2040.”
Thoughts on the Future of World Oil Production
By Jean Laherrère, originally published by Resilience.org
December 5, 2018
https://www.resilience.org/stories/2018-12-05/thoughts-on-the-future-of-world-oil-production/
Kengeo,
None of Laherrere’s charts for the World suggest a 5% decline. If you created a Hubbert curve that matches World output, you would see that this is true. I am not going to argue facts with you, do the math, it is not difficult.
You’ll have a lot of demand for oil in the future in Asia, Africa and Latin America.
Electricity grid there isn’t really up to date for electric car charging – and when oil get’s cheap again in the 2030s and 40s why not burn it with cheap constructed cars there. Fuel logistic is much more simple than a good grid that can handle the loading of huge amounts of cars in the evening (they have to drive in the day time).
Yes, is WOULD be better to stop burning fossil fuels – but other people than white middle class people don’t really get the concept of voluntary abstinence. Chinese call them baizuo, and my african friends roll their eyes very dramatically when talking about typically european moral stuff.
“You’ll have a lot of demand for oil in the future in Asia, Africa and Latin America.”
Of course you will. In the rest of the world too.
Wherever there are people.
But as oil gets scarce/expensive they [all human regardless if they meet your narrow definition of moral- who enslaved who?]
will push hard (scramble) for other mechanisms of transportation.
Its a global issue, sparing a few places that have unique situations, such as Russia.
It may seem voluntary now.
It will not seem voluntary (or a so-called moral choice) soon.
It will be purely a reaction based on economic survival.
To many, like the nearly 5 million Chinese buyers of electric vehicles in 2022, the decision to save of money on transportation is no longer some future scenario.
Here in the forum the main consense is oil gets dirt cheap in 10 year because of falling demand. That’s my reply why this won’t happen, in my opinion.
I don’t there is a consensus, here or anywhere, what happens to oil prices in 10 years time. This forum especially is polarized between cornucopians and doomers.
Of course, there is no consensus. I think the doomers, like me, outnumber the cornucopians on this forum. I have no doubt that production will fall, because of geology, much faster than demand will fall, because of technology.
I actually think we are more or less in consensus, using the URRs that Dennis likes to mention (2500 Gb) results in a peak oil date several years ago…using one of his slightly higher URRs results in peak oil more or less right now. Ultimately URR plays a small role once you are at the half way point does it matter the size of the field your playing on? As it turns out not much. Every year world market tears thru ~30 Gbs. Another way to look at it is that every year we are consuming 1% of our total oil and we’ve already consumed somewhere between 45-55% of it. We don’t need to worry about when we run out, rather we need to worry about when less oil is available for growing economies. We have or will reach that tipping point so further production growth is impossible. World less US reached that point 6 years ago in 2016. US has a short supply of shale oil that will likely see decline rates as much as 50%, and not less than 15%. The shale oil play will end as quickly as it began…
Kengeo,
The World C+C URR that I use is about 3000 Gb, we reach the mid point of that at 1500 Gb. I agree the peak will be soon, I just do not agree the URR is 2500 Gb. Note the Laherrere article with the best guess URR for C plus C of 3500 Gb. That would put the 50% point at 1750 Gb, at the end of 2021 the World cumulative C plus C output was about 1436 Gb.
World remaining recoverable oil reserves is something that can only be estimated. As such, it is a very poor guide as to when oil production will actually peak. A far better guide is looking at actual production trends such as decline rates, water cuts, and new discoveries. All those things considered, it looks like world oil production peaked in 2018-2019. One can estimate URRs until the cows come home, but never forget, it is an estimated URR, not a known URR.
Ron –
I disagree with your analysis, World (less US) peaked in 2015-2016 timeframe (not 2018-2019). The US should be given little importance WRT the world, specially since US is a net importer of crude. The ‘losers’ group is declining at ~4.4% since 2018 (granted the pandemic likely skews that value a bit).
It may be more accurate to say “up to” 5% annual decline rate…looking at HL profiles for various URR estimates (as Dennis suggested) I believe a long term average decline rate is closer to 3% /- 0.5%.
See below, analysis of EIA data for World and Top 3 (US-Russia-Saudi Arabia). For the Top 3, I think it’s safe to assume a much higher decline rate than for the rest…
My first post at PO.com 17 or 18 years ago asked; ‘do we have enough time to transition before the energy cost is too high’ — I still think it’s an open question. Frankly the apparent death-wobble of society right now makes me wonder if it even matters.
But then I’m always a doomer on Wednesdays.
Kengeo wrote: Ron – I disagree with your analysis, World (less US) peaked in 2015-2016 timeframe (not 2018-2019).
How can you disagree with something I never said. I said world oil production peaked in 2018-2019. World less US peaked in 2016-2017 timeframe.
You may want to completely disregard the US but I cannot. I count all C+C regardless of where it is produced.
Ron – fair enough, just want to make a distinction between the top 3 producers peaking much later than the rest of the world. Rest of the world not growing much between 2000 and 2016 peak, meanwhile top 3 growing steadily from late 90’s to 2020 peak…a 2018 peak is simply an artifact of these 2 very different groups peaking at different times (2016 + 2020)…
Question is now for how long the Top 3 can make up for losses of the rest of the world…prob. not much longer…
Kengeo, I am not so sure that is the case. Both Russia and the USA peaked, 12 mth average, in 2019. The US may, or may not get a bit higher than that point. If so, it will be a tiny bit, not much more. There is not a chance in hell that Russia will do that. Russia has peaked, end of story. Saudi, I believe, is very close to its peak right now.
Ron,
Do we have water cut information for World C plus C? I have never seen it. We have production data and Hubbert linearizarion uses that data to estimate URR. We have some discovery data, but not future discovery or reserve growth data. You estimate what you believe the trends will be in the future. I do that and add estimates of URR using output data and look at a variety of estimates of URR, output trends, discovery trends, etc to make a guess about the future.
In the past Jean Laherrere has made very conservative estimates of World URR, his most recent estimate is 3500 Gb, about 500 Gb higher than my estimate, which is surprising. His estimate has 1000 Gb from unconventional oil, my estimate is about 200 Gb, but my estimate for conventional oil is 300 Gb higher than Jean Laherrere at al (2800 Gb vs 2500 Gb). Decline rate for World less top 10 is about 2.7% (625 kb/d). Top 10 as a group is likely to increase output over time.
URR is always an estimate as is anything about the future.
Dennis –
What’s interesting is that the peak oil date focusing only on the discovered conventional oil is 2008… (50% URR of 2150 Gb)
The way I read it is 2500 Gb conventional (2150 discovered and 350 undiscovered). He then has 500 Gb of Canadian/Venezuelan tarsands/heavy. Using HL he estimates a URR of 2500 (excluding LTO)…so something is a little strange…maybe he ignores the XH since it’s too slow to produce to make an impact to the peak. Doesn’t really sound like he’s putting much trust in a URR of 3500 Gb…
“This in turn reflects the nature of a Hubbert curve, where a significantly greater URR leads to a higher production peak but one not much postponed.”
For the reserve growth, do you have estimates for the post 2000 time period? I know Rystad has been lowering estimates considerably for past number of years…so maybe reserve growth is a pre-2000 phenomenon and reserve decline is a post-2000 issue?
Kengeo,
One way to think about reserve growth and cumulative discoveries is to look at past URR estimates for conventional oil. These have increased from 1800 Gb on 1998 to about 2500 Gb in 2022, that is a pretty big increase over the years. As to whether it will continue to increase in the future, perhaps not as Rystad recently reduced their estimate, but that might be due to low oil prices as well as the pandemic. I also have reduced ny esimate of future unconventional output. I once had a best guess for extra heavy oil of 500 Gb (basically following Jean Laherrere’s estimate from around 2011 or so. I have reduced this to 115 Gb and my LTO estimate is about 74 Gb for a total unconventional estimate of about 200 Gb. The recent estimate by Laherrrere at al is about 1000 Gb for unconventional oil, but I think they underestimate conventional oil by 300 Gb so the difference in estimates for all C plus C is only 500 Gb (3000 Gb vs 3500 Gb).
