267 thoughts to “Open Thread Petroleum, January 29, 2019”

    1. I think it would be this year, if not last year. Ron has said 2019 at one time. Dennis thinks later, around 2025, as I recall.

      1. According to the chart from iRA I posted below, we would be on a Seneca cliff now, without shale oil. Just flattened the drop for awhile.

    1. Guym,

      Possibly OPEC/Russia fill the gap as oil prices rise to $80/b or more over the 2019 to 2020 period.

      Then US tight oil output can continue to rise after 2020. Doubtful World Oil (12 month trailing average) peaks befoer 2023 in my opinion.

      1. I don’t think OPEC/Russia have the capacity. But, that’s just a guess.

        1. Also for World minus US C+C trailing 12 month average we have chart below based on EIA data.

        2. As stated many times on ‘theoildrum’, State of the art EOR projects deplete oilfields, who without EOR would go in terminal decline much earlier, very rapidly. So a world oilproduction cliff cannot be ruled out, especially if money reserves from oil companies dry up.

          1. Han Neumann,

            Oil prices are likely to rise if there is a shortage of oil, this will mean oil companies will have plenty of financial resources as long as demand is sufficient to consume the oil produced. Not suggesting there will not be a decline, just unlikely there will be a cliff unless oil prices drop, so far there is no evidence of a cliff and given World stock level trend, prices are unlikely to drop further and are more likely to increase in the future.

            1. Dennis,

              A cliff is unlikely to happen, I agree.
              But to repeat a cliché: depletion never sleeps. Already about fifteen years ago EOR projects were started that extracted oil from (quite) ‘past peak’ or ‘on plateau production’ oilfields. EOR projects in case of ‘quite past peak’ fields, to get ‘the last recoverable’ barrel out resulting in oil production/day far less than peak production. I know, the recoverable quantity increases with rising oilprices and better extraction techniques, but still the production/day way past peak will be much less than on peak. What will happen when oilprices don’t increase a lot for the next ten years, for a combination of reasons ? At a certain point in time all the money in the world couldn’t prevent world production decline and the further that point will be in the future, the steeper will be the decline I think. So better sooner than later oilprices begin to increase significantly, to buy some time for the transition to EV’s, etc. I am not an expert in engineering nor in geology, far from that, just expressing a feeling that I got after having read the many posts on theoildrum regarding this matter.

              https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#4691a69d44cf

            2. Han N.

              I agree there will be a peak or plateau, difficult to know in advance which it will be. If there is an extended plateau perhaps from 2025-2035 due to extreme efforts to keep output as high as possible it will result in steeper decline.

              This would occur if extraction rates for conventional oil were increased to 10 or even 20% (from producing reserves), in that case we get something close to a Seneca cliff. Note that I doubt this scenario is very likely.

              Scenario below has 2018 extraction rate at about 5.6% from 2015 to 2019, URR is 2800 Gb for conventional, 100 Gb for LTO and 500 Gb for extra heavy oil. Producing reserves for conventional oil were 479 Gb in 2017 and 2018 (close to peak) and output increases because the extraction rate is assumed to increase as producing reserves gradually decrease. Output of World C+C is about 86 Mb/d from 2024 to 2048 (rounded to nearest whole number) in this scenario. ( I repeat that I doubt this scenario will be followed it is simply a theoretical possibility given know oil resources and potential rising oil prices as oil depletes while consumption needs to be limited to available supply and is rationed by rising oil prices.)

              The peak annual decline rate for World C+C occurs in 2059 at about 5% per year, which is steep but perhaps not a “cliff”. I have never seen a definition of what annual decline rate in C+C output would constitute a “Seneca cliff”. This scenario was created in November 2017 and has not been revised. As always, a larger image can be viewed by clicking on chart.

            3. If there is an extended plateau perhaps from 2025-2035 due to extreme efforts to keep output as high as possible it will result in steeper decline.

              Dennis, the flaw in your scenario is your failure to realize that those “extreme efforts” began well over a decade ago and the results of those “extreme efforts” have already begun.

              Rystad: Mature fields decline faster

              While the trend in spending for oil and gas companies since the crash in oil prices has been a steep decline, production has remained relatively stable since 2015. This might lead to the conclusion that companies have found ways to remain just as productive in the new price environment, but detailed analysis reveals that the production plateau is largely thanks to projects approved during pre-2014 prices coming online. However, the drop in oil and gas spending has had a material impact on the production decline for maturing oil fields, where the drilling of new wells has dropped by 50%, according to data from Rystad Energy.
              This lower level of activity on already-declining fields has had quite a dramatic impact on decline rates. Mature, offshore oil fields now decline at a rate of -8% per year, whereas the same fields declined by only -5% in 2014, before the drop in drilling activities (see chart below).

            4. Hi Ron,

              The scenario is based on the oil shock model and considers historical oil discoveries and uses a dispersive discovery model to guess future discovery rates for oil (this includes any future reserve growth). Jean Laherrere estimates World C+C URR (excluding extra heavy oil) will be about 2500 Gb. The USGS estimates World “non-continuous” (excludes both LTO and extra heavy oil) C+C will be about 3000 Gb. My oil shock model (original model developed by Paul Pukite) uses 2800 Gb for non-continuous C+C URR (excludes both extra heavy and LTO output).

              The decline rates for fields are not an input to the model, the World decline rate for all C+C output is an output of the model.

              Scenario below is a modification done in August 2018 with different extraction rates for conventional oil and a lower scenario for extra heavy oil (200 Gb rather than the previous 500 Gb scenario). For this scenario there is a short plateau at 85 Mb/d for World C+C output from 2023 to 2030, peak years are 2026 and 2027.

              Larger chart can be viewed with a click on the chart.

            5. Dennis,

              What would happen to your model if prices can’t rise very high for very long?

              It seems likely to me that, due to the primacy of oil in the economy, any oil price increase puts a drag on the economy which gets more potent the higher the price rises. This shortly leads to recession or slowdown and thus reduces the oil price before too long.

              But, disregarding my airmchair economic theories, what happens to your model if, for example, oil price cannot rise above an average of $100/barrel?

            6. Niko,

              Output is lower if prices are lower. The oil shock model does not explicitly include economics, it simply assumes prices are high enough to make the oil profitable to produce, essentially demand is considered to be unlimited so that price is always high enough to induce oil to be produced.

              A transition to less liquid fuel use in the transportation sector as oil prices rise which might limit demand could restrict oil output, this is easily modelled by reducing extraction rates. A lower extraction rate model is below which might coincide with lower oil prices (below $100/b) peak is in 2022 at 86 Mb/d. Note that I see no particular reason why oil prices will remain below $100/b (in 2018$) from now until 2030, though potentially a recession or transition to alternative energy may cause oil prices to fall in the future (I expect that to occur after 2030). So I do not think the scenario below is very realistic. Click on chart for larger view.

            8. Dennis, if it is not too difficult to derive, I am wondering what the cumulative production is over the next 25 yrs compared to the past 25 yrs, for both the 3100 and 3400 Gb URR modeling you show here. Thank you.

            9. Hickory,

              For first scenario (long plateau to 2048) with URR of 3400 Gb, previous 25 years ending in 2018 cumulative output is 659 Gb and next 25 years (2019-2043) cumulative output is 781 Gb.

              For second scenario (my best guess) with shorter plateau from 2023 to 2030 the previous 25 years is 659 Gb and the next 25 years is 750 Gb.

              If we take the peak as 2025 and look at the cumulative from 2001-2025 it is 708 Gb and from 2026-2050 cumulative output is 711 Gb. Note that there is no particular reason the output curve needs to be symmetrical about the peak, it just happens to work out close to this for my best guess by chance.

            10. Thank you Dennis.
              I find that projection of production for the next 25 yrs to be very surprising, and I think most people discount the long tail of production after peak too much.
              Then again , who foresaw fracking?
              And who knows whats next. Maybe Venez will be able to slowly ramp back up.

            11. You’re welcome Hickory.

              So you expected the next 25 years would be less output than the previous 25? As far as I know we have not reached peak oil yet.

              If we consider only the trailing 12 month average output for World C+C, there has not been a decline in output in many years.

              I know there are many who believe the peak will be very soon, but my assessment is they are incorrect unless they define “very soon” as within 4 to 8 years.

              Yes there is a potential that tight oil will be developed in other nations and that Venezuela will quickly recover from the current crisis, but I doubt either of those events are very likely and the effect of either or even both events will only slow the decline a bit, a secondary peak (after the 2023-2030 plateau) is not very likely in my view.

              Oh and on fracking and the tight oil boom, I was very skeptical in 2011-2012, but as I analyzed it it seemed might be pretty significant.

              Link below to some of my old posts on tight oil, turns out I was too low by about a factor of 3 for tight oil URR (20 Gb vs current estimate of 60 Gb for US).

              http://oilpeakclimate.blogspot.com/2013/

            12. “So you expected the next 25 years would be less output than the previous 25? As far as I know we have not reached peak oil yet.”

              Yes, I expected a falloff in production to be more rapid than ramp up. Not to the extent of a cliff, but far from symmetry.

            13. Hickory,

              Another way to look at it is as follows:
              For the Plateau Scenario with a long plateau from 2023 to 2047, if we call the “peak” the midpoint of the plateau, that would be 2035 and cumulative C+C production at that point would be 1893 Gb, the URR for that scenario is 3400 Gb so the midpoint for a symmetrical scenario would be a cumulative output of 1700 Gb (which occurs in 2029 for that first scenario). Also note that the drop in output is pretty darn steep after 2047 for the “plateau” scenario reaching about a 5% annual decline rate. In any case I do not expect that scenario is all that likely, though with poor policy we might approach such a path.

              For the more “realistic” scenario (my opinion) the peak year for output is 2026 with cumulative output of 1610 Gb, that is fairly close to the midpoint of the URR at 1550 Gb, so the scenario is relatively symmetric. The closest year to the midpoint of the URR is 2024 with cumulative output at 1548 Gb at the end of the year. Note that this scenario is pretty conservative in its estimate for extra heavy oil at a URR of 200 Gb, this is 300 Gb less than the first scenario (with extra heavy oil URR=500 Gb). The 500 Gb scenario is based on papers by Jean Laherrere from around 2012, I believe he might have revised this estimate.

              Actually he revise his crude less extra heavy estimate to 2600 Gb in Jan 2018

              https://aspofrance.files.wordpress.com/2018/02/graphsjljan2018.pdf

              The extra heavy estimate from an August 2018 paper by Laherrere has a range of 200 to 450 Gb, if we take the average it would be 325 Gb, in his synthesis the XH oil URR is 230 Gb (115 from Canada and 115 from Venezuela). This may be why I revised my extra heavy oil estimate to 200 Gb (it’s a round number close to Jean Laherrere’s most recent estimate.

              https://aspofrance.org/2018/08/31/extrapolation-of-oil-past-production-to-forecast-future-production-in-barrels/#prettyPhoto

            15. Dennis,

              Han N. on the analogy of Ron P. ? Indeed was he one of my favorite writers on theoildrum and on (t)his site here, because he never forgets to include human nature in the big picture. Rising tensions in many countries and the world in general, among other factors, make it questionable if the theoretical possibilities regarding world oilproduction will be realised.

  3. 1886 — First successful gasoline-driven car patented, Karl Benz, Karlsruhe.

  4. I think a Seneca cliff arrives when demand falls faster than supply as high oil prices accelerates the transition to alternative energy. Probably this would be in 2035+/-5. I expect peak oil in 2025 with a gradual 1 to 2% annual decline rate from 2025 to 2035, unless a Great Depression in 2030 leads to a decline in demand prior to 2035. In that case the transition may be delayed.

    1. Odd. This condition describes depletion in nature, which I would assumed coincides with the term peak oil. Not demand.

      1. Guym,

        Peak oil is about peak output. So demand and supply don’t really matter. The point is that a Seneca cliff is more likely due to high prices leading to a transition away from liquid fossil fuels eventually this leads to less demand for liquid fossil fuels driving down prices which reduces supply to the level of demand, which keeps prices high enough to continue the transition, unlikely to see a Seneca cliff otherwise.

        1. The Seneca Cliff concept is based on an exaggerated estimate of the importance of oil It assumes that stagnating or declining oil production would cause societal disruptions that would accelerate decline.

          On the other hand, there are many substitutes for oil. Some are somewhat longterm, like EVs. Some are overnight, like carpooling (which accounts for more commuting than mass transit).

          Carpooling. The horror.

          2. Oil demand could be reduced substantially, and rather quickly, by implementing a substantial tax on heavy high powered vehicles, excepting those actually USED in commercial applications.

            Or substantial reduction could be achieved by putting a higher tax on motor fuel.

            Both options will be politically viable at some point. It’s not a question of IF, it’s a question of WHEN, assuming a long lasting oil supply crisis.

            I believe in electrification of personal transportation and light commercial trucks, and maybe heavy trucks, construction equipment, and farm machinery as well, some day.

            But the seat of my pants tells me an oil supply crisis may come to pass, because I’m not optimistic that electric vehicles and machinery will displace ICE powered vehicles quickly enough.

            The number of ice vehicles sold annually will continue to increase for quite some time yet, ditto ICE equipped farm and construction equipment.

            1. I agree, generally. A few thoughts:

              You really don’t want to create a loophole for commercial vehicles. Commercial owners can afford to pay a tax. If they can’t, then their consumption isn’t worth the overall cost of the fuel, including the external cost of pollution, security, etc. Loopholes create many problems: excess complexity, and perverse incentives. For example, a truck loophole is part of what artificially created the SUV mania in the US (along with the “chicken tax” tariff subsidy).

              Fuel and carbon taxes are the best thing. We might want to rebate it back to consumers, to create political support. That won’t diminish the value of the taxes, as you’d give everyone a flat amount, rather than something based on fuel consumption.

              Efficiency regulations are also a very good thing – e.g., CAFE regs. They create planning certainty for big corporations and consumers.

              The number of ICE vehicles sold may have peaked in the US: in 2018 ICE sales dropped very slightly, and only EV sales accounted for net growth. That’s mostly because of the general business cycle peaking, but what the heck, we’ll take it!

  5. Phil Flynn reports that Trump administration gave the refiners a heads up on coming sanctions, so they could buy more oil before they went into effect. Wouldn’t expect the API report or EIA weeklies to show a decrease for awhile.

  6. New here, been lurking for a while. I’m a geologist with a small oil and gas exploration and operating company. We explore conventional only. I have however read all your predictions of peak oil etc. but don’t you think that given higher prices, other basins world wide that are similar to the Permian could be successfully exploited for years to come holding off peak oil for decades? I’m no expert but I would venture there are hundreds of basins that could as good or better than the Permian. Just in the U.S., we have the Permian, Bakken, Niobrara, Eagleford and about a dozen others. Surely our success could be duplicated on a global scale if the price was right.

    1. There is the Vaca Muerte in Argentina, but probably under the scale of the Eagle Ford. There are a LOT of contraints holding the dead cow back. A lot of countries I have heard of that have gas potential, e.g. China, even UK. But, I have not heard of a lot of oil potential. The way my limited understanding goes, the play has to be new enough on the geological age, to still have oil. As in, the Eagle Ford has three windows which depend on geological age, and pressure. The oil window is younger, the condensate and gas windows are older. I think the Permian will have areas, too. But, I received my geology degree from a cracker jacks box? but your last sentence may hold some validity. For that matter, I don’t think shale has given up completely after the first go round, if the price is right. Would that delay peak to another date? Quien sabe. Money talks. What price? I know I would keep an ICE around for long trips at $200 a barrel for the convenience. Food may be higher, though.

