The OPEC Monthly Oil Market Report for September 2021 was published this past week. The last month reported in each of the charts that follow is August 2021 and output reported for OPEC nations is crude oil output in thousands of barrels per day (kb/d). In the charts that follow the blue line is monthly output and the red line is the centered twelve month average (CTMA) output.
OPEC produced 26762 kb/d of crude oil in Aug 2021 based on secondary sources, an increase of 151 kb/d from June. July output was revised down by 46 kb/d from what was reported last month and June output was revised up by 9 kb/d. Most of the increase in OPEC output was from Iraq (90 kb/d) followed by KSA (69 kb/d), UAE (55 kb/d), and Angola (43 kb/d). The biggest decrease was in Nigeria (-114 kb/d), with small decreases in Congo (-14 kb/d) and Iran (-8 kb/d). All other OPEC members saw increases of less than 10 kb/d in August 2021 based on secondary sources.
World oil supply decreased by 30 kb/d in August, relatively flat compared to last month, most of this was due to Hurricane Ida which caused US petroleum liquids output to drop by 370 kb/d in August.
The chart above uses data from the Russian Energy Ministry and converts from metric tonnes to barrels at 7.3 barrels per tonne, the combination is OPEC crude plus Russian C+C output. Russian output decreased by 35 kb/d in Aug 2021 to 10383 kb/d. OPEC13 crude + Russian C+C output increased by 116 kb/d in Aug 2021 to 37145 kb/d. The centered 12 month average OPEC crude plus Russian C+C output in March 2021 (most recent data point) was 35545 kb/d an increase of 265 kb/d from the Feb 2021 level.
OPEC 13 + Russian C+C output in August 2021 is about 5.2 million barrels per day below the Jan 2018 level which is similar to the centered 12 month average from July 2017 to June 2018, some nations may not be able to return to the Jan 2018 level, I would estimate this is about 3.3 Mb/d so roughly 1.9 Mb/d might be added to OPEC 13 and Russian output, about 0.5 Mb/d of this is Russian output. OPEC 13 output may struggle to rise above 28.4 Mb/d unless sanctions are removed from Iran or other OPEC countries increase their capacity which is doubtful in the short term.
Based on the OPEC supply and demand balance for 2021 and 2022 in figures 17 and 18 above and a likely OPEC capacity of 28.4 Mb/d, it seems likely the World will be short on oil unless Iranian sanctions are removed and even if that occurs OPEC 13 capacity would increase to only 29.7 Mb/d. Note also that OPEC has very optimistic expectations for future non-OPEC output so their estimates for future OPEC demand may be too low. The OPEC estimates for future World oil demand look reasonable, based on past relationships between real GDP and oil consumption, adjusted lower by 20 to 25% gives an estimate similar to the 2022 World demand of 101 Mb/d.
OECD stocks were 122 Mb below the latest 5 year average in July 2021. If we look at the Appendix of the Sept 2021 MOMR we find the second quarter closing stocks for OECD commercial petroleum were 2902 Mb. The OPEC estimate for the 2021Q3 call on OPEC is 29.1 Mb/d and if September 2021 output is 250 kb/d higher than August 2021 output, the OPEC output would be 26.8 Mb/d. This suggests stocks would be reduced by 2.3 Mb/d times 90 days in the third quarter is a total reduction of 209 Mb in 2021Q3. This would bring closing stocks to 2693 Mb and OECD demand for 2021Q4 is expected to be 45.85 Mb/d. In terms of days of forward consumption the Third Quarter 2021 closing commercial stocks would be at 59 days which is lower than the 2018 average (60 days). In short, at the end of the 3rd quarter of 2021 oil stocks will be low suggesting that oil prices will be moving higher in the fourth quarter of 2021.
Thank you all for all the efforts, have been following the issue since -08 or so on various websites, I think we´ll see in short order how things finally works out. China has been keeping things going for a long time since GFC, but things there are getting shakey lately. Think I`ll hug my bag of NPK a bit later…
But hopefully for us our close connections to the norwegians will assure us of a little bit of oil in the future to keep things running, at quite reduced speed of course.
Best regards from the far north of Sweden!
All going downhill!
Good stuff Dennis!
Everyone including OPEC seems to be overestimating future supply. I wonder how much of that is intentional, especially from OPEC. OPEC especially can then use this overestimation to justify reduction in its own capex. Capex levels at OPEC are very low (see: https://www.opec.org/opec_web/en/647.htm) exemplified by perhaps the number of oil rigs in operation in Saudi with only about 27 oil rigs in operation now compared to 60-70 in 2019.
When the world demands more oil next year OPEC can show it’s empty pockets and say ‘no more oil in the bank’. Oil will reach triple digits and OPEC will be like – sorry, I thought there was gas in the tank. It might even point fingers at US shale for not producing enough!!
The world is in for an interesting time!!
Ancientarcher, Another way is to appeal to the current thinking that peak demand is at hand. I wonder how many oil company executives, knowing that they are hard pressed to find new oil fields, will use this as a fig leaf to explain their actions. The same goes for politicians and economists, both groups being in their own kind of bubbles.
Thanks Ancient Archer.
It could be that CAPEX will increase in 2022, there is no doubt a lag between oil price and CAPEX. The low levels in 2021 are likely due to low oil price levels and excess capacity that existed in 2020.
OPEC produced 26762 kb/d of crude oil in Aug 2021 based on secondary sources, an increase of 151 kb/d from June.
I though OPEC+ had agreed to a 400 kb/d increase every month for the rest of the year? If so, they’re not living up to their promise.
Frugal.
OPEC increase should be 250 and the non-OPEC part of OPECplus about a 150 kb/d increase. If Nigeria had not dropped by 114 kb/d, OPEC would have been 14 kb/d above their target.
Dennis.
I think there will be more and more “if”:s going forward.
“If” you had purchased Occidental shares (king os the Permian) one year ago today. You would have more than doubled your money.
Or,
if you bought it 3 years ago you’d still have 30 cents
for every dollar that you used to have
🙂
I had to write a financial analysis of OXY for a class in 1988 or 1989. My conclusion was sell.
Got a C- because I probably butchered the math. But as far as whether is was right or wrong, pretty clear on that one compared to the market as a whole.
Why natural gas prices have surged to some of their highest levels in years
A marriage of factors in North America and Europe — from summer storms to an overseas supply crunch — have contributed to sharp rise in the price of the fossil fuel.
Natural gas kicking in Europe and N. America. Coal kicking in Asia. What about the price of electric power? How will the economy react if oil kicks at the same time? Inflation? We will see how Nordstream II effects the gas price.
This recent era of inadequate reserve replacement and now a general malaise over taking the Exploration and Production industry seems almost like total capitulation by the industry. With impossibly volatile prices governing and in many cases destroying economic returns, it really feels like the industry has made a statement through their inaction that enough is enough and we are done battling all of forces that have attacked this healthy and important industry. I don’t see a vibrant restart in the cards. ESG investing or whatever we want to call it has no goal or fundamentals that tied to real life but more so to a dream that sustainable green alternative energy will fill the gap. The overthrow of our old system of supply and demand has given way to let’s get rid of the old with a bear hug embrace of the new even if the new doesn’t provide solutions or sustainability of our accustomed lifestyles.
Just yesterday I had a meeting with an old friend who is from Texas and lives in the Northeast. He is amazed at the speed in which investing and banking institutions are fleeing the fossil fuel industry. He said their is zero appetite for new oil and gas deals in his circle of high powered and well heeled investors.
Whether it is due to this recent period of low to negative returns of the past 6 years or the expedient desire to jump on the ESG bandwagon, reserve replacement has vanished and it will take many many years to gear back up and a political reversal away from the climate change investing to provide enough supply to narrowly avert an all out war for survival in a dark period of energy poverty.
I am in favor of alternative energy and have been for the last 30 years which is when we should have begun this effort to combat the peak oil reality. Our leaders and institutions I am convinced are convinced that by throwing unlimited amounts Funding to this new industry, the result will somehow solve the climate change issues while providing affordable and abundant energy for all. Sadly it will not and I expect the fossil fuel industry will continue to sit on the bench and watch the shit show unfold. As an energy producer for 40 years, it has been an uphill slog with a few bright spots of technological breakthroughs like 3D and 4 D seismic, horizontal drilling, bright spot analysis, and many other advancements, but my colleagues and professional staff are worn out, tired and have little faith that the market will be stable and reliable enough to warrant the humongous risks necessary to continue to explore, find and produce new reserves in a meaningful way. This seems vastly different in that the political will against this industry is so overwhelming that I am not sure that even $150 oil will yield the results that we experienced in the last 20 years. It’s simply too unpopular and now more than ever being popular, cool, and woke has usurped good and rational common sense.
Please forgive me for sounding like an “old man” but I am amazed and stunned every day by the magical thinking and activities that rule the day. Shoot maybe it will all turn out just fine and I am just a bit out of step with the new world realities.
LTO Survivor,
I can’t agree more with what you wrote.
As regards investors fleeing the sector, I have personal experience of this. I work for one of the largest pension funds in the world with hundreds of billions of dollars under management. For the last few years, for each of our investments we had a CO2 budget i.e. whatever we invested in, say Google, we had to note how much CO2 they are emitting directly or indirectly (very little for Google obviously). The investment committee would reject anything that had high CO2 emissions even if it was a good potential investment. There was a tight CO2 budget and hence we invested little in oil and gas and related companies, especially in oil even though we had a dedicated team of people analysing the sector and investing in the equity market. Now, top management has decided that there will be no further investment in the O&G sector from 2022. Remember, this is a huge fund with hundreds of billions under management and them stepping back will affect valuations and yields in the equity and debt markets. They will still invest a little in gas related projects/companies (CEO says gas is a transitional fuel) but zero, nada for oil. In the last townhall, an employee asked the CEO why we still invest in O&G and the CEO was defensive. The employee didn’t obviously think that his entire lifestyle depends on oil – he probably travels to work in a petrol powered vehicle, the metals in the vehicle have been extracted using oil as energy, he has clothes that are derived from oil, the paint he has on his car or house is from oil, the food he eats is transported using oil.. I can go on and on. But you get my point – people are losing sight of what is enabling their lifestyle in the madness to go woke and green.
I see how it works in these large funds and I can tell you we are not alone in moving away from O&G. Other large funds are facing the same pressure from their investors, shareholders, partners, governments, activists and even their own employees. The pressure is relentless. No one wants to invest in O&G but everyone wants to enjoy the benefits. This is not going to last!
Another thing – young people don’t want to join this sector. If you look at the technical schools, intake has reduced considerably. Technical companies, like those doing seismic are shutting down or laying off lots of people. When the old guys retire, there will be no one to take their place. There is a significant skill deficit in the future. Even if the world wants to invest in O&G extraction, I don’t think it will be possible to do that in 5-10 years time because the skills would have disappeared.
Points very nicely made, LTO and AA. I am an oldie marine exploration/engineering geophysicist, but with skills transferable to offshore wind farm installation.
Pleasingly I am still in demand from both O&G and wind, but will probably have to hang up my hard hat before long.
Looking at the rocketing price of natural gas in Europe, along with same for domestic consumers, both gas and electricity, I wonder if this site should not temporarily be renamed ‘peakgastank’.
Although the situation will likely be resolved over the coming months with Nord Stream II coming online, and Russia increasing exports, it would be an irony if during our long discussion of peak oil, the straw the breaks the camel’s back derives from a shortage of NG.
