163 thoughts to “Open Thread Petroleum, March 28, 2018”

  2. https://www.bloomberg.com/amp/news/articles/2018-03-28/texas-sized-gas-conundrum-emerges-in-america-s-busiest-oil-field

    Possibly zero to negative selling price of gas coming.

    https://www.upi.com/Energy-News/2018/03/28/IEA-sees-short-term-bottlenecks-for-US-oil-sector/8151522241570/

    Ok, even IEA recognizes the oil takeaway bottleneck. The oddity to this, is that I don’t see them backing away from the 1.3 million barrel increase. Which, I think is totally unrealistic. But, even if it did, how much would the discount be, if it did? I’ve heard of shooting yourself in the foot, but not with an RPG. It’s barely started, yet, and the discount is already $5. Canada’s discount is almost $31, because of lack of pipeline capacity. At some point, you have to agree with Gump, “stupid is, as stupid does.”

      1. I posted that first article in the post above, but it needs to be told again. There was a study on excess flaring last year, but I know of no location to get to the amount that is being flared. RRC is way too lenient on this. They have, or can retrieve those numbers, as they are reported monthly per lease. I’d be interested to see how far a lawsuit on wastage would go for mineral right holders. Though if they don’t flare it, the royalty owners may wind up getting zip on the sale, or may see a deduct from their check on paying to get rid of it. It’s really not the oil companies’ oil and gas, it’s the mineral right owners oil and gas. Once it’s gone, it’s gone. Oil companies should produce it in the most economical manner. That’s their responsibility, but they are too irresponsible. Way stupid.

        To compound that problem, a lot of the wells in the Delaware Basin are heavy on gas production. Heck, most of the production from Apache’s new Alpine High field is gas.

        Somehow, I have a real problem putting this all together:

        https://oilprice.com/Energy/Oil-Prices/Barclays-Expect-51-Oil-This-Year.html

        How does this 1.7 million get out of the US to make Brent drop to $58? Expansion to ports is not due until 2020. Worse yet, discount will be over $30 a barrel, making the net around $20, maybe except for that hedged. ????

        1. Most leases dont entitle the mineral owner to royalty from flared gas unless specifically stated so lawsuits would go exactly nowhere in many cases. The amount being flared is miniscule

          1. This was back in November, and I doubt it has subsided any. Does not appear to be minuscule.
            http://blogs.edf.org/energyexchange/2017/11/14/new-texas-permian-oil-and-gas-flaring-report-reveals-excessive-gas-waste-and-major-gaps-in-operator-flaring-practices/

            More of the same, except it describes how operators have anticipated the low prices, and have hedged the problem. None of that income from hedging will reach the royalty owner.
            https://www.dallasnews.com/business/energy/2018/03/29/oil-rich-permian-basin-texas-sized-natural-gas-problem

          2. Bullshit on the miniscule flaring comment. You are kidding, right?

            I just came from the Permian again a few weeks ago; both basins. Its stunning how much gas is being flared. From the ground its amazing. Fly over it all at dusk in a small fixed wing aircraft at it is unbelievable. Every four months or so I’ve gone, it gets worse. There are articles everywhere about there being no gas takeaway; do you think folks make that up ? If operators can’t sell associated gas, what do they do with it? They don’t shut their wells in…they flare it. There are few leasehold provisions in the Permian regarding flaring and mineral compensation because most of the leases have been HBP for decades.

            We have been using polymers, solvents and surfactants in EOR, circulating gas thru old reservoirs to recover liquids for 70 years; now, because the shale oil industry does it is a miracle of “resourcefulness.” Here is an example of shale resourcefulness, it is wasting America’s natural gas resources: https://viirs.skytruth.org/apps/heatmap/flaringmap.html#lat=29.43243&lon=15.26825&zoom=3&offset=15

            Every well location, besides an array of 436s a football field long and three deep, has frac tanks on it for extra storage; they can’t move the oil anymore. Everybody that use to drive oil trucks, and water trucks, is now hauling sand. Every disposal facility I saw had a waiting line six trucks long; with drive and wait time, water disposal is pushing $2.50. They are draining W. Texas groundwater sources and then having trouble re-injecting all of it. The traffic, and the damage to highways and roads is horrendous. The numbers are way off in this article; frac’ing now requires 500-600K BW, but it is important: http://www.circleofblue.org/2018/world/americas-oil-boom-can-not-happen-without-groundwater/

            One third of the revenue streams in West Texas are now gas. Gas is eeking out a buck fifty per mmbtu right now, wait another month and it will be half that. D&C costs are going up; economics are getting worse, in spite of higher productivity (and steeper declines). Its hard to unleash America’s energy “dominance” on the rest of the world when you do dumb stuff like this: https://www.chron.com/business/energy/article/Steel-tariffs-to-squeeze-oil-service-producer-12781550.php.

            6 month payouts in the STACK, 5000 feet of “pay” in Pinedale in the Powder River Basin, 1.4MM BOE EUR’s, billions of dollars of free cash flow, higher dividends, more growth…the shale oil and shale gas industry and its cheerleaders say that kind of bullshit because they are taking advantage of people who do not understand and can’t think for themselves. Who cannot do simple arithmetic. The shale industry will do and say anything at this point to raise more money or defer their debt as long as they can and keep investors from bailing. It is trying to drill its way out of the mess it made for itself, all the while begging OPEC for more production cuts, praying for higher prices.