      1. Speaking as a geologist, this is incorrect.

        Thermal maturity depends on far more than age.

        The Utica gas window is 300 million years older than the eagle fords gas window, just for example.

        1. I knew I’d be wrong on that, just repeating what I read on a non-technical site. Thanks

    2. Yes, of course there are more shale sources out there. But perhaps not as many as you think. All reservoir rock is not so tight as to hold most of its oil in place. There is, or rather was, lots of oil in West Texas but not much shale oil. The same is true for Southern California. I suspect most of the Middle east is similar.

      Also there is the cost. If it takes more energy to extract the oil from shale than you get from the oil you pump out then it is a sink, not a source. For instance it would be extremely difficult to extract oil from offshore shale. You would have to ship the sand out by barge, build huge platforms for every well to hold all that fracking equipment and so on.

      There are lots of shale oil sources in Russia. And if prices get high enough, they will probably try to extract it. Imagine hauling train loads of sand to the north slope of Alaska, then trucking it over the tundra by truck to every well. You would have similar problems in Western Siberia.

      Return on investment is the primary problem with shale. If it cost more in time and energy than you receive from the extracted producte, it will stay in the ground. Anyway, that’s just my unprofessional opinion. Some of the professionals on this blog may have a better educated opinion.

      1. “If it cost more in time and energy than you receive from the extracted producte, it will stay in the ground.”

        @Ron Patterson, you seem to be saying that extraction will go forward as long as there is the potential for *any* marginal return, at least expressed in money if not in EROEI. So for example, as long as I can charge $101 for a barrel of oil that cost me $100 to get out of the ground, I’ll keep doing it (or someone else will). Do you really think this is the case, or is there a threshold/floor below which it won’t make economic sense due to produce oil? Due perhaps to knock-on factors in the larger economy? Obviously I’m no expert on any of this, so please take it easy on me in any replies. Thanks!

        1. Phil, I really have no idea at what point oil companies will decide it is not worth the effort due to low profits or other causes, they will cease drilling. However it must be noted that a majority of oil companies producing shale oil today are doing it at a loss. Of course they all expect to be making money sometime soon. They expect prices to rise so they are just trying to hang on until they are profitible.

          So you see it is just not that simple. They may produce oil at a loss for some time before they fold. But obviously they cannot produce oil at a loss forever. There are many factors that govern their decision to fold their tents and walk away. I think it is impossible to predict exactly at what or when that point is. At least it is beyond my ability to do so.

          1. Hi Ron,
            I don’t have any better idea how much shale oil is out there, or whether it can be produced profitably, than you do.

            But I will add this much to the discussion.

            Even if it is out there , and can be produced profitably, this is no guarantee that shale oil can prevent peak oil happening.

            New shale production, which is subject to extraordinarily fast decline in and of it self, would have to be brought online fast enough to offset both its own decline PLUS the decline of the worlds giant conventional legacy oil fields.

            Even if it’s profitable to do so, and in large enough quantities, at some particular price, this does not necessarily mean that it will be possible to muster enough capital, equipment, skilled labor, and political will to make it happen FAST ENOUGH to offset conventional legacy oil declining production.

            It’s been a while since I paid much attention to the actual numbers, but I know you are well acquainted with them.

            So what’s your estimate, these days, of the conventional legacy oil decline rate? Have you raised it or lowered it recently?

          2. As I have read from news lately a more strict requirements from investors, banks ,hedgefunds makes it reasonable that investment in shale oil compeared to 2018.budget will be reduced by 19%. One significant player will reduce their number if riggs from 24 to 18 as they exspect oil price WTI in 2019 to be in mid 50 usd range. To me it seems the confident among investors to US shale have changed significant espesialy 4th quartile of 2018. Now they only want to support projects that give cash return , seems they are tiered of promises as there have been to much of and shale oil depth have never been higher . Since oil demand is linked to groth in world economy that is alo same for interest of liability. EIA , and some other analyst like Rystad sees US shale production in 2019 will continue with strong increase and predict we only have seen the beginning. After working within oil and gaz projects in many years I know the oil majours dont want to loose money ,when a project seems not profittable they stop until oil price incresse or they get cost down. I doubt there will be lots of investments in US shale with oil price in range 50-60 USD , because there is significant documentation only a very limited part ( decreasing) within core area is profittable as of now. Beside this a oil price in range 50-60.WTI or 55- 65 usd each barrel brent is not enough to pay the cost of exsploration drilling offshore , build new infra structure.

            1. Freddy,

              The EIA Short Term Energy Outlook predicts a 340 kb/d increase in US lower48 excluding Gulf of Mexico from Dec 2018 to Dec 2019 (most of this increase will be tight oil). Data below in Mb/d. This is a much smaller than a look at annual averages would suggest. Tight oil output will increase at a rate that is 4.4 times lower than the rate of increase in 2018 (Dec 2017 to Dec 2018).

              Dec-18 9.46
              Jan-19 9.5
              Feb-19 9.53
              Mar-19 9.57
              Apr-19 9.63
              May-19 9.67
              Jun-19 9.7
              Jul-19 9.73
              Aug-19 9.75
              Sep-19 9.75
              Oct-19 9.76
              Nov-19 9.77
              Dec-19 9.8

              From https://www.eia.gov/outlooks/steo/data/browser/#/?v=9&f=M&s=0&start=201812&end=202012&linechart=COPRPUS&maptype=0&ctype=linechart

      2. Western Siberia isn’t all tundra. The tundra starts way north of the Ob river (before it makes the right turn towards the Ob Gulf). But it’s a lot more difficult than West Texas. My impression is that North America hit the shale jackpot, the same way Saudi Arabia hit the jackpot with Ghawar.

        Take Venezuela, the source rocks are usually buried very deep, the shales on top are very stressed and over pressured and drilling a horizontal well in that environment is very difficult.

        1. What makes doing a horizontal difficult in that situation? Is it too deep and hard to curve? does over pressuring (which i don’t understand) make it hard to turn?

          1. It takes more and larger casing, and drilling a hole in an overpressured highly stressed shale is difficult. Overpressured means the pressure gradient from the shale to the surface exceeds the regional pressure gradient, which in a non overpressured environment is roughly sea water gradient.

            When the rock we are drilling is overpressured the mud weight needed to keep the hole open can exceed the fracture gradient of shallower formations, so they need to be protected with a casing string.

            This means the hole down to the top of the shale has to be larger, to accommodate an extra string of casing.

            A stressed shale like that also tends to close, meaning the bit makes a hole and the hole starts taking an oval shape, this requires extra trips to ream the hole and keep it open. So now you find yourself reaming a hole and at some point you have to start building angle to be near horizontal at the target depth. And you are doing this at 3 to 4 thousand meters, with barite mud in the hole.

            So you get through that top shale and can’t start your horizontal section until you run another string of casing. And then you start drilling a hard shale, what we used to call marl, and the hole has to be kept within target but it will try to walk. This can be controlled but at the end you have a 6000 meter long hole, which you have to frac and complete with a high pressure tree, and a flow line like a battleship’s 6 or 8 inch cannon barrel.

            And so, it costs $15 million if you are very lucky.

            2. Fernando

              That’s a great description of just some of what these guys encounter during drilling in difficult conditions.

              That nails a lot of the problems the operators in the Tuscaloosa Marine Shale faced a few years back.

              In an attempt to expedite things, the big three of Encana, Goodrich and Halcon collaborated with their geologic and operational data so as to more effectively overcome the ongoing downhole problems they were experiencing.

              Ultimately, they failed.

              However, a gutsy, small Australian outfit is giving it another shot with results from 2 wells due in a few weeks.

              At 14,000+ feet, high pressure, and shaky geology, the challenges are daunting.
              Still, the 94% oil cut and very low entry price is enticing.

              A nearby well that flowed over 300,000 barrels first 24 months is an added incentive.

            3. Sometimes I wonder if it may not be worthwhile to develop a drilling system to put back pressure on the annulus while using a lighter weight mud? That requires a drilling rig coupled to a huge snubbing unit.?

            5. Fernando

              I do not know what direction future operations will take, but at the moment, bigger rigs and lottsa casing seems to be the preferred option.

              Case in point is the recent Deep Utica from CNX – the Bell Point 6.
              13,500′ vertical depth, 7,000′ lateral, almost 9,000 psi Flowing Casing Pressure at the outset, cost $17.5 million.
              CNX is shooting to reduce costs to the $12 million/well level, but they have a ways to go.

              Production from this expanding Deep Utica footprint certainly warrants the efforts as the Bell Point 6 is expected to produce 21 MMcfd on restricted choke for 14 months.

              We shall see.

              Speaking of snubbing, an outfit out of western Pennsylvania, Deep Well Services, is rapidly expanding into the Permian.
              This one company alone has played a huge role in the dramatic lengthening of Appalachian Basin laterals.
              On the world record 20,800 footer, the Purple Hayes, DWS drilled out 126 frac plugs in 117 hours.

              It is exactly this type of improving performance that is behind much of the unconventional industry’s torrid pace of productivity increases.

            6. Fernando thanks for shearing this very interesting knowledge, I believe compared to a sand stone reservoirewith exselent permeability this hard rock increase some problem we know exsist. Is this hard rock formation often reason for drilling equipment get stuck and drill string need to be cut , fishing of equipment i.e. Such challanges often increase drilling periode and price.

    3. Other jurisdictions trying to develope shale resources lack the capital markets to develop such resources. Takes a sophisticated and deep capital market to borrow the amounts US shale does

    4. The problem with other countries is that they take 80% of the profit.

      Which is a squeeze with juicy conventional prospects. But is flat impossible with lower margin shale wells. So they will dig in and companies wont invest.

      Here in the US, the government doesn’t really enter into the contracts between landowners/companies, so companies can go block up 250-500k acres and start drilling in 18 months.

      Same process elsewhere might take over a decade. Or two.

      1. Other countries don’t necessarily take 80% of the profit. And it’s fairly easy to cut a one off deal or convince the government to make a bid round limited to a specific type of production…in a third world country. I have worked in countries in the past where we kept 60% of the net income, which implies a 40% income tax. And we paid NO royalty.

    5. If the price was right is an interesting question. In the US we have excellent highways, three million heavy trucks, the best rail network in the world, locomotives, railcars, tanker cars, pipelines for takeaway and for gas. Not least we have the best and most flexible workforce in the world for oil and gas, and also the best and most flexible capital system.

      Recreating some of that capital cost, which was free during the fracking boom, since the Great recession let an overhang of surplus everything, could be expensive. You would know better than me, but the geological knowledge from decades of drilling I would assume helped narrow in on economical sweet spots sooner too.

      Even with all that, the Permian is most or all of the growth these pat few years, is’t it?

      1. I think the U.S. is at most 20 years away from severe dysfunction at every level of society, and possibly even civil war and break up.

        I mention this only because I can sense a certain desperation in your post and why not counter it with pessimistic reality? The U.S. is not the only country in the world. 95% of the world’s population, and 80% of it’s economy, is outside the U.S.

        The unipolar moment of American dominance is over, finished, never to return. Still possible to have a decent life for awhile, but we’ll see. Just remember, Europeans believed in the early 20th century that they would rule the world for centuries to come, if not millenia. They had no reason to believe otherwise. Look how that turned out.

    7. Davo,

      The US is quite unique having drilled about 10 times more oil wells than the rest of the World.
      Perhaps some tight oil will be developed elsewhere, but probably only at $200/b or more in 2018$. I expect URR for tight oil for the World will be 60 Gb to 140 Gb, with about 40 to 80 Gb for US tight oil URR.

    1. It’s interesting to see how the media distorts the news. Juan Guaidó is the National Assembly President, elected by that body on January 5, 2019, as the new session started. Venezuela has a unicameral Congress, which means Guaidó is equivalent to the US Senate Majority Leader and the Speaker of the House rolled into one position. The article does a hatchet job on Guaidó, it fails to explain that a conflict was foreseen because Maduro attempted to take over a new term even though he had organized fake elections on May 20, 2018. Guaidó had in hand all the Assembly resolutions and needed paperwork after the Assembly declared Maduro an usurper and an illegitimate occupier of the President’s office on January 21. He called for a massive protest on January 23, and when he was surrounded by hundreds of thousands of Venezuelans, asked them to raise their hands with him as he swore the Presidential oath. This was done to avoid getting shot or arrested by Maduro’s secret police or his special forces, so after he swore he gave a short speech in which he asked for international support and for the military to get on his side, he turned into the crowd and vanished.

      I have learned that mainstream media is definitely lying and crafting fake news because I see it happen in events where I’m very familiar and I’m a witness of events. So when it comes to Venezuela, or anything they can lie about to further their interests, such as attacking Trump, I wouldn’t believe anything they say or print.

      1. Yes, but the last paragraph is the key one I was talking about. If we cut off the naphtha?

        1. About 300,000 BOPD is blended with imported naphta. We can assume they can reduce the blend API density a little bit, so let’s say they can continue to ship about 50,000 bopd. This implies a 250,000 BOPD cut.

          But the situation is so chaotic I doubt the fields will be producing even 1 mmbopd. A few minutes ago I saw about 300 soldiers parading through Maturin. They had blocked all traffic. And this causes problems for trucks which travel through Maturin to the oilfields. I’ve been trying to get the locals to blockade that road, and as it turns out today the regime has done exactly what I had hoped for.

          Let’s face it, this is a gigantic struggle which pits an Axis of Evil against the Venezuelan people, and evil has very powerful players aligned to help Maduro survive. Let’s see what happens in the European Parliament in a few hours (they are supposed to vote to recognize Guaidó but the Europeans are thoroughly penetrated by communists and other bad actors.

          I’ve been monitoring the Russian response, and thus far they seem to be limiting themselves to sending planes to Caracas to help Maduro and his cronies loot gold from Central Bank reserves.

          1. “Let’s face it, this is a gigantic struggle which pits an Axis of Evil against the Venezuelan people, and evil has very powerful players aligned to help Maduro survive.”

            You would think this description is over-the-top yet consider the sadist we have in the White House.

            1. People in my family had personally met with families from Venezuela who leaved behind everything they had and walked 200 km (babies included) to reach Boa Vista, Roraima (Brazil´s northern state, borders Venezuela).

              Please notify me when Americans do the same (to Mexico or Canada, or perhaps Nicaragua, whatever) to run away from Trump´s government.

            2. If you want to see Maduro snuff porno it’s available on the internet. A lot of it is being collected for the International Criminal Court.

              It’s a shame most of you don’t speak Spanish, there are videos of mothers whose sons were murdered, speeches by the exiled State Attorney General explaining what moves she’s making to have international justice judge Maduro, by OAS Secretary General reviewing his abuses, etc.

              Unfortunately you don’t see coverage in the US because Trump sided with the people, and therefore they automatically shift to undermine him.

              I don’t really like Trump, but I have no choice between a party which helps the Castro dictatorship, is riddled with communists, and this week started pushing murderous third trimester abortion laws. I have never been anti abortion but enough is enough.

            3. “Unfortunately you don’t see coverage in the US because Trump sided with the people, and therefore they automatically shift to undermine him.”

              Trump only does things that benefit Trump, or what he thinks benefits him. Yet considering his multiple bankruptcies and the fact that his administration has 90 indictments (vs zero for Obama) he actually has no idea what he’s doing. Anything he does that happens to benefit someone outside the country is likely accidental and totally meaningless.

            4. Really sad to see a good site where intelligent people used to discuss energy matters became a place where politicians´s fanboys came to shout “everything A does is good and everything B does is bad because I said so”.