I do not have specific estimates year by year of reserve growth, this is difficult to measure with precision as I do not have access to the data that would be needed.
I stopped ny analysis of US reserve growth in 2005, because tight oil was not much of a factor before 2006, after that the LTO reserves muddies the water.
“I don’t there is a consensus, here or anywhere, what happens to oil prices in 10 years time. This forum especially is polarized between cornucopians and doomers.” ~ Required
golden mean fallacy
https://en.m.wikipedia.org/wiki/Argument_to_moderation
… and yet, one of the poles may be quite correct.
I find Dennis a bit too rosy, to put it mildly. But wtf do I know. I like Dennis’ history of high medium and low scenarios, or call it different shades of pessimism. I like to keep my finger on the pulse of humanity, and then I just put my own line in there between a couple of Dennis’ lines. The one I think looks good; do whatever helps you sleep at night, as my accountant usually advises.
Makes sense survivalist.
I see the 2000-2020 timeframe as the global peak oil plateau…like driving up a steep grade for a couple hours and then you reach a giant mesa and flat ground for some time…
From a oil perspective, I think we just left the mesa and are starting to descend into a dangerous canyon…
Maybe renewables and EVs will be at the bottom waiting for us…or maybe not.
“Maybe renewables and EVs will be at the bottom waiting for us…or maybe not.” ~ KenGeo
With regards to the future, I feel there will likely be a few wealthy urban areas featuring green washed products & concentrated opulence. Much of the rest of the planet will be at a boot’s pace, until we build out a shitload of horses and veterinarians. FWIW- Advanced militaries had battalions of veterinarian services up until the end of WW1.
Survivalist –
Great point, as we inevitably slide back into lower energy economies, we should expect much of the past to be resurrected…on the brightside, that cruise you’ve always wanted to go on will be in reach…you’ll just need to be part of a spanish armada…
Funny to look back 600 years at how things use to be…language in particular paints a different picture than our recent oil-based societies:
Travel – “Middle English travailen, travelen (which means to torment, labor, strive, journey)”
Eulenspiegel,
Electric transport will be cheaper than using ICEV even at $30/b by 2040. Electricity may be cheap as well as cost of solar power comes down.
That’s a pipe dream to do it in just 20 years. Perhaps some western countries – I even don’t see it here in Germany because of all that chaos without fossil backup power.
Imagine the chaos in a developing country when using solar big – from brown outs in the mid day heat to blackouts at sunset. That’s even worse than their current power plants.
The usual car in those countries drives all day long (ok, stop and goes, you can’t call that driving) and would be needed to be charged in the night. Since most cars are the income of their owners and transport things and people.
Even in India most conpanies have own Diesel backup – so charging electric cars is somewhat, ahem, silly.
And in 20 years these countries still will drive old western cars – so buying price is a different matter. And this buying price matters when money is scare – all the electric stuff has big frontdoor tickets. Solar cells, electric cars, batteries, electronics.
I just don’t see it – and when oil is cheap as you say there will be zero economic pressure to change anything.
And yes, in remote villages you have now often a solar panel and a car battery to have LED light and TV in the evening – but you can’t really call that an electric grid.
The infrastructure is the main problem.
“And in 20 years these countries still will drive old western cars”
Most people in the world will no longer have access to petrol by then
(for individual transport purposes)
I disagree with the idea that oil will become inexpensive as HHH asserts,
except perhaps in a few countries or a few short periods of time.
Hickory,
I also guess that oil demand will decrease to less than oil supply (at say $100/bo in 2021$) by 2033 or so. As we reach this point OPEC falls apart and middle east nations and Russia sart to compete for market share and drive oil prices down, I expect this stabilizes at about $30/bo in 2040 or so, but by then most land transport will have converted to BEVs or electrified trains. New tight oil wells, new oil sands projects, Arctic oil , and/or ultra deep water projects will be in the rearview mirror. Only the cheapest oil will be profitable to produce (mostly onshore or shallow water projects).
Eulenspiegel,
Yes today’s systems will not work well, in the future there will be different systems that are difficult to predict. Thirty years ago nobody saw cell phone communication compwting with landlines, now especially in the Third World, land line communication is mostly unnecessary. People can charge cars during the day when the car is parked, taxi services could have several cars with some parked and charging during the day (using solar power) while others are being used. Humans are innovative, in addition, wind, nuclear, and hydro can be used for electicity, along with geothermal. In fact so much solar could be cheaply installed that synthetic fuel could be produced with excess solar to be used as back up at night if wind and nuclear were inadequate, or batteries could be charged during the day as backup during peak periods.
Best methods will be developed in the OECD and the technology transferred to developing nations.
Note that 20 years is the time frame for electric transport to reduce oil demand so that oil prices fall. The $30/bo price in 2020 $ is the estimate of where oil becomes competitive with electric transport at today’s cost for electirc transport, in fact those costs are likely to fall as the technology advances. No consideration has been given to advances in air and water transport and how oil might be reduced in those industries in my analysis.
My guess is that things will change faster than I foresee.
We will be seeing a lot more headlines like this in the very near future.
Refinery Shuts Down Due To Lack Of Crude
A South African refinery has shut down operations and declared force majeure on the supply of petroleum products due to a delay in the shipment of crude, which highlights the fact that the physical market for crude is tight these days despite a slump in paper-traded oil futures.
Sasol, the biggest fuel producer in South Africa, was forced to declare force majeure on refined product deliveries because of delays in the crude oil supplied to its 108,000 barrels per day (bpd) refinery Natref, a company spokesperson told South Africa-based financial news outlet Fin24 on Saturday.
No more fracking growth per Halliburton:
https://finance.yahoo.com/news/fracking-growth-almost-impossible-halliburton-145602100.html
https://www.reuters.com/business/energy/russias-gazprom-declares-force-majeure-gas-supplies-europe-2022-07-18/
Gazprom declares force majeure
Saudi Arabia Crude Stocks
In May the SA crude stocks increased by 4,842 kb or at a rate of 156.2 kb/d. January was the low point this year at 133,742 kb.
Are the stocks increasing because SA is buying Russian heating oil?
Pennsylvania just released May’s production numbers and the Deremer 2HC is now the top Appalachian Basin producing well.
Online ~2 1/2 years (915 days), this well has produced almost 24 1/2 Billion cubic feet of natgas (24,291,168,000 cubic feet, precisely) … the oil equivalent (boe) of over 4 million barrels of earl (~4.2 million barrels).
Current output is over 14 Million cfd … 2,432 boe per day.
Using 73,000 cubic feet per year average US residential natgas consumption, (cooking food, warming water, home heating, drying clothes), this one well – at a D&C cost of ~$10 million – could provide a year’s worth of fuel to the residents of Cincinnati, Pittsburgh, and St. Louis COMBINED. (3 persons per household.)
While the Deremer 2HC is certainly not a typical Marcellus/Utica well, it is, nevertheless, a real world example of what is taking place in the AB.
As the world continues to grapple with energy shortfalls, the global receptivity to ‘shale’ production – and natgas in particular – will increase. Huge boost in the Vaca Muerta being just one example.
Here is a link to the most recent Dallas Fed Energy Survey – the special questions part:
https://www.dallasfed.org/research/surveys/des/2022/2202.aspx#tab-questions
Scroll to the “Special Questions Comments” section. Not exactly upbeat on increasing domestic production.
Quote:
“The real energy crisis isn’t even here yet. The U.S. Energy Information Administration forecasts U.S. oil production to average 12.5 million barrels per day for the next 30 years. This is all but impossible. Shale will likely tip into terminal decline in about five years as the main shale plays run out of locations. Unfortunately, by then, most of the individuals with incumbent knowledge about offshore and international development will have retired. The brain drain in the industry will create a real and much larger crisis in the mid-to-late 2020s. ”
Rgds
WP
Thanks WP, that’s painting a very negative picture…
Anyone know if/what the impact of heavier crude is having on refining in US/globally?
Seems to me that part of the untold story might be higher costs associated with refining lower quality crude…
2017 paper here: https://onepetro.org/WPCONGRESS/proceedings-abstract/WPC22/2-WPC22/D023S007R001/166971
North Dakota posted its May production numbers today.