There is as yet little MSM coverage in the UK of the impending crisis. Domestic prices are capped until April ‘22, which may lead to some failures amongst the smaller energy suppliers that have not hedged their supplies sufficiently. I get the impression that most people are unaware of how dependent they are for all aspects of modern life on FF energy.
Although this is probably a short-term issue, nevertheless it will be a wake up call if inflation spikes over the coming months.
Magical thinking is the key word.
The election battle here is all about moral and high intentions. Children reporters are asking the candidates… We want world peace and everything is clean an fine and everyone is happy. Not a tiny bit less.
That all doesn’t work at all. Energy is only solar and wind – atomic plants are a completely no go, about geo energy nobody speaks. I’m sitting here on a spot where you have to drill only 2000 meters to get boiling hot 160 degree celsius water. And they are speaking to convert all heating to insulation and heat pumps. Drilling technology from oil experts can be come handy here, too, I think.
From one “old man ” to another “old man ” .
One has to be young and stupid before one is old and wise . 🙂 . Copy ,paste from Eulen’s post
“The election battle here is all about moral and high intentions. Children reporters are asking the candidates… We want world peace and everything is clean an fine and everyone is happy. Not a tiny bit less. ” 🙂
“it is due to this recent period of low to negative returns of the past 6 years” LTO
Yep.
Nothing will damper enthusiasm more than loss of hard earned money, year after year.
LTO Survivor,
A smart investor ignores the herd mentality.
Oil companies that do so stand to make a lot of money from 2021 to 2030. Atvthat point they should have an exit strategy prepared as oil prices may see a steep decline over the 2030 to 2035 time frame.
The breakup between the oil industry and the financial industry (and the rest of society) reminds me of Gwen Stefanie’s breakup with her bassist boyfriend.
I really feel
I’m losing
My best friend
I can’t believe
This could be the end
It looks as though
You’re letting go
And if it’s real,
Well I don’t want to know
Don’t speak
I know just what you’re saying
So please stop explaining
Don’t tell me ’cause it hurts
Don’t speak
I know what you’re thinking
I don’t need your reasons
Don’t tell me ’cause it hurts
Very emotional. I wondering if both sides will be able to muster as much honesty as this video shows.
https://youtu.be/TR3Vdo5etCQ?t=31
I doubt it. Expect a long drawn out case akin to one pretending they own all the CDs in the house and the big screen TV, while the other goes about changing the locks and gaslighting.
If we were really good at honesty, we’d have accepted what was going to happen thirty years ago and made a rapid transition when the writing was on the wall and not manifesting as reality. Instead, it looks like we’re going to half arse everything here to no one’s satisfaction but whoever creams off any profits to be had.
Excellent work Dennis. I notice that UAE and SA both experienced sharp spikes in oil production around March 2020. Does this reflect oil released from internal storage, or did these countries use additional shut in production capacity to reach these peaks?
Tony,
In April 2020, all OPEC countries were positioning themselves for quotas. So, they pumped out as much as they could and on top of that, they added oil draws from their storage and called it production. That production level (production + inventory draw), in April 2020, was used to arrive at production quotas for each country going forward. Obviously, no producer will admit that some of their so-called production in April 2020 was from their storage, but everyone knows it.
If the question is whether the OPEC production for April 2020 level is achievable in the future, for each country or the group as a whole, then I will bet that it is not. Definitely not a sustainable level for two reasons:
1) Part of that production was actually not production but inventory draws
2) Capex has plummeted in 2020 and 2021 so obviously capacity to produce has gone down
I don’t see how OPEC will be able to reach April 2020 levels in the short and medium term, or even in the long-term.
Good observation , ancient archer .
TonyH
I think it was actual production and not from storage as many claim.
I do not think those levels are sustainable, I focus on the centered 12 month average. In my post I adjusted for nations with declining output, capacity is probably 28 Mbpd and if sanctions are removed for Iran perhaps 29.3 Mbpd for OPEC 13
If there is low CAPEX going forward for OPEC then these levels will drop as all but 5 nations have flat or declining output in the OPEC 13 group.
Mike S on the Permian ” the last hope ” .
https://www.oilystuffblog.com/single-post/chart-to-make-your-hair-stand-up?postId=e1c1ba82-acba-4a7c-8cbf-fe1f32f8fb84
When is squeaky bum time for the US oil sector then? Are we close to seeing the production output waver?
HIH
It is all about DUCs. Attached is a Table which summarizes the July DUC data for the four major oil producing basins.
The “% DUCs” column shows the percentage of the completed wells that were DUCs. The last column shows the percentage increase in oil production relative to June.
Let’s look at the Permian data shown at Oilystuff and what happens when no DUCs are completed to get an idea of the significance of the last column.
I have to go back a few months to the July production data since that is the latest month for DUC data.
During July, 263 wells were drilled and 393 were completed. The drilled wells added 286 kb/d to the forecast July output. The decline was 238 kb/d which resulted in a net increase of 48 kb/d. If no DUCs were completed, output would have been close to 191 kb/d. (263/393*286 = 191). This would have resulted in a decline of 47 kb/d rather than the 48 kb/d increase. Note that this is just a one month estimate. As time goes on and fewer wells are drilled and completed, the decline rate would also drop.
While the forecast production data for October is mostly positive, as opposed to mostly declines in July, the percentages are still small, less than 1.6%.
At some point more drilling will be required as the number of Prime/Sweet DUCs diminishes. The outstanding question is “How many of the remaining DUCs are dead DUCs.
Shale profile has an excellent long term projection for the Permian.
https://shaleprofile.com/blog/permian/permian-update-through-june-2021/
Ovi , thou art great . I have earlier commented ” What would we do without you ? Tweddle our thumbs .”
HIH
Thanks.
While I don’t know much about oil and I have never seen a drill rig, I can flip numbers to make a point.
Ovi , we are in the same boat . The only thing I know about oil is what I fill in my gas tank, good at numbers but not good at ” flipping ” them as you are . Be well , we need you here .
Ovi,
Enno Peters does great work. The supply projection is very conservative as it assumes a constant rig count and constant completion rate from Aug 2021 to Dec 2029. The recent annual rate of increase for Permian basin horizontal oil rigs is about 60 per year over the April to Sept 2021 time frame.
A projection which assumes an increasing rig count would be more realistic.
More stories like this will come . The lies and the chickens are coming to roost .
https://www.businessdailyafrica.com/bd/economy/80pc-of-kenya-s-crude-oil-cannot-be-tapped-3553040
https://www.abc.net.au/news/2021-09-18/australia-nuclear-submarine-deal-aukus-change-relationship-world/100471990
Is Australia going nuclear not a sign of Peak Oil?
#1 Coal and Natural Gas exporter; Largest Uranium Reserves; Huge Shale RESOURCE, Fishing and Seafood, Farmland, Rare Earth Metals and other finite commodities….
They broke a contract and they bought nuclear submarines (it is the first time that I see USA selling nuclear submarines, by the way) to have more autonomy and to comply in a political and military alliance with USA and UK. Perhaps, Taïwan will buy the submarines which were supposed to be sold to Australia. They have no facilities to process and enrich uranium. They will be dependent of USA or UK.
The French weren’t going to deliver till 2030. The original contract was 60 billion, already overrun to 90 billion
https://www.news.com.au/technology/innovation/military/important-detail-we-missed-in-the-arrival-of-chinese-warships-to-sydney/news-story/a8474e5d7219ee21d42f3bf73388c7c1
The Chinese parked 3 military vessels in Sydney Harbor.
We aren’t waiting for the French to sew their surrender flags, before we act.
If you don’t think the Chinese are after Australia’s resources…you aren’t very smart.
Downunder , you are going to get second hand equipment which is past expiry date . You are being taken to the cleaners . Rejoice . As to the Chinese parking three vessels , it is under a reciprocal agreement . Aussie’s knew they were coming and what was there nature . If they are squatting what is stopping the Australian navy and army from evicting them ?? Think . My favorite George Carlin ” My first rule is never believe what the government says “
The Chinese were sending a message. Just like they are by driving by Alaska.
China has 1.4 billion people. Australia has 20 million.
If you think Australia could single handedly beat China in a war you aren’t thinking properly.
A nuclear submarine fleet give Australia away to strike China, which they don’t currently have.
US and UK are training Australia how to build their own.
Buying SSNs from other members of the Five Eyes is a purely strategic move in terms of securing Asia against an expansionist, or at least emboldened, China. Australia is happy to have UK and US expertise in attack subs, and the UK and US are happy to enable an ally to assist in looking after our interests on the other side of the world.
JFF , Kleiber , both of you are correct . Nothing but a way for US, UK (NATO) to get rid of some old equipment and profit from it . By the way the Scott Morrison govt just printed a ” bullseye ” target over Australia for the Chinese to aim at . Best of luck to my friends in ” The Lucky Country ” .
That’s not second hand equipments. It’s going to be a submarine model developped from scratch and it will take at least a decade to see a nuclear australian submarine while the construction of the Attack class submarines was supposed to start in 2023. In the mean time, a lot of things can happen and the Australian navy is going to be deprived of modern submarines to deal with naval problems. https://www.globaldefensecorp.com/2021/09/16/australia-to-acquire-nuclear-powered-submarine-scraps-conventional-submarine-project/
You are assuming the US isn’t parking nuclear subs in the meantime.
Australia is buying subs that are already working. They don’t need to be built.
Hello from Down Under . You my dear friend are living in delusion . Your Achilles heel is climate change and water . The country is becoming drier and precipitation is decreasing . Your farmland is deteriorating by the day . Are you aware that Australia is now importing ” millers wheat ” ? As to the rest let me dismantle them one at a time :
Coal and NG : Coal OK , you have a lead , but till when ? CC is real and you will have to stop or you will fry the planet . NG , stupid decision to export to China and prefer to have rolling blackouts in Australia because the power plants are short of NG .
Shale : Forget it . Shale is a US phenomena . It cannot and rpt cannot be duplicated in any part of the world .
Fishing and seafood : I don’t know much about this , but never heard of Aussie being a major exporter .
Farmland : Explained already with CC . The Murray – Darling basin( major food growing area ) is drying up .
Rare earths ; Maybe you can mine them , but you will send them to China for processing . Where do you win on this . ?? . Hey , do you have technicians and engineers to even mine the rare earths ?
Now let us get real . Australia shut down it’s last refinery . You are dependent on your basic fuel requirements ? Island nations are at high risk as and when international trade slows down ( the end of globalisation ) . This is what is happening now . Read Tainter .
Reluctantly mention the most grotesque lockdown and subversion of civil liberties by the Scott Morrison govt on the public due to Covid . My opinion , start a reverse countdown . Read this website every day . Might save your a***.
https://crudeoilpeak.info/
Downunder , read this . I didn’t write this , it is from the ” Sydney Morning Herald ” . Like they say ” If you don’t know who the sucker is at the poker table then you are it ” . Enjoy the coffee .
https://www.smh.com.au/national/morrison-the-third-amigo-speaks-loudly-to-xi-20210916-p58sfk.html
https://foreignpolicy.com/2021/09/16/u-s-seeking-basing-in-australia-after-submarine-deal/
I forgot to mention the US and Australia have a joint plan to develop Hypersonic Missiles.
Also, the US is parking B2 bombers over here.
Shale – I said a huge shale RESOURCE. Desperate times and people will try to develop like the Chinese.
Fish and Seafood – Look at a map. Australia is a giant Island by itself.
Farmland – Australia has abundant Farmland
Rare Earths – US will want them
Listen up. All I said is the US/UK giving Australia nuclear is a sign of Peak OIl. There is no doubt in my mind the Chinese want Australia’s resources.