            5. Brazilian Guy. You make a good point. One that applies to partisanship on both sides-
              “or anything they can lie about to further their interests, such as attacking Trump, I wouldn’t believe anything they say or print.”
              That statement from your buddy got the discussion rolling to a place you didn’t like. Did it strike you as a political rant?

            6. I referred specifically to the distortion of the news I’ve read about Venezuela and other instances where I or very close friends are first hand witnesses. The media seems to swing in unison reporting issues with similar language which leads to the same distorted view.

              The MSNBC link above smeared Interim President Guaidó by leaving out the fact that he was the equivalent of the Speaker of the House and Senate Majority Leader. This is a critical piece of information you are being denied.

              The European Parliament approved yesterday a resolution recognizing Guaido as president. This led to an Italian government refusal to accept the resolution, German calls for united diplomacy, a statement by the EU coordinator of foreign policy which proposed a contact group to discuss the issue with Latin American nations which was rebutted by Colombia, which practically told the Europeans to stop dawdling and recognize Guaidó.

              These are items you don’t hear about, or they feed you an incredible amount of baloney.

      2. Fernanado- “is definitely lying and crafting fake news because I see it happen in events where I’m very familiar and I’m a witness of events….I wouldn’t believe anything they say or print.”

        Yes indeed, be highly skeptical. And that certainly applies to anything coming from Trump (the master of it), or Putin for that matter.

        1. Everybody lies nowadays. The left lies a lot more. 15 years ago, during the run up to the Iraq invasion they ALL got together to lie about the WMD. And in 1999 they all lied about the supposed Kosovo genocide. And on and on.

          I only watch CNN and Russian TV on YouTube to take note of their lies. It’s possible to drill down for information if you know they are liars.

          2. Everybody lies nowadays. The left lies a lot more.

            Bullshit!No one lies more than Trump. The Right and Fox News repeats his lies over and over.

            15 years ago, during the run-up to the Iraq invasion they ALL got together to lie about the WMD.

            More bullshit! It was the Bush Administration that lied about weapons of mass destruction, not the left. There were none. They, Bush, Cheney, and the rest of those right-wing nut cases, lied to justify the invasion.

            However some were not lying, they actually believed that Iraq had weapons of mass destruction. But that just goes to show how stupid they were. After all, stupidity is a trait found mostly on the right. (This stupidity trait is demonstrated by the 37% of Americans who think Trump is doing a great job.)

            This is pure irony. Fernando, I understand your hatred of Communism. But right now it is Trump who is cozying up to the Putin, the leader of the Communist World. And the ultra-right-wing nutcases, like all those on Fox News and many Republicans in Congress are marching in lockstep with him.

            Note: This conversation belongs on the non-petroleum thread. Not here.

            1. The New York Times and CNN are left leaning (I assume you will agree), and they were the key pieces of the campaign to lie about the WMD in Iraq.

              My cross checking about things I know such as Venezuela shows the left leaning media is lying much more than say Fox. I judge them based on items I do know. And when it comes to that, the left leaning media is definitely getting worse. Fox seems to lie more in areas such as Israel versus Palestinians.

            2. The New York Times and CNN are left leaning (I assume you will agree),

              Somewhat. The New York times is balanced and truthful. However, these days, the truth is far more to the left than to the right. As for CNN, it was considered in the middle of the road before Trump. Now it is decidedly anti-Trump. Any media that is not anti-Trump is pro-liar.

              they were the key pieces of the campaign to lie about the WMD in Iraq.

              I have no evidence that this is the case. If you have links that shows this, I would appreciate you posting them. My recollection of CNN and the New York Times is that they did not support the right-wing war mongering crowd during this period.

              My cross checking about things I know such as Venezuela shows the left leaning media is lying much more than say Fox.

              You need to recalibrate your crosschecker. It is feeding you pure bullshit!

            5. Fernando said:

              “Don’t forget that my job has involved access to private intelligence you don’t get. “

              Don’t forget that you don’t have access to our brain cells, which is our own private intelligence ? lol

            6. Ron,

              I’m afraid the NYT did indeed roll over for Bush and the invasion of Iraq. That doesn’t mean they’re not generally among the most reliable sources of news. Just that they got fooled too.

            7. Yes they even had to apologize for it in May 2004. Maybe in a few years Fox News will apologize for the decades of lies…but I wouldn’t hold my breath.

            8. My wife’s hairdresser figured that one out correctly.
              You really needed not to be paying attention.

            9. The NY Times didn’t get fooled. They dumped the blame on Miller to get an escape hatch. They also lied in 1999 about Kosovo. And they lie now all the time.

            10. And they lie now all the time.

              Bullshit! It is the typical right-wing response to Trumps lies. Hillary did it, or Obama did it, or CNN does it, or the New York Times does it.

              No, hell no, Trump intentionally lies, the Times and CNN do not internally lie. They often get things wrong, or publish what they believe are facts when it sometimes turns out that the info they got was incorrect. But they do not intentionally lie.

              Since Trump became president and lies constantly, the right wing tries to justify it by saying that everyone does it. No, that is bullshit.

            11. Fernando,

              Such nonsense really reduces your credibility.

              Your statement is: “The New York Times lies all the time.”

              This is indeed an absurd statement and makes one wonder who it should be applied to.

            12. Such nonsense really reduces your credibility.

              Only if you have credibility to lose. Trump lies all the time and his credibility is holding steady at about 37%. 😉

          3. I don’t lie. My father used to say you can tell a man is a thief because he says every man is a thief. God knows he had his flaws, but he was honest. He also used to say he didn’t care whether honesty was the best policy or not.
            You’re pretty much outing yourself as a liar here. It’s pretty obvious to anyone who’s read your political bullshit that you’re a liar, but that doesn’t mean everyone else are liars as well. And even if we were, it would be no excuse.

    1. https://www.bizjournals.com/houston/news/2019/01/29/exxon-reportedly-to-move-forward-on-major-beaumont.amp.html

      Motiva had previously upgraded refinery capacity to accept light oil, Exxon keeps adding more, and now Chevron will, no doubt, expand. Maybe the big oil will buy up some more of the weaker Permian players, which could slow down the insane growth; and make the Permian more of a feeder for their refineries than an export source. I really can’t imagine that they are spending billions on refineries with the expectation that it may start to expire in five years. Exxon and Chevron are already two of the top ten producers in the Permian, and they can get bigger, if they want to. Gobbling up most of these producers would only amount to a snack for them. And doing it while the pure Permian producers a floating in the doldrums of 2019 would fit perfectly. That could affect projections for US shale growth. The refiners would look at it over a longer term usage, and not how much they can ship out. However, it could still lower net imports. Win, win.Thus, possibly saving West Texas from extinction, and move away from boom or bust some. Add pipelines to the East and West coast, and upgrade refineries, and you have a longer term solution. With Canadian and Mexican heavy oil and sprinkle in some EOR, we could get by for a longer period of time. Peak oil is a meaningful event, but it does not, absolutely, have to affect the US for a while.

      On a different topic, a Japanese company is interested in becoming an Eagle Ford player. Japan needs LNG. Eagle Ford has a largely untapped huge gas window. So, even if we do not use the planned upgraded ports for oil, we may still be using them for LNG.

      Ok, it’s only a dream, now, but the parts are beginning to come together. Big oil has its benefits, and this benefit fits into big oil’s need for future existance. When the price of oil goes up, then what’s the projected stock price of Exxon or Chevron? They will be back into the mode they were in decades ago, start to finish.

      1. This rings true to me. The big boys have few other options left for expansion (Guyana, Mexico and/or Brazil if they can work their way through the corruption) other than the Permian. Oil prices are likely to remain volatile for the foreseeable future, generating occasional buying opportunities for companies with lots of cash on hand. Kind of the way the tech giants like Apple and Amazon and Facebook bought up all the small fry app/tech companies for lack of anything better to do with their money. If this happens I would expect a slower pace of development to emerge for tight oil over the next decade and a longer tail.

        1. Yeah, that’s what I’m thinking. Make peak closer to the time period of somewhere pretty close. I think we better move, we may be sitting to close to that smelly fan.

          https://www.bloomberg.com/news/articles/2018-03-07/was-chevron-smart-or-just-lucky-in-the-permian-basin

          https://corporate.exxonmobil.com/en/company/multimedia/the-lamp/exxonmobil-continues-to-increase-permian-basin-acreage

          Chevron’s holdings are the size of Yellowstone, and Exxon is not far behind. Will they pick up any additional acreage if the get a good buy? Does a dog bark?

          1. https://oilprice.com/Energy/Energy-General/Chevron-Looks-To-Double-Permian-Production-By-2022.html

            Plans on growth in the Permian, “….and an increase in net acreage.”

            Competition with 2 800lbs gorillas?
            https://www.houstonchronicle.com/business/amp/Permian-land-rush-is-over-leaving-big-players-to-12842858.php

            This says nothing about the quality of rock, but lists acreage by the top holders. Oxy, ConocoPhillips, and EOG will be more conservative in development, and are not really prime acquisition targets. But adding them and Exxon and Chevron, you get most of the acreage. Energen and Diamondback have merged.

        1. The state of oil and gas in Midland is healthy, according to Tim Leach CEO of Concho.

          https://www.mrt.com/business/oil/article/Concho-CEO-Permian-oil-is-
          economic-engine-to-13575074.php#item-85307-tbla-5

          Leach, chairman and chief executive officer of Concho Resources, cited statistics indicating Permian Basin crude production is expected to climb from the current 4 million barrels a day to 6 million barrels a day in just six years. That, he told the sold-out crowd at the Horseshoe, would comprise 7 percent of total world oil production and 40 percent of U.S. production. In addition, the Permian Basin could see 45,000 new high-paying technical jobs on top of the 50,000 jobs that have been created since about 2000.

          “Companies operating here today will be investing $50 billion a year in drilling and completing wells,” leading to over $1 trillion in spending in that same timeframe, he said. That has created numerous opportunities throughout the Permian Basin, but also significant challenges, he said.

          When he and other leaders of local oil companies review their business plans and consider their greatest concerns, he said it’s not sand or pipeline capacity or technology. “Collectively, they say it’s schools, roads, doctors and housing.”

          1. Ok. Concho managed to eek out a loss the third quarter. Good source of info.

  9. Viewed thru a ‘scope which is focused only on hydrocarbon energy, then sure, a Senneca Cliff of production (or will it be consumption) seems plausible. But of course the world’s socio-political-economic situation is a bit more complex than that mercifully-simple perspective would suggest.
    A softening of demand for fossil fuels may drop price, which will see some reserves undeveloped, which will see production fall (completions not matching depletion) and then the price will rise, making development of alternative energy sources and systems (EV’s for example) more attractive, which will reduce demand again, and around and around (and down and down) the oil price will go as more users turn to replacements for oil. Market by market there will be tipping points, where fewer folk call in at the pumps to sip on the back tea.
    The risk is that production will suffer an overall tipping point, leading to global disruptions to supply when some cold grey morning major producers find that they can no longer afford to open the shop

    1. Adam,

      Pretty much how I see it as well.

      A Seneca cliff results as oil prices fall due to lack of oil demand relaive to supply at any given price level as the transition to non fossil fuel energy occurs.

    2. “..which will reduce demand again, and around and around (and down and down) the oil price will go as more users turn to replacements for oil. ”

      That’s an interesting theory you have there. Unfortunately it is not yet seen anywhere in the real world data.
      I get the “EV’s will save us” fantasy, it’s a psychologically compelling story, but it doesn’t stack up to the data.
      Here are some numbers for the US (as a proxy for the world, imperfect, but a place to start).
      1) Roughly 2/3rds (65%) of oil is used for transportation. The other 1/3rd is not amenable to “substitution” by alternatives. Electrons are not useful for creating plastics or chemical feedstocks.
      2) Of that 2/3rds used for transportation, more than a quarter (28%) of *that* is used for freight which is not amenable to being hauled by electricity. So we’re left with 0.65 * 0.28 = 0.47. So 47% of oil use is potentially targetable by EV replacement. Let’s call that half.
      3) roughly 10% of *that* is air travel which also is not substitutable by electrons carving another 5% off our figure. So 45% of oil use is by passenger travel that could be disrupted by EV’s.

      Leaving aside such obvious considerations as “is there enough cobalt and/or lithium for even the US to effect a 100% EV transition?” or “what about the less-than-wealthy people who cannot afford the cost of an EV?” maximum possible theoretical disruption is 45%.

      If we’re committed to running Business As Usual (BAU) then I would politely suggest that in the real world we’ll never get anywhere close to that theoretical number (disruption free). Market forces are just too slow and the economics don’t support it.

      Instead it strikes me as far more likely that we run into a supply disruption rooted in the decline curves of the oil fields put into service in the 1940’s – 1970’s.

      The big, usual caveat I have is the same as everyone’s; A massive economic depression could kill demand for a while. Outside of that, I don’t see any real-world data (yet) to support the idea that EV’s are an oil disrupting technology.

      Yes the EV growth rate is fast…but not yet fast enough to swamp the increase in standard ICE vehicles. An ~0.5% percent growth in ICE vehicles is equivalent to a 100% growth in EV vehicles at current numbers. (assuming 1 billion ICE, 5 million EV). ICE vehicle sales grew by 3.3% last year. Hard to catch up at those rates.

      1. Global population growth rate of vehicles is about 1.03 percent per year. Growth rate of plug-in EV population is greater than 60 percent per year.

        Crossover point for EV’s is 2028, equal amounts of ICE and EV being produced.
        Zero point for ICE population is 2037.
        Using logistical growth curve not exponential.

        1. Extrapolating 60% yearly growth rates for 19 more years…what could go wrong?
          😉
          Seriously, that’s Madoff style reporting there…
          Please, bust out some resource numbers there. Give it a go.

          1. Chris,

            Who said “EVs will save us?” I think the point was that a reduction in demand growth would occur where oil quantity supplied at say $150/b would be more than the quantity consumed at that price. Inventories would build under that scenario and prices would decrease, over time this is likely to lead to lower oil prices and lower supply (as fewer new oil projects would be profitable). Simple economics and no one is “saved”.
            I assume you know what a logistic curve is? Gone Fishing has not assumed exponential growth (where the rate of growth would be constant). Less cobalt is being used, there is plenty of lithium resource and as EV prices decrease and oil prices increase the move from ice vehicles to Electric powered land transport can be quite quick, for passenger vehicles a transition less than 5% ICEV by 2040 is a very reasonable estimate and Gone Fishing’s scenario seems pretty reasonable.

            Nobody is suggesting BAU, just that this is one of many potential paths to reducing fossil fuel use, reducing total fertility ratios through more equal rights for women and better education and healthcare for all World citizens is another important approach along with rapid adoption of solar PV, wind power, and an expansion of the HVDC grid World wide with better international grid connections.

            Better soil and water conservation and agricultural practices with fewer poisons being injected into the environment would also help.

            The economic incentives are not in place now, but oil at $150/b (2018$) in 2023 will change the economic calculus quite a bit.

            It will be a little like the horse to ICE transition in the US, but it will be ICEV to EV from 2020 to 2040 rather than horse to ICEV from 1920 to 1940 ( and perhaps we will see an economic slowdown from 2030 to 2040 which will slow the transition as it did from 1930 to 1939.)

            Also there might not be a Seneca cliff, I am simply suggesting the decline in oil output will be slow if the transition is slow. Also there is no reason rail couldn’t be electrified for long haul freight and EV freight trucks move the goods the final few miles from railhead to final destination. Air travel and freight will become more expensive and more energy efficient so that oil used in that sector may be reduced over time. Much of the chemical feedstocks and fertilizers are from natural gas and NGLs.

            We tend to focus on crude plus condensate and ignore biofuels, refinery gain, and NGL.