            1. Is it just me, or does the world flaring map that Mike linked highlight that the world oil market better not just rely on US shale for supply sustainability, let alone supply growth?

              On a worldwide scale, the US shale basins are small. Just a few counties in each.

              Not the kind of size that appears to guarantee decades of abundant supply.

            2. great post Mike, thanks

              also serves to highlight the difficulty of fracking large scale in other countries….you need water, sand, trucks, roads, pipelines, and a willing capital market

              not easy

            4. Mike & Shallow,

              The largest operator in the Permian is Pioneer Resources. In 2016 Pioneer produced nearly 60 million barrels of oil… they were also the largest natural gas producer as well. You would think that with being the largest producer, Pioneer would be making MONEY HAND OVER FIST.

              They AIN’T.

              For example, Pioneer made $4.8 billion in cash from operations 2015-2017, but they spent $6.3 billion in CAPEX to produce that high-quality oil and gas. Now, if we stayed awake during grade school math, then Pioneer spent $1.5 billion more to produce that oil and gas.

              Well, that’s not economical, is it? If it weren’t for the $1.3 billion in asset sales as well as the $2.5 billion in new stock issuance in 2016, Pioneer would have added $1.5 billion to their long-term debt.

              However, Pioneer has HOODWINKED the market and investors into believing they can make money turning GOLD into LEAD.

              So, as long as investors and the market continue to think with their SMALLER HEAD, then the insanity will continue.

              steve

        2. Isn’t New Mexico tougher on gas flaring than Texas?

          Is that making a difference in how the Delaware Basin is being developed?

          1. Actually, New Mexico flaring regulations are very lax, more lax than Texas. Its a good point, by the way, about geographical size of the resource plays in America compared to the rest of the world; if you take that thought further the number of counties that make up most of the production in those shale plays is very small.

            By the way, for those considering the Concho/RSP “merger” an indication of how wonderful the Permian is, better look at the numbers one more time; who got the debt liability, who got the stock bump, the astounding acreage costs; this was a forced marriage by lenders, little else. Water costs going up, frac and drilling costs going up, steel going up ($235K per well) and these acreage costs…$1M per well just got added onto the economics. And the E in BOE by year end will be NA, for not applicable.

            Here is Concho’s plan: “Long laterals and (avoiding) the parent-child relationship” where close well spacing reduces output, drove the deal, said Leach. “Large, contiguous blocks of acreage are strategic,” he told investors, here https://finance.yahoo.com/news/shale-wells-grow-longer-buyouts-153036148.html…imagine spending $9.5 billion to be able to avoid well interference because you can’t otherwise discipline yourself enough to avoid well interference, thereby reducing output, on your own. Good grief.

            Anybody thinking this shale thing is a piece of cake, sustainable, and good for our long term hydrocarbon future in America needs their head examined.

            1. Hi Mike,

              Are Texas regs too lax?

              Sometimes you say there are too many regs(maybe from EPA), sometimes you say they are just right(or maybe better than other states), and here you imply the flaring regs are too lax.

              Can you clarify?

            2. Dennis, flaring regulations are different than well density and spacing regulations that could be used as a means of regulation shale oil growth. Flaring regulations in Texas appear to be getting ‘laxer,’ yes. “Regs” is a broad term; I favor not wasting hydrocarbons, slowing shale oil development in the name of conservation and the future, and not exporting America’s hydrocarbons, at the same time continuing to support a healthy oil and natural gas industry that ALL American’s will need, desperately, for decades to come.

              By the way, less than 300K BOPD is hauled to end users by rail in America, most of that from PADD 5 (EIA); little to none by truck, anywhere. Trucks haul to pipelines. When pipelines are full generally refineries have no vacancy either and trucks don’t haul. There are actually no alternatives. We are coming up on maintenance season and throughput is going to go way down.

              Higher oil prices, if they occur, will exacerbate the market problems in America, not automatically make them better. Prices are still very volatile. Yesterday alone (WTI down $2) there were 5 major important news announcements suggesting prices will not rise much higher than they are now, or go down. Folks that need prices to go lots higher (and stay there, that is the REAL issue), whatever their reason, have outkicked their coverage by 2 years.

            3. Thanks Mike,

              Generally, I favor less intervention in free markets except in the case of externalities (pollution of air, water, and the environment in general).

              I agree resources should not be “wasted”, but I believe a producer should not be restricted on who their product is sold to, that the market should be “free” as long as the production and sales of a product do not affect others negatively (due to pollution).

              This was once considered Republican orthodoxy, until very recently.

              On higher market prices I also disagree.

              As long as the market is allowed to freely determine a market clearing price for oil, that oil price will lead to the most efficient allocation of scarce resources.

              This is intermediate microeconomics, which you are no doubt familiar with.

              The world oil price is likely to rise because current oil prices will likely lead to a World oil supply which is lower than World demand for oil.

              If there is a lack of adequate oil and natural gas pipeline capacity, new pipelines will be built to take advantage of the price discount that results in areas with more output than available capacity.