May was up 151 kb/d from April but still 71 kb/d lower than March. Clearly ND had not fully recovered from April’s severe winter storm by the end of May. The Director’s cut page shows the following without text following the production numbers.
= 1,200,000→1,100,000→1,000,000 barrels/day
Seems to imply production will slowly fall toward 1,000,000 b/d and that ND tight oil peaked in 2019.
The Permian is settling out at an inventory of two and a half months. The drill/completion numbers will be in balance in about four months with a DUC number of around 1100. The operators seem to be reducing frac spreads now rather than adding rigs, but it will take a few months to see if that trend holds. In the early years of LTO here months of inventory was considered the minimum to allow for the logistics of scheduling drilling and fracking on the well pads but it appears things have got more efficient.
Niobrara has reached equilibrium with 300 DUCs and an inventory just under thee months. Last month here was the first in some time where spuds exceeded completions in an LTO basin.
Eagleford might be settling out at five months inventory, but spuds have showed big increases the last two months without similar rises in completions. Numbers are often revised in subsequent months and there may be some seasonal effect. I would expect the operators would want to lower the inventory if they can, and I don’t see why EF conditions should be different from the Permian.
The Bakken has a similar recent pattern to EF with steady completions and a recent jump in spuds and inventory settling at around five months with 420 DUCS, but I can imagine there are different leasing, supply and weather conditions in ND that might make a larger leeway advantageous. Overall in all basins the DUC numbers are at or near minimum working levels so the coming changes in rigs and frac spreads will give clearer signals for how the operators see the developments proceeding.
George
Here is a slightly different view of the same data. This chart shows the extra number of completed DUCs over the number of drilled wells. For June, 31 more wells were completed than drilled. In other words the DUC count in these four basins came down by 31 in June. Of the 31, 30 came from the Permian. Essentially the DUC count in the Bakken, EF and Niobrara has stabilized. In the Permian, the number of excess DUCs continues to drop every month.
Over the last two months, the drop in the number of Permian DUCs completed was 14. This implies that at that rate, drilled and completed wells will equalize in about 4 months with the current gap in completed and drilled wells being 30.
Bloomberg has an article “Saudi Arabia Reveals Oil Output Is Near Its Ceiling”
https://www.bloomberg.com/opinion/articles/2022-07-20/saudi-arabia-reveals-oil-output-is-near-its-ceiling?srnd=premium&sref=hEO85HQm
During US President Joseph Biden’s trip to Saudi Arabia, the world was so focused on how Crown Prince Mohammed bin Salman would respond to his plea to pump more oil immediately that it missed a bombshell: the level at which Saudi oil production will peak.
It’s a lot lower than many anticipated. It’s lower than the Saudis have ever intimated. And with the world still hungry for fossil fuels, it spells long-term trouble for the global economy.
For years, Saudi oil ministers and royals have sidestepped one of the most important questions the energy market faces: What is the long-term upper limit of the kingdom’s oilfields? The guesstimate was that they could always pump more, and for longer; if the Saudis knew the answer, they kept it secret. And then, almost casually on Saturday, Prince Mohammed broke the news, revealing that the ultimate maximum capacity is 13 million barrels a day.
Peak Oil
Saudi crude production is set to average 10.7 million barrels a day in 2021, the highest ever annual pumping level
Prince Mohammed framed his answer emphasizing that the world — and not just countries like Saudi Arabia — needs to invest in fossil-fuels production over the next two decades to meet growing global demand and avoid energy shortages. “The kingdom will do its part in this regard, as it announced an increase in its production capacity to 13 million barrels per day, after which the kingdom will not have any additional capacity to increase production,” he said in a wide-ranging speech.
It bears repeating: Saudi Arabia, the holder of the world’s largest oil reserves, is telling the world that in the not-so-distant future it “will not have any additional capacity to increase production.” Let that sink in.
The first part of his announcement was well known. In 2020, Riyadh instructed its state-owned oil giant Saudi Aramco to embark on a multiyear, multibillion-dollar program to boost its maximum production capacity to 13 million barrels by 2027, up from 12 million. The project is ongoing, with the first small additions coming online in 2024 followed by larger ones in the following three years.
But the second part was completely new, setting a hard ceiling at a much lower level than the Saudis have themselves discussed in the past. Back in 2004 and 2005, during Riyadh’s last big expansion, the kingdom made plans to expand its pumping capacity to 15 million if needed. And there was no suggestion that even that elevated level was an upper limit.
For example, Aramco executives told the CSIS think tank in Washington in 2004 that the company could sustain output levels of 10, 12 and 15 million barrels a day for 50 years if needed. At the time, Riyadh was fighting the views of the late Matt Simmons, author of the much-discussed book “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.” The book argued that peak Saudi oil production was just around the corner.
One reason why Saudi Arabia is now setting a lower production ceiling may be related to climate change. Unsure about future oil demand growth, Riyadh may calculate that it’s foolish to spend billions of dollars in new capacity that may not be needed.
In his speech, Prince Mohammed stressed the “importance of assuring investors” that policies do “not pose a threat to their investments,” with the aim of avoiding “their reluctance to invest.” I don’t think Prince Mohammed was talking about Wall Street money and hedge funds when he said “investors.” It’s a term that also covers Saudi Arabia’s interests.
Oil demand forecasting is as much art as science — and the kingdom is conservative by nature. A decade ago, then Saudi energy minister Ali Al-Naimi said Saudi Arabia would be “lucky” to be pumping more than 9 million by the early 2020s. “Realistically, based on all projections that I have seen, including ours, there is no call on us to go past 11 million by 2030 or 2040.” The reality has turned far more positive than he anticipated: next month, Aramco will lift daily production to just above 11 million barrels.
If demand proves stronger in the coming years than the Saudis currently anticipate, the kingdom may simply revise its investment plans, and announce it’s able to boost output further. But Prince Mohammed sounded rather definitive in setting that 13 million upper boundary. If money isn’t the constraint, then it must be geology.
For years, Saudi Arabia has brought new oil fields online to offset the natural decline of its aging reservoirs, and allowed Ghawar, the world’s biggest oil field, to run at lower rates. As it seeks to boost production capacity and not just offset natural declines, Aramco is increasingly turning to more expensive offshore reservoirs. Perhaps Riyadh is less confident in its ability to add new oilfields. Ghawar itself is pumping far less than the market assumed. For years, the conventional wisdom was that the field was able to produce about 5 million barrels, but in 2019 Aramco disclosed that Ghawar’s maximum capacity was 3.8 million.
If the obstacle to boosting production is geology, rather than pessimism about future oil demand, the world faces a rocky period if consumption turns to be stronger than currently expected. For now, Saudi peak production is a relatively distant matter, at least five years away. More urgent is whether Riyadh would be able to sustain its current output of 11 million — something it has achieved only twice in its history, and then only briefly — let alone increase it further. But that ceiling will matter towards the end of the decade, and perhaps even earlier.
Despite widespread talk about peak oil demand, the truth is that, for now at least, consumption keeps growing. The world relies heavily on three nations for crude: the US, Saudi Arabia and Russia. Together, they account for nearly 45% of global total oil supply. With US investors unwilling to finance a return to the days of “drill, baby, drill” at home, American output growth is now slower than it was in the 2010s. Russia faces an even darker outlook as the impact of Western sanctions not only curb current supply, but also hinder its ability to expand in the future.
In an era of climate change, Saudi oil production will be, ironically, even more important. And Riyadh has now, publicly, set a hard limit on how much it can pump. This time, oil demand will have to peak — because there won’t be additional supply. Ultimately, there are only two routes to that outcome: Voluntarily, by shifting to low-carbon sources of energy such as nuclear power or wind; or by compulsion, via much higher oil prices, faster inflation and slower economic growth. If we don’t take the first path, we’ll be forced to follow the second.
Rgds
WP
Whoa. This article is huge news.
You folks know better. Amirite?
It is not news that Saudi is at peak production and can increase production a small amount… in a few years.
What is huge news is that the Saudis now admit it.
I think that in a few years, instead of increasing production, they will be battleing declining production. Of course they will not admit that. Well, not now anyway.