            2. Ah, Fernando, that’s the kind of comment that destroys your credibility.

              EVs fit perfectly with wind and solar, because the demand is “dispatchable”: an electric vehicle that can travel 300 kilometers but is only used for 30 km per day can be charged whenever the wind blows and the sun shines.

              Nuclear would certainly work, but it’s absolutely not necessary.

          2. Very funny Chris, from that first comment and your post it seems you are biased against EV and renewables. No one thinks they are going to “save” the planet, just the current fastest way to reduce carbon pollution. Just remember every gallon not used is at least 1.7 gallons equivalent of fossil fuel avoided since there is oil, natural gas and coal used heavily in the process between well and user.
            As I said in my comment I used a logistical function not an exponential for the EV population.

            Although I did use an exponential growth equation for the ICE population.
            More importantly is the fuel consumption. If, due to increasing price of fuel and competition from EV, the ICE vehicles become more efficient then fuel consumption starts falling quite soon despite growth in the number of vehicles.

            However, this all depends on the assumption that things stay mostly the same over that period. Certainly that will not be the case. I also assume that there is some intelligence on the planet and it kicks in when various predicaments become more obvious, driving large changes in the social structure and the demand for carbon fuels.

            Either way, if we can feed ourselves, the ecosystem doesn’t crash too far and we can still manufacture complex systems in 2030; renewable energy (solar +wind) and EV transport is a convenient first step toward needed change. There are lots of other changes to be made.

            2. I’m really getting confused on what this site is about. Is it oil? In which case I’m interested. Is it about what we do after oil, or how we can reduce it? If so, I’m outta here.

            3. GuyM,

              It is about peak oil, a related topic is how this will affect society. The EV stuff usually is not discussed on the Petroleum thread, sorry.

              The initial question asked by someone is the Seneca cliff (steep decline after peak). I doubt this happens for 15 to 20 years.

              Seems you are concerned about a potential oil shortage, I would think the question of what happens next might be of interest.

            5. Mining lithium consumes huge amounts of diesel and natural gas. As the cost of these fuels go up, so must the produced metal. And not just in the mining operation, but in building roads to the mines, and other processing infrastructure. I think it is very clear that these operations cannot be powered by solar or wind.

              Automobile lithium packs have to be exchanged every couple of years in a car, costing 10s of thousands of dollars. Because of this, many electric car owners get rid of their ride when the battery expires. A whole new business has arisen, that of selling used Teslas minus the battery. It is already possible to buy a relatively recent model 3 ‘shell’ (stripped of battery, but has everything else and is fully functional) for as low as $6,000. Essentially we are now seeing that service life of the vehicle shell is contingent on the economics of the battery that powers it. Perhaps it makes sense to low-cash buyers to buy a used shell and re-battery it, which is contingent on the original owner to take a substantial hit to the pocket book.

              And oh yes, there is this famous outcry ‘costs will come down!’ …almost like it’s some kind of birthright, and that repeating it ad-infinitum ad- nauseum – is supposed to make it true. No, costs do not have to come down. Power systems (battery, ICE, whatever) are not the same thing as the last 3 decades of improvement in electronics. Energy does not equal technology. Historically, costs for metals used in energy systems have outdistanced standard inflation by many hundreds of percent. The following elements have increased in price from 1980 to 2018; copper 200%, nickle 55.4%, iron ore 504.2%, lithium +800%, manganese 0% (unchanged), cobalt 534%. It doesn’t look to me like ‘costs are-a commin’ down!!’, in fact quite the opposite.

              Now as for lithium specifically – no, ‘there aint’ lots of it, as some here want so desperately to believe. From Metalary – ‘There’s only a limited supply of this element, because it only makes up 0.0007 percent of the Earth’s crust. Chile produces most of the element for the world market, with Australia coming in second. In the US you can only find a single mine in the whole country. It doesn’t occur naturally in elemental form, either.’

              ‘……What these things all mean is that the demand for lithium-ion batteries will rise even further. The price of LITHIUM CARBONATE IS UP 47% FROM 2015 and the year 2017 will see increased sales of pure electric cars. Add the fact that Li-ion batteries are also used for mobile devices such as smartphones, tablets, laptops, and other wearable devices, and the demand for the commodity will surely increase as well.’ Clearly, from all of the above, there is only one direction for lithium prices and it will rocket up accordingly.

              EV, if it is here to stay, will remain as a status item of very limited quantity as governed by sales prices equivalent to the upper echelon of the luxury car market. Battery materials costs, which in lithium format are not and will not decrease going forward, will permanently keep it there.

            8. Mike Sutherland is totally full of shit. I can’t remember the last time anybody posted such ridiculous crap here.

              What isn’t an outright lie is a gross distortion.

            9. Okay, I am not taking sides in this cat fight. But I would like someone to give some stats on the lifetime of lithium batteries along with the cost of replacing them. And a link supporting your stats.

              I googled it and got this.

              The typical estimated life of a Lithium-Ion battery is about two to three years or. 300 to 500 charge cycles, whichever occurs first. One charge cycle is a period of use from fully charged, to fully discharged, and fully recharged again.

              But I could find nothing on the replacement cost of a Tesla battery.

            10. This article on Tesla battery degradation claims 10 percent degradation at 160K miles.

              https://electrek.co/2018/04/14/tesla-battery-degradation-data/

              The Model 3 Long Range warranty is for at least 70 percent range at 120K miles

              Tesla sells a Model S (and X I assume) warranty for at least 70 percent capability for 8 years and unlimited miles.

              Based on this, I find it very hard to believe your statement of “Automobile lithium packs have to be exchanged every couple of years in a car, costing 10s of thousands of dollars. “

            11. Ron,

              Tesla, and other EV makers, do their best to ensure that the batteries are never fully charged or fully discharged. This greatly increases their lifetime.

              The current cost to replace a Tesla battery is not fully known, because virtually every Tesla is still under warranty. Reading over some Tesla forums, it seems likely the current cost would be over 10,000(perhaps far over) for the battery itself, plus labor costs. So it’s a lot. But no one is paying this right now. In the future we will actually hear what it costs as warranties expire. Musk claims he is gonna get the cost down to $100 per kWh, which means the 100kWh battery packs would cost $10,000. They are more in the $125-150/kWh range right now.

            13. I have a 2013 Leaf, battery still has about 90% of life, so even if it degrades another 10% in the next six years, it’ll still be usable, for twelve years of use, which I would guess is about average life span for a car. My guess is the battery tech has improved in the interim. Price to replace it is around $7K. Keep in mind I’ve never had to change the oil, flush the radiator or any of that other maintenance crap that sucks up a lot of time also.

        2. Seems unlikely that majority of the middle class can afford EV’s. Most new vehicles are sold using a lot of debt. as loan durations increase. I believe the current trend to sell inventory is with 84 month loans and there is increasing interest in 96 month loans as interest rates move higher. Also dealer inventories have been very high since 2017:
          https://www.autonews.com/article/20181015/RETAIL01/181019834/inventory-matches-slowing-market

          http://www.thedrive.com/news/24489/over-half-of-new-car-loans-in-canada-have-84-month-terms-as-sales-continue-to-rise

          I just don’t believe the average Joe can afford an EV. In additional the US grid would need add a heck of lot of infrastructure and power plants to support an EV transportation system. My guess it would probably cost at least $1T USA (which we don’t have). Since most of the new power comes from NatGas, switching to EVs is re-arranging Deck chairs on the Titanic: switching from Oil to NatGas for transportation. To move to a renewable power source to support EV transportation is probably around $10T for the US, which is economically unobtainable considering the looming debt & demographic problems.

          Realistically the bucket bottom of the US Economy is likely to fall out during the 2020’s, as Debt & Demographics overwhelm the economy. US Nat Debt is now over $22T and increasing by more than $1T per year ($1.4T in 2018). There is at least $100T in underfunded entitlements & pensions. Its not as if the USA is going to go Soylent green on its retirees to solve its financial problems.

          That said EVs are dumb idea considering the amount of resources needed. The obvious choice would be to focus on mass transportation and rebuilding the oil rail network that was destroyed by air travel. It would made a lot of sense to start rebuilding rail & railstations decades ago rail improvements take long time it has to be integrated with working rail-lines (ie you cannot shutdown a highway or rail line to make improvements: You have to work around the traffic). If every major town and city was connected it could bring in local freight & move passengers. People could use their ICE vehicles to commute the short distance to the nearest rail station. it would also reduce the need for long haul trucking and switch most of the trucking to just local delivery.

          The only reason people want EV is so they don’t have to change!

          1. Well said Tech Guy, absolutely 100% endorse what you’ve written above.

            You’re ‘spot-on’ in your assessment of costly infrastructure issues, unsustainable government debts, and demographic problems. These factors will constrain EV production to those that can afford them, which isn’t the impoverished middle class anymore. EV’s will therefore remain a purchase option only for an upper-middle to upper-high class range demographic.

            1. Suth said:

              “These factors will constrain EV production to those that can afford them, which isn’t the impoverished middle class anymore”

              That’s funny. When I am road biking in the mountains, climbing a steep grade, suddenly an older lady is pedaling behind me and quickly passes me.

              A cheap electric-battery powered bike! Gotta laugh every time that happens.

          2. You guys focus too much on the US. What I want to know is how do you expect for EVs to get charged in Spain, and what are we supposed to do stretch battery life when we have 35 deg C in long summer days and -5 deg C winter nights. And where is the country supposed to get that electricity when the idiots who run the government don’t like nuclear, nor natural gas?

            1. Please take this conversation to non-petroleum thread.

              Thanks.

      2. EVs are now over 8% of the world’s biggest market, China.

        https://cleantechnica.com/2019/02/03/8-plug-in-electric-vehicle-market-share-in-china/

        ICE sales were pretty much flat YoY from 2017 to 2018. Deloitte says they were down, and is more or less predicting that 2017 was peak for production oil ICE light use vehicles.

        I realize this is a bit off topic, but the interesting thing about EVs is not replacing ICEs, it’s breaking down the wall between electricity and transportation. The oil industry exists because oil is a good way to store energy in a moving vehicle, not because it is a cheap source of energy.

        Gas is a cheap source of energy. Gas gets flared off because it is so cheap, and oil is so profitable. EVs will suck the profit out of the oil industry. Gas will survive. The fundamentals of the business are changing.

        Replacement is just one scenario.

      3. Lots are happening related to EV , even remote controlled electric ship, The fact is if use of green energy ( energy used for charging EV is often from coal ) this need to be popular in Countries where most future car drivers live like China , India, Indonesia,.Philippines i.e and I want to see Musk setting up chargers in the suburb where most pepole still lives.

  10. https://newatlas.com/new-holland-cr1090-worlds-most-powerful-combine-harvester/33211/

    As of 2014.

    652 Horsepower which is (X 745 watts/hp) 486 Kilowatts

    340 gallon fuel tank which equates to a 410 bushel wheat storage bin that under power can unload at 4 bushels/second. This is 13,848 kilowatt hours.

    Weight of that fuel is a bit over 1 ton. I think battery technology would come in at something like 35 tons for that much muscle and stamina.

    Buy guns and have a destination to flee to. The only alternative energy that is going to save you is what flows to your legs to walk away from the city.

    1. It’s just because labour is more expensive than oil. When you would use 2 or 3 machines, Energy / bushel grain would be much much better.

      Here is the homepage of an energy self supplying farm:

      http://www.energiebauernhof.com/ (it’s german , perhaps use google translator)

      They need all the gadgets, but they don’t buy any energy. They produce the diesel for their cars and harvester themselves.

      In old times round about a third of all farm land was for energy harvesting – food for the horses / mules to pull all the heavy equipment.

      1. It’s possible to produce enough staple foods using farm produced biofuels.

        The REAL problem with biofuels is that they in my opinion at least cannot be scaled up to run any thing even approaching our current economy.

        If the public ever once gets hooked on the idea that we can raise crops enough, or salvage enough biomass of any sort, such as scrap wood, corn stalks, wheat straw, etc, to operate conventional cars and trucks by the tens of millions, we’re totally cooked. That road leads to environmental destruction and economic turmoil that make our current agricultural problems look like a rain shower on the church picnic.

        1. I don’t think biofuels is the sollution, too. Better to drive these things electric once the next generation of batteries is out, and cover the barns and sheds with solar cells when energy independence is the goal.

          I just wanted to point out agricultural production doesn’t need huge volumes of Diesel oil. Even without falling back to horses and mules.

          It’s the same: you don’t need a Ford F350 to drive to work. Really, try it, there is something in between that and going by foot.

          1. Ethanol production consumes 40% of our corn crop. As the switch to EVs continues, this food will be available to people rather than ICEs. Mass starvation is a long way away for the US.

            2. Naw you’d be too drunk. But ethanol is made from corn, and you can eat that.

            4. Stephen Hren Wrote:
              “Ethanol production consumes 40% of our corn crop.”

              Yup. Ethanol is just a subsidy to corn growers & its an energy sink since it take more energy to fertialize, plant, harvest, ferment & distill than you get out with combustion. Not to mention the depletion of aquifiers and fertializer\herbicide\pesticide runoffs that end up in rivers, lakes and oceans.

              Stephen Hren:
              “As the switch to EVs continues, this food will be available to people rather than ICEs”

              Nope. Most people cannot afford them, and EVs and Ethanol use the same power source: NatGas. EVs will never go mainstream and probably largely disappear in the 2020s. Probably Hybrids will remain on the market (for those that can afford them). Considering the entire US vehicle economy survives on subprime auto loans, its just a matter of time before it just implodes. The only people that can afford EVs are those making more than $100K per year.

              https://www.dmv.com/blog/electric-car-buyers-younger-and-richer-than-those-who-buy-hybrids-or-conventional-cars-521541

              “The study shows that the average buyer of a regular Ford Focus was 46 years old and had a household income of $77,000 per year, as compared to the an annual household income of $199,000 for the average, 43-year-old owner of Ford Focus electric.”

              https://www.forbes.com/sites/oliviergarret/2017/07/13/subprime-auto-loans-up-car-sales-down-why-this-could-be-good-for-gold/

              40% of Americans can’t cover a $400 emergency expense:
              https://money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html

              https://www.autonews.com/article/20181121/FINANCE_AND_INSURANCE/181129967/subprime-originations-rise-for-the-first-time-in-two-years

              Auto loan debt Tops $1.17 Trillion:
              https://247wallst.com/autos/2018/12/07/us-consumers-owe-1-17-billion-in-car-loans/

            5. The number of used cars sold are expected to reach 39.5 million, while new car sales are expected to decline to 17.1 million. You have declining new car sales, probably because of affordability.

            6. Nope. Bought a 2013 Leaf four years ago for $10K, just paid it off with a four year loan at $240/month, now only pay $10/month in electricity with zero maintenance costs, battery still has 90% life and car drives great. Wouldn’t be surprised if I’m still driving it ten years from now with the same battery. Can use the $$ I save to buy more PV panels to put on my system up on the roof since they’ve come down in cost 95% since I initially installed my system in 2007. Average joe home inspector make about $40K/year. Just give a shit and spend my time learning and doing stuff rather than talking out of my ass about things I don’t know.

          2. Yep my Tesla Model 3 works pretty well. Just need some solar panels to make that transport relatively carbon free.

      2. Farms aren’t just about tractors; they also consume huge amounts of herbicides, pesticides, and fertilizers – all of which are made with huge amounts of petroleum feedstocks. Usually, these chemicals are applied twice a year to a field…at the beginning and end of a season, if I recall correctly.