              In addition, investments will move to those basins where pipeline capacity is adequate (or where there is excess rail capacity, such as North Dakota.) Perhaps the DJ Basin or SCOOP might see more investment as the Permian pipeline capacity becomes tight.

              Have higher oil prices affected you negatively?

            4. Dennis, yes, they have, actually. Labor is a major problem in the oil industry right now; the Permian flash in the pan has drained our entire work force. Higher oil prices the past 6 months have led to higher costs. More LTO oversupply is negatively affecting markets at the moment and even purchase of product, whatever the price. There must be 40 comments, with links, to that very thing on this thread alone; you should read them, not ignore them. Another below “intermediate” example of market problems is flaring, which is a waste, and harmful to the environment.

              US shale oil has the lowest finding costs in the world. Why? Because those finding costs are limited to interest paid on debt, the principle of which seems to never get paid back. Your wild ass growth predictions cannot happen without adding more new debt on top of old debt. Your solution to marketing issues is more pipelines (to export terminals, I guess), and more debt. No other producer in the world can compete with the US shale oil phenomena. That’s not “free” enterprise, that is a perfect example of one of the biggest government subsidized wealth distribution schemes in history. The government prints the money, a chosen few skim hundreds of millions off the top, and the consumer reaps the rewards. The US shale oil phenomena is the sole cause for lack of meaningful investment in remaining conventional hydrocarbon resources, the kind that will last, and advancement of cost affective alternatives needed for transportation. And you call yourself a liberal !

              Shale oil has never been profitable, not ever. It is not now. When shale oil is gone, America will be in deep shit. Which I guess, is really what you want, isn’t it; off fossil fuels ASAP. That’s the mission.

            5. Mike, you make a lot of sense. Are you saying the LTO industry is running on inflation (growth of money supply)?

            6. Hi Mike,

              Interesting, so how low would you like to see the price of oil?

              Shallow sand had suggested in the past that he would prefer 55 to 65 per barrel. Do you have a preferred price range, is it perhaps $45 to $55 per barrel?

              I agree the flaring is wasteful, that is up to the RRC to regulate and is exactly the type of externality I was referring to, if it is a pollution problem. If not it is up to the owner of the resource to decide what to do with their resources, again a pretty common free market principle.

              In a free market system people are free to invest their capital as they see fit, I think it’s a pretty good system, not perfect just the best humans have figured out so far.

              For a conservative you have some pretty left leaning ideas.

              I am less of a liberal and more of a properly regulated free market centrist (along the lines of many western European nations).

              Free trade- good idea
              Properly regulated markets- good idea

              Properly regulated means pollution is either taxed or capped at levels where environmental damage is minimized.

              Most people think that government interference in business decisions should be minimized unless those business decisions negatively affect the environment (usually due to pollution.)

              Do you share that view?

            7. Respectfully, Dennis; I no longer trust your motives regarding our nation’s hydrocarbon future and what you are trying to accomplish on POB. I do not understand your incessant need to predict prices, or production rates. You are all over the map on just about everything. I do believe, and you have said as much, many times, that you too want fossil fuels to be over and done with as soon as possible and I see that as a bit of hypocrisy on a blog that use to be a reasonable place to come to discuss interesting topics about the future of oil. That changed with Ron left. Almost everyone I enjoyed hearing from that had ever gotten their hands dirty, at least, has been run off, or voluntarily left POB. I need to go as well.

              I was literally born in the oilfield 67 years ago; when I was old enough to learn to add and subtract I learned well economics, when oil prices were $3.20 a barrel. I understand decline, and depletion, and I KNOW that unconventional shale is not the answer to our nations hydrocarbon woes. Your answer, Dennis, for everything, is not rooted in real life. Mine is. I am a conservative, and a Republican supporter, but know that our dimensioning hydrocarbon resources circumvent stupid political idealism that you, and tee tee, and Nick, and everyone else on POB live and seem to sleep by. Its way past time to be worrying about stupid shit like that. There are some angry, pissed off, divisive people here. What a waste of breathable air to spend Easter, on the internet berating Christians.

              We’re running out of oil, pardnor. And its happening fast now. No amount of borrowed money you want to throw at this problem, but don’t have to pay back yourself, is going to fix it now. Nor is higher prices. And society is not equipped, nor emotionally/financially prepared to delve off into the vast alternative unknown. Not yet. That cannot work either without yet another mass wealth re-distribution in our country and when that happens it will be wind and battery and solar dickheads skimming off the top, instead of shale oil CEO’s. Wait, I guess that has already happened, hasn’t it?

              Good luck with the $80.39 per BO thing by December 31, 2018, 14:00 GMT. I hope it works out for you.

              Mike

            8. “You are all over the map on just about everything. “

              Well, we are getting feedback that the reason that projections are so off is because much of the real data is closely guarded. Not much we can do about that but to do the best with the data we have.

            9. Mike,

              As far as my wild guesses, about a year ago I tried to do an estimate and made some errors in the initial post which I corrected in the comment below.

              http://peakoilbarrel.com/future-us-light-tight-oil-lto-update/#comment-599611

              In the chart below I have updated the medium scenario (dashed line in chart in linked comment) by simply updating the LTO output data and adding actual monthly WTI price data.