Well——
https://www.resilience.org/stories/2022-07-17/energy-consultancy-keeps-lowering-worldwide-recoverable-oil-resources/
Graphs of the World less top 3 (WLT3) and Top 3 (T3):
WLT3 and T3 appear to have very different peak oil profiles.
T3 likely have a much steeper decline profile coming up compared to WLT3.
Also different peak periods.
WLT3 has a broad peak centered between 2004 to 2020 with an actual maximum production in Nov 2016.
T3 has a narrow peak 2017 to 2023, so far the actual maximum production was in early 2020. It’s not clear if/when T3 would make an additional peak, but due to covid it’s possible that a double-peak could occur before 2024.
WLT3 has recovered from the covid induced decline and is now above a trendline. T3 has not recovered from the covid induced decline, several major factors presenting further recovery include:
Decline rates related to production
For Russia, the Ukraine conflict and related sanctions.
For US, various challenges both above and below ground.
For Saudi Arabia, likely reserves are much lower than published data.
Kangeo
I need clarification.
1) Above you state: WLT3 has recovered from the covid induced decline and is now above a trend line. I see two data points above your trend line.
2) Above you state: T3 has not recovered from the covid induced decline. I see four data points above the trend line.
Please explain how two points above a trend line means recovered for WLT3 but 4 points above a trend line means not recovered for T3.
Sorry Ovi – Yes, should clarify the trendline is essentially the pre-covid best-fit line for recent data. For WLT3, the trendline is a declining rate of 1.6% annually. Conversely, for T3 increasing rate trend line was 3.6%. If T3 production was still growing at 3.6% then T3 should be able to reach a new production high relatively soon, but T3 has not and likely is encountering geologic and physical production constraints. Cumulatively, T3 has produced well over 500 Gb (about 1/3 of all produced oil, worldwide).
T3 1P reserves = 128 Gb (depletion status = 80%)
T3 2P reserves = 250 Gb (depletion status = 67%)
T3 2PC reserves = 494 Gb (depletion status = >50%)
No matter how you cut it the T3 producers hit peak production sometime in past ~20 years, likely 2001 for 1P, 2008 for 2P, and 2020 for 2PC.
Bottom line is we should expect decline rates to speed up considerably…
10-15 years of oil to help transition to other energy sources…not much time left at all…
Dennis,
You asked me either somewhere above in this thread or maybe in the last post. What was my timeline for a return to $25 oil.
Within 8 months.
The Eurodollar curve has a tad over 120 basis points of inversion in it. Only in the worse part of 2008-2009 has it been that bad.
While banks in the US were recapitalized after 2008 those in Europe were not. While we might not have to worry about bank failure here. Europe is a different story.
China has sold $100 billion in US treasuries in last 6 months. Not because they don’t like us. They sold them to get dollars. China has the biggest dollar problem of any country.
Look at Chinese exports and imports data. Exports don’t look too bad but imports look horrible. They don’t have the dollar’s needed and are trying to hold onto all the dollars they possibly can.
Not going to be just a recession. We going to see significant dollar deflation over next 8 months.
You may have 25$ oil on the paper market, but you won’t get much liquid oil for this price. Most producers will stop pumping and the OPEC will remove at least 10 mbd from the market again as during the corona shock.
Stocks are strained already – so there will be empty buy orders.
What was my timeline for a return to $25 oil.
Within 8 months.
No, not a snowball’s chance in hell. The price is going up, not down. Barring another great depression that would rival the 1930s, we will see an oil shortage next year that will cause oil prices to skyrocket.
Are OPEC And The IEA Right About What’s Next For Oil?
Both OPEC and the International Energy Agency are predicting next year’s market to be one of the tightest in recent history. According to a Financial Times post, the two bodies have based this assumption on recovering demand in China and continued growth in India. The prediction also runs counter to widespread fears of recession. With oil prices currently declining from record highs, it can be difficult to predict where the market will go next.
In just a few months, it is going to dawn on people that the demand for oil is rising much faster than the supply. That will be the “ah shit” moment. Then the price of oil will go through the roof.
Nope. Dollar shortage and all those long oil contracts gets sold to meet dollar requirements.
In commodities trading every long has a short. So if long contacts gets sold shorts disappear as well. That doesn’t do anything for the net dollar position (which is zero anyway except for margin posted).
rgds
WP
HHH,
So you are confident that you can predict central bank actions throughout the World over the next 8 months? Very bold. I don’t think your odds of success are high. Good luck with your trades.
Central banks don’t actually matter. Because they can’t print money.
They can print bank reserves which don’t matter.
Matter of fact they make the collateral shortage worse when they transfer collateral onto their balance sheet through QE that could be used in real economy to create money through REPO.
Realistically maybe two more rate hikes by the FED and FEDs funds rate the only rate that they actually control will be inverted with the 10 year yields.
And spoiler alert it doesn’t matter if they reverse course and cut rates.
Only thing that matters is are the global banks that are part of the Eurodollar system. Are they going to lend or not. Because if not there will be a mad scramble for dollars.
I trade what the Eurodollar curve is saying.
And right now that curve suggests that things will be bad enough that the FED not only cuts rates but cuts them aggressively over next 6-8 months.
Ergo $25 oil on the way.
Square that with CPI at 9% the banks that make all the loans into economy are telling you they are scared shitless of something.
So the banks that create all the real money are saying one thing while central banks who don’t create real money are saying something totally opposite.
My money is on those who create the real money.
“Central banks don’t actually matter”
Preposterous.
Central Banks make lots of bad decisions, and are arrogant in their belief that they can set the parameters of the economy by their decisions.
You could even argue it would be better to get rid of them and create a new system.
But as currently configured, they definitely matter.
Central banks can influence the rate of interest and can control the supply of money by buying or selling government securities (this is Econ 101 stuff).
We will have to wait and see if your $25/bo oil guess proves correct in 8 months time.
Good luck with that.
Ron and Eulenspigel
HHH is basing his prediction on the possible recession developing into an outright depression. The basic argument is the size of the eurodollar system and how various countries are running out of dollars, and thus unable to transact business. It is based on global finance and not economics per say. You can learn this aspect from this video by Jeff Snider. Whether Jeff Snider is correct requires to connect some dots. Interestingly he mentions that Lynn Alden does not share his view, although I have read and heard similar analysis from her.
https://www.youtube.com/watch?v=KNa-fewraJA
Seppo,
The problem with the argument is that the price of dollars adjusts on foreign exchange markets. If there is a lot of demand for dollars the price of a dollar in Euros (or whatever foreign currency) increases until the market is in balance. This will increase the price of oil and natural gas in Europe (assuming that the price is set in US dollars on international markets.) That in turn will reduce the quantity of oil and natural gas consumed.
Will this result in a depression? Impossible to predict in advance, but my guess is the odds are very low (less than 1 in 20). There are always bears out there that predict 1000 out of every 10 severe recessions. They consistently make these incorrect predictions until they are correct (and I am being generous giving them a 1% success rate). Perhaps by 2030 or so they will be correct, but it is not a bet that would likely pay off.
Dennis, I was trying to point out on what HHH seems to base his thinking without necessarily agreeing with it. But I am trying to follow Jeff Snider’s argument and see whether he is making any logical errors. There is also Alfonso Peccatiello who seems to agree with him.
How do you arrive at the odds 1 in 20? These are unlikely to be based on probability theory. An interesting book on this is by Leonard Mlodinov titled Drunkard’s Walk, How Randomness Rules our Lives. It shows that in order to make even fairly simple probabilistic calculations (the most simple ones can be done in your head) requires definition of the sample space, i.e. all the possible outcomes, and then establish whether the outcomes are equally likely or not. After that if the sample space is small, one can draw it on a Venn diagram and count them by hand. But if the sample space is large and the events follow a conditional probability, then one needs to bring out the mathematical formalism to arrive at the answer. You note that I refrained answering the question of decline in world production exactly for this reason. Too many wheels means that the conditional probabilities rule the issue and there is no way to assign probabilities to the events.
As I said in me previous post, watching what is happening over the world, suggests that we are arriving at the Seneca Cliff. The next country in trouble might be Egypt, or some country without good institutions such as Myanmar, Argentina, and various African countries. And even countries with nominally good institutions can go off the rails, as the leaders are ill informed, or cannot think outside the box, so to speak.