The US and UK want them too!
You could think of Germany as the canary in the energy mine. Watch how this country scrambles to navigate this decade. Sure other countries are just as vulnerable, but it is the productive hub of Europe.
Something like 98% of crude oil product consumption in Germany was imported as of 2018.
No wonder they are scrambling to find some degree of a workaround. No good or easy answer.
They also import most of their nat gas and coal, with the biggest supplier of all three fuels being Russia.
https://www.cleanenergywire.org/factsheets/germanys-dependence-imported-fossil-fuels
Germany does have a lot coal, but it something like 95% soft/brown coal with lower energy content. It is all stripped mined, being close to the surface. Far from optimal.
“opencast lignite mining has altered 179,490 hectares of countryside in Germany. Since 1924, 313 settlements have been lost to lignite mines in Germany.”
Additionally, Germany is poor in solar reserve- if they were in the US they would rank last in the lower 48.
https://globalsolaratlas.info/map?c=46.346928,10.59082,4
They do have a good wind resource in the north part of country and offshore.
https://globalwindatlas.info/
Volkswagen has arrived on the electric car scene in a big way in Europe, and has very ambitious plans-
https://www.carmagazine.co.uk/electric/volkswagen/
This past month vehicles with plugs made up 28% of sales in Germany. VW #1
https://cleantechnica.com/2021/09/16/plugin-electric-vehicles-get-28-market-share-in-germany-in-august/
North Dakota Monthly Oil Production took a hit in production in July, down 55,709 barrels per day. Daily oil per well dropped from 69 barrels per day to 65 barrels per well, the lowest since May 2010. Wells producing increased by 20 to an all-time high of 16,486.
More information may be gleaned from the Director’s Cut.
Wow. No good news in that one. Rigs are up, completion crews are up, summer is prime time to drill and complete wells in ND, yet wiped out last few months incremental gain.
Ron,
I agree, the North Dakota Bakken has likely peaked, scenario below assumes future Brent oil price in 2020$/bo never rise above $70.50/bo in the future. ERR is about 7.5 Gb with cumulative tight oil production through July 2021 at about 3.97 Gb. High oil prices might allow a bit more total output, but is unlikely to increase output to levels above the previous peak.
Ron,
Indeed. And take a look at this seriously ANOMALOUS situation with Bakken’s Water Production & Ratio shooting higher while oil production heads south.
I stick to my 75% Collapse of U.S. Shale Oil Production by 2030.
steve
Ron, has the Bakken reached a permanent peak in your opinion?
North Dakota peaked at 1,519,035 barrels per day in November 2019. They had declined by 83,722 barrels per day before the covid collapse. And they are now down 441,246 barrels per day below their peak at 1,077,789 bpd.
So yes, I think they definitely peaked in November 2019, and will never see that level of production again.
Posters really need to pay attention to the posts of Mike and LTO.
You might not always like what you read, but you are getting a wealth of inside info for free.
This site isn’t visited as much as it should be. The world has ran on petroleum since WW1. It is now a dirty word in the Western world.
Lots of uncertainty. It is taken for granted that food and fuel will be there, because it generally has been for generations.
Maybe the transition won’t be bumpy?
Yes, and I appreciate all the thoughtful and experienced comments here [even when they don’t jive with my take on things].
Such important set of issues.
“Maybe the transition won’t be bumpy?”
Boy, I wish I could be optimistic about that. But considering everything I certainly am not. At some point here we are likely to see a very painful and hard scramble. Most likely the energy available to mankind over the coming decades will be considerably lower than is now the case, and it won’t be on purpose.
If you want optimism speak to Ron
(hah).
“Maybe the transition won’t be bumpy?”
People have to discuss the transition properly in order for it to go less bumpy.
I discovered a long time ago that it is impossible to discuss peak oil with people.
It’s a simple concept that people cannot or refuse to grasp, kind of like evolution.
You try to explain what peak oil is, and they say, “But there’s still plenty of oil in the ground.”
You try to explain peak flow rates, and they say, “You’re saying we’re going to run out of oil.”
You try to explain the possible societal effects, and they say, “You’re saying the world is going to end.”
Peak oil has been permanently straw-manned. Add to that the fact that I’m just a lay person, not a geologist or oil industry professional, and some people just think I’m crazy. I have given up and mostly read here in silent communion with the rest of you.
Ain’t that the truth. I have recently been informing my father of the natural gas issues brewing in Europe, since he has a habit of enquiring what my utility tariffs are so he can gloat about his better deals. Trying to get him to grok the production versus reserves thing, or to understand that there is no magic alternative to FFs that can come on stream any time soon and enable such profligate energy expenditure and so economic growth, is an uphill struggle.
I’m pretty sure, deep down, most people get the concepts. It’s just a cognitive dissonance of wanting life to continue as they have always known it (and perceived via poor education about the past, as how it’s always been), despite the idea that nothing grows forever. People will happily embrace the net zero narrative and not question that it means lifestyle changes and hard choices in what we do in the transition, not that the reality isn’t a case of unplugging one energy source and plugging another in as one would a battery pack.
It’s hard, even for graduate educated friends in science, to comprehend how much time and energy needs to go into making an RE powered society and how just having FFs plateaux is painful enough. We’ve not even hit the declining FFs while building out replacement RE phase yet. And I already have neighbours complaining about solar panels and turbines nearby, LOL. They ain’t seen nothing yet.
I don’t see any problems at all Shallow.
At least legal disputes in the future will be quicker to resolve: two men enter, one man leaves.
😉 .
Shallow sand,
Life is a bumpy ride. The transition is likely to be bumpier than usual.
Despite the great information from you, Rasputin, LTO Survivor, and Mr Shellman, in my view the high future oil prices which are likely in the future will allow those willing to invest in oil production to earn a high return on their investment. The less that other investors are willing to risk, the higher the returns will be for those willing to take the (considerable) risk as supply will be very short and oil prices will be very high.
It does not matter that politicians are making bold claims about no new ICEVs after 2030 and other edicts. The fact is the transition to EV and other plugin transport will not make a significant dent in World oil demand until 2035. In the mean time those with the knowledge and ability to produce oil have the potential to make a lot of money as their product will be needed by society in order to make the transition to lower total fossil fuel use in the future.
Dennis.
I agree with you.
I just wish the need for oil would be acknowledged by our Federal and certain state governments and that producers would not be looked upon so unfavorably.
“I just wish the need for oil would be acknowledged ”
Agree with the sentiment, and not just from government, but among all people who live in the modern world.
And not just oil- but all forms of energy (yes- including coal and solar and wind)
People (and business) take energy for granted, and waste much of it, burn with a frivolous mindset.
It will take energy poverty for most to pay attention.
Most people don’t even realize that the explosion in energy use in the past 150 years enabled the explosion in population size, and prosperity. Who among us is ready to acknowledge that population size will need to rapidly reverse to make due with less energy after peak fossil fuel. They don’t even teach this in school. What country policy or business plan, or family plan, takes this into account?
Shallow sand,
I agree. The bright side is that those willing to accept the risks of investing in an unpopular industry may reap very high rewards. It is not a popularity contest, the harder it is the less competition and lower supply which tends to favor a high price environment.
Generally that will be good for producers.
My medium oil price scenario has WTI at 92 per barrel in 2020 $ by 2027. There is money to be made at that price.
Dennis , sorry to be the party pooper . Oil at $ 92 in $2020 by 2027 ?? ” If wishes were horses beggars would ride . There is a bright side to everything . Let me tell you a joke . In India we have arranged marriages and a dowry system where the girl’s family pays a handsome amount to the boy’s family if the marriage is finalised . Well , on an event the boy rejected the girl because she was deaf and dumb but the dowry was huge , so what do the parents tell the boy ” doesn’t matter if she is deaf and dumb but she has a perfect teeth line ” 🙂 . Very similar to the justification provided by you .
Hole in head,
I remembered incorrectly, it is $92/bo in 2029, not 2027.
Oil supply will not meet demand at lower oil prices, just a fact.
For tight oil high prices will mean lots of profit, if oil prices are low (note that vey few of the oil pros predict low oil prices in the future, in fact LTO survivor has told me recently he expects higher oil prices as supply is likely to be short. I think he has this right.
Other oil pros steadfastly maintain that oil prices cannot be predicted, I agree with that as well. Surely I have never predicted future oil prices correctly, but I have yet to hear an oil pro say that your prediction of $25/bo in 2025 seems reasonable, perhaps I missed it.
Your metaphor is far from the mark. Time will tell us which oil price prediction is closer to reality, mine at $79/bo for WTI in 2020$ (for my medium oil price scenario) or yours at $25/bo for WTI in nominal dollars (or $22.10/bo in 2020$ if we assume an average annual inflation rate of 2.5%). We will see.
Dennis,
High STABLE prices will encourage capital to come back into the sector and I agree with this for sure. However, the Shale segment of the industry is really struggling with inventory count, well spacing and pressure depletion. Higher prices may allow for five wells per section instead of 4 wells per section but I just really see nothing but consolidation ahead and modest growth. The Shale sector depends on high Stable Prices to capture the return in the first year to be profitable and the Energy Service side of the business needs to ramp back up as well, Capital is going to Charging Stations and Solar Panels so I dont know when the Capital will come back into this world. It surely wont happen at $70 per barrel.
LTO Survivor,
I think the pandemic will eventually subside and I doubt we will see the supply glut of 2015-2017 or 2018-2019. As far as capital, my scenarios have all future Permian CAPEX funded from cash flow by E&P firms, interest on debt is assumed at a 7.5% annual rate and 25% of net revenue is paid out in dividends, even at WTI at 67.50 per barrel in 2020 $ as a maximum price (my low oil price scenario) it works. I assume 4 wells per mile (1320 foot spacing) and assume wells are shut in at 20 bopd (though the economics suggests 10 bopd is possible at the oil, natural gas, and NGL prices I assume (natural gas assumed to sell at 2.50/ MCF, NGL at 35% of crude price per barrel.) I also have excluded many of the lower quality benches from the analysis, eliminating 20 million acres included in the USGS analyses so that only 30 million prospective acres at the end of 2017 are included in the analysis, this reduces the mean TRR estimate from 75 Gb to 50 Gb, with fewer potential wells.
Note my scenarios don’t have any meaningful increase in tight oil until 2023, giving some time for service side to ramp up.
Note that I do not expect oil prices to remain at $70/bo. See my medium oil price scenario below, prices are Brent Oil in 2020 US$/bo.
LTO Survivor,
Can you give us your best guess for future oil prices? Thanks.
I think my medium oil price scenario is relatively conservative, I would say there is roughly a 50/50 chance oil prices will be higher or lower than this scenario. Also note there is likely to be volatility, think of this as a 3 year centered average price.
Chart below has centered average 3 year (36 month) average Brent Oil price in 2020 US$/bo.
Natgas blurb
There now exists something called EMGF — eastern Mediterranean gas forum. Members Egypt, Cyprus, Greece, Israel, Italy, Jordan, Palestine, and France. Devoted to cooperation and blah blah blah. Notice Turkey not there nor Lebanon and Italy and France are nowhere near it all.
Headquarters Egypt.
Egypt has LNG facilities and Israel is already exporting gas to them for LNG forwarding. There is talk of pipelines to Europe. Ain’t happened yet.
Israel is now the source of Jordan natgas. Israeli domestic consumption of natgas has risen from 1.2 billion cubic meters/year in 2001 to presently 11.7. Offshore production is about 13 bcm. So they are exporting 1 bcm/yr.