              Bottom line, my guesses have tended to be on the low side of actual output for 2017.

              Currently my guess is an 800-1200 kb/d US LTO increase for 2018, based on last year’s increase of 1100 kb/d for US LTO Output (Dec 2016 to Dec 2017). My model predicted 8860 new US LTO wells in 2017, which may have been too low or possibly the average completed well was more productive than I assumed.

              Click on chart to enlarge (brown crosses are WTI prices (right axis in $/b)

            10. Hi Mike,

              Respectfully, the future oil price affects future output of oil.

              Currently I expect about 80+/-10 $/b for Brent and maybe $75+/-10 for WTI for the monthly average spot price in Dec 2018. Currently the WTI is at about $62/b for the past month, up from about $50/b 6 months ago.

              I expect the World oil market will be tight over the next 9 months, if that is correct oil prices are likely to rise. If the rate of increase of the past 6 months continues for the next 9 months, we would see oil prices rise by $18/b which would bring WTI to $80/b by the end of 2018.

              As the future of oil and natural gas and how it affects society is what this blog is about, I attempt to predict future prices.

              Interesting that you are unwilling to suggest a price you would like (not about predicting oil price, just saying the oil price you think is “right”).

              Do you think oil prices are too high?

              You seemed to imply that the current price level is a problem because it is too high.

              I agree oil output will peak and decline, society needs to deal with that problem.

              As to wealthy people benefiting from capitalism, a progressive tax system would help reverse some of the damage done since 1981, since the tax code has become much less progressive since then.

              My motives are to understand how a transition to less fossil fuel use might be accomplished.

              Chart below shows my medium oil price scenario from last April (2017), the average price for WTI in 2017 was $51/b, slightly lower than the medium scenario ($55/b). The average 2018 price from the April 2017 medium oil price scenario is $57/b (2016$) or $60/b in 2018$. Click on chart to enlarge

            11. Here is the high price scenario I did in April 2017, I have updated only the EIA US LTO data on this chart through Feb 2018. Again my “wild ass guesses” proved too conservative relative to what actually occurred in 2017. Click on chart to enlarge.

              Note A= all US LTO, P=Permian, B=Bakken, EF=Eagle Ford, and O= other US LTO besides P, B, or EF. the numbers are total ERR for each area as well as the US Total ERR (economically recoverable resource) for this scenario.

  3. Remember when Ronald Walter used to post all that info about rail car shipments? It’s kind of a hot topic these days in respects to Canadian WCS.

    1. Re Canadian WCS and CBR …

      Doing some research (prompted by an exchange on another site) on the latest goings on with SAGD.

      Seems like it might be the very early stages before SASAGD becomes recognized, that is, Solvent Assissted Steam Assisted Gravity Drainage.

      In addition to other innovations like modular build out of expensive SAGD infrastructure (expanding economic footprint), the effective use of solvents shows great promise in increasing recovery.

      One goal of the operators is to utilize propane, butanes, pentanes to the goal of NOT liquifying the heavier asphaltenes.

      In effect, Keeping It In The Ground.

      If those Crazy Canadians achieve the result of producing pipeline- ready, lighter API earl right at the well head, ramifications could be enormous.
      (Huge supply of NGLs right up there in the Duverney and Montney).

      Depletion never sleeps.
      Human resourcefulness never takes a nap.

      1. I was member of a technical committee reviewing solvent processes to recover heavy oil until 2010, later I did some consulting reviewing solvent processes, and worked a bit on a process I can’t describe here, which involve very aggressive use of solvents.

        It seems to me adding a bit of butane to the steam going into a SAGD chamber is useful. The propane doesn’t help as much, pentane is too expensive. But the pilots are over a decade old. Therefore this isn’t really new technology. It’s all about being able to get cheaper butane and recovering as much as possible with the produced oil.

          1. Lightsout,

            That company seems to be a few quarters away from bankruptcy. When a company utilizes SPONSORED POSTS to get the word out, it should be a RED FLAG.

            As I have mentioned in previous posts, the OIL PRICE is heading much lower even though analysts such as Art Berman, using supply & demand forces, believe higher prices are coming.

            The COT REPORT Structure for Oil is a staggering 734,000 Commercial Short positions. This does not suggest higher prices are coming, but rather, much lower as the markets correct by 50%.

            Thus, an oil price of $30-$40 would most certainly KILL this crappy oil company for good.

            steve

            2. Lightstout,

              Yeah… they do. However, they claim that figure at PRODUCTION COSTS only and not including any CAPEX spending to make the plant.

              If you read that article, then you would have noticed that U.S. Oil Sands Inc in Utah went BELLY UP.

              Both companies are selling the very same thing…. SNAKE OIL.

              steve

            3. I agree just interesting to watch how much cash gets sucked in. The mining plan approuved by Utah describes the removal of 5million tons of material per annum to supply a 2500bopd plant. The ore is so hard it requires drilling and blasting. Mmmmmm….

          2. I looked into this over a decade ago. It took me about 6 hours to decide they had nothing we could use.

            The day one of these guys comes up with something worthwhile you’ll see the large oil companies buy them out. This is the surface equipment version of those discoveries we see in the South Atlantic north of the Falklands. They seem to always be on the edge, but never get there.