I am reading The Trillion Dollar Triage right now and last week finished The Lords of Easy Money. Both good books to unravel the mysteries of central banks and the monetary system.
Seppo Korpela,
The one in 20 odds is subjective.
Since 1872 there have been two major World financial crises in 1929 to 1939 and 2008 to 2009 over a 250 year stretch, that is about 1 in 125, a very simplistic way to look at this.
Potentially we could use the last 3 .ajor World ecomic crises in 1870, 1930, and 2009 to give us a mean time between major crises
of about 70 years. Than we could use a maximum entropy probaboity distribution with mean equal to standard deviation at 70 years. For that probability disribution we would have about a 17% probability a major fonancial crisis might occur before the end of 2022, and a 50% probability it would occur before or after 2058.
So you are correct, the one in 20 odds was a poor guess, but to me one in 5 sounds right, if statitical physics is a good guide.
An alternative is to look at time between major crises, 1870, 1930, and 2009
“it is going to dawn on people that the demand for oil is rising much faster than the supply. That will be the “ah shit” moment. Then the price of oil will go through the roof.”
Yes.
Any drop in oil price due to currency issues or economic downturn [short of severe and prolonged recession/depresion]
will be be short-lived.
Global demand is not about to evaporate.
Thanks HHH,
We will see what happens in March of 2023. I believe $25/b for either Brent or WTI spot price has about 1 in 100 odds for monthly average price for February, March, or April 2023. Note that my focus is on physical markets rather than paper barrels which are often far from the mark.
As long as there is enough oil on the market, the paper barrel can do their stuff.
When storages are full, weird things happen as seen in cushing 2020 when prices got negative – not normal on a paper market where a value goes to 0 when a companie goes broke.
And when storages are empty, the remaining oil will be bid until enough bidders are tapped out.
That can happen at 25$ when nobody has $s anymore (apocalyptic deflationary shock when this happens in just 8 months), or it will be at 300$ – since most economies can more easy abstain from new goods like cars or electronics for a time than oil.
Only food is more important.
But between these 2 extreme positions all the market stuff from HHH will play out.
For the oil price consider that SPRs are emptied at the moment – when this stops it has to be a severe recession to compensate this. And 25$ oil will take 10-20 mbpd capacity from the market very fast – OPEC won’t watch this doing nothing, and Russia will try how good the west can get along without russian oil at all.
In Europe, Italy is a good place to watch. Does it matter if the ECB buys Italian bonds if banks are unwilling to lend money into the economy?
ECB has no power to prevent what is happening. Central banks are for the most part irrelevant now.
HHH,
Dollar value on foreign exchange markets will be affected by central bank policy.
Nope. People believe that but there is plenty of proof that interest rates differentials don’t matter that much. Only place it might matter some is USD/JPY and even there it’s starting to wane a bit.
Not central bank policy that is driving the value of the dollar. It’s actual dollars that are created in Eurodollar market or not that
control the dollar’s value against other currencies.
Other central banks can raise rates and you’ll at best see a small increase in value to the dollar. Before dollars trend higher continues.
Dollar value is determined by if credit or loans are being made in real economy not by central banks.
In an expanding booming economy the dollar trends lower because dollar’s are being borrowed.
And if we had and expanding booming economy where yield curves were positive or steepening I’d be on board with higher oil prices. But that’s not our reality.
Up above Berndt says- “No, energy from renewables does not help to solve the problem.”
The problem being loss of available energy due to the global depletion of fossil fuels, I assume he is referring to.
Its been a common, and very stale, refrain from 50 years ago that solar and wind energy [S-W] can’t “save the world”, or replace all the fossil fuels used by the world.
Its a mute point.
I’m more interested in the practical issue- How much energy from S-W can we produce from today and going forward til 2050? Will it be enough to offset a big chunk of the current coal use, and the oil decline that starts this decade (or 2018)? Will it be enough to supplement all of the other sources of energy so that civilization doesn’t come crashing down due to energy shortage?
I assert that part of the answer to these big questions is
-some places will have much more energy than others
-part of that difference is due to the choices that they make on big energy issues including deployment of S-W-Nuc, and energy storage, electrification of vehicles and such
-some places will offset much of the current coal and oil depletion with a combination of energy especially at gas, solar, wind, and perhaps nuclear (if they can afford it and get very busy quick).
-other places will fail miserably
I don’t worry beyond 2050 for a few reasons
-the scenario will be very different so predictions made now are pretty useless
-I suspect that population will have peaked, and so will demand for almost everything
-people will have learned a lot about living with less energy by then, primarily the hard way
btw-
The Photovoltaic Energy energy payback times (EPBT)—the time it takes to produce
all the energy used in their life cycles from mining to installation and operation—currently is between 6
months to two years, depending on the primarily on the solar irradiation of the installed location.
And with expected life times of 30 years, their
ERRs are in the range of 60:1 to 15:1, depending on the location and the specific PV technology, thus returning 15 to 60 times more energy than the
energy embedded in their creation.
To put it simply- install PV in a half-way sunny area and the energy used in the creation is paid back by two years, with next 28-40 years being surplus. Beat that.
“Less than the 3 billion new air conditioners will consume”. That’s the answer to question #1, according to the IEA.
Looking at solar cost alone is only the half story.
In a sunny country you need a battery and the electronics for it for night supply – perhaps even the AC will run into the hot evening. On the few cloudy days you’ll have to cut back consumption, no AC and electric cooking on a serie of cloudy days if you want to wash.
And in less sunny countries it has to be backupped 100% – either by really big storages or other power sources.
That comes on the top of the energetic price.
It’s like coal – you need not only the power plant, but also a coal mine, big ships or freight trains to keep it running.
Yes, solar makes a lot of sense especially in sunny countries, but it isn’t that easy.
I think solar should be more incentivised for individual/family uses on their roof etc, in essence taking pressure off the grid (some will be able to push the surplus energy back into the grid also). The grid can continue being gas, coal, wind, hydro or a mix of those i suppose, but gradually taking pressure off the grid by incentivising solar especially in sunnier countries should be look at more closely, instead of changing the grid to entirely renewables.
Thats my 2 cents.
“instead of changing the grid to entirely renewables.”
Agree Mike, with the word entirely being key.
S/W and storage are just several pieces of a puzzle.
In some countries will become much bigger than others.
Beats the hell out of paying huge money for fossil fuels as depletion runs along,
or losing access to energy all together.
Renewables converted to long duration storage (chemical, thermal, kinetic mechanisms)
will achieve a massive presence, regardless if many here seem blind to the possibilities and eventuality.
And yes to Eulenspiegel- the intermittency of S/W requires that energy storage will be a big part of the scenario, including cost and possibilities.
The world will have to shift its modes of operation and expectations as fossil fuel supplies run down.
No doubt.
You can write it down.
40 or 50 years ago the grid was a very reliable and predictable structure. The primary sources were nuclear, coal and natural gas with peaking plants built as needed. Today the grid is filled with wind and solar with diminishing fossil fuels plants. And the system operators have to deal with the questions about weather, is the wind going to blow, is the sun going to shine and how much and how long. And how about the owners of the fossil plants that have to be staffed and maintained just to run a few days or weeks a year, are they earning enough to cover these costs? The grid is more unstable that it ever was and until the politician’s allow the engineers back in charge, you better give Generac a call.
Part of the instability is due to grid inertia. The traditional grid handles up to 18% from non-turbine-spinning sources without much trouble. Above that, algorithms must concoct artificial grid inertia. They claim to have that figured out. We’ll see.
Gerry –
on grid inertia it looks like a theoretical problem that is indeed a readily solvable issue
As per the US Dept of Energy-
“Although growth in inverter-based resources will reduce the amount of grid inertia, there are multiple solutions for maintaining or improving system reliability—so declines in inertia do not pose significant technical or economic barriers to significant growth in wind, solar, and storage to well beyond today’s levels for most of the United States.”
Inertia and the Power Grid: A Guide Without the Spin
https://www.nrel.gov/docs/fy20osti/73856.pdf
Thanks for that link.