        But whatever the case, agriculturally derived fuels aren’t going to give the 100:1 EROEI that this society is dependent on. While I don’t know what the final EROEI of an agriculturally produced fuel is, I suspect it is likely in the low single digits for canola and sunflower oil. A very large field of sunflowers and/or canola has to be harvested to run a 652hp tractor. And again, this is without consideration for transportation, pesticide, herbicide, and fertilizer energy requirements.

        1. The whole issue of what, in our current agricultural system, has to be retained needs to be rethought. As an example, I recently read Gabe Brown’s new book, “Dirt to Soil.” He farms about 5000 acres near Bismarck, ND, a cold, dry region that typically goes for mono-culture production of small grains, corn, soybeans and sunflowers. Brown, who now lectures around the world, has sharply reduced his field work (diesel), and almost all outside fertilizers, pesticides and herbicides, all while building top soil, organic matter and producing what he calls “nutrient dense food.” Most of the food is sold locally too. Plus he’s making way more income without taking any subsidies. Don’t say “It can’t be done,” just read the book.

          1. Yep-
            Ag is where we have really gone wrong (for the long term).

          2. Jim, If I ever find the time then yes I will read the book. But I strongly, in no unequivocal terms, assert that you will never ever get the kind of output to feed 8 billion people using Gabe Berg’s farming methods. Perhaps if 70-80% of the population returned to a Gabe Berg style agrarian lifestyle then perhaps 8 billion might not starve, but I doubt it. Rather -and admittedly this is conjecture – I think that people like Gabe fail to understand the amount of petroleum he is actually dependent on to live.

          3. I strongly doubt anybody is farming anything at all in North Dakota at the five thousand acre scale, and selling most of it locally.

            Unless maybe it’s livestock feed, potatoes, grain, or beans sent to a local processing plant with the refined food product shipped out of state.

            The harvest season for fruits and veggies in North Dakota is so short you miss it if you blink. Local markets hardly exist, given the population density, lol.

            1. OFM If you haven’t heard of Gabe Brown then you are obviously out of touch with current commodity agriculture especially No till. Gabe has not used any purchased fertilizer on or pesticide on his farm other than herbicides to kill weeds about once every 3 years. He has also been notill for 20 some years. I would estimate his primary products are beef grains covercrop seeds lamb eggs. Of course the farm employs some help and it is being studied by several scientists.

    2. Meanwhile a third of the American maize crop is burnt for fuel. So we need huge fuel consuming vehicles to produce fuel to run…

      1. And if it wasn’t for that ethanol demand, corn would be selling for under $2, tax payers would have to bail out farmers even more than Trump did with regard to soybeans, or a lot of farmers would need to go bankrupt and quite a bit of corn acres would need to be taken out of production.

        Corn prices have been weak for one year longer than crude oil prices have been weak.

    1. Greenbub,

      That is normal seasonal variation. Lower demand in winter and higher is summer, every year.

  12. Although this link is about solar power, given that the discussion today is mostly about how peak oil will play out, it’s relevant. I will also post it in the non petroleum thread.

    Given the adoption of solar power on a large enough scale in oil producing countries in the Middle Eastern area, and wind power in some other countries that produce oil as well, there’s a very real possibility that these countries will have more oil to sell than expected. It doesn’t take an MBA from an Ivy to see that solar power is cheap enough already to make it quite profitable to sell most of the oil countries such as Saudi Arabia are currently burning to generate electricity.

    It’s possible that battery costs will come down enough that such countries can cut the amount of oil they use to generate electricity by eighty percent or more, maybe even close to one hundred percent.

    I believe oil prices WILL go up, and stay up, for quite some time, but I’m not predicting WHEN. Everybody knows the cost of both solar and wind power is declining fast, with no apparent end in sight, not yet at least.

    https://qz.com/1536917/the-uae-has-the-worlds-largest-virtual-battery-plant/

    1. While Batteries are necessary – they are but a slice of the solution. It’s immoral to convert Pure PV Power to Toxic eChemicals to attempt to run “Designed for Grid Slavery” loads. In other words, don’t store energy in Batteries just to waste it away. eChem power is not viable for most devices that waste more energy than they use. ENERGY = Power times TIME. Perpetual 24/7 RUNTIME is a harsh mistress.
      Survival requires continuous bleeding reduction before adding additional blood to the patient, Patch large holes in bucket to allow filling. Long runtime Single phase motors, Low-efficiency Transformers, Lossy power conversions, etc are a good example of what MUST be Phased out. Chart of “Rejected” energy. https://flowcharts.llnl.gov/
      Solar Energy storage by thermal mass and/or phase change is viable where eChem may never be.
      Compare power consumption utility of ARM RISC base devices (Battery powered Phones/Tablets) to devices with Legacy Intel Based CISC “Complex Instruction Set Architecture”.
      It’s the ARM architecture makes Battery operation feasible. It’s likely much of this Slavery by Resource destruction will continue till major Grid crashes resulting in massive chaos and unnecessary suffering. By design and Balance of PV to Load a well designed autonomous energy system should function without battery during daylight hours. Success requires appropriate loads. Many solar systems, they are not “systems” by design. Zero resiliency and absolute dependence on central planning malice. PV kWh’s now a nickel and falling. eChem 3 to 20 times that? So 85%+ PV Direct consumption is a worthy design goal.

      1. I agree that real time use of power should be mazimized, though how my washing machine or refrigerator could handle the varying output on a breezy partly cloudy day where the solar PV output cycles on the length of minutes is beyond me, without some form of battery to level out the system. Once PV and wind become ubiquitous I can see some smoothing of the system being inherent, for those still connected to the grid system. Up until then, using the grid as a “battery” mean just more toxic eco-devastation.

        A good lithium battery of say 24 kWh, can store 50,000 kWh or more during it’s life. That is about a nickel per kWh since batteries are falling toward the less than $100 per kWh range. Even at 1000 cycles that is only a dime per kWh.
        No problem then when it is dark, cloudy and rainy for a few days in a row. We do need lights at night you know.

    2. OFM, Long Timber, and Gone Fishing.

      Let’s keep stuff on solar, wind, EVs, farming, ethanol output etc in the non-petroleum thread.

      This thread is supposed to focus on oil and natural gas production. Everything else goes in non-petroleum thread.

      Thanks.

      Your comments are great, but many of the petroleum guys will no longer participate if all threads become non-petroleum threads.

          1. Not a big problem, I made the same mistake myself. I will try to do better in the future.

  14. Dennis. In a previous post that I can’t find anymore, I think you explained the difference between how the EIA calculates DUCs and how Shaleprofile calculates them. The difference between the two is pretty striking, so at the risk of being a pest, do you mind explaining again the difference in how the two calculate them and why one is better than the other? Thanks.

    1. Mario,

      Shaleprofile uses actual data from states, which often is revised higher later. The Drilling Productivity report uses a model which is not very good.
      Through May 2018 they agree pretty well for the areas covered by shaleprofile. After that it is hard to guess,but I would say the actual DUC count would be between the two estimates. Taking the average through Sept 2018 would give a very rough guess. After Sept maybe guess the 6 month trend of that average, but that’s very speculative. Basically we dont know.

  15. Postpone FED Hike Today means more Investment $$ for Shale…. Or more time to prepare?

  16. Gail Tverberg has a new article that begins thus:

    “A few years ago, especially in the 2005-2008 period, many people were concerned that the oil supply would run out. ”

    Isn’t that fucking stupid? I’m not even going to link to it. . . .

    1. She’s obviously writing the same thing to the same audience for the Nth time, understanding that what she is repeating will maximize the retention of her (likely declining) blog audience. Her niche is that she’s supposedly an independent thinker on these matters, cringe.

      1. She has the same problem that The Oil Drum had. Running out of article ideas, and in the case of TOD, running out of articles that reached a level of academic quality desired by the people running that blog at that time.

        So, repetition.

  18. Some international distillates inventories week/week changes (million barrels)
    Total Distillates: -4.58
    Light Distillates: -1.19
    Middle Distillates: -2.40
    Heavy Distillates: -0.99
    Total https://pbs.twimg.com/media/DyQazaCXQAEPudA.jpg
    Light & Middles https://pbs.twimg.com/media/DyQa_TyWwAAHMY-.jpg
    Singapore https://pbs.twimg.com/media/DyQbNUAXgAA0nnG.jpg
    A seasonal chart for the fuel hubs – with the weekly numbers used for January https://pbs.twimg.com/media/DyQgKmAX0AAlyOw.jpg

  20. I’m wondering if someone can answer this question that’s been on my mind for a while. As much detail as possible please.

    How much choice do we have in what we turn oil into? I mean, I know that refineries produce all sorts of different products from oil. Gasoline, diesel, jet fuel, feedstocks, etc. How much choice is available in deciding the relative amounts of types of products created? For example, if I no longer need gasoline, is the portion of oil that was previously turned into gasoline now available to be turned into something else? How interchangeable are the various products in this way? Can the portion used to make jet fuel be instead used to create gasoline? Etc etc. I’m very curious how this works.

    1. Heavy distillate mostly gets cracked into diesel and gasoline (more so after 2020 when the marine market for bunker oil mostly disappears). There is a bit of leeway about how much of each can be made from a given oil slate in a given refinery but generally heavier oil gives more diesel. The current issues with diesel supply are partly to do with loss of heavy oil from Venezuela plus OPEC cuts are usually on heavier oil first. Cracking can be fluid catalytic cracking (remove carbon as petrocoke to produce lighter molecules) or hydrocracking (add hydrogen). I think FCC tends to make diesel and hydrocracking more gasoline but my memories going a bit. Once produced and distilled diesel and gasoline are not convertible commercially.

      1. Once produced and distilled diesel and gasoline are not convertible commercially.

        So before the initial production, is there full choice? AKA could all heavy distillate become one or the other? And does a barrel of oil contain some amount of heavy distillate and some amount of other stuff? Like is the barrel (making numbers up here), 40% heavy distillate which can become gasoline or diesel and 60% other stuff, which cannot become gasoline or diesel? Or are the contents of a barrel more dynamic than that?

        I’m not sure if my question is totally intelligible, trying to express as best I can. What I am trying to understand is how much freedom there is in choosing what products a barrel is refined into. How much does the initial composition effect the possibility of products? If, for example, there is no more market for gasoline, is there still a market for the rest of the barrel, thus the reduction in gasoline demand would not reduce oil demand? Or would the reduction in gasoline demand mean that less barrels are needed in aggregate? If there is a “fixed”, or somewhat fixed, output from a barrel, in terms of barrel composition, then reduced demand for gasoline does not necessarily reduce oil demand. Would reduced demand for gasoline “free up” some percentage of the barrel for conversion into other products? If so, how much? If there was 0 demand for gasoline, would that portion that was previously turned into gasoline just be waste?

        1. Is there full choice? No petroleum engineer here, but my questions to that have netted there is only a small percentage choice. That is, if you wanted to concentrate on distillates over gasoline, there could only be a small percentage increase.

          1. Thanks guym, that’s the conclusion I have started coming to.

        2. It’s possible to build a plant to turn furniture plus urine to gasoline. So given enough time and money we can do just about anything. Many years ago I doodled a plant to take heavy oil, coal, and hydrogen from methane into synthetic diesel. Look up “gasifier” and you’ll get an idea.

          1. Fernando,

            What do you know about going the “other direction”, taking the components of crude oil that are currently converted into gasoline and diesel, and turning them into other products, say kerosene for example? Or could some percentage of the components which we turn into diesel and gasoline be turned into asphalt instead? Apologies for the poorly worded question, I don’t know the proper terminology.

            1. Niko, we can turn methane into syncrude, synthetic diesel, synthetic gasoline, etc. We can also take asphalt and turn it into the same products. But that requires equipment. I imagine that some USA refineries will be modified to make the required products from a very light feed. Theoretically, a plant to make synthetic kerosene from butane is a lot cheaper than one to make it from methane. Never saw it done, and it makes more sense to export it to Caribbean islands to generate electricity.

      2. George, The latest EIA data shows GOM production for Nov 2018 increased 188,000 bpd to 1,922,000 bpd. August was 1,920,000 bpd. Is the Nov. increase just a bounce back, or is the start of a trend? My impression from prior posts was that GOM would be struggling to maintain current production, however some are predicting a resurgence of production growth. Link below is to Oilprice article on deepwater production growth.

        https://oilprice.com/Energy/Crude-Oil/Global-Deepwater-Oil-Production-To-Hit-New-Record-In-2019.html

        1. This Oilprice item is also referenced below by GuyM.

          2018 GOM production will be another record – the first time averaging over 1.7 mmbopd for the entire year. EIA thinks GOM will be 1.9 for 2019. I think that’s a bit high – I predicted between 1-7-1.8 in a previous post.
          The OilPrice article specifically references Shell’s Appomattox project coming on line in 2019, but there are a number of meaty existing producing fields behind these numbers.
          What’s keeping production this high – I think, more than anything else, is continued successes in the biggest fields, like the Mars-Ursa area, Thunderhorse, Atlantis, Tahiti, Jack-StMalo, Mad Dog. Most of these fields have had new projects come on-line, and have additional projects in the queue.
          I was at an industry talk last year given by Shell on the Mars-Ursa area. They have well activity lined up for the next 15-20 years out there. And Kaikias was recently brought on line.
          Thunderhorse has had 3-4 new projects come on line in the last few years, or about to come on line – field extensions, water floods,, and BP just announced 1 BBO of new OOIP.
          Similar story with Atlantis.
          Tahiti brought on the TVEX project last year, and production has rebounded to back over 100 kbopd.
          JSM Phase 2 is completed, or near completion, and that facility is at name plate capacity – around 170 kbopd, and there is likely to be a future water flood in one of the fields as well.
          Mad Dog’s production has been surprising stable over the last 3-4 years, and the MD2 project has not even come on line yet – with over 10 new producers and numerous injectors.

          1. SouthLaGeo, Thanks for your response, it is very helpful to have the view of someone with your knowledge. It is rare to get the viewpoint of someone with extensive bottoms up knowledge on a blog. Thanks again.

    2. You left out a variable in your question. All oil from all geographic locations do not produce the same percentage distillate yield.

      If you do a search online for the phrase oil assay you will find a layout of the different percentages of product from the oil extracted from the oilfield being assayed. It is usually laid out as the percentage of liquid that boils at various temperatures. The different products have different boiling points.

      Actually, that’s rare. More typically you will see not much more than the API density of liquid from a given field and how much sulfur and vanadium is in it. A proper assay is more comprehensive.

      1. Thanks, Watcher, this is another piece if the puzzle I’m thinking through.

        1. We keep assay data bases. I have one in a hard drive somewhere in my spare bedroom closet. The full assay for available crudes plus those being marketed and the prices for crudes and products are fed into computer programs to optimize which crude to buy and how to mix the refinery feed to yield the optimum product mix. But my data is old. I have nothing for the Permian blends being shipped nowadays, or the other new crudes.

      1. Thanks Hickory, that was quite helpful. It still hasn’t fully answered my question as to the degree of freedom in choosing outputs, but I think I know enough to logic through something now.

  21. Some interesting stuff from ConocoPhillips and Hess.

    COP plans to spend $6.1 billion CAPEX in 2019 and hold production relatively flat. 1.31 million BOEPD in Q4 2018, forecast 1.3-1.35 million BOEPD full year 2019.

    HES plans on ramping up Bakken production from 120K BOEPD in 2018 to 200K BOEPD in 2021. Claims Bakken wells just cost $5.9 million per, but I am thinking that is just the intangible cost, and doesn’t include equipment. Dividing Bakken CAPEX by completes wells in 2018 closer to $8 million. Still, cheaper than I expected.