    1. Since no significant payments are required for 6 years anyway, this is a non-event. Six years from now maybe they’ll change their minds.

      The new refinery is what about 3 months away?

      1. we shall see—
        Maduro was to be gone 2 years ago——
        The information is quite suspect.

  5. EXCLUSIVE: FIRMS COMPLAIN OF CONTAMINATED CRUDE FROM U.S. RESERVE

    NEW YORK (Reuters) – Three firms that bought crude oil last year from U.S. emergency stockpiles raised concerns about dangerous levels of a poisonous chemical in the cargoes, according to internal Energy Department emails and shipping documents reviewed by Reuters.

    Just speculating but, although the H2S could have been in the original stored oil, possibly, especially as it seems to have gone without notice, it was created in the storage tanks. SRBs (sulphate reducing bacteria) need warmth, water, anaerobic conditions, sulphate salts for energy and fatty acids to eat. They get all those in abundance at the bottom of oil tanks. Once present they are extremely difficult to remove. They corrode the steel and form a cap of corrosion product that protects them from biocides. They corrode down and out making the metal look like it’s been punched with an ice pick. Tanks often need to be emptied, cleaned and recoated. If left unattended the H2S in tanks can quickly get bad enough to be a serious health risk.

    https://uk.reuters.com/article/us-usa-oil-contamination-exclusive/exclusive-firms-complain-of-contaminated-crude-from-u-s-reserve-idUKKBN1H50GI

    1. Fun side note: SRBs have been living on this planet for about 3.5 billion years and will probably be here for another 3 0r 4 billion more until our sun turns into a red giant vaporizing all remaining life on earth. The worst consequences of the Anthropocence will probably only last another couple hundred thousand years or so, then another couple of million to evolve new lifeforms and ecosystems, de-acidify the oceans and reabsorb all the excess CO2 emitted by burning all that high sulfur fossil fuel … Homo sapiens will probably have been long gone by then. Life on earth will go on! The question remains, were humans ever any smarter than SRBs? 😉
      Cheers!

      1. I think they can even survive the solar nova – by traveling on the solar wind and micro meteors to some Saturn moons and surviving there in methane puddles. Spores of these bacterias are extreme tough and survive several months in space (and there are many).

        So it’s better to store gas, diesel and aviation fuel as national reserve, and rotate this stock on regular base.

        Would be the same as in an old fortress – when after 50 years the pirates finally come, the old gun powder will do nothing at all.

      2. The Earth probably only has about 500M years for surface life. When the next Pangea forms in about 500M years is likely to trigger thermal runaway. The sun will be hotter compared to the last Pangea, about 200M years ago. The last Pangea raised temperatures killing off about 95% of surface species.

        Perhaps, if Human somehow survive and are able to continue to develop space technology, the Earth could be moved to a wider orbit to prevent a thermal runaway. Really all that is needed is a large asteroid to slowly increase orbital energy by stealing some of Jupiter’s orbital energy. An asteroid would orbit between the Earth and Jupiter in a way that transfer orbital energy between the two planets. This can occur over 100’s of thousands or Millions of years. Sadly I doubt this will happen.

        “de-acidify the oceans and reabsorb all the excess CO2 emitted by burning all that high sulfur fossil fuel ”

        During the Formation of Pangea or even much sooner (ie Yellowstone & other super volcanoes) will releases 10s to 100s of times more CO2 and Sulphur into the atmosphere. Civilization has existed for very short period and in a very quiet geological period with miminal events. The last significant geological event was Lake Toba about 70K years ago, which likely nearly ended human species. Sooner or later Earth will unleash destruction on a scale that will make human interfere look like a pin drop.

        The biggest threat in my opinion is Socialism\fanatical religion and global war. The Past two global wars had deep connection to socialism as socialistic parties gained control and threw the world into turmoil. Fortunately for humanity and the Earth, there wasn’t the availability of nuclear weapons (except the 2 nukes dropped on Japan) during the previous world wars. This time all of the major industrial powers have nuclear weapons as well as advanced bioweapons. When the next world war happens billions will be killed in a matter of hours. Whole nations will turn in to giant graveyards and the land will remain contaminated for 10s of thousands of years (longer than Civilization has existed). At least 98% of all species will go extinct as they die off from the direct or indirect effects of a nuclear/biological war.

        The world has entered into another cold war and arms race. Military budgets are ballooning as nations prepare for war. It will be amazing if the world avoids another global war in the next ten years.

        1. Spot on.
          Created from Stardust, return to Stardust.
          Nothing new under the Sun- it’s ALL been done before.

        2. The Past two global wars had deep connection to socialism

          Stalin was a dictator, just like the czar. He ruled in the name of the proletariat (“dictatorship of the proletariat”). Communism never existed in Russia. It was never even tried in Russia. No one really pretended it existed in Russia. The same is true for socialism.

          People like the Kochs, who claim they are fighting against Soviet-style communism, are delusional. Ironically, they are aspiring dictators.