Haven’t done the math to confirm, but articles claim this is about $13 billion per year influx to Israel. Shouldn’t run out for a decade or 3. I think this is more than 2X US aid to Israel.
Dennis,
You may want to look at North Dakota’s production this past month. The decline of LTO wells plus the reduction in inventory will make it nearly impossible to reach 9605. Let’s say the price goes to $100 per barrel over the next six months, we could see more rigs employed but from everything I have experienced, the best locations have been drilled and each successive well will yield less production. I would be stunned if we can keep production flat for the next several years even with higher prices. One other issue that we are facing is labor shortages, supply chain delays with regards to steel and other items. We would have to see the rig count double in order to eek out modest growth in my opinion.
Regarding those labor shortages. I haven’t looked into how it will effect LTO producers at the margins. But lots of companies are having to increase wages in order to attract and keep employees. And at the margins it’s becoming a problem. Companies that are loaded with debt are starting to squeezed at the margins. And right now the only thing they can control in the situation is labor.
So if labor shortage continues and it continues to force higher wages. Expect layoffs to follow. Which only compounds the problem of not having enough help. Again inflation is a major headwind for economy. Higher priced oil does not help this.
I’m of the belief that oil prices can chug along higher might even reach $100. But something somewhere breaks sending oil prices right backdown to $30 or below. I think higher prices can happen but the aren’t sustainable over a long enough timeline to make Dennis’s models reality.
I think Steve’s 75% less LTO production by 2030 is closer to reality of what is actually going to happen. And in meantime US conventional oil also contracts 4% a year for another 8 years.
LTO Survivor,
We will see. Most of the increased output is from the Permian basin, with a bit from Niobrara and other plays. About 44 Gb ERR from Permian basin.
LTO Survivor,
Higher oil prices will eventually get things sorted, Bakken saw a down month, but mostly output has been pretty flat due to low rig count, in the Permian rig count is rising and if that continues output will continue to rise, at a constant rig count Enno Peters has Permian output rising see (from shale profile)
https://public.tableau.com/shared/D8M5WSNK3?:display_count=y&:origin=viz_share_link&:embed=y
Note that a more realistic projection has completion rate rising as rigs are likely to continue to increase at about 60 rigs per year (rate from April to Sept 2021) in the Permian basin (horizontal oil rig count).
From shaleprofile supply projection for Permian where 286 well completions per month are assumed from Sept 2021 to Dec 2029 (constant rig count over the period). Output of tight oil from Permian basin projected at 4893 kb/d in Dec 2029, this projection is exceedingly conservative, since April 2021 horizontal oil rigs have increased at an annual rate of roughly 60 per year, the scenario below assumes this suddenly stops and the rate of increase becomes zero, this is highly unlikely.
Click onchart for larger view.
LTO Survivor,
Here is the North Dakota Bakken/Three Forks part of my US tight oil scenario for my medium oil price scenario, ERR is 7.9 Gb (consistent with cumulative production plus proved reserves at end of 2019), total wells completed about 24700, with about 16576 wells completed through July 2021 (shaleprofile.com estimate for July 2021 ND Bakken/Three Forks wells completed as of Sept 21, 2021 at 5:23 pm).
Notice that my model has underestimated ND Bakken/Three Forks output since August 2020, the model is quite conservative.
Watcher , you simplified everything , so no reason for me to elaborate .
“Natgas blurb ”
You are a genius . KISS ( Keep It Simple and Stupid ) . 🙂
Oh , forgot “Headquarters Egypt.”
A country where only 3% of the land is agricultural to feed a population of 70 million . The world’s largest importer of wheat . Human memory is short but it was the increase of prices of “roti ” ( bread ) that ended the regime of Hosseni Mubarak . Those who forget history are condemned to repeat it .
Considering that the Nile river dumps more than 500 cubic kilometers of water into the Mediterranean Sea each year, water shortages in Egypt hardly seem like a problem.
And considering the amount of land and sunshine available, all that is really lacking is fertilizer. Wheat production is growing slower than the population, but population growth is slowing.
Of course the real problem, as so often is inefficiency.
https://www.al-monitor.com/originals/2021/09/egypt-develops-ambitious-projects-meet-growing-water-needs
Here is what tight oil output looks like for my medium oil price scenario which has WTI at $92/bo in late 2029 or early 2030 in 2020 US$/bo. ERR is 74 Gb with cumulative tight oil production to date at about 20 Gb, peak in 2028 at about 9600 kb/d.
Click on chart for larger view.
Dennis, that tight oil peak will be after the Bakken and Eagle Ford have run dry, so all that is coming from the Permian? Even though folks who work in the Permian who comment here are saying that by 2027 it will be completely picked over by then, even at current drilling rates. Are you sure you want to stick with this excessively optimistic forecast? You seem to be putting all your eggs in one basket in terms of believing the EIA’s estimates…
Stephen Hren,
This will not be the first time that a scenario I have created is considered very optimistic. In almost every case this has been said in the past, the scenario proved to be pessimistic despite claims that the scenario was “wildly optimistic”. In my view there is a 50/50 chance output will be above or below this scenario.
Below is EIA AEO 2021 reference case scenario for US tight oil. The cumulative output from Jan 2021 to Dec 2050 for my scenaio is 54 Gb and for the EIA’s scenario is 94 Gb, the two scenarios are very different.
There are many intelligent folks who read and/or contribute to this site. With all due respect to your work, Dennis, are there any other people who think the above scenario that you laid out is likely? You seem to be the lone optimist amongst a large group of knowledgeable folks who visit and comment here.
But perhaps I am wrong?
The point is relevant, because your boosterism leads to complacency imho. Promoting a view of abundance when the opposite is more likely true could materially increase the level of misery in the world by lulling people into believing the status quo is maintainable for much longer than it is.
Stephen,
I stand by my scenario.
The same knowledgeable group has always considered every scenario I have created as being wildly optimistic, the group has consistently been wrong and I have in fact always proven to be wrong also by being too pessimistic. Perhaps the future will be different, peak oil won’t be taken seriously when wildly pessimistic scenarios are the norm.
I create realistic scenarios to counter the group think here.
Mr. Hren
“There are many intelligent folks who read and/or contribute to this site”.
That is not only demonstrably correct, I would go further in saying that most who contribute to this site are sincerely striving for a – collective – betterment of all of us.
This does not mean that these intelligent, sincere folks are employing accurate data, and I would use you, specifically, as an example.
During our last back and forth, years ago, you posted a retort to my positive appraisal of the General Electric 7 HA gas turbines.
The then-present manufacturing shortfalls were not only overcome, the accelerated adoption of 3-D printing ‘fixes’ has had profound ripple effects on large scale hardware maintenance throughout the world.
The incredible global build out of CCGTs (Brazil right now turning online ~1.6 GW capacity outside of Rio – the ACU/GNU complex – is just the preliminary phase of a 6 GW total. Siemens hardware being used) is just one example.
Vietnam’s gargantuan ~16 GW buildout is primarily using GE turbines.
Many, many more projects could be cited.
A poster above mentioned increasing WOR in the Bakken.
I am not sure how much that individual is aware of the current status of HVFRs, (these are enabling the long term underground retention of frac fluid.
One consequence is that the former ‘flowback’ fluids are now counted – frequently over several months – as produced water). This skews any historical comparisons as different practices are now being used.
This same above poster, btw, enthusiastically – right on this site – claimed a peak in Marcellus production back in ~2014/5 when a temporary drop occurred at the ~14 Bcfd level.
Current Pennsylvania production is over 20 Bcfd with total Appalachian Basin putput at 34 Bcfd.
So much for ‘experts’.
Mr. Hren, this site has taken on the commonplace characteristics of online exchanges in becoming an echo chamber … an increasingly thick siloed repository of information that confirms, rather than informs, that which intelligent folks wish to be true.
Stephen,
There are few that think my scenarios are likely, there are many that believe they are either too low or too high. Note that the Permian scenarios were adjusted by reducing TRR to 50 Gb which is 25 Gb below the USGS mean estimate and only 6 Gb more than the USGS F95 TRR estimate (which is the USGS estimate that has about a 95% probability of being too low.) Bottom line the Permian scenario is very conservative which makes it more likely the Permian scenarios will be pessimistic rather than optimistic.
Dennis
Somewhat surprising, but not entirely, that you continue to get negative feedback from so many on this site.
You are entirely correct in many of your assumptions, and may yet prove to be underestimating future output depending upon many factors … economic (aka price of hydrocarbons and their production costs) being a prominent component.
The remaining hydrocarbons in mature shale formations still retain ~90% of the OOIP/OGIP. Current practices assure much of that will be extracted along with ever increasing percentages in future wells as techniques continue to evolve.
Proof is in the pudding, so they say.
Summer of 2022 production numbers should indicate that your projections will – roughly – show to have been accurate.
No, there is almost no doubt next year’s shale numbers will be better, and probably through 2025. That tells us nothing unfortunately. Based upon what the many other commentators have to say about it, I give Dennis’s projections a 3-5% chance of being accurate to within 10% by 2028. That’s my two cents from a hippie/doomer/optimist who is also wrong 90% of the time.
Stephen,
I would guess at between 8000 and 10000 kbpd for US tight oil output in 2028 for 12 month average output,with perhaps a 60% probability it will fall between those numbers. I would guess at roughly a 50/50 chance it will be above or below 9000 kbpd.
As far as abundance, we are talking about 54 Gb over a 30 year period.
The US consumes about 6 Gb of crude per year, over 30 years that would be 180 Gb, tight oil is a drop in the bucket.
For the World recent crude consumption levels are about 30 Gb per year, over 30 years that would be 900 Gb my tight oil scenario would supply 6% of that total.
Note that if the transition to electric transport is quick we would see low oil prices and lower output. Oil prices are difficult to predict, my scenarios are based on a set of future prices that are likely to be incorrect.
Coffeeguyzz,
For Williston basin about 9 Gb of C plus C is the likely ERR, mean OOIP estimates are about 400 Gb for Williston basin, That would be about 2.25%, and I do not expect we will see 10% of the OOIP resource extracted for tight oil. For shale gas, I have not really focused on that, no idea. The notion that we will see 40 Gb of C plus C extracted from the Williston basin, is investor hype from 2015, not to be taken seriously. The mean USGS TRR estimate for the North Dakota Bakken/Three Forks is about 11 Gb, about 8 Gb will be extracted profitably under reasonable economic assumptions.
Below I have two tight oil scenarios for low oil prices (maximum of $67/bo in 2020$ for WTI) and medium oil prices (where oil prices gradually rise to a maximum of $92/bo for WTI in 2020$ by 2030.) ERR is about 60 Gb for the low price scenario with a peak of about 8300 kb/d in 2027 and ERR is 74 Gb for the medium oil price scenario with a peak of about 9600 kb/d in 2028. Permian ERR is 44 Gb for the medium oil price scenario and ERR is 35 Gb for the low oil price scenario.
This graph above is physically impossible.
LTO Survivor,
Enno Peters has (with no change in rig count) US tight oil at 7918 kb/d in Dec 2029. My scenario assumes the rig count does not remain fixed, and the low price scenario has output at about 8000 kb/d in Dec 2029. Is there some reason that it is physically impossible to increase the rig count?
Note that a few years ago (circa 2017) I thought it physically impossible for Permian output to reach 8000 kb/d in the future. I was wrong.
We will see how it plays out, I think my medium oil price scenario will be about right if oil prices are close to my medium oil price scenario (linear increase in Brent oil prices from today’s level to $95/bo (2020 $) by Jan 2030. Lower oil prices will result in lower output.