    John Hess said EUR for 2019 wells north of 1 million barrels (assume he means BOE). Also says they have adequate gas takeaway capacity and don’t see flaring restrictions holding them back. The first claim definitely is bull based on shaleprofile.com.

    COP seems to be exercising discipline. HES, not so much.

    1. Yes, ConocoPhillips has a huge acreage (about a million acres) in the Permian and elected to be conservative in the Permian to wait for infrastructure. They posted their first profit in years for 2018.

  22. I think readers here may be interested to learn that a relatively new term is being mentioned in the CC’s, at least it was by COP and HES.

    That term, with regard to the shale basins, is “managing the plateau.”

    1. As I posted above, I hope big oil will more dominate the Permian and shale. They are building refineries and buying old ones to accept the LTO to be used in the US, rather than worrying about shipping it out. Oxy, Exxon, Chevron, and Conoco’s acreage position in the Permian dwarfs the rest at about 7 million acres combined. While the basin spans 48 million acres, probably less than half of that would be productive, my guess. Even if some is shipped, they are, hopefully, more environmentally concerned, or at least won’t go off the deep end. So, when projections of growth are being computed, their intentions can’t be left out of the computation. If they can gobble up some more this year and next, things could be looking up for a more responsible growth, or even a plateau.

  24. Has everyone read the report on Shalebubble.org?

    This “shale revolution,” we’re told, will fundamentally change the U.S. energy picture for decades to come—leading to energy independence, a rebirth of U.S. manufacturing, and a surplus supply of both oil and natural gas that can be exported to allies around the world. This promise of oil and natural gas abundance is influencing climate policy, foreign policy, and investments in alternative energy sources.

    The primary source for these rosy expectations of future production is the U.S. Department of Energy’s Energy Information Administration (EIA), which publishes every year an Annual Energy Outlook that projects energy production and prices for decades to come.

    But what if the EIA’s forecasts are wrong?

    The Reality

    The Reality is that the government’s long-term forecasts — the ones everyone is relying on to guide our energy policy and planning — are extremely optimistic.

    This conclusion is based on ongoing analysis of well production data for all major shale gas and tight oil plays in the U.S., using data from Drillinginfo, a commercial database of well-level production data which is utilized by the EIA and most major oil and gas companies. This analysis of current and historical production (including well counts by county, well- and field-decline rates, distribution of wells in terms of quality, density of wells in sweet spots, and average productivity of wells since 2012) is then compared to the EIA’s Annual Energy Outlook forecasts.

    To meet reference case projections in its Annual Energy Outlook 2017 (AEO2017) more than 1 MILLION shale gas and tight oil wells would need to be drilled between 2015-2050 in the top plays, at a cost of $5.7 TRILLION, and require 100% of proven reserves plus 60-73% of unproven resources. (Proven reserves have been demonstrated by drilling to be technically and economically recoverable; unproven resources are thought to be technically recoverable but have not been demonstrated to be economically viable – as such they are much less certain than proven reserves.)

    One can only assume that the EIA’s optimism is based on technological improvements made over recent years. Technological advances have included longer horizontal laterals, a tripling of water and proppant injection per well, and more fracking stages. But as the data show, these improvements have only led to a faster depletion of oil and gas reserves, not a growth in the total amount of oil and gas that can be produced. Ultimately, technology can’t overcome core characteristics of shale — steep decline rates (wells decline between 70-90% in the first three years, and field declines without new drilling typically range from 20-40% per year) and variable reservoir quality, with “sweet spots” or “core areas” containing the highest quality reservoir rock typically comprising 20% or less of overall play area.

    Tight oil and shale gas producers have focused their efforts and technological improvements on targeting these “sweet spots” and in many plays we are already witnessing the point of diminishing returns. But the EIA is counting on — and asking the American people to bank on — technological miracles overcoming physical limits. A sound energy policy, however, should be based on reality.

    1. That looks a bit overstated.

      “Technological advances have included longer horizontal laterals, a tripling of water and proppant injection per well, and more fracking stages. But as the data show, these improvements have only led to a faster depletion of oil and gas reserves, not a growth in the total amount of oil and gas that can be produced. ”

      What data shows this?

      Sure, the more you produce, the more there is depletion (unless reserves size is changed, which it sometimes is), but this is not relevant to the “total amount of oil and gas that can be produced”. An EUR number may or may not change with that production.

      If there were actual technological improvements (an increase in lateral length is not really a technological improvement, it’s just a longer well — that is still described with the word “well” and makes production per “well” look like an improvement), like super duper proppant that holds more fractures open, then of course this would mean an increase in recovery rate.

      It’s overstated. If “data” is saying no change in ultimate recovery while production increases, that doesn’t have to mean production methods are the reason why there is no change.

      1. I agree, Watcher. I have seen no data that indicates it just gets it out faster. And, no one addresses the possibility of EOR. It’s all a guess, but they are correct that EIA uses faulty logic. That’s far from a surprise.

        1. GuyM,

          EOR tends to be very expensive. At $250/b it might be profitable, so far it looks like it could work in theory, but will only be proven for tight oil at very high oil prices. In the most mature tight oil play (North Dakota Bakken Three Forks) we have seen new oil well average EUR increase from 300 kb for the average 2008 to 2013 well to 355 kb in 2017. In 2018, the wells look very similar to 2017, also they will run out of room in the sweet spots for new wells eventually (my guess is 2019 or 2020 for the Bakken) at that point new well EUR is likely to decrease. So far this has not occurred, but I think old hands like Mike Shellman might suggest that this will happen at some point, I doubt he would be as foolish as me and venture a guess when it might occur.

          I believe George Kaplan’s analysis has suggested it might happen fairly soon, though he also is unlikely to put a year on it with the limited information available.

          Data for average well profiles by year for North Dakota Bakken from

          https://shaleprofile.com/2019/01/21/north-dakota-update-through-november-2018/

          Enno Peters’ shaleprofile.com is excellent.

          1. No, not all EOR is expensive according to EOG. They have been doing this with over 100 wells in the EF, and doing more each year, with a significant increase. Thirty to sixty percent increase in EUR, but that’s, no doubt, stretching it.

            1. Well productivity has indeed increased in the Bakken over the past few years due to longer laterals and stuffing more sand into those laterals. The rate of productivity increase is disproportionate to the costs involved and economics have NOT improved in North Dakota. They have gotten worse, and will continue to GET worse as higher productivity leads to sweet spot depletion faster. All anyone has to do to recognize this is happening, even Coffee, is to look at increasing GOR. It won’t be long now and some significant bad news will occur in N. Dakota.

              If one looks thru Hess’s recent SEC filings for 2018 well costs have now increased to over $10MM per well. Anybody in the Bakken still touting $8MM wells is lying thru their oil stained, frozen teeth. Do the numbers using about $15 per BO net back, after all costs, and, well, it is NOT working. OPM makes it APPEAR to work.

              It ironic to me how many people put so much faith in productivity increases and ignore economics; it is though the money will keep flowing into private enterprise for the sake of low gasoline prices, and economic stimulus, like growing cabbages for the sake of the Motherland. Its was an interesting theory for awhile, Watcher, but ultimately reality sets in. Phffftttttt.

              I can’t find ANY meaningful increases in OIL recovery from all the efforts EOG has made, for the past five years, to cram more gas into shale containers under the auspices of EOR. Re-pressurizing “asphalt” is going to give one a balloon affect and its important to make sure its liquids that are improving because of gas injection, when the balloon is deflated, not BOE. EOG is the best in the industry at making stuff up.

              I note, sadly, that this site is now leaking liberalism all over the floor like hydraulic fluid. According to search engines, looks, hits, into POB from outsiders interesting in learning something about peak oil issues, and not being lectured about health care and EV batteries, are way down. Thru the floor, in fact. Pity that. But its good to finally, fully, come out of the closet, I think. This site is almost entirely, directly or indirectly, about getting away from fossil fuels as fast as possible, however detrimental to common folk. I particularly like the comments about the NYT being fair and balanced. That’s a hoot.

            2. Combined, Chevron and Exxon anticipate a 600bpd increase from over 3 million acres by 2025, or thereabouts. Amost all of that, no doubt, is going to their refinery expansions. To me, that seems reasonable.

              I know EOG has to be making money on my wells due to their production. That’s the extent of my understanding that I can hang a hat on.

              I don’t think shale should ever be looked at as anything other than a supplemental source of oil. I think big oil will eventually take over enough of the independents to get this back on track. I hope. There will be enough restrictions on exports until 2021 to give them time to pick and choose. I couldn’t see it as anything other than beneficial, long term, for independents, because for most of them, shale is mostly what they have.

              Everything else from independents, EIA, IEA, and OPEC seems really far fetched, and stupid. Including EOGs reports, which you notice I put a caveat on their EOR reports.

              You notice that both Ron and Dennis asked the posters to take non-oil related comments to another board.

              As to everyone being on the liberal side, that would not be true, either. But, I definitely look forward to your comments on oil. And, I agree that shale oil is not the savior, nor is the profitability as portrayed, but that does not make it less useful as a supplemental source of oil. And I hope it’s supplemental use will mostly profit refineries in the US, and not mostly exported.

            3. Ackshualy, Mr. Roughneck, Bakken laterals have almost entirely been in the 10,000 foot range since the state mandated 2 square mile Drilling Spacing Units a decade ago. (Longer laterals under Lake Sakakawea and recent ones by the ever-innovative Liberty Resources up near Divide county being the main outliers).

              This uniformity provides an effective benchmark with which to evaluate the impact of other changing metrics.

              All that sand being crammed downhole?
              That is the result of the huge expansion in size of the Stimulated Reservoir Volume (SRV) brought about by vastly improved completion practices.
              In other words, FAR more fractures are being induced and need to be propped.
              Diverters, pumping volumes/pressures microproppants are playing a role in this.

              Regarding EOR, the re-pressuring of the field is only partially the goal, albeit an important one.

              The miscibility of the injected material is every bit as important to the success of these efforts, along with several other components.

              Liberty’s current EOR pilot in the Bakken is using gas with 40% ethane, propane, butanes and pentanes.
              This reduces the Mean Miscibilty Pressure dramatically.

              The perspective is growing that the asphaltenes blocking the pore throats play a large role in wells’ rapid drop in output. This miscibility factor could be very important when the code is cracked.

              Sumptin’ like dat.

            4. Thanks for the comment Mike. Like GuyM, I also look forward to your occasional comments.

              Interesting “out of the closet” comment. Note that I don’t think anyone used “fair and balanced”, I tend to think of that terminology being needed when in fact reporting is the opposite.

              I agree the New York Times has a liberal point of view, the claim is that is different from lies. Though some people may believe that any view point that is different from there own is by definition a “lie”, I think it is just a different point of view.

              Has lateral length actually increased in the Bakken?

              I thought average lateral length had remained at roughly 10,000 feet in the North Dakota Bakken/Three Forks since 2008. I agree that there has been an increase in proppant and number of frac stages per well and it is likely that the well cost has increased.

              The average 2017 ND Bakken/Three Forks well might have an EUR of 360 kbo and would need about $65.30/b at the wellhead for a $10 million dollar well to earn a 10% annual rate of return.

              I would expect that well completion rates will remain low in North Dakota at current oil price levels. Though larger producers may have hedged some of their output when oil prices were higher. I am not sure what the average price barrels are sold for in the Williston Basin as the prices vary from company to company.

              Is it roughly correct that eventually all fields see average new well EUR (for similar well designs) decrease as sweet spots get fully drilled. I have surmised as much from comments by experts like you, but would defer to your expertise.

              Technology can improve output to some degree, but not without limit, poorer quality rock (with lower permeability and less oil and/or natural gas within the rock) is likely to produce less oil, or so it seems.

              This site is about peak oil. Part of the conversation (which is supposed to occur in the non-petroleum thread) is what do we do when oil output peaks.

              There are lots of associated questions about the consequences of putting excess carbon onto the atmosphere which may indeed be detrimental to the average human as well as all other life on the planet. How quickly society can wean itself of fossil fuel is not a question which may interest you. Unfortunately sometimes comments end up in the wrong place.

            5. Mike,

              Only at the “getting away from fossiles” thing:
              It’s visible the world needs much more transportation than now – China developing, India, too – and lots of smaller countries want development, too.

              Just doing the same thing more doesn’t help any more, as seen by the chinese example. They want to break away from oil, more than green movements in western countries ever managed.

              WE drive a few extra pricey Teslas –
              They electrified ALL scooters, more and more town busses and taxis. Oh yes, and a few private cars, too.

              Oil production can’t rise much more, so much is discussed in the blog – most is on reserve energy, peak US LTO will propably mark peak oil, wonders (like world peace) aside.

              So every country without oil and with enough power should crawl away from oil, or at least prepare it. You see it everywhere when you look.

              This isn’t argumented enviromental – just the state of the oil business.
              Less than 10 countries left who possibly can rise production substantial, and 3 of these in political turbulences (Lybia, Iran, Venezuela), 2 limited (Canada enviromentalists + Pipelines, Brasil corruption). Every political leader should make 1 or 2 thoughts in this situation – about stop gaps and long term solutions.

              You are right – discussions about batteries & co belong to the others thread, but discussions about sinking demand belong here if it has impact on oil business.

            6. GuyM,

              I stand corrected. Reinjecting produced gas may not be all that expensive and might be cheap as long as natural gas prices remain low. I guess I was thinking of other types of EOR. Seems EOG sometimes overstates the output of their wells, so I am not sure how much we can trust their investor presentations to be accurate.

    2. Yeah, I read the most recent detail of post carbon institute. Mainly points out the glaring errors of EIA.

    1. December 2018 had 885 active land drilling riggs US , now end of January 847 wich is down 4,3 %. Seems US Shale production soon will drop and if the main reason is lack of profitt , declining investment 2019 might end with significant decline.

  29. Freddy made the comment below in the Non=Petroleum Thread.

    I am copying it here because I thought it was good.

    Interested article related to US shale from Rig Zone..
    https://www.rigzone.com/News/Print/158049/Trumps_Price_Policies_Hurting_US_Shale_Activity
    Seems djuring the last collapse in oil price in 2016 many was able to get some profit even WTI below 50.usd bbl , by use longer latheral, more wells from same pad, improved propant , drilling fluid. Think also shift of focus to sweet spots. To me it seems most of advantages by improved design, work process is already taken out. Horizontal latheral section seems to be linited by about 15 000 feet , that is already reached. As I see it the best sweet spots might already be fully utilized , cost if capital is increasing , also cost of labour and equipment. This together with rock that have reduced quality that gives less barrels each well in average will raise break even cost further. EIA predict oil will flow but it might be the pioneer Papa is correct when he told the best is already behind..

    1. Good post. At a risk of sounding like a parrot, big oil’s interest in the Permian is going to take a toll on the huge increases expected for the next five years. They are not interested in the marginal areas, but they will snatch up good buys in a heartbeat. Right now, I notice XTO seems to be leading the pack with completions and permits in the E F and the Permian. But, they can afford to, because most of that will travel to the new and expanded refineries they own. After that, they will be managing their “plateau”. Same with Chevron. OXY and COP are interested in growth, but they are in touch with the communities and somewhat in the environment, and will be more conservative. EOG has a little in Trinidad, but, basically, when shale is over, they are done. I wouldn’t be surprised if they don’t get some big oil stock. Same with the rest. Those stocks will reflect the benefits of full integration, and I doubt they stop just at transportation and refinery. Scenery is going to change. And the insane chatter by some of the mid and smaller companies will be subdued.