          1. Russia Czar was over thrown by the Bolsheviks when Stalin was a minor player. Lennon and Trotsky were the primary leaders until Stalin took over. Otto von Bismarck’s introduced Socialism into Germany when Germany industrialized. After WW1, There were multiple Socialist parties but it was Hitler’s NAZI party (National Socialist) that won. Both the Russia Bolsheviks & Germany Brown Shirts used false flags in order to gain power. There is also Italy’s Mussolini & Spains Franco, who were also socialist.

            Socialism is destructive because it makes the public dependent on the gov’t. More dependent the people are on the gov’t the more power the gov’t gains. Sooner or later handing money out bankrupts the state treasury and thats when the Blame game comes, which permits socialist gov’ts to introduce Police states, Gulags, and start wars to sieze the resources of neighboring states.

            It does not matter if these were never “TRUE” Communist or Socialist systems, it never happens because revolutionaries or those in gov’t power always grab power until they have complete authority. There has never been a Socialist Utopia and there never will be. The only non-self destructive revolution in the past 1000 years was the America revolution and it survived because wasn’t Socialist.

            1. Here’s a definition of socialism.

              “a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.”

              It says nothing about being dependent on government. If your community IS the government, you are just dependent on each other within the community. There isn’t a bigger government to be dependent upon.

              I don’t believe socialism is the issue. It’s whether the community allows one person more power than anyone else. Then it is no longer socialism, if it ever was.

    2. The USA reserve is stored in salt domes. It’s possible they are allowing a % of sulfate salts in the brine used to pump out the crude. In this case the bacteria have a great feeding environment.

  7. “Shale patch making money, hiring and ready to drill for more”
    http://www.worldoil.com/news/2018/3/29/shale-patch-making-money-hiring-and-ready-to-drill-for-more
    “The vast majority of explorers surveyed for a Federal Reserve Bank of Dallas report released Wednesday said they could profitably drill a new well at current prices. More than half are increasing headcount. The outlook for small oil and gas companies in the Permian Basin, however, is “dismal” unless benchmark prices stabilize at $70/bbl or higher, according to the study.

    The Permian, covering a vast area of West Texas and New Mexico, has become one of the world’s hottest oil exploration areas, luring billions of dollars of investment from giants like Exxon Mobil and sending acreage prices skyrocketing. As competition there heats up, Concho Resources is paying $8 billion for rival RSP Permian to create the basin’s biggest producer.

    Among 136 oil and gas executives interviewed by the Dallas Fed March 14-22, the response to how much they need per barrel to cover costs of new developments in the U.S. averaged $52, and just $35 for existing wells. In both cases, the averages increased by $2 from last year but are way below the U.S. benchmark price”

      1. Fernando,

        Your 2016 model says about $80/b for June 30, 2018, is there an updated model on your blog?

        All I could find was a July 2016 post. Dec 31, 2017 would be about $71/b according to that July 2016 oil price scenario in 2015 US$.

        Can you show us your updated model?

        1. Dennis, my model is a spreadsheet. I crank in numbers, it spits out a price it thinks ought to be used for project economics. A while back, when prices were low, it said all investments should use $63 escalated for inflation.

          This means that if you wanted to say buy a producing property you could use that $63. If you escalate that for inflation you get around $66. Which means the revised model at $68 is mostly reflecting cost inflation, a tiny amount comes from increased refinery runs (that’s my proxy for real demand), and there’s some fudge because the reserve replacement is a bit better than I plugged in a few years ago.

          The $80 comes from an overlay which assumes that the marginal cost to supply a barrel to satisfy demand is a bit higher, and continues escalating over time until it reaches $150. The way this works, you invest making sure the RISKED venture has a zero PV7 to PV10 (depends on your financing costs) at $68 (using today’s estimate), and the higher profile is used as eye candy for investors. I never use anything like “IRR over 20%” or such bullshit. What can be done is to take the higher price deck and estimate it’s PV12, and discounted payout at 12%.

          Remember that I don’t get into oil price prediction as such. What I put in my blog is a sketch of what I see that morning.

          I advice people on whether they should buy, sell, at what price, which project option looks better, etc. I do use it to buy stocks for myself once in a while. Back when prices were low and those Wall Street geniuses were predicting $25 I went ahead and bought oil stocks, Halliburton and Sclumberger. It’s done ok. Dividends are fine. But don’t come to me expecting some sort of wonderful wisdom. I use what I got because it’s easy to use, and I wouldn’t say it’s anything special.

          1. Thanks Fernando.

            Your guess would likely be better than mine. We come at it from different angles, you seem to be looking at marginal production costs and the price that would allow a reasonable ROI (if I understood you correctly).

            I am looking a likely short term oil supply and demand and the oil price that might balance those. In a situation where there has been global underinvestment in oil megaprojects (2015-2017) there will be a lag of 3 to 6 years between an increase in oil prices and new supply from megaprojects hitting the World market. The price from your model assumes supply meets demand instantaneously, my model suggests the lag will lead to a short term rise in oil prices until supply rises and demand falls so that the market is balanced.

            In short, reality is probably somewhere between your $68/b estimate and my $80/b estimate (maybe $74+/-6 per barrel) by the end of 2018.

  8. IN addition we are now drilling OIL wells is the Scoop Woodford with a 6-8 months payout at $60. just the facts and nutin but the facts?