LTO Survivor,
There are two scenarios shown. Do you believe both are physically impossible?
Stephen,
Note that my scenarios are based in part on USGS estimates for technically recoverable resources (TRR), this is coupled with average well profiles developed using data available from shaleprofile.com, historical completion rates and historical tight output to verify the model over the 2005 to 2021 period. Then a discounted cash flow model is used with realistic CAPEX, OPEX, transport cost, oil prices, natural gas prices , NGL prices, interest rates, discount rates, tax payments, and royalty payments and future completion rates consistent with potential future well completions. This exercise is done with a particular focus on the Permian basin, but a slightly less sophisticated model (which focuses only on C plus C and ignores natural gas and NGL) is used for the Bakken/Three Forks, Eagle Ford, Niobrara, and other US tight oil (all other tight oil plays and also including condensate from shale gas plays).
Bottom line, the EIA estimates for tight oil are not very good, I ignore them.
The Permian is over 85,000 square miles in size. How do workers in the Permian know the statist of the Majors holdings now and in the future ?
Stephen,
Permian scenarios below for low medium and high oil price scenarios.
Dennis
Looking at the OPEC forecast for Q4-21, they are expecting an increase of 1.43 M/d over Q3 in world output. These are the primary contributors.
All Liquids. M/d
US. 0.5
Canada 0.1
Norway 0.1
Brazil 0.2
Russia 0.3
Azerbaijan 0.1
Total 1.3 M/d
I still can’t see how the US will add 0.5 Mb/d in Q4. I wonder if they are just accepting the EIA’s STEO projection which starts to ramp up in October.
I understand your incomprehesion. I read on a article of reuter that the backlog was seriously dropping in several county : ”At current well completion rates, the EIA estimates that the top U.S. shale field responsible for U.S. oil gains in the last decade has less than six months of DUCs remaining.” Furthermore, the output of GOM will shrink (shrank) of 100 kb/d due to the effects of Ida : ”this year’s output is running about 11.4 million barrels per day (bpd), according to the EIA, and will shrink by 100,000 bpd through the end of this year, on losses from Hurricane Ida, the EIA said.” So I don’t see how the oil output of USA is going to increase of 500 kb/d for what is left of the year. Perhaps they are hoping that the rest of the world will not need the oil that they can’t no more extract. https://www.reuters.com/business/energy/oil-well-backlog-shrinks-us-shale-may-upset-investors-drill-more-2021-09-14/
Ovi , I am wondering how the heck can any of the listed countries add anything . All are members of the ” red queen ” club .
HiH
Canada is not part of the Red Queen club. Oil sands are a mining operation. Essentially no exploration required. Just keep mining and find more efficient ways to do it.
For example, Suncor which runs an open pit mine, uses huge trucks to take two or three scoops of oil sands to the first stage separation plant. The trucks are now being modified to become driverless. These are $200k jobs.
Ovi,
I agree, I have US tight oil down a bit about 50 kbpd in 2022Q4.
Mistake above output down in 2021Q4 and up a bit for 2022Q4, see comment below where I referred to spreadsheet to get the right numbers.
Ovi,
I agree. OPEC is likely overestimating non-OPEC output for 2021Q4, especially the US. My tight oil scenario has output down slightly in the fourth quarter of 2021 (by about 25 kb/d from the average third quarter level). Tight oil output then gradually rises by 100 kb/d from 2021Q4 to 2022Q4. Output then increases more rapidly from 2022Q4 (7161 kb/d) to 2025Q4 (9094 kb/d), an average annual rate of increase of 644 kb/d each year over that 3 year period.
Ovi,
Thinking a little further on this and remember that this is all liquids so it includes NGL which has been increasing at about 450 kb/d annually. In addition Q3 output will be affected by Ida and there will be a rebound from that by Q4, so perhaps the OPEC guess will be right, but even with these adjustments I still believe it will be an overestimate.
Unintended consequences of the NG problem in UK . Empty shelves .
https://mishtalk.com/economics/alarm-bells-ring-in-the-uk-over-critical-shortage-of-carbon-dioxide
The Transition to Green Energy Wind & Solar will be the DEATHKNELL of Europe & the United States. What we are witnessing now is just a mere WHIFF of the coming ENERGY CLIFF that I have been warning about for years.
This is not a European problem, but global as Japan/Korea LNG prices surged 23% just on Friday. With Dutch TTF Natgas prices reaching nearly 80 Euros on Wednesday, we had a nice Fed Powell imitation by Kremiln Spokesman that Nord 2 would help elevate the high gas prices.
https://oilprice.com/Energy/Gas-Prices/Kremlin-Spokesman-Assures-Markets-Nord-Stream-2-Will-Stabilize-Natural-Gas-Price.html
This announcement had a profound impact on the Dutch TTF gas price as it fell down to 62 Euros in two days. But, mere words don’t stop the REAL PROBLEM that RUSSIA’s Natgas storage levels reached a low of just 19% in April this year. Thus, the lack of Russian Natgas supplies to Europe has nothing to do with Geopolitics or Nord 2. Rather it’s simple SUPPLY-DEMAND FORCES at work, along with lousy Wind & Solar power generation.
Russia will continue to build Natgas stocks until November, thus Europe is going to likely have to EAT CROW or pay much higher prices elsewhere to get supplies before the winter hits.
Unfortunately, Europeans that went along with their INSANE Politicians GREEN ENERGY policies have set themselves up with a Natgas Shortfall disaster in the future.
This is the beginning stage of the ENERGY CLIFF.
steve
Yes let’s continue on forever with intermittent fossil fuels, available for a mere six generations before disappearing forever. That’s the joke here, that’s energy sources that have been consistently available for billions of years are “intermittent “. While fossil fuels that are available for less than two hundred years are “reliable”.
Y’all there is literally no other option than trying to transition to renewable energy, even if we fail spectacularly. Because we know absolutely we will fail by persuing further growth from fossil fuels.
We do have another option in the Integral Fast Reactor and related closed fuel cycle nuclear reactor concepts. It is not inconceivable that these could be built quickly if we pulled out all stops. But from what Steve is saying above, we may be out of time for any kind of solution now. Until now FF depletion has been a slow burning problem that is gradually eating away at the average man’s prosperity. It does appear that we are approaching a discontinuity, at which point supply will rapidly decline in absolute terms.
I don’t have Steve’s level of knowledge. Whilst I knew that production of oil and gas would decline eventually, the speed with which shortages have emerged in Europe (where I live) has shocked me. For the first time I begin to feel seriously worried that the end may not be far away for a lot of people, myself included. Peak oil has gone from being something that I saw as a problem for the future, to being an imminent threat to life for me and real people that I know. If the grid goes down, we lose fresh water. We lose food production and distribution. Under that scenario, a rapid die off scenario is quite plausible.
I can only hope that this will turn out to be an early warning that frightens people into action. Some nations will be effected sooner than others. One can only hope that nations with better resources are shaken into action by the tragedy of others. If a systematic collapse occurs in the UK and a large chunk of the population dies off, it would certainly be a wake up call for other countries. One has the hope at least of not dying in vain.
One easy way to reduce the impact of lower FF extraction might be to use triple glazed windows and more than a brick or 1″ of insulation (goes for TX too), air/air heatpumps are also a great way to reduce heating bills in mid- and northern Europe and comparable climates. In general the manufacturing industry, as I´ve experienced and studied, also has plenty of low hanging fruits when it comes to reducing energy use. It will take a while to get there but when it hurts your wallet the will to invest a bit in reduced energy consumption will become much, much stronger! Being less reliant on imported food items while exporting to Africa, hurting local farmers there will also help, maybe something for the EU council and British parliament to consider. But the big picture stays the same, use less but live well anyway (and possibly grow a garden, if possible). Best wishes!
I agree Laplander, most “energy” problems can easily be solved by wasting less energy.
As Jimmy Carter pointed out, if you are chilly in the winter you can wear a sweater.
And as Steven Chu pointed out, if you are hot in the summer you can paint your roof white. If gas costs too much at the pump you should check your tire pressure.
Most driving in America could be eliminated by getting rid of current brain-dead zoning laws. My father rode a bicycle to work in a munitions factory in WWII when gas was rationed. And so on.
Societies that refuse to accept this logic are setting themselves up to fail. It’s like being an anti-vaxxer. Fine, whatever, but don’t act surprised when your loved ones kick the bucket.
Mr. TonyH
Naval ships around the world have been successfully nuclear powered for decades.
It may make some curious as to why more implementation has not been done on a wider basis.
The Bowland and Weald Basins contain sufficient recoverable natgas to comfortably supply the UK for many decades.
Fracturing restrictions such as .5 seismic readings – a mere fraction of the 2.0 commonly registered by foot stomping football fans – have stymied production in the UK.
As you have so poignantly stated, being ‘shaken into action’ is an absolutely imminent requisite for prompt (dramatic?) engagement that might best be grasped with an accurate understanding of WHY things have gotten to this point.
Absent that, the continuing downward spiral is inevitable.
Stephen Hren,
Unfortunately, you are trying to compare APPLES to ORANGES when it comes to Fossil Fuel Energy & the Non-Renewable Renewables. I wish people would stop using that silly term “Renewables.” Most of the wind turbines and blades are CHUCKED into the landfills when they reach their end of life. Same with Solar. There is nothing renewable about Green Energy, similar to clothes that aren’t renewable when you throw them out after 10-15 years
Sure, some of this GREEN SHYTE is recycled into a few nice Parks or made into expensive Filler for more High-tech stuff that won’t have that much of a lifespan.
Regardless… I say ramp up Wind & Solar as fast and as much as we can so we can really MUCK up the Natural Gas Supply Chain and reach the ENERGY CLIFF sooner than later.
I am all for it.
steve
Steve, you are being sarky. I don’t believe that you really want to see us reach the net energy cliff. Crossing that threshold is going to result in unimaginable amounts of human suffering.
I am starting to realise that this is something that is real and is going to happen to me and those around me, maybe in the near future. It isn’t an abstract idea that I read or write about, it is a real thing that is going to happen. We spend years writing about the approach of these things that our logical minds tell us are inevitable. But somehow, our subconscious minds don’t quite perceive these things as real until we see them happen. Even if you know its going to happen beforehand, there is still a psychological threshold later on where these concepts suddenly become real to you. Here in the UK, with imminent natural gas supply shortages leading to surging electricity prices and industries shutting down; the net energy cliff is becoming real.
I can see more suffering if we again “dodge the bullet”. There were worries about reaching peak oil around the year 2000. Now 20 years later and about 1.7 billion more people, the suffering is going to be greater the further the point of maximum production will be pushed.
I was listening a podcast by Jim Rutt and he repeated the complaint of Albert Bartlett, that people just cannot comprehend what kind of hardships exponential growth will bring to future generations.
I agree that ‘renewable’ is a very poor choice of terminology Steve.
As opposed to the depleting sources of energy, the proper term for wind or solar or wave energy would be
Perpetual Energy.
[per.pet.u.al- 1. occurring repeatedly; so frequent as to seem endless and uninterrupted 2. never ending or changing. 3. continuing or enduring forever; everlasting. ]
Of course the collectors of that Perpetual Energy are prone to degradation, just like the metal and concrete in a nuclear reactor, thermal coal plant, internal combustion engine or oil rig. Nothing unique in that regard.
No golden ticket.
Just lots of energy for even when you can no longer afford oil to get around.