      1. Guy M , I think you have right and there are always some Companys that will be having some advantages but that will not change the challanges caused by geological structures and reduced confidenial from investors as they now have started to learn the shale play. I exspect as the activity will be forced to less productive Area also decline rate will increase, and for thoose still operating in the sweet spot Areas will need to cover the cost of increased frack hits. With oil price WTI 45-55 usd bbl in 2019 there will be a significant decline in us shale production and the investors will loose more confidense. Than in 2020 as the world economy continue to grow and push oil demand above 2 mill barrels increase anualy (2%) price will be forced back to 65-75 usd bbl and there might be some increased shale production for a period unthil the geological contraints again requires a higher oil price to deliver profit to investors. Than ofcourse as we have seen last year there might be some news that new Areas are discovered but if that Area will be profittable to develop with current oil price remains to see, if not it will not have any impact of the fundamental. In mean time most of the world have confidence to EIA forcast that sees booming us shale production that also impact on oil majours will to invest in exploration drilling offshore where proven resourses have been in declined for many years. What Saudi Arabia and Russia can produce when US shale more or less peak remain to see but that might also be limited as last increased production Saudi took from storage oil that already was produced.

        1. FreddyW,

          The EIA’s AEO 2019 has lower 48 onshore US C+C output increasing from 9.46 Mb/d (from EIA’s STEO) in Dec 2018 to 11.3 Mb/d in 2025, or an average increase of 260 kb/d each year from 2019 to 2025. This does not seem like “booming” shale output (most of the increase (99%) of US L48 onshore output will be from tight oil.)

          see
          https://www.eia.gov/outlooks/aeo/data/browser/#/?id=71-AEO2019&region=0-0&cases=ref2019&start=2017&end=2050&f=A&linechart=ref2019-d111618a.6-71-AEO2019&ctype=linechart&sourcekey=0

          and

          https://www.eia.gov/outlooks/steo/data/browser/#/?v=9&f=M&s=0&start=201701&end=202012&map=&ctype=linechart&maptype=0&linechart=PAPR48NGOM

      2. GuyM,

        For EIA’s AEO2019 the Permian (US Southwest region) is expected to increase by about 1600 kb/d from 2019 to 2031 (12 years) or by about an average of 133 kb/d each year on average (1600/12). Seems a pretty modest increase in output and a fairly conservative scenario through 2030, after that I think the EIA has overestimated the URR with cumulative output from 2017 to 2050 at 61 Gb, probably about 10 to 20% too high. Decline after 2032 (if the scenario is correct up to that year) is likely to be far steeper than estimated by the EIA.

        2. I really don’t give a durn what EIA is saying. You missed the point. If big oil does take over the shale fields, they will be mostly interested in keeping their new refineries running. They are not likely to get 1600bpd higher. The growth would be slower, and there would be more a plateau. Just a thought, but it is moving that way. But, maybe not.

          1. Hi GuyM.

            You said:

            big oil’s interest in the Permian is going to take a toll on the huge increases expected for the next five years.

            My comment is simply pointing out that the EIA predicts that Permian output will increase by 133 kb/d each year on average from 2019 to 2031.

            Do you consider that a “huge” increase? For comparison in 2017 and 2018 the average annual increase in Permian basin output was about 880 kb/d each of those 2 years, so the EIA expects the future increases will be a factor of 6.6 lower than the recent past.

            The EIA’s forecast from 2019 to 2030 is very conservative and might be correct if big oil slows the rate of increase in output so that oil prices increase.

            My expectation was that output would increase to about 7.2 Mb/d in the Permian by 2027. Chart below has a “medium scenario” where Permian tight oil output increases to between 7 and 7.3 Mb/d from 2025 to 2030 and then declines to 2.2 Mb/d by 2045, URR is about 60 Gb (2010-2060).

          2. GuyM,

            A more conservative scenario is below, the completion rate increases more slowly in this scenario with a peak in 2032 at 5600 kb/d (Nov 2018 Permian tight oil output was about 3100 kb/d). Over the next 13 years this would be an average annual increase in output of about 190 kb/d for Permian tight oil, a relatively modest rate of increase (about 4.6 times lower than the 2017 and 2018 rate of increase). This scenario is still a bit more aggressive than the EIA’s AEO 2019 reference case (which includes conventional output along with tight oil output for the entire southwest region.)

  30. Refinery outputs

    A simple refinery (Teapot) uses only distillation and so they have no choice as to output. They can only separate out what’s in the oil mixture.
    They can change the cut-off points. eg That’s like mixing a small volume of kerosene into the diesel because they need more diesel and have too much kerosene. Hence the need for fuel quality standards.

    Making diesel from smaller molecules is in theory possible but the synthetic diesel would cost more. That’s like GTL – natural gas to liquid fuel.

    Modern more complex refineries have crakers (that require heavier oil). Crakers do have some flexablity but the choice of output is built in at the design stage and cannot change without a costly upgrade. I thought this quote in Wiki was worth reading.

    (Wiki) Hydrocracking – The major products from hydrocracking are jet fuel and diesel, but low sulphur naphtha fractions and LPG are also produced. All these products have a very low content of sulfur and other contaminants.
    It is very common in Europe and Asia because those regions have high demand for diesel and kerosene. In the US, fluid catalytic cracking is more common because the demand for gasoline is higher
    Wiki–> https://en.wikipedia.org/wiki/Cracking_(chemistry)#Hydrocracking

    1. Energy News,

      Thanks! I spent the entire day two days ago reading everything I could on refinery process, including that article on hydrocracking.

      Here’s the general conclusion I’ve come to, someone correct me if I’m wrong: we can do just about anything in terms of rearranging molecules, but some processes are a lot more expensive (energetically and materially, and thus financially as well) than others. Further, once a refinery is built it essentially produces a certain mixture from a given input, and only expensive upgrades and/or rebuilds can change this mixture appreciably. More advanced refineries could theoretically offer more choice, but this would lead to lots of equipment not being in use some of the time, since you would not always want the mixture that equipment was intended to produce.

      The input crude makes a huge difference, because the closer the product is to simple fractional distillation, the cheaper and easier it is to produce. Cracking and reforming get more costly the more it has to be done, and the more complex the conversions. Turning simple Naptha into Kerosene, for example, is not done much, because it would be quite costly and because the demand for gasoline and diesel is so high, so refineries have not been built with this conversion in mind.

      Finally of interest is how this might all affect crude oil demand. Due to refinery upgrade expense and time required to upgrade, there is a significant time lag between when demand for products changes and when refineries can retool in order to take advantage of the change in demand. This means that, if there is a decrease in demand for gasoline or diesel, we should not expect an immediate decrease in demand for crude in general, as the refineries will still want to produce the other products in essentially the same ratios. It’s possible this dynamic would change refinery economics in ways unfavorable to the refineries, since they will be losing some portion of a source of income. Perhaps this means the prices of the other products would need to increase to keep the refineries solvent, or the marginal refineries go out of business.

      We would also expect demand for certain crudes to increase while demand for others falls, based on what products existing refineries can produce from certain crudes.

      It could take many years after a decrease in demand for gasoline/diesel for there to be a general decrease in demand for crude, and as this happens it seems likely that other oil products become more expensive, until enough time has passed that existing refineries are modified and new ones are brought online.

      Do I have the basic understanding correct?

      1. Don’t forget refinery utilization. On average refineries around the world have a great deal of unused capacity, in part due to overbuilding (e.g., Saudi Arabia is building refineries for their national interest, not due to overall demand for products.).

        So, there’s much more flexibility.

        1. Is that flexibility in terms of choosing different output ratios, or moreso flexibility in increasing throughput when desired?

          1. It’s both.

            If crude profiles change, or if demand shifts, then the prices of both different kinds of crude and the prices of their products change and crudes become more attractive to the refineries that are best suited for them. There’s some “friction”, in the form of transportation costs and delays, contractual arrangements, import/export limits, etc., but if the US were to suddenly reduce it’s demand for gasoline I don’t think you have to worry about too much gasoline being produced because of inflexible refining ratios: overall demand for crude would also fall, by roughly the same number of barrels/tons.

            1. This doesn’t square with the research I’ve done at all. If we still need the same amount of kerosene, and refineries in the US have focused on maximizing gasoline output, how will a reduction in gasoline demand translate to a reduction in oil demand? I still need the same number of barrels to produce the same amount of kerosene, asphalt, feedstocks, etc, until the refineries have had time to be refit. I will reduce demand somewhat for those crudes without an appreciable content of stuff other than gasoline precursors, but that’s it. Unless you are claiming we have massive amounts of unused capacity for say, converting gasoline precursors into kerosene, asphalt, etc. Otherwise we still need the other components of the barrel, regardless of gasoline demand.

            2. There are synthetic routes to produce jet fuel at 70 percent rates if that is the problem. Bitumen can be sourced directly.
              Gasoline and diesel will once again move toward being waste products looking for a use, probably cracked for polymer feedstock.
              Basically the large refineries will disappear.

            3. Of course. But all of this retooling, for example synthesizing kerosene, introduces a significant time delay between decrease of gasoline/diesel demand and decrease of oil demand. How significant I do not know, but it seems quite clear the time lag will occur to some extent.

            4. If…refineries in the US have focused on maximizing gasoline output…

              Don’t forget, we’re talking about a world market for oil. Refineries in different countries (or different regions in one country, e.g. Gulf of Mexico vs Great Lakes vs East and West Coasts) have refineries built for different kinds of oil. If you need more diesel in your product mix,then it will make sense for oil to move to the refineries that are best for that.

              And individual refineries can tweak their output slightly – if gas prices plunge then refineries around the world will change their output accordingly.

              And, finally, if gas prices plunge and diesel prices rise, consumers will also make adjustments. They’ll make many adjustments, but one important one is vehicles moving from high-use drivers to low-use drivers.

              Cars turnover quite quickly: new cars are sold to second owners in 3-4 years, then to 3rd owners in 3-4 years more, so on and so on. Consumption patterns can change pretty fast.

      2. Nikon McManus

        That is a pretty fair set of assumptions regarding a somewhat complex topic.

        You may find it helpful as well as of great interest to view the large, single graphic which visually describes the refining process from the brand new refinery about to be built just west of the Bakken.
        The graphic accompanies the story in the January/February issue of ‘Oilman Magazine’ with the article titled “Going Green in the Bakken”.

        This 50,000 barrel per day complex will produce diesel, gasoline, fuel oil along with propane and butane.

        This is the first greenfield refinery in the US in over 40 years and there are several noteworthy aspects to it.
        Prominent among these is that the latest modularization techniques will be employed so as to minimize costs and greatly speed up the process.

        Furthermore, the entire power plant will be fueled by ultra cheap, excess Bakken natgas.

        Looking farther down the road, this plant may offer future possibilities to construct small refineries, tailored for nearby hydrocarbon production, as a pathway to much cheaper retail products.

        Meridian Energy is the owner.
        This plant is the Davis refinery, to be sited in Belfield, ND.

    1. Thanks, EN. Going forward we have a decrease in US growth, OPEC cuts, Iran sanctions, Venezuela sanctions, Libya outages, and non-opec declines. Should be interesting, and I doubt it approximates a marathon as IEA describes. Fundamentals are what they are, and oil prices do not have much relation to actual fundamentals. Still, prices have to go up, sometime. I still think the market will keep prices depressed until probably sometime in the second quarter. Also, if the market tubes, who cares about fundamentals, oil prices will tube again, for awhile.

      1. Venezuela’s production should be below 1.0 mmbopd for January (best guess 950 Kbopd). February should be down to 800 KBopd.

        I just saw a summary drilling report for a large field sector which shows extreme incompetence, poor planning, and a serious lack of personnel. This explains the steep decline we are seeing. PDVSA performs much worse than state owned outfits I saw in the old USSR, Myanmar, and Argentina. And those were really bad.

        The EU keeps trying to torpedo the Lima Group and the USA by making moves that help Maduro survive, due to a joint effort by Mogherini and Spanish socialist Pedro Sánchez. They are working hard with the communist Lopez Obrador from Mexico.

        The next 48 hours are critical, because we may see the Europeans defeated. And sometime around February 4th there will be an effort to send convoys with humanitarian aid the regime has refused. One convoy is going to try the bridge on the road from Cúcuta to San Cristobal, another will go from Boa Vista in Brazil into Tumeremo. And the third is confidential. Unfortunately given the European behavior and the high probability that either Cuban or Russian spies are working hard on figuring out what’s going to happen, I’m not told even 10% of what’s going on, but I sense Maduro will fall soon. And that means the end of sanctions.

          1. A turn around will be extremely slow. The key priorities will be getting medicine to people who are dying right now. The next priority is vaccination campaigns and food for children, then food for adults, fixing the water supply system, improving security to reduce looting, patching the electric grid and getting generators to work, helping refugees who fled to other nations to return. And of course thus will have to be done with Cuban military and agents trying to obstruct, and communist fanatics carrying out terrorism and kidnapping. Other minor issues will be getting the Colombian ELN out of the gold fields and hunted down in cooperation with the Colombian army, and building camps for Cuban POWs and hard core chavistas. The oil will have to be a secondary or tertiary focus.

            Right now several countries have issued statements recognizing Guaidó as President. It appears to have been a coordinated action timed for 1100 GMT.

  32. Can someone please explain this- According to this site Non OPEC production of oil (minus USA) is around 38 million barrels and declining at about 2.5 % per year. By 2050 even assuming a non increasing decline rate this would be around 18 million barrels.
    Production from 10 OPEC countries other than Saudi Arabia,Iraq,Iran,Kuwait and UAE is 11 million barrels and declining at about 3 %. By 2050 this will be around 3 million barrels.

    US Shale oil production will not exceed 1-1.5 million barrels and conventional US production may be down to a million barrels.

    Even assuming the Big 5 of OPEC currently producing about 24 million barrels can produce about 20 million barrels by 2050 the total oil production will be 45 million barrels from the current 82 million barrels. (I took all the numbers from the charts published on this site)

    Can the civilization survive this given our dependence on liquid fuels. Can Coal to liquids and Gas to Liquids pick up the slack? I am not an expert in this so please forgive any oversight. Thanks.

    1. Ravi, current decline rates, like current increase rates, can never be extended into the future with any degree of accuracy. But it is my opinion that decline rates will increase and oil export rates will increase even faster. And countries that are currently increasing production, or can increase production, will gradually, cease to do so. And all this will happen long before 2050.

      What will happen when this happens? I haven’t a clue.

      1. Ron, Thanks for replying.

        Are you saying that decline rates will increase because we are not discovering enough oil to replace what we are consuming? Does this mean output may be less than 45 million barrels in 2050? This is the Rystad report on oil and gas discoveries for past couple years regarding oil and gas discoveries.

        https://www.rystadenergy.com/newsevents/news/press-releases/oil-gas-exploration-winners-2018/

        As you can see despite highest upfront spending in 2014 for exploration(according to EIA report) the discovery was only about 19% of oil and gas consumed.

        Does this mean there simply isn’t a lot of oil to be discovered and no amount of exploration will change that?

        1. Are you saying that decline rates will increase because we are not discovering enough oil to replace what we are consuming?

          No, that’s not what I meant at all. I meant decline rates in large fields, where about 60% of our oil comes from, are increasing. They are increasing because of massive infill drilling which caused decline rates to decrease whin first implimented. That infill drilling decreased decline rates but increased depleation rates in those giant fields.

          As you can see despite highest upfront spending in 2014 for exploration(according to EIA report) the discovery was only about 19% of oil and gas consumed.
          Does this mean there simply isn’t a lot of oil to be discovered and no amount of exploration will change that?

          Of course, that’s exactly what it means. And the trend will continue while the demand for oil will continue to increase. That means something’s gotta give. Both trends connot possibly continue. So production will fall. However I have no idea what the result will be. Many on this blog are of the firm opinion that renewables will rise to meet the challange. But count me among the skeptics.