  9. I am putting this is the petroleum thread because it is related to electricity generation and how those gas fired plants might be put to use.

    “The U.S. electricity sector is eyeing the developing electric car market as a remedy for an unprecedented decline in demand for electricity.

    After decades of rising electricity demand, experts say the utility industry grossly underestimated the impact of cheap renewable energy and the surge of natural gas production. For the first time ever, the Tennessee Valley Authority is projecting a 13 percent drop in demand across the region it serves in seven states, which is the first persistent decline in the federally owned agency’s 85-year history.

    Electric vehicles (EVs) only make up 1 percent of the U.S. car market, but utility companies are taking advantage of their growing popularity by investing in charging infrastructure and partnering with carmakers to offer rebates, says Quartz reporter Michael J. Coren.”

    https://www.npr.org/2018/03/29/598032288/u-s-utilities-look-to-electric-cars-as-their-savior-amid-decline-in-demand

  11. EIA Natural Gas Weekly Update – for week ending March 28, 2018
    The difference between natural gas spot prices in the Permian Basin and at the Henry Hub has generally widened as Permian production has increased, which is consistent with the lack of sufficient takeaway capacity for associated gas.
    https://www.eia.gov/naturalgas/weekly/#itn-tabs-0

    The Waha hub price has averaged 76¢/MMBtu lower than the Henry Hub price during March (to 27th).

    3. Well, I guess my count of little growth to flat for Texas was fairly close. I had not over 3971. Looks like the EIA weekly total is really much too high, as usual. That is, unless you don’t think a 440k increase in two months from the Permian is pushing reality. So, from Feb. to Dec 31, it has to climb over 1.3 million barrels to make it. That’s while fighting headwinds with pipelines, shortages of labor, increased costs, and the list goes on. When are these morons gonna wake up?

      It’s really going to be entertaining in listening to IEA and EIA’s spin when they back down on their ridiculous projections.

      https://oilprice.com/Energy/Energy-General/The-US-Faces-A-Pipeline-Crisis.html

      Here is another one.

  13. Do have to acknowledge Texas Tea, OK is growing. I was a skeptic, will admit.

    Still wonder how much of that is condensate and how much is higher than 55 API.

    Our light sweet 31-36 API looking pretty salty right now. Not a lot of that floating around these days.

  14. US Ending Stocks – January
    Crude Oil: down -1.2 million barrels
    Oil Products: up +17.3 million barrels
    (Crude Oil & Oil Products: +16.1 million barrels, shown on chart)
    SPR: up +1.4 million barrels
    Natural Gas (ethane, propane, butane): down -33 million barrels

  15. Attached below are a few charts. Comparison of Mthly vs Weekly U.S. Oil production. The gap re-appears.

    1. Thanks for the chart, Ovi.
      So has GOM oil production peaked? On an annual basis, 2017 was the highest ever at about 1.68 mmbopd. On a monthly basis, the couple months in 2017 where production hovered around 1.75 was similar to high level seen in August/September 2009.
      George Kaplan responded to a query in his last post regarding when will the GOM peak in oil production, and he said 2017. As of now, I’m inclined to agree.

      1. George is the expert on the GOM. I recall he had a list of some upcoming new fields.

    1. Thanks Ovi,

      Generally over the Jan 2016 to to Jan 2018 period it looks like Nov-Jan output is flat or slightly negative, perhaps due to cold weather or snow. My expectation is that output for US L48 will increase from Jan 2018 to Dec 2018 by about 1000+/-200 kb/d. Note the 2017 increase was about 1200 kb/d (roughly 6600 to 7800 kb/d), Permian basin pipeline constraints for both oil and natural gas might reduce the increase for 2018 relative to 2017.

      1. I think your estimate of 1000+/- 200 is reasonable. I also wonder if some of the bigger sisters, XOM, BP, Shell, CVX might begin to realise that just keeping production level in a rising price environment may be a better strategy than Drill/Spend, Drill/Spend….
        That oil in the ground will only get more valuable with time if they play their cards right.

      2. It’s at negative the end of January. I give it 700 bbls a day plus or minus 100. Dallas Fed is pretty negative about much growth the first quarter. That link was in a previous post.

        1. Guym,

          Note that your estimate is 600-800 kb/d, is that for the US L48 or just Texas?

          What is your expectation for oil price (World price aka Brent)?

          I expect Brent will rise to $70/b (at minimum) by Dec 2017, that will keep profits up (if correct) and may tend to keep US L48 output at high levels.

          Remember that all US output does not come from the Permian basin, if output cannot rise there, money will move to other basins (Niobrara, SCOOP, and Bakken).