Yeah, very perpetual. Unfortunately, the Earth’s supply of minerals and other concentrated resources needed to build the energy hardware are not perpetual. They are being depleted (or dispersed more accurately) in the blink of an eye compared to the geological timescales needed to concentrate them from base rocks. So it is important to build hardware that uses mineral resources as sparingly and efficiently as possible.
Here are the steel and concrete requirements for several different powerplants per average MW:
http://fhr.nuc.berkeley.edu/wp-content/uploads/2014/10/05-001-A_Material_input.pdf
Wind turbines = 450-470 tonnes steel (per av MW);
New nuclear = 10-40 tonnes steel (per av MW) – range depends on technical option.
Which is the more sustainable in terms of of its use of the Earth’s resources?
What do you need for a coal power plant.
Please don’t forget the requirements for the coal mine, and the super carrier to get it from oversee. Ah, and the two giant harbors. Plus all the additional goodies as a few hundred miles of rail and giant excavators.
Nuclear is very resource efficient – but it has to be some newer tech. For the old nukes, uranium will run out in short time when they are rolled out widely (let’s say 10 times more installations than now).
You’ll need breeding tech, or better tame the thorium cycle. All the current nuclear technology is more or less from the cold war to have the back door of breeding bomb material – but not to maintain a fuel efficient fission.
The price of coal in China might rise too much for the green energy transition to occur.
Steve you absolutely hit the nail on the head!
Steve-
You should check out the European Landfill Directive. Landfills are being phased out in Europe. In Northern Europe, many all have already closed. You need to update your story.
It would make a lot of sense if Americans followed suit. We’ll see.
More problems with Europe NG
UK energy provider Bulb seeks emergency fund injection
“The spate of failures comes amid a record spike in energy prices due to a combination of low wind power and global gas shortages.”
Double whammy from NG prices and low wind speeds. Are low wind speeds associated with CC?
https://www.cityam.com/uk-energy-provider-bulb-seeks-funds-to-avoid-collapse/
I’m watching this NG situation in Europe closely. This could lead to both the GBP and EUR getting hammered. And a stronger dollar. Which will weigh in on oil price.
Also watching situation in China As it plays out it’s likely the Chinese yuan CNY gets hammered also. Which will push dollar higher also. Which will weigh in on oil price.
If your leveraged long CL futures and the dollar goes against your position. This run up in oil price can get unwound in a hurry.
Hilariously, Bulb is my electricity provider and 100% RE powered. I’ve had several e-mails over the last 9 months relating to price increases since they use a one month rolling, single tariff contract. I was only joking the other day with my father that I may get hit, and here we are.
There are something like 70 energy companies in the UK. There may be only 10 by year’s end. These companies are basically just middlemen if they’re not, say, British Gas or EDF, so looks like their ways of cutting costs by being brokers for wholesale energy won’t get them out of this pickle.
”Are low wind speed associated with CC?” It depends on where and when… Modifications of climate dynamics due to climate change are a difficult question about which climatologists don’t agree (they don’t agree about the consequences and about the interpretation(s) of the observations, not about the phenomenon itself). About mid-latitudes, it has been recorded a slowdown of ”westerlies” : the succession of anticylones and depressions on a specific location has slowed which is linked to the decrease of temperature gradient between Equatorial areas and Arctic areas. The Arctic is warming faster than the Equatorial areas. This can have the result to fix ”in place” the anticyclones and the depression which in turn provokes weather persistence. When you are in the first case, you have possibly less winds and dryness and when you are in the second option, you have more rain and winds. After it depends on where you are located. That’s what can be said quickly. After, it is perhaps a question of mere coincidence and bad luck.
JFF
A puzzle. “The Arctic is warming faster than the Equatorial areas.” If the Arctic is warming that fast why is there more ice in the Arctic in 2021 than 2007 and 2012?
The dashed line is 2012. Lowest ice year. Solid red is 2007. Blue is 2021.
https://nsidc.org/arcticseaicenews/charctic-interactive-sea-ice-graph/
Ovi,
Perhaps the amount of ice in the Arctic in Summer has a lot to do with wind and weather patterns?
It is a fact that the Arctic and Antarctic have warmed much more than the equator.
Ovi , I follow this but not too closely , so excusee (French ) if I am incorrect . If the area is increased but the volume is decreased , then ?? . I follow Paul Beckwith(you tube ) occasionally to update myself on this matter . He is what Mike S , SS , LTO’s , Rasputin, Dennis, Ron on oil issues . Maestro . Last minute , Doug Leighton on the non petroleum thread is doing an excellent job by providing updates on CC . Thanks Doug , appreciated .
JFF,
The answer is simple, stated by several Arctic scientists. The massive melting of ice is creating a higher percentage of freshwater. Freshwater freezes more readily than saltwater.
While freshwater freezes at 32 degrees, saltwater freezes at 28.4 degrees.
steve
Steve , Dank u well , merci , bedankt , Koszonem , meherbani , shaukriya . They all mean ” thanks ” . 🙂
Extent/area ≠ volume.
There is not more ice in the Arctic. There may be more first year ice in certain areas leading to extent, and perhaps area is on the high end as well for some seas, but volume of ice and integrity of said ice is negligible. Single year ice is totally different to five year ice in mechanical strength and composition. Compare what we have today to being like a Slush Puppy versus having a cold drink with whisky stone like ice cubes.
The other thing to note, insolation plays a big role. There was practically no sun through peak solar insolation this summer, meaning very little of the ice above 85º got hit full on with the sun. A lot of the Siberian side fared worse, but areas on the opposite side of the Arctic were more or less average. Export through the Fram Strait can also make a difference, and that is entirely down to wind patterns. Ice that gets pushed down to the Atlantic gets murdered.
So, weather plays a huge part of this. You get years like 2007 and 2012 that are phenomenal in what they do to the ice, and indeed the former year was a true paradigm shift. But make no mistake, the state of the ice this year, despite it being a very average year for melt enhancing factors, illustrates just how fragile the situation is. It would only take another 2007 or 2012 now to get us decidedly below all time records.
The trend is unchanged. Ice loss is accelerating and the period where melt happens is also expanding.
Tks, Klieber .
What you are seeing is surface of sea ice. This can be reduced by winds (the ice is compacted) or extended by winds. The fact is that meteorological conditions in Arctic area have not been favorable this year for an extensive dispersal of sea ice promoting more ice melt. Beyond this, you must see that the ice pack is in three dimensions : the ice pack has a thickness. And from this point of view, the record is very bad. First, the multiyears ice (more than one year old) is now representing 26% of the surface of Arctic sea ice during summer while at the beginning of the 1980s it represented 75% or so of the surface of Arctic perennial ice during summer. Second, the PIOMAS has evaluated the decrease the volume of ice stock to 300 km3/year or so for both March and September period of the year.
The Chinese stuff is big discussion in the WTI chatroom now. Some chatists associate the Chinese economic problems with bad news for bullish oil price expectations.
My guess is FED will be uber dovish at their meeting this week and stocks bounce. And oil finds support to move higher.
I don’t believe FED can allow any correction to take place. We’d get a pension fund crisis if stocks are allowed to correct. In order to make up shortfalls pension have borrowed massively. So they are not just long but leveraged long corporate debt.
They are buying the market at all time highs with leveraged. It will end in disaster one day. But until then. I expect markets to move higher. Oil might just get carried with them higher.
What going on in Europe and China would have to turn into a full blown crisis to drag these markets down. Not there yet. And neither may turn into full blown crisis. It’s wait and see at moment.
My speaking.
The FED and other central banks can’t reduce the dose of opium, crack and meth. They can only talk about it, as the alcoholic about drinking less booze. The market would immediately crash completely, tearing down anything with it. The beginning would be a margin call crash bringing margin to zero. Both in stock and bonds.
Even with the inflation the damage of tapering or even ending QE would be too big. There will be a day when we get a new, full electronic $ and €. Without cash.
Then they won’t need QE anymore – without cash they can set interest to -5% if they like or need. Nobody can flee as today. Today -5% isn’t possible – big banks and funds would lend out money, convert it to cash and hord it in fortified mountainside vaults to make an arbitrage yield.
In my opinion they will bail out evergrand somehow – not completely to punish invesetors somewhat, but enough to stop a chain reaction. Let’s see.
Eulen , the time for bailout is over . If it was to be done it would have been done after Friday market close and before Monday evening . Evergrande defaulted on an interest payment on Monday and is now due for a bond repayment on Thursday . Monday and Tuesday were holidays in China and still nothing has been done . See my post in the earlier thread on this matter . This is now about power consolidation by Xi and a few dead bodies are immaterial . Scanning the anti Chinese media is an observation that this is a tussle between the Jiang Xi Min faction and XI Ping – Hu Jint tao factions. Don’t know if this is correct .
In the meanwhile some more companies have shown up at the gate .
https://www.zerohedge.com/markets/and-another-shanghai-based-property-developer-crashes-87-minutes-it-halted
https://min.news/en/economy/c0f1266d9cce41d29a9936c25c2cbcc4.html
https://asia.nikkei.com/Spotlight/Caixin/Huarong-to-sell-59bn-of-bad-assets-in-revitalization-push
Regarding the FED , they will do nothing till something ( what ? currencies , cryptos , stocks , bonds ??)
blows up . They are only ” reactive ” and never “precative ” . Their preferred course is always to err on the side of caution and then clean up the mess afterwards .
The Shanghai exchange will open after a 4 day long weekend on Wednesday and on Thursday Evergrande must make a bond payment . Interesting to see what happens . Further now the real estate Moghuls in Hong Kong and Macau are thinking ” what can we do if CCP comes after us .” Chinese saying ” May you live in interesting times ” . Wish is granted . 🙂
Heh, “precative.” Well, that sounds good, but I think you meant “proactive”, Hole. 😉
Kleiber , what is the difference between an “o” and an “e” between friends . Tks for correcting 🙂
(Bloomberg) — Nigeria has the ability to boost crude oil output to its OPEC+ quota of 1.7m b/d within two months, and further to 2m b/d in six months, Minister of State for Petroleum Industry Timipre Sylva said at the Gastech conference in Dubai. The country is producing below its quota because of difficulties in restarting fields that were shut when OPEC+ had deeper output curbs in place. Nigeria has asked OPEC for a higher oil-output quota, he said.
That doesn’t make any sense. Nigeria dropped 114,000 barrels per day in August. The reason could not have been because of difficulty restarting fields shut down because of OPEC quotas. Nigeria has serious political problems and no doubt could produce more oil if they did not have those problems. But their problems are not OPEC quotas and never have been. Nigeria last produced 2 million barrels per day in January 2013. The idea that they could return production to that level in six months is preposterous.
Playing the same card as UAE .
Politicians spewing bullshit, I suppose. But, seriously, their targets are stiff. I don’t know why they would even ask for more OPEC quotas. They will be laughed out of the room. Just posturing.
Russia
https://www.bloomberg.com/news/articles/2021-09-21/russia-sees-its-oil-output-close-to-post-soviet-high-next-year
Russia Sees Its Oil Output Close to Post-Soviet High Next Year
> Total production seen at 559.9m tons in 2022 in draft budget
Russian companies are seen raising combined production of crude and a light oil called condensate by 8% to 559.9 million tons in 2022, and stay close to that level from 2023 to 2024, according to a draft budget submitted by the Finance Ministry to the government.
The document, which was seen by Bloomberg, requires approval from the parliament and President Vladimir Putin. It sets expectations for budget revenue and spending over the period, but actual figures may differ.
Russia’s projected output for next year is equivalent to an average 11.24 million barrels a day, according to Bloomberg calculations. Russia produced 11.25 million barrels a day in 2019, the highest level in its post-Soviet history.