          Discovery rates have falling since 1964.

          1. So instead of allowing geology to take its course and follow a natural decline rate we are using technology to stabilize the decline in the short term but increasing depletion and making things worse in long term.
            That seems very foolish but also very typical of our civilization.

            I agree with you that renewables simply lack the energy density to come anywhere near fossil fuels. They will have a role to play in the future but only if we reduce our consumption by a large degree. If we refuse to change our ways immediately, this coupled with climate change and environmental degradation will very likely collapse the civilization by 2050-2060.

            1. Well, they are just using infill drilling, and I don’t think that is new technology. However horizontal wells, though they have had that technology for a long time, they have only seen very widespread use in the last couple of decades. And they do recover some oil that would not be otherwise recovered.

              But yes, because of massive infill drilling, the decline rate will be a lot faster when the water finally hits those horizontal wells. But that is just how the world works, or more correctly, how the human mind works. Cornucopia today and hope technology will take care of everything tomorrow.

          1. Hi Dennis,

            Is this the URR given by Jean Laherrere? I remember his estimate of URR to be around 2.2 trillion barrels excluding extra heavy. Also cumulative production till 2017 has been around 1.3 trillion barrels which means a URR of 3.1 trillion would indicate another 1.7 trillion barrels remaining.
            This aligns with BP estimate of reserves which is completely unreliable. For instance they still say that Saudi Arabia has 261 barrels which hasn’t budged a barrel since 1970-80s despite pumping more than a 100 billion barrels. Also there is not much oil left to be discovered as Ron posted in previous comment.So how is this figure of 3.1 trillion barrels arrived at?

            1. Hi Ravi,

              Laherrere has updated his estimate to 2500 Gb (excluding extra heavy oil), typically he uses an estimate of 500 Gb for extra heavy oil for a total of 3000 Gb. The 3100 Gb estimate assumes about 2800 Gb of conventional oil (excludes both extra heavy and tight oil) with a 200 Gb estimate for extra heavy oil and 100 Gb for tight oil.

              The USGS estimates about 4000 Gb for the TRR for oil (continuous and non-continuous oil).

              If you have read Jean Laherrere’s work you will note that his URR estimates keep increasing over time in 1998 conventional URR was 1800 Gb, in 2005 about 2000 Gb, in 2012 about 2200 Gb and in 2018 about 2500 Gb. Over time discoveries can come both from new fields and revised estimates of fields that have already been discovered. Note that the IHS estimates of proved plus probable reserves in 2011 were very similar to BP “proved” reserve estimates for the World total.

              Globally, BP [13] estimates 1263 Gb of conventional proved reserves in 2011 (slightly more than cumulative production to date) and 389 Gb of non-conventional proved reserves. The latter comprise 169 Gb of Canadian oil sands and 220 Gb of Venezuelan extra-heavy oil, but both estimates are disputed and only a fraction of this volume is likely to be recovered over the next 25 years. In principle, global 2P reserves should be larger than 1P reserves, but according to an authoritative industry source (IHS Energy) global 2P reserves are approximately the same as national declared 1P reserves—suggesting an overstatement of proved reserves by several producing countries.

              See just below figure 5 at link below https://royalsocietypublishing.org/doi/full/10.1098/rsta.2013.0179

    2. “Can the civilization survive this given our dependence on liquid fuels.”

      The unacceptable answer, but the overwhelming most probable one, is no.

      6 of the 7 billion will most probably die over a period of 3 – 5 years in the not too distant future. Their corpses will rot above ground and disease derived from them will kill even more.

      ” Can Coal to liquids and Gas to Liquids pick up the slack?”

      No.

      1. Liquid fuels are one the way being phased out.

        China is leading – they don’t have any intererrest being dependend on the black stuff, since their own resources are fading – and dependence on oily stuff is a military Achilles heel of category 1. So they develop technology to do this:
        – Scooters? Already no more black stuff
        – Town busses? Half way done.
        To go: private transportation, trucks, planes. No car company will be allowed to sale ICE cars in a few years, when they don’t offer electic, too.

        It’s generation 1 now, generation 2(solid state battery) is on the way to the market. At generation 3(either high power density flouride or lowest price sodium battery) the price will be attractive to everyone.

        So reducing demand gives longer runtime on existing reserves. The next 30 years count for this.

        1. Eulenspiegel Wrote:
          “Liquid fuels are one the way being phased out.”

          Considering that global production has grown to 84 mbpd it does appear to be on its way to being phased out. Seems like us humans cannot get enough of the stuff as it is.
          Eulenspiegel Wrote:
          “China is leading – they don’t have any intererrest being dependend on the black stuff, ”

          Is that why China is in VZ and investing billions in Oil producing nations not under US control?

          “It’s generation 1 now, generation 2(solid state battery) is on the way to the market”
          Batteries are energy storage devices. Most of the electricity is from Coal, NatGas, some nuclear, a bit of Hydro, and some renewable crumbs. Presuming if global product peaks and begins declining 4% to 7% per year than there will be no way to avoid a collapse.

          Third the capital & manpower simply isn’t there. World Debt is going to top $250T this year, and its fiscal imbalances will begin to soar as entitlement, pensions and healthcare outlays double over the next ten years, which little or not capital set aside to support it.

          World continues to march to WW3, as the industrialize world is locked in nuclear arms race, led by the USA withdrawing from treaties. US, China, & Russia are now approaching 10% yearly increases in Military spending (on the books, who knows what the real increases are). The US also has started trade wars with both China & Russia which is usually the precursor to hot wars.
          Its all madness, but the public goes no as if nothing is wrong.

          1. To go all in oil, China would have to:
            – Maintain a as big as the carrier / submarine force as the USA to keep sea ways open
            – Maintain bases in big oil production countries.

            They go only half in there – getting supply until it phases out.

            Phasing out means a process of about 30 years. Look as long it took to phase out horses. New York was first – now it will be Shanghai or any other chinese town.

            All these big proxy wars have been around oil – coal, gas and even nuclear isn’t as explosive in history.

            1. Eulenspiegel Wrote:
              “Phasing out means a process of about 30 years. Look as long it took to phase out horses.”

              Unlikely. War & collapse first. Its easy to switch to high-dense low cost energy source, than it is to switch to a low-dense, high cost energy source, and when Autos & trucks became available Horse demand began to decline almost immediately. You analogy does not apply to “Phasing out Oil” since production and consumption of Oil well out paces growth in EV and renewables. For a person to stop gaining weight they have to stop shoveling food into their mouth. Currently like the World the obese persion has a squeeze ball in their hand for exercise (aka Investments in Renewables).

              Eulenspiegel Wrote:
              “To go all in oil, China would have to:
              – Maintain a as big as the carrier / submarine force as the USA to keep sea ways open. – Maintain bases in big oil production countries.”

              Not really, if the US pushes China into a corner they start up a bunch of proxy wars, limit exports to the US, and perhaps just go berserk & let the nukes fly.

            2. Electricity is high density, and solar/wind is very low cost.

              Oil is a bit more convenient, that’s all. Though, when you think about it, charging in your garage is a heck of a lot more convenient than going to the gas station.

      2. From 1979 to 1983 World consumption of oil fell at an average rate of 2.8% per year (using BP consumption data in tonnes of oil equivalent) over that 4 year period. Higher oil prices lead to adjusted allocation of energy resources to their most important uses.

        It has happened before and the most likely scenario is that it will occur again as oil output declines in the future. Peak decline during the 1979 to 1983 period was 1979-1980 when the annual decline in oil consumption was 3.9%.

        The World did not end.

        1. dood, the only thing that “happened before” was Iran lost 80% of its oil production during the 1979 Revolution, which stayed down REGARDLESS of price. Global oil production loss was essentially what Iran lost and consumption loss tracked production loss for the incredibly difficult reason to understand — that there was inadequate oil being produced to be consumed.

          You know better than this. Stop the delusion. Nothing is going to solve the coming massive deaths other than cutting the deaths in half by eliminating consumption of other countries by force. You can get the death count down to 3 billion rather than 6 that way. Pretty much no other way.

          1. Oil hit an inflation adjusted price (2018 dollars) of $122 per barrel in 1979, which has only been surpassed by the 2008 spike of $144 inflation adjusted price (2018 dollars).

            1. Shallow sand,

              If output drops prices are likely to rise, just as was the case in the past, in fact whenever there is a shortage of a good the price of the good will rise in a free market.

              If the government chooses to control the price of the good (as Nixon attempted in 1973 and 1974) then you get long lines at the gas pump.

              A better solution is to let the price rise so the scarce good is allocated to its most important uses.

              People using fuel idling in gas station lines is a pretty poor use of a scarce good.

            3. Dennis C Wrote:
              “A better solution is to let the price rise so the scarce good is allocated to its most important uses.”

              its not as simple as that. High energy costs cause rebellions and wars. Recall that it was the high energy prices that triggered the arab spring. France has been enduring wide spread protests and strikes since November over higher energy taxes.

              Raising energy costs solves nothing, it just pushes the public over the edge. As soon as energy prices jump back up, most of the EU nations will be under siege with frequent riots and terriorism. We’ll see the same world wide in Asia, Africa, Latin America and eventually the USA, as people begin to suffer and simply lose it.

              I am pretty sure the backdrop over the three way cold war is future energy shortages. The US took the first shot by going into the Middle East in order to control the biggest pie. Next on the list is Venezuela and Iran, Probably VZ first will be targeted, since its easier to topple. Iran is a tougher Nut for the US to crack since Iran does have a few nukes already. Its possible that a US-Iran hot war will start WW3.

            4. High energy costs cause rebellions and wars.

              Only if there is a very bad public relations approach. Places like Egypt and Haiti had fuel price riots because, well….everyone there hates their government, and for good reason. But also, they handled the price increases really, really badly. For instance, they didn’t substitute some kind of subsidy for the working poor (which would have been far cheaper and far fairer, as it happens – cheap fuel is a terrible way to help the working poor. It’s very expensive and inefficient because most of the subsidy goes to the wealthy).

              Both India and China have raised fuel costs sharply in the last few years (by lifting price controls and reducing subsidies), and they’ve done pretty well.

              And, of course, Europe has had high fuel costs for passenger vehicles basically forever.

  33. Don’t have the link handy. Norway’s SWF fund manager is interviewed on Bloomberg. Interesting item — sometimes he includes the North Sea oil fields as part of his presumed portfolio. When he does, then he doesn’t need to buy oil company stocks that pump elsewhere. But other times he considers that revenue flow into the SWF to be something not relevant to oil — just money that comes in. When he thinks that way, he needs to buy oil company stocks.

    1. Norway’s SWF is over 1 trillion dollars in size. It represents between 1 and 2% of all the common stock shares on Earth.

      Let that sink in for a moment. Tiny Norway controls between 1 and 2% of the world’s stocks. The other countries with similar funds accumulate to trillions of additional dollars add additional percentages of all the common stock shares on Earth. You can add them up yourselves and realize that all of it came from oil and gas.

      It is possibly the most important interview Bloomberg has ever presented.

      One other thing worth noting. These funds got to 1 trillion dollars and more, over a period of I believe decades, but only two decades. A look at long-term stock index charts shows a severe decline in the 2000 to 2002 time frame, and then the smash of 2008/2009. The point being that the growth came from the relentless addition of money from oil to those funds. It was not compounding that solely, or even mostly, generated these enormous sizes. It was the annual influx of cash from surplus money the countries had from selling oil and gas. Now because these funds are so large in size, returns become more and more important in contrast to the past, but despite that the enormous annual influx defines largely the philosophy of portfolio management that this guy will follow. He doesn’t need big returns, if those returns are accompanied by risk. He can more wisely accept low returns, accompanied by low-risk, because if there is a loss of a low magnitude, derived from low-risk, it will be easily and quickly erased by the annual influx.

      The world has never seen a combined entity like this before.

      https://www.bloomberg.com/news/features/2019-02-02/norway-s-1-trillion-man-talks-brexit-china-and-big-tech

    1. The way things have been unfolding, production was bound to drop a lot in January and get even worse in February, due to the significant amount of unrest within the country. For example Maturin, the core oil field city in the East, has been having anti government demonstrations and regime military parades to try to show who’s boss. All this blocks city traffic and keeps oilfield materials and personnel from moving.

      As I wrote before the drilling and work over rigs are paralyzed, and I don’t see much energy in the labor force to help Maduro survive.

      Right now there are convoys with food and medicine trying to cross the border, but the Venezuelan military won’t allow it. The people leading the convoys use bullhorns to sends messages to the military explaining they aren’t armed and only want to deliver the humanitarian relief. I assume these scenes aren’t being shown on CNN or reported by The NY Times, because they aren’t news fit to print.

      There are countermoves being made by the international left, with significant efforts by Spanish socialist president Sanchez and Mexico’s communist president Lopez Obrador. The European Union’s foreign minister, Migherini, who is also a communist, is trying to use subtle moves to help Maduro gain time.

      And of course the forces trying to free Venezuela are also preparing their moves. But those I’m not about to discuss here. I wouldn’t count in much oil coming out of Venezuela for February. God willing, Maduro and the Cubans will be defeated, but it will be a tough fight.

      1. Didn’t the people vote for Chavez more than once?

        Which is more important? Democracy, or an ism defined by a substance created from thin air, that is, money.

        3. Isn’t Chavez dead? Do the people have a chance to change their minds after they figure out that Chavez’s agenda ruined their country?

          1. They did have that chance. Several times. Look up the Chavez wiki.

            The people chose between an ism and a foreign source of pressure. They rejected the foreign source of pressure.

            And I can assure you that if the country were one of pure capitalism, but US sanctions continued, it would still fail. Depending on what you mean by fail. Population is growing there, just as it has in Cuba amid decades of US sanctions. Population growth is the proper measure of success/fail.

            1. My understanding is the population growth has significantly slowed recently with all the refugees leaving for Columbia, Brazil, etc.

            2. Population is growing there, just as it has in Cuba amid decades of US sanctions.

              No, the population of Venezuela is definitely not growing, though some charts that just project past growth into the future show it growing.

              Venezuela Has Lost 13% of its Population in a Mass Exodus from Socialism

              Official figures from the International Organization of Migration (IOM) indicate that between 2015 and 2017, Venezuelan emigration more than doubled, increasing from 700,000 people to 1.5 million.

              Of course, this site is biased. The people are fleeing famine due to political corruption, not necessarily socialism.

              And a 2018 update on the mass exodus. The population decline has increased to three million.

              Venezuela: All you need to know about the crisis in seven charts

              6. Many Venezuelans are leaving

              Three million Venezuelans have left their home country since 2014, according to the UN.

              The majority of those leaving have crossed into neighboring Colombia, some then move on to Ecuador, Peru and Chile. Others have gone south to Brazil.

              Of those three million, about 2,650,000 left in 2018. So, the exodus is dramatically accelerating.

      2. Fernando,

        Here is some mainstream coverage:

        https://www.reuters.com/article/us-venezuela-politics-guaido-idUSKCN1PN1CX

        and

        https://www.cnn.com/americas/live-news/venezuela-protests-2019/index.html

        and

        https://www.cnn.com/2019/01/23/americas/venezuela-protests/index.html

        and

        https://www.nytimes.com/2019/02/02/world/americas/venezuela-protests-opposition-maduro.html

        and

        https://www.bbc.com/news/world-latin-america-47115857

        and

        https://www.aljazeera.com/news/2019/01/venezuela-crisis-latest-updates-190123205835912.html

        Feel free to point out all the “lies” you find.

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