From the summary:
Key takeaways from the full report include:
1. Grid frequency, which is a measure of the balance of supply of electricity and demand, can drop if a large power plant or transmission fails. Inertia resists this drop in frequency, giving the grid time to rebalance supply and demand.
2. Inertia is only one of several grid services that help maintain power system reliability. Understanding the role of inertia requires understanding the interplay of inertia and these other services, particularly primary frequency response, which is largely derived from relatively slow-responding mechanical systems.
3. The importance of inertia to a power system depends on many factors, including the size of the grid and how quickly generators in the grid can detect and respond to imbalances. A grid with slower generators needs more inertia to maintain reliability than a grid that can respond quickly.
4. Using power electronics, inverter-based resources including wind, solar, and storage can quickly detect frequency deviations and respond to system imbalances. Tapping into electronic-based resources for this “fast frequency response” can enable response rates many times faster than traditional mechanical response from conventional generators, thereby reducing the need for inertia.
5. Replacing conventional generators with inverter-based resources, including wind, solar, and certain types of energy storage, has two counterbalancing effects. First, these resources decrease the amount of inertia available. But second, these resources can reduce the amount of inertia actually needed—and thus address the first effect. In combination, this represents a paradigm shift in how we think about providing frequency response.
Ervin
In the US on the grid
we have just as much nuclear as ever, and more nat gas than ever,much less coal,
and more wind and solar.
The US has had an uptick in grid outages over the past 20 years- all categorized as due to severe weather event interruptions rather than source failures.
Grid reliability is a matter of smart management, planning, and upgrading.
We have a lot of work to do on many aspects of it.
All countries better get to the task instead of just weeping and moaning about how great things have been while the fossil fuels were on the upswing.
Upswing era is over.
Ervin- are you calling for a rapid uptick in coal and nuclear energy production? If so- how much domestic coal reserve and combustion capacity is there in your country, and how quickly do you think the nuclear power generation option can be planned, permitted, funded, and delivered?
Mr. Ervin,
Yesterday, the New England wholesale spot electricity price passed the $1,000/Mw threshold.
Oil (!!!) provided ~2,500 Mw while wind provided ~150 Mw out of a total 24,500 Mw generated. (All data easily viewable on the fine ISO-NE site).
The fact that Russian-sourced fuel oil barely got those folks through last winter provides a disturbing backdrop if those sources (and global LNG) are no longer available.
This entire Renewables (sic) narrative will shortly be under extreme stress as Reality manifests in the most dramatic fashion.
Coffee.
New England has a marginal onshore energy resource, and very little has been built.
So of course you wouldn’t expect much production.
Hawaii doesn’t produce much nat gas either.
The offshore NEngland wind resource is a whole different matter- outstanding.
It has not been tapped yet.
That may change in a big way over the next 20 years.
To get a quick sense of the resource magnitude check out the global wind atlas. Compare the general wind resource of Iowa (which gets close to 60% of its annual electricity form wind even though it is still in relatively early phases of deployment) with the resource offshore Maine. Big upgrade!
https://globalwindatlas.info/
note that any site over 8 m/s at hub height is a big winner
Hickory,
Unfortunately the fishermen in Maine are very much against the development of wind resources, so it is likely to be an uphill battle trying to tap this resource, unfortunately. I would think deepwater offshore wind would not affect fishermen very much, bit unlike oil and gas there is not a powerful lobby in support of wind power (which is a partial explanation for why there is a lot of oil and gas development in the GOM, but very little wind development offshore in the US.)
Maybe things will change, I am not optimistic.
I’m not surprised Dennis.
The energy supplied after oil starts to slide, the jobs created, and the lack of negative affects on fisheries
will likely gradually change the tune they sing.
As a former fisherman, gallons burned per hour was a huge factor.
We even played with prop sizes —–
Hickory,
The NIMBY problem may never allow these projects to get off the ground, people don’t like change, true in most places.
“40 or 50 years ago the grid was a very reliable and predictable structure.”
I’m curious to know the source of historical reliability data that supports this claim. The EIA only began collecting electric reliability data in 2013.
Unsurprisingly, Amory Lovins has something to say about renewables and grid reliability:
https://e360.yale.edu/features/three-myths-about-renewable-energy-and-the-grid-debunked
These are the three myths that Lovins addresses:
Myth No. 1: A grid that increasingly relies on renewable energy is an unreliable grid.
Myth No. 2: Countries like Germany must continue to rely on fossil fuels to stabilize the grid and back up variable wind and solar power.
Myth No. 3: Because solar and wind energy can be generated only when the sun is shining or the wind is blowing, they cannot be the basis of a grid that has to provide electricity 24/7, year-round
“The United States, where renewable energy and nuclear power each provide roughly 20 percent of electricity, had five times Germany’s outage rate — 1.28 hours in 2020. Since 2006, Germany’s renewable share of electricity generation has nearly quadrupled, while its power outage rate was nearly halved. Similarly, the Texas grid became more stable as its wind capacity sextupled from 2007 to 2020. Today, Texas generates more wind power — about a fifth of its total electricity — than any other state in the U.S.”
“as the percentage of electricity generated by renewables in Germany steadily grew, its grid reliability improved, and its coal burning and greenhouse gas emissions substantially decreased.”
“To pick a much tougher case, the “dark doldrums” of European winters are often claimed to need many months of battery storage for an all-renewable electrical grid. Yet top German and Belgian grid operators find Europe would need only one to two weeks of renewably derived backup fuel, providing just 6 percent of winter output — not a huge challenge.
The bottom line is simple. Electrical grids can deal with much larger fractions of renewable energy at zero or modest cost, and this has been known for quite a while. Some European countries with little or no hydropower already get about half to three-fourths of their electricity from renewables with grid reliability better than in the U.S. It is time to get past the myths.”
Thanks Bob.
$180 oil is inevitable: Eric Nuttall
A great nine-minute video tells it like it is. It is two months old but still to the point. He explains why Russian oil production will continue to drop and why OPEC is nearing full production capacity.
Does Eric say anything about yield curves and collateral? And how actual money is borrowed to buy oil futures?
Because prices are set in futures markets. No money no $180 oil regardless of supply/demand balance.
Heck why not say $280 or $380 is inevitable. 😂
Well I don’t know where it went but Ron had posted a short video I was going to watch on about how $180 oil is inevitable.
Well, it was two months old so I decided to delete it. I have restored it now so have a look.
Ron
Here is a more current one, 22 days old. Note WTI then was $15/b higher than today.
He has a Twitter account for those on Twitter. @ericnuttall.
https://www.bnnbloomberg.ca/video/generalists-don-t-understand-this-is-the-tightest-oil-market-in-decades-eric-nuttall~2475933
Note you may have to click the link twice to make it connect or copy and past it directly into your browser.
Thanks, Ovi. I thought his remark about “embedded ignorance” in the oil market was spot on.
More on Halliburton saying no more fracking growth…
“All the Biden administration can hope for now is a recession to curb consumer demand to rebalance markets.”
After years of divestment, oilfield equipment supply is running especially low.
Halliburton’s CEO Jeff Miller is warning that oilfield equipment market is so tight that oil explorers are already discussing 2023 projects.
Miller noted that diesel-powered and electric equipment are in short supply, “making it almost impossible to add incremental capacity this year.”
https://oilprice.com/Energy/Energy-General/Halliburton-Warns-Significant-Frack-Growth-May-Be-Impossible-This-Year.html
Without a healthy service industry, predictions about future production is a fool’s errand. Jeff Miller is saying what I am experiencing daily.
LTO.
I do not understand how the Permian is growing given the cost of steel. Are most wells being completed out of steel inventory. Or has the PB been immune from the double to quadruple price increases since 2020?
No. The price of steel:tubulars are still ridiculous but coming down modestly. I just received an AFE that is 30% higher than 6 months ago. Fortunately with the current oil price and price of Nat gas, the wells are economic and pay back in 9 months. The Rig count is steady and we are starting to see better efficiency in pressure pumping. In other words, time is being saved in the completion process. Therefore more wells can be completed with a smaller number of crews.
Any down draft in the price of oil would immediately bring the rig count down. Many companies are having hedges roll off and I believe most companies having felt the pain of $50 swaps are loathed to hedge aggressively.