Hurricane damage to offshore transfer facilities to cut Shell’s oil output through year-end
Royal Dutch Shell, the largest U.S. Gulf of Mexico oil producer, said damage to offshore transfer facilities from Hurricane Ida will cut production into early next year, slashing deliveries of a type of crude oil prized by refiners.
The fields are a key source of Mars sour crude, a grade prized by oil refiners in the United States and Asia. Rystad analyst Artem Abramov estimated the lost production will remove 200,000 to 250,000 barrels per day (bpd) of Gulf of Mexico oil supply for several months.
https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-shell-says-it-expects-its-gulf-of-mexico-crude-transfer-station-to-be/
ConocoPhillips to buy Shells Permian assets for $9.5 billion and raises quarterly dividend from $.43 to $.46. Truist raises target price from $78 to $84.
COP up $2
To all , the question is WHY ? At a time when Tom , Dick and Harry are exiting the shale plays . Is it only financial engineering at work or something more ? As Cuba Gooding ( or was it Tom Cruise ) ” Show me the money ” .
Conoco Makes a Persuasive Case for Its Big Land Deal — Barrons.com
11:53 am ET September 21, 2021 (Dow Jones) Print
Avi Salzman
The movement to fight climate change by reducing the amount of oil and gas being drilled around the world is likely to have a perverse effect in the next few years — oil prices are likely to stay high because demand will take longer to fall than supply.
That dynamic means that companies that can produce oil efficiently are likely to make more money in the next decade, before a reckoning takes place over fossil fuels. And it means that ConocoPhillips (ticker: COP) is likely set up nicely to profit over the next few years following its decision announced Monday to buy Royal Dutch Shell’s (RDS.B) assets in the Permian Basin in Texas. After falling on Monday, shares were up 2.3% on Tuesday.
Several analysts weighed in with positive notes on the company’s move. It’s not the kind of “steal” that some companies got by buying assets during the Covid panic last year. But it does look as if Conoco is paying a reasonable price, buying assets from a motivated seller that is looking to reduce its oil and gas footprint.
Conoco says the land it acquired is valued at $15,000 an acre — above the $10,000 an acre it paid for fellow producer Concho Resources earlier this year, but below the $60,000 paid by Occidental Petroleum (OXY) for similar acreage from Anadarko Petroleum in 2019, according to Andrew Dittmar, senior M&A analyst at Enverus.
“After waiting patiently on M&A opportunities through the land-rush years of the shale boom, Conoco has been able to pick up prime Permian real estate at what looks to be attractive price points,” Dittmar wrote.
Even if West Texas Intermediate oil prices fall to $50 a barrel — and they are now above $70 — Conoco expects to generate $80 billion in free cash flow over the next decade and pay $75 billion back to shareholders in dividends and buybacks.
Already, the company raised its dividend by 7% on Monday, a rare move for a company to announce on the same day as an acquisition. Conoco’s market cap today is about $75 billion. If oil prices stay above $50 — and several factors indicate they will — the company could presumably send even more back to shareholders.
Shell got decent money for the acreage and achieved a goal of shrinking its oil-and-gas footprint as investors demand that the company commit more resources to fighting climate change. It will record a gain of $2.4 billion to $2.6 billion for the assets. But its decision to return $7 billion of that money to shareholders raised a concern with at least one analyst.
Citigroup analyst Alastair Syme wrote that the price Shell got from Conoco valued the assets at about the same valuation as the rest of Shell, meaning that if the company uses the money to buy back stock it’s not really accretive to overall value. Plus, the Permian assets were some of Shell’s best, meaning that its future divestitures may not fetch similar price tags.
“And perhaps the bigger problem is that one could argue the Permian was sold because it was salable,” Syme wrote. “Our sense is that there is comparatively little interest from the industry in international upstream assets: Of the few transactions we observe, valuations seem to be around two to three times cash flow from operations. ‘Shrinking and returning’ at these valuations would only make some sense if you believed that the valuations will derate even further this decade.”
Shell has many other positive attributes — including its substantial gas station network and liquefied natural gas business — and arguably has traded at an unfair valuation discount. But for a company that says it is leaning hard into the energy transition, it is perplexing that it wouldn’t be able to invest that money at higher returns.
Mr Shellman has done some calculations using Enno Peters data . Interesting conclusions .
https://www.oilystuffblog.com/single-post/the-future-ain-t-what-it-use-to-be?postId=3dbab1f3-af49-4220-8c07-fefe4de5fc22
Hole in head,
If we make the assumption that no new wells are drilled output drops very quickly.
It is true that well productivity will decline.
A assumption of 11% decline in productivity per year may sound reasonable, but it doesn’t match very well with what we observe to date. Also rig efficiency has tended to increase over time, we could assume rig count will drop, which actually has been observed when prices drop, but we would to assume a drop in oil prices.
Poor assumptions will lead to poor results, we will see in the future which assumptions are more realistic.
So far we have seen rig count increase and output increase in the Permian.
Dennis ” Poor assumptions will lead to poor results, we will see in the future which assumptions are more realistic. ”
Isn’t that the gripe by many on your assumptions ? Calling the kettle black . Be fair .
Hole in head,
Point is very simple, assumptions can be wrong about the future. Perhaps. Mike’s assumptions will be correct, obviously he thinks they will be, I know far less than him, but my guess is that he is being far too pessimistic. Rig efficiency is unlikely to decrease over the next 5 years and rig counts are unlikely to decrease, if we assume as I do that rig efficiency is unchanged. I agree with Mike that EUR may decrease, but I think it will be at a rate that is 10 times lower than Mike’s estimate over the 2022 to 2027 time frame.
Time will tell us which assumptions are better. It is unlikely that either set of assumptions will be correct out of the infinite set of possible sets of assumptions.
D.Coyne, I am not in the “assumption” business; I did not post my article on your site, someone else did, and I did not invite your criticism of it. If you insist, don’t misquote me. For instance I never wrote there would be no more wells drilled in the Permian Basin and the 1/2 or 1% decline in well productivity I entered into the shale profile tool equates to 6% annual decline, not 11% as you said.
Rig efficiency is a meaningless metric but the 1% decline in the number of wells drilled per rig per month, from 1.2 wells down to 1.0, just a few days per well! makes a big difference in output projections using that particular SPC tool. The reasons I used for a decline in rig efficiency are real, by the way; for instance methane taxes, or drought and frac source water, or earthquakes caused by skyrocketing WOR, which you must have missed. Or is that a NIMBY thing?
As to your statement, “poor assumptions lead to poor results,” I got a big belly laugh out of that. Find a historic chart of US rig count to US WTI oil prices and tell me you were able to predict all that volatility the years you’ve been an oil analyst…based on a short interval “linear” trends. Phfttttttt.
Don’t read my stuff; I don’t yours.
Money talks, bullshit walks
By Collin Eaton
ConocoPhillips is set to become the second-largest oil and gas producer in the contiguous U.S. following its $9.5 billion purchase of Royal Dutch Shell PLC’s assets in the Permian Basin.
The company’s acquisition of 225,000 net acres in West Texas is a big bet that drilling in the busiest American oil field will underpin returns for a decade. It is also the latest example of how competition to consolidate is reshuffling the pecking order among top U.S. shale drillers.
ConocoPhillips has been among the biggest spenders in the recent consolidation wave. It closed a $9.7 billion purchase of Permian oil producer Concho Resources Inc. in January, before disclosing its plans to buy Shell’s assets on Monday.
When its Shell deal closes in the fourth quarter, ConocoPhillips’ oil and gas production in the Lower 48 U.S. states will overtake that of Chevron Corp., natural gas driller EQT Corp. and oil producers Occidental Petroleum Corp. and EOG Resources Inc., according to the consulting firm Rystad Energy.
Adding an estimated 200,000 barrels of oil equivalent a day will put ConocoPhillips within striking distance of leader Exxon Mobil Corp., which is expected to produce about 1 million barrels of oil equivalent a day from the Lower 48 this year, the company said.
ConocoPhillips shares rose 4% Tuesday, as other energy stocks including Exxon and Chevron were flat.
The spending spree marks an about-face in strategy for the Houston-based company. For years, ConocoPhillips had focused on shrinking its size, spinning off its refining business — now Phillips 66 — halting exploration of deep-water fields, and selling off Canadian assets.
In an interview, ConocoPhillips Chief Executive Ryan Lance said that while scale was important in the oil business, growing in size wasn’t the driving force behind its recent deals.
“We believe it has some of the best rocks,” Mr. Lance said of the Permian Basin, which straddles Texas and New Mexico, and has what oil experts describe as multiple levels of geologic deposits companies can tap, akin to layers of a wedding cake.
Shell’s assets will generate an additional $20 billion in cash from operations for ConocoPhillips and another $10 billion for its shareholders over a decadelong period. The company is sending about $6 billion back to shareholders this year, about 8% of its market capitalization, he said.
“What’s important is giving a significant amount of your cash back to your shareholders and then having a portfolio you can live off of and modestly grow your company,” Mr. Lance said.
The company’s two purchases in the past year make it the second-largest producer in the Permian after Pioneer Natural Resources Co., up from No. 13, according to energy consulting firm Wood Mackenzie.
ConocoPhillips is betting on shale just as capital investments in U.S. oil fields have dropped to the lowest level since 2004, before the start of the American shale boom. The American oil-and-gas industry was hard hit by the pandemic, which caused a brutal crash in oil prices last year.
U.S. oil companies are expected to spend about $56 billion in capital expenditures this year, slightly less than in 2020 and down from $108 billion in 2019 before the pandemic, according to investment bank Evercore ISI.
Shale companies have said they are making debt payments and shareholder dividends a bigger priority than increasing oil and gas production, a stark reversal of their business model following a decade of poor returns that soured many investors. Most companies have spent just enough to keep their oil production flat this year.
Even so, if oil prices continue to top $70 a barrel into 2022 and fuel demand recovers to pre-pandemic levels, the world will likely need shale oil producers to pump more crude, Mr. Lance said. While he said he doesn’t expect U.S. output to rise by 1 million barrels a day in one year, as it did during the shale boom, he believes demand for the nation’s crude production will rise by some amount.
“If these prices persist next year, I think you will probably see a little bit of ramping activity,” Mr. Lance said, noting that his company is planning to increase oil-field activity modestly next year. “We’re watching it pretty closely to see how the macro conditions develop.”
ConocoPhillips’ deal also underscores how oil companies are trying to attract investors’ attention by emphasizing the benefits of improving their environmental footprints. The company said it planned to raise its targets for reduction of emissions intensity by 2030, in conjunction with the deal. Part of that effort involves putting monitoring devices at its well sites to detect leaks of methane, a potent greenhouse gas, and replacing old equipment.
Mr. Lance acknowledged that adding Shell’s assets will increase the company’s absolute emissions levels, at least in the short term, in a region known for the rampant flaring, or burning of natural gas. But he said the company is aiming to eliminate routine flaring in the Permian by 2025, and its efforts to cut emissions intensity to zero by 2050 will bring its absolute emissions to zero.
“We’re on track to do that and I think these Permian assets fit that really, really well,” he said.
Looks like a Permian Money Machine
Sorry Mike,
I must have misread your post. I thought you said 1% per month in productivity decline, that equates to about 11.4% annual decline. You said 0.5% decline, so yes about 5.6% annual decline in productivity, after average lateral length stabilizes at the optimum level we will see what happens to productivity decline, I doubt that it will be 6% per year, it will depend on completion rate in my view, at a very high completion rate it might approach that level eventually, a lower completion rates average well productivity is likely to decrease more slowly.
This is based on the idea that premium locations with high productivity are limited and that those locations tend to be where the wells are completed, when we complete more wells each year we run out of the highest productivity locations more quickly and see a higher rate pf productivity decrease. Perhaps rig efficiency will decrease, historically in the Permian basin for horizontal rig efficiency has increased.
You are correct about oil prices, I agree they are difficult to predict.
I will not make comments on your posts in the future, sorry. You are free to comment on on anything I write, I am willing to listen to criticism and defend my assumptions.
Mike,
I don’t subscribe to shaleprofile, the WOR is no longer reported on the blog so I do not have up to date information on that unless Enno Peters mentions it in his posts and he has not done so recently. So yes if WOR has increased significantly in the last few months I would have missed it.
The last data I have is from a post on March 19 2021 see links below
https://shaleprofile.com/blog/permian/permian-update-through-december-2020/
https://public.tableau.com/shared/JC3SX9YNY?:toolbar=n&:display_count=n&:origin=viz_share_link&:embed=y
Meanwhile Permian output continues to increase, from April to August 2021 the annual rate of increase in Permian basin output has been about 710 kb/d.
Soaring Energy Prices Become Major Headache For China
Perhaps somewhat surprisingly, the big problem for China is not natural gas. It’s coal, which powers the majority of its power plants, Bloomberg reported this week, citing state-run outlet China Energy News.
The EIA weekly report is now forecasting the first three weeks of September US production to be below 11,000 kb/d. 10,600 kb/d for the week of September 17. Crude imports for the last two weeks exceeded exports by over 3,000 kb/d. WTI currently $71.50, up $1.01
Ovi , and what is the excuse this time ?
IDA
Hole in head,
Weely estimate is often wrong, it is obvious from the chart. Typically we see output drop during hurricane season, also clear in the historical data. This is not unexpected.
Dennis
I don’t think there is any doubt that September is down. Also with Shell having shut in 200 kb/d in the GOM, September will be lower than 11,000 kb/d.
As for the chart, the numbers are not that far off on a percentage basis.
Ovi I agree September is down,
Look at April 2020, montly estimate about 10000 kb/d and weekly about 11500, about 15% off is not very good in my opinion, YMMV.
Dennis
Picky, picky. You are cherry picking. One bad point out of 25 does not negate the other ones.
Tks Dennis . Not paying attention to the fine print . Tks for waking me .
Ovi
Just giving an example of bad data.
There are other examples, mostly the estimates are reasonable, we only know which ones are good when we get the monthly data, at any time we might have a 4% chance of the data being 15 % off the mark.
I am picky about accurate data, guilty as charged.
I was mulling over what was said after FED’s meeting today. I’m left thinking any good economic data going forward should be dollar bullish. Oil is going to have fight a stronger dollar in months ahead. Not what you want if your long oil, Not what you need if you want higher production.
If you look at a DXY chart. The two lowest price points on the DXY coincide with the two highest points on a WTI chart. Go back to 2008 when the dollar made a all time low on DXY. Oil made a all time high a little later. There is some lag between timing. Then go to 2011 on both charts and you’ll see same thing. Dollar makes a low then oil makes another high again with some lag.
Honestly. If oil is going to go to $100 or more like some believe it is. The dollar has to get crushed first.
BoE will probably start tightening too https://www.reuters.com/world/uk/bank-england-keeps-interest-rate-unchanged-01-2021-09-23/
I doubt they will follow their plans.
Yeah I laughed hard on that one. They are fixing to start rationing gasoline. Because not enough drivers to keep every gas station full. This is on top of their current NG problems.
Yet there is reason to do modest monetary tightening soon?
So just about every central bank is planning to tighten at same time. That should workout well for higher prices. 😂
Guess if they are all tightening it mean everything is peachy.
If anyone still believes what the Central Bankers spew then I have a bridge to sell , hurry . LOL 🙂 . Powell is creme de la creme . Interest rates will start rising in 2022 thru 2024 . ROFL .
US tight oil estimates for August are out see spreadsheet at link below
https://www.eia.gov/energyexplained/oil-and-petroleum-products/data/US-tight-oil-production.xlsx
For the April 2021 to August 2021 period the annual rate of increase is roughly 550 kb/d, Permian up about 710 kb/d over same period and rest of US tight oil declining about 160 kb/d over that 5 month period.
Permian chart at link below
https://peakoilbarrel.com/opec-update-september-2021/#comment-725978
clicking on any chart will enlarge it (or allow you to zoom in).
LTO Survivor,
Mike Shellman is looking to come in contact with you, you can find him here:
https://www.oilystuffblog.com/forum
On his blog.
I know i and others are looking forward to to a possible discussion between the two of you about US tight oil operations and it would be very interesting to see if the two of you are basically on the same page.
Anyways, thanks for your posts here, hope to see a discussion between you and Mike.
Take care.
I would be happy to talk with ‘Mike. I do believe we share the same view. I really sense a shift in reality happening as winter approaches. With the wholesale divestment in fossil fuels by most of the Western World, we will begin the see the first signs of energy poverty in the European Union. All of those who have climbed on the energy transition train in favor of climate control are ironically going to get a crash course in the inability to climate control their own micro climates like their homes and offices. While the West believes climate change is the number one issue facing humanity vis a vis Joe Biden’s UN speech, China continues to build more coal plants to meet their energy needs. Simultaneously Biden is begging Russia to provide more gas to Europe while mulling over domestic carbon taxes and shutting down pipelines. I just read in the past few weeks Boston University and Harvard endowments are divesting their fossil fuel investments.
I am not here to debate climate change nor the deleterious effect of carbon on our planet. I do however believe we have seen peak oil and without capital the decline in worldwide production of hydrocarbons will occur much quicker than most understand. The era of energy surplus is officially over hastened by the abandonment of the investing community ( PE, Pension Funds, Shell Oil, BP, College endowments) in replacing fossil fuel reserves in favor of windmills and solar panels and other schemes of folly.
Our way of life is going to change rapidly and dramatically. It sure would have been nice to have addressed this energy transition about 50 years ago. The current global economy and in increasing per capita wealth was created by cheap fossil fuel. Will it be sustained by this energy transition and if not how will the world cope with less electricity, food, transportation, water, heating and cooling our micro environments? It looks like the EU may get a tiny taste of our future this winter. Buckle up.
LTO.
Don’t forget about Joe Biden asking OPEC to produce more oil.
Will be interesting to watch all the complaints about high oil and natural gas prices from the political types as the 2022 elections approach.
Maybe the US will rely more on ethanol. Going to be a big corn crop in the triple I region. The climate crisis has brought moderate temperatures and more rainfall to the Eastern corn belt.
Don’t forget about all the complaining right here about losing money in American oil fields in a free capitalist market. Is the problem with the lack of supply because American producers need a personal request from the president to increase production, American producers can’t produce low cost oil or is the American fossil fuel industry playing politics because the current resident of the White House is pro transitioning away from fossil fuels?
Maybe the US will rely on EV’s and renewables. Mining and producing lithium batteries for transportation because the American oil fields can’t supply Americans with clean low cost energy.
Maybe the US can stop wasting so much oil.
Ethanol is a terrible idea. You could produce ten times as much electricity on the same land with wind and solar.
LTO Survivor,
Yes that is my guess also that you are more or less in agreement what is about to transpire but details from such a discussion would be very interesting.
I also agree with you about reality coming knocking this winter on many peoples doors.
https://www.oilystuffblog.com/forum/forum-stuff/energy-policy-and-virtue-signaling
I have been updating this thread about how the “green” transformation is working out in reality and more specific Sweden for close to a year now it seems. Comparing post dates towards reality one could conclude its playing out as expected.
To sum it up in the name of renewable we have achieved much higher consumer electric prices, we now have our oil burner plants in full operation, garbage burner plants are our new stand by capacity.
The situation will get much worse as we build more wind and terminate more nuclear. But there is no doubt that this is the path we will press on. So will most of Europe even though the results so far speak volumes of the path selected.
The green agenda is taking us towards the cliff faster.
Hope to see you pick up a discussion with Mike on his platform.
Baggen , what is your thought about Richard Duncan’s ” Olduvai theory ” , which lays out a scenario based on decline of per capita electricity . Just dusting some books and see he had electricity shortages starting in 2012 . Suddenly electricity shortage is in the news .
https://oilprice.com/Energy/Energy-General/The-European-Energy-Crisis-Is-About-To-Go-Global.html
https://www.zerohedge.com/commodities/china-enforces-power-rationing-major-industrial-hubs-amid-shortages-and-climate-push
I suppose we should pretend that oil will be abundant forever?
Once again, there is no shortage of money for good projects.
Good as in a positive return on investment.
Does the US domestic oil industry need government price support to give a price floor (say 60$ or 80 bucks/barrel) so that producers have a guarantee of long term price visibility? I suppose a tax on gasoline/diesel that went specifically to oil producers would be a mechanism to accomplish that goal.
Or how else will the dysfunctional market provide that long term price visibility to the industry.
Boom and bust scenario of supply, and pricing, and funding, seems baked into our unregulated system.
please note- I am not advocating price support, just raising the idea in regard to the justifiable frustration with the market I hear being expressed.
In regard to being 50 years late on a plan- absolutely! The government has failed to do energy planning. So has the civilization at large. We have known about depletion, and global warming science for about 50 years now.
The time to have taken all this seriously was starting in the early seventies.
Now trouble is baked in the cake.
Who has pretended that?
I suggest you actually read the thread from start to end and then discuss it with me.
Hi Baggen.
I certainly have read the whole thread, and take the rational thoughts and observations seriously and with respect.
The notion about pretending pertains to the civilization at large- government, political parties, economic planners, and almost all families and individuals.
Just going about business as usual without fully acknowledging that fossil fuels are depleting and that we are entirely dependent on them is a failed game of pretend.
Imagine the status of energy supply and prices if hydraulic fracturing techniques had not been feasible. That is where we are likely headed as this decade unfolds.
Just to be straight up, I also think it is pretend to suggest that there is some easy, or even achievable, successful alternative scenario to fossil fuel depletion. Its a matter of degree, based in part on geography, country borders, policy and behavior. It is a fantasy scenario to act as if we shouldn’t be considering/implementing all alternative energy sources at breakneck speed and effort.
I don’t have a good answer about the global warming issue. The ramifications are bad whatever decisions are made, but it is rational to acknowledge the reality and make decisions. That is what some people are trying to do. I admit that the poorer half of humanity does not have the luxury of any choice on this, other than perhaps to pick a time and place to migrate away the river bottoms and coastlines, and towards shade and hopefully job. Failed state status is likely to become more common as energy shortage and global warming become bigger forces. Bad outcome is a certainty for a huge swath of humanity.
Hickory,
Sorry i don’t have much time now but to shortly try tp state my view.
I believe we need to transition for the very simple reason that hydrocarbon is a finite resource. I just believe we are going about it in the wrong way and it will lead to exactly the opposite of what needs to happen.
Very few seem willing to actually look on the results, Germany, Norway, Sweden etc… Its not going especially well if the target is to reduce oil and gas consumption.
Be well.
China declares crypto illegal . What happened or will happen ? Comments please .
https://apnews.com/article/business-technology-china-crime-campaigns-c6e869b63af6de3d1d699ee105d602e6
Capital flight might slow down a bit.
New posts up
https://peakoilbarrel.com/norway-2021-part-1-of-2-exploration-discoveries-and-reserves/
and
https://peakoilbarrel.com/open-thread-non-petroleum-sept-24-2021/