Again it all seems to be a problem of labor. We just set surface pipe on a well at midnight and when we called the welder out, he told us that he would be there in the morning around 10 am which means we had 10 hours of down time. When you you include all of the services on location, this delay costs the project about an incremental $35k.
So the delays and lack of labor are really impacting total well costs. I am seeing this in every project I am participating in.
The Permian is now almost like a factory line. The sweet spots are well known. A new well costs $10M. At current prices it will break even in 18 months, with most of that coming in the first six. Large companies have a corner on tubular steel, frack water and crews, and have reserved pipeline space and wastewater disposal. Slowing down and preserving LTO would be great for the country but destroy the factory line. What we are watching is that crazy dragon Ouroboros eating his own tail, I guess because it tasted so damn good.
So to be clear you expected the welder to come
out at midnight? All I have to say is “fuck that”.
LTO Survivor,
Yes a healthy service industry is needed, I imagine when things are in short supply prices increase and then supply increases (of service for oil industry), obviously it does not happen overnight, but it is likely in my view over the next few years. The trend in Permian completions suggests higher output even if the rate does not increase any further.
Dennis I understand supply and demand very well. There is a need and demand for oilfield personnel now and the pay 💰 is very attractive but still no labor is coming back. I have not seen anything like this in my 40 year career. Where did they go? I don’t know.
The scenario below is very conservative and assumes 400 wells are completed per month from early 2022 to late 2032. My expectation is that the completion rate will continue to rise slowly reaching 600 to 650 per month by 2026, the current rate is 436 per month and rising at about 9 per month on average since July 2020. If that rate of increase continued we would reach 650 wells per month by June 2024.
I think the scenario in the chart below is the minimum we could expect for future Permian output, total wells completed is 87,800 from Jan 2010 to Dec 2033.
If milk is $5 per gallon then couldn’t oil be? Maybe it could be $10 or even $15 per gallon, why not? We know the days of $0.40 per gallon oil are over. $4 per gallon oil seems entirely reasonable to me…
At $280 that’s ~$7 per gallon…
Right now we are already 50% higher than it’s ever been…
For personal vehicles, $20 per gallon gas actually makes a lot of sense. Someone driving average mileage of 15k per year would spend between $6k – $7k per year… maybe ridesharing becomes more widespread or carpooling…
That’s only about 25% of the average income in US…
I think inflation alone will push oil and gas prices up considerably…prob. $1 per gallon each year for gas prices…market will cause higher fluctuations…
The problem is all of the goods that have to travel by big rig…they only get 7 miles per gallon, so at $20 diesel cost is $3 per mile or $180 per hour to operate in fuel alon…that would mean the average trucking is spending $500k per year on fuel!
So currently truckers most be spending almost $150k per year on fuel…
Also important to factor this into oil production in US…costs to drill and produces must have gone up considerably…
During the history of the hydrocarbon-driven attenuation of thermal discomfort, manufacture of more awe-inspiring petrochemical products and cheap transportation fuel, oil prices have been lower than reasonable.
For example, coffee beans are easy to grow and harvest and just as easy to roast. Oil, on the other hand, is created from keeping marine fossils at just the right temperature (ironically about the same as a good cup of coffee) for a million years. Too low and you get kerogen. Too high and you overcook the oil. It’s very picky. Additionally, the pressure must fit the temperature equation.
But if you were to roll an oil barrel into a Starbucks and fill it up with latte, it would cost you a few thousand dollars. There are two possibilities: either they’re charging too much for their coffee or oil has been way underpriced.
For example, coffee beans are easy to grow and harvest and just as easy to roast.
I grew coffee on my property on Maui.
It is easy to grow, but a hassle to process.
Roasting? Better know what you are doing.
HHH:
You don’t have to borrow money to buy oil futures. If you are a retail buyers you may have to put down margin, but large players don’t have to do that. And the situation is the same for the futures seller.
Oil FUTURES are a zero sum game, for every long there is a short – they are risk transfer instruments, not assets.
If you buy actual oil you will have to put up some cash or collateral but you pledge your purchasing agreement as collateral for a loan, so the actual amount of existing cash that is needed is quite marginal.
Rgds
WP
they are risk transfer instruments, not assets.
Yep
Bingo
For gas prices, here’s linear, exponential, and 2 order poly growth trends….
linear has $2 per gallon increase each year…
Real Gasoline Price in 2021 $/gallon from Jan 2011 to June 2022 (monthly) EIA data.
https://www.eia.gov/outlooks/steo/realprices/
It seems to me that the longer historical perspective on prices from Jan 11 to Sept 14 that was a reasonable equilibrium ‘fair price’ for gasoline that was disrupted by the manic development of shale resources, followed by a brief squabble between Putin and the Saudis over who would control OPEC , and then the coronavirus recession, followed now by a reversion to the equilibrium price. Just have to wait now for the next major event to push us one way or the other.
Likewise with natural gas prices, reverting to their historic mean after the shale glut is used up/exported.
https://wolfstreet.com/2022/07/22/us-natural-gas-prices-re-spike-after-the-big-plunge/
That price rise in the US is all about exportation.
Also higher US summer demand for AC due to climate disruption
Kengeo,
By “gas” do you mean gasoline or natural gas?
Dennis – My chart is diesel, here’s AAA national average for diesel (70% higher than 12 months ago):
Diesel (has dropped ~6% in past 30 days)…
Current Avg. $5.476
Yesterday Avg. $5.497
Week Ago Avg. $5.592
Month Ago Avg. $5.812
Year Ago Avg. $3.272
9:00pm EDST For the last 8 hours the enlightened New Englanders have been producing 2000 MW an hour by burning diesel fuel.
Mr. Ervin,
If you are following the New England electricity situation, you may be interested to know the January, 2023 Algonquin Citygate price (a main supply point for New England) passed the $40/mmbtu threshold yesterday.
This is about triple the average natgas price foŕ this past winter.
As highly expensive as this amount is, the real danger is the looming fuel shortage as New Englanders are now participants in a fierce, global scramble for ever diminishing hydrocarbon supplies.
Kengeo,
Ok. The chart title fooled me. “Diesel Price” for the title (or in the original comment, perhaps would have made things clearer.
Real diesel prices from
https://www.eia.gov/outlooks/steo/realprices/
Here’s NGL production (red left axis) and price (blue right axis)…
Here’s an interesting model for US tight oil (GlobalShift), more or less 3% annual decline after 2024…
Kengeo,
Doubtful that forecast will be correct. My scenario has a peak in 2030 or so (2028-2032) at 11500 kb/d and decline will be much steeper than 3% per year as oil prices are likely to be falling after 2032 and new tight oil wells will no longer be profitable to complete after 2035. For my scenario the annual decline rate is about 23% per year by 2034, by 2042 it increases to 26% per year and peaks in 2047 at 47% per year, by 2050 I have average annual output at 33 kb/d. Chart below has my best guess scenario. CTMA=centered twelve month average.
Dennis,
I like the shape of this curve. I don’t know if I agree with you on the timing of peak LTO because it is so product price dependent but the curve now looks reasonable all things being equal. I am also more in the camp that peak LTO will be closer to 10,000,000. The large the number, the more difficult it is to achieve growth without significant service industry expansion. If we didn’t deplete any DUCs this year, I am not sure we would have seen as much growth as we are experiencing. Is there any way to see what growth would be if we didn’t complete more wells than drilled monthly?
Lto survivor,
If we look at the rate that wells drilled has been increasing it is pretty clear that within a few months the DUC count will stop decreasing and if the rate of increase in completions also continues at the rate of the past 12 months, then the DUCs will start increasing. So we will be in a situation where more wells are drilled than are being completed. When tight oil companies reach a point where their DUC inventory is at around 5 months of their desired completion rate, then wells drilled should slow down to the rate of completion, at least in theory.
In short, I set the increase in completion rate at a very reasonable rate by historical standards (about one third of past rates of increase.)
Potentially the rate will peak around 10 Mbpd, note that this scenario is for all tight oil plays and not just the Permian. At the peak in 2029 the plays besides the Permian are at about 2.9 Mb/d and Permian at about 8.5 Mb/d.
If there is no expansion of Permian basin crude takeaway pipeline capacity between now and 2029, then the peak would be 7.6 Mb/d for the Permian, my guess is this expansion in capacity may happen in the next 7 years, though it is difficult to forecast.
My Permian basin scenario has the completion rate reaching a maximum of 650 wells per month in Sept 2026, that is an average increase of 4 wells per month over 52 months, in the past 2 years the competion rate in the Permian has increased at an average rate of about 9/month. This seems reasonable to me, but perhaps I am too optimistic. Note that if the Permian cannot increase beyond 7.6 Mb/d and other basins also cannot increase any more than my best guess, the peak for US tight oil would be 10.6 Mb/d, closer to your estimate.
Dennis.
You may have answered before, but can you give me a breakdown of total wells by county in the Permian Basin in your scenario(s)?
I’m other words, how many wells in:
Midland, Howard, Martin, Upton, etc.
How many wells in: Eddy, Lea, Reeves, Loving, etc.
Also, if you have it broken down this much, do you also by bench?
Shallow sand,
I do not have a breakout by county, but earlier I did give a breakout between Wolfcamp in Midland and Delaware basins and for Spraberry and Bonespring. I don’t have data on individual benches within the formations.
The Delaware wells will mostly (probably over 95%) be in the four core Delaware basin counties (2 in NM and 2 in Texas) and the Midland basin wells will mostly be in the 4 core Midland basin counties.
See comment linked below
https://peakoilbarrel.com/opec-update-july-2022/#comment-743084
Dennis, thanks.
I have a short memory, lol.
Or more likely too much on my plate!
Shallow sand,
Sorry I am too lazy to the breakout by county, I would need to do a separate well profile for each county and then a separate well profile for each formation in each county, so that’s 8 in all, I could probably do it, but haven’t take the time to do it. Right now I just lump the counties together and have the 4 core counties in the Delaware with Bonespring and Wolfcamp (2 well profiles) and then the 4 core counties in the Midland basin with a wolfcamp and spraberry well profile (2 well profiles) for total of 4 well profiles, breaking out by county would maybe increase this to as much as 12 well profiles (I might include a non-core well profile for each of the major formations for completeness). At some point I might do this, but for now what I explained is what I have done, not perfect, but all I have had time for, but hey not bad for the price!
Dennis –
I think this scenario overlooks infrastructure constraints that others have pointed out to you recently…seems silly to try and squeeze that much out of the permian so quickly…from what I can tell the permian has produced just about 10 Gb in the past 15 years…It’s possible that proven reserves by the end of the year may be as low as 10 Gb…so unless reserves increase considerably then permian will start declining very soon…this seems to agree with the GlobalShift forecast.
A 15% decline rate yields an additional 10 Gb over next 10 years…
I believe that would be a conservative estimate…
Ken geo,
There may be as much as 75 Gb of technically recoverable resources in the Permian based on the mean USGS estimate. I have looked very carefully at the USGS assessments and eliminated the less productive parts of the play reducing the TRR to about 54 Gb and then based on falling oil prices which I assume after 2034 some of these resources will not be economically recoverable so the URR of my scenario is 43.5 Gb. This is less than the USGS F95 TRR estimate (they expect there is a 95% probability that TRR is 44 Gb or higher). My scenario is already very conservative.
Note that a 1P estimate for reserves has a 90% probability that it will be at least as large as the estimate. A better estimate is the engineering best guess which is 2P reserves. Typically this is 70% more than the 1P estimate. Permian 2P reserves at the end of 2020 were about 20 Gb, and about 7 Gb had been produced at the end of 2020. That’s about 27 Gb total and I expect more will be added over time.
https://retirementlifestyleadvocates.com/podcast/episode/2022-07-17-retirement-lifestyle-advocates-radio-w-karl-denninger
@11 minute mark – Karl is provocative to say the least.
I find whether you agree or disagree with him…he always has some stuff you haven’t thought of.
He is razor focused on energy and inflation. Not a good sign.
Dennis – My biggest question is how the midpoint ends up being 2026 yet increased production thru 2029/2030? That seems unlikely could overcome major decline rates for 3-4 years…
Also 2P reserves are only 36 Gb (you need at least 50 Gb for the graph you are showing), by 2025 you will need 1P (27 Gb) to grow by at least 3 Gb per year thru 2031…
While I’m not saying it’s impossible, I’d bet there is less than a 10% chance it could happen…
I believe overall tight oil is on the decline and not likely to challenge past levels due to many reasons.
To be realistic, assume go additional growth in production thru ~2028, then 7% annual decline thru ~2050.
Some adjustments to your chart below:
Also, I would really hope that the US stretches our remaining limited supply of oil for as long as possible, it would be much wiser to stretch it out then to burn it all up in next 5 years…with that in mind I hope we can keep it at 1-2% annual decline for as long as possible…what a waste to overproduce it….
Kengeo,
You can’t have it both ways,, you want both a low decline rate and a low depletion rate.
If your decline rate is low, it’s low because your depletion rate is high.
If you want a low depletion rate, then your decline rate needs to be high(er).
I learned that from Ron.
Bob – Makes perfect sense, if production rate drops then you leave more oil in the ground and hence a lower depletion rate, got it. I guess it all really gets to Laherrere’s recent point…the overall amount of oil has little effect on the time horrizon (shifts it a couple years +/-). The amount of oil controls the y axis (max. production rate).
With that in mind, doesn’t sound like the permian has much production capacity left in it…
Kengeo,
The scenario calls for a drop in oil prices whuch drops output quickly after 2032. Note that if this scenario proves correct, making the tight oil last simply results in it never being produced. I will never be produced at oil prices under $50/b. So we can peoduce the oil or leave it in the ground, those are the options. My guess is that it will be produced and the smart oil companies won’t wait for oil prices to start falling to ramp up production, they will do it while oil prices are high.
Note also that in 2029 at the peak for tight oil, cumulative output is about 50 Gb, if oil prices were to remain high, it is likely that tight oil URR could be 100 Gb. The steep drop in output in my scenario is due to an assumed steep drop in the price of oil. Oil price scenario in chart below. If we assume oil prices remain at $100/bo, the tight oil output would be different.
Also note that my scenario for unconventional oil (extra heavy oil plus tight oil) peaks at 15.4 Mb/d in 2029 at a cumulative output of 82 Gb. The URR for unconventional oil is 190 Gb for my best guess scenario so the cumulative output at the peak is about 43% of URR.
Kengeo,
When I do a Hubbert linarization on my scenario through Dec 2028, it suggests a URR for the Permian basin of 62 Gb, this is what might occur if oil prices do not drop as I foresee. I maintain that oil prices will drop in the 2030 to 2035 time period, but note that I tend to be incorrect on my guesses about the future. Higher oil prices than my scenario above will result in higher tight oil output than the 74 Gb than I have guessed, perhaps as much as 100 Gb. Much will depend on future oil prices which are difficult to predict.
Non-OPEC post will be up later today
The autonomous vehicle news is really picking up
https://www.reuters.com/technology/baidu-unveils-autonomous-vehicle-without-steering-wheel-2022-07-21/
Seppo Korpela,
The one in 20 odds is subjective.
Since 1872 there have been two major World financial crises in 1929 to 1939 and 2008 to 2009 over a 250 year stretch, that is about 1 in 125, a very simplistic way to look at this.
Potentially we could use the last 3 .ajor World ecomic crises in 1870, 1930, and 2009 to give us a mean time between major crises
of about 70 years. Than we could use a maximum entropy probaboity distribution with mean equal to standard deviation at 70 years. For that probability disribution we would have about a 17% probability a major fonancial crisis might occur before the end of 2022, and a 50% probability it would occur before or after 2058.
So you are correct, the one in 20 odds was a poor guess, but to me one in 5 sounds right, if statitical physics is a good guide.
An alternative is to look at time between major crises, 1870, 1930, and 2009
A new thread on Non-OPEC oil production has been posted,
https://peakoilbarrel.com/march-non-opec-oil-production-at-post-pandemic-high/
A new Open Thread Non-Petroleum has been posted.
https://peakoilbarrel.com/open-thread-non-petroleum-july-23-2022/