          1. Yes, I’ve thought about increases from other areas, especially the Eagle Ford. If they decide to do it now, it would be the very end of the year before it transpired. Plan, permit, drill, and frac, and completion. It doesn’t happen overnight. Companies like EOG, and others that hold prime areas, would be far ahead doing that now, or yesterday. It still takes time to culminate, and during that time, they do not produce oil.
            You meant the oil price by Dec 2018, I’m sure. Much of that depends on when EIA and IEA decide they need to tell the world, we are into waist deep dung, for a while, at least. You think they will? Not a chance. So, the other timing would be when the rest of the world recognizes it. That’s happening very slowly. In the meantime, we have banks stating that oil will be $51 a barrel by the third quarter, because the Permian will produce 1.7 million barrels by the end of the year. Inventories will drain, big time, but all the while they will still be talking about the shale being able to turn on like a faucet, and fill them back up, again. But, then, it won’t. 2019 is when it will sink in, and oil will be 100 plus, again. Sometime in 2019. So, $70 by year end is as good as any, with the outside chance reality sets in.
            A 700k bbl increase per day is not small potatoes. To get there you have to first cover the declines from the previous wells.

            1. Guym,

              Last year (2017) the US L48 increased output by 1200 kb/d at a lower average price level than is likely in 2018, it takes about 6 months from decision to drill and completed well, but there may be many of those wells already in the pipeline as oil prices rose by about $20/b in the last 6 months of 2017.

              In any case, your high estimate (800 kb/d) is the same as my low estimate, an 850 kb/d (+/-150 kb/d) estimate averages our guesses.

              We are in agreement that the 1200-1700 kb/d increases in US C+C output expected by the EIA and IEA are likely to be incorrect, the 1200 kb/d is possible (maybe a 10% probability), but only with an oil price level above the STEO forecast by the EIA ($56/b WTI in Jan 2019).

            2. Looking at last year, a 1000k increase would, indeed, be reasonable and actually pretty conservative. But, we started off last year on a high note, and the first quarter yielded close to 400k of that increase. This year, we start off with a 50k decrease, and the Dallas Fed saying it’s slowing down for the first quarter. Plus, we are already seeing oil pipeline constraints causing a $5 discount, and previously in 2014, it resulted in a $20 discount. Gas pipeline restraints may cause gas to sell at zero, or negative, at times per various reports. There is a significant dearth of personnel which seems to continue to be a problem. A few of those companies in the Permian can opt to shift their efforts to different areas. Too late for Pioneer, but looking at permits, it looks like EOG has given themselves that option in the Eagle Ford. I’m assuming some price increase, that’s why the 700k figure. If it goes to 1000k, the discount will be far worse than $20, but it’s possible. Six months from decision to production was a good rule of thumb within the past three years, but it’s probably closer to nine, now. The extended time being a result of lack of frac crews, and transportation shortages. Agree, though, neither of us is agreeing with the outlandish 1,300k a day increase. Fitch has 1.7 million, hence the bank estimate of $51 a barrel by the third quarter. Which still makes no sense, considering world supply demand estimates with Canada and Brazil unable to account for the extra 500k barrels estimated the first of the year. But, I hope that bank is heavily into shorting oil price, to teach themselves a lesson. From now until the end of the year, and more into 2019, inventories will drop. And that is the projection based on Guy aka Rosanna, Rossana Dana.

  18. Russia shipping Arctic LNG to India.

    15 of these amazing ships have been commisioned to take Arctic gas to the global market.

    http://www.ep.total.com/en/areas/liquefied-natural-gas/lng-ice-breaker-first-shipment-liquefied-natural-gas

    The gas market which has been broken up into global regions is slowly being turned into a single market due to the massive expansion of gas production and LNG technology.

    https://www.oilandgasinvestor.com/australian-lng-exports-hit-record-highs-2017-1678556

    https://www.houstonchronicle.com/business/energy/article/U-S-LNG-exports-reach-a-tipping-point-12413699.php

    Hopefully cheaper gas will drive down the consumption of coal.

    1. BP bible says nat gas production globally increased only 0.3% 2016. One third of 1%.

      1. I was mainly thinking of the coal consumption in China where consumption rose again in 2017.
        China’s electricity consumption rose far more than intermittent wind and solar could provide.
        http://www.xinhuanet.com/english/2018-01/22/c_136914991.htm

        The Chinese government knows it’s existence depends on delivering economic growth in the hope of keeping descent under control.

        https://edition.cnn.com/2017/02/22/asia/china-labor-unrest-we-the-workers/index.html
        Electricity is essential for that and that is why they continue to allow new coal plants to be built.

        https://endcoal.org/global-coal-plant-tracker/

        China commissioned 33,000Mw of new coal fired power plants last year, 47,000Mw in 2016 and 60,000Mw in 2015. To put that into perspective a large coal power station is 1,000Mw.

        1. “Electricity from nuclear, wind and solar power plants rose 16.5 percent, 26.3 percent and 75.4 percent, respectively.”

          Exponential growth will always win, even if it seems deceptively small to start. The tortoise and the hare…

          You can’t just count new capacity, you have to count retirements: Per your coal source, China retired an average of about 37GW of coal plants per year, over 2010-17. Plus: new plants tend to be much more efficient than old plants; and coal generation capacity factors have been falling: both factors reduce coal consumption, even if nameplate generation capacity, (or even coal-generated kWhs) has risen.

        2. Oh Peter, your glass is always half empty. Your numbers show new coal fired power plants down almost 50% in two years. Considering there is about a 10 year lead time from planning, design, engineering, construction to going online. Welcome to the Obama 21st Century.

          The world is going to leave you Trump voters behind with black lung. I don’t think that’s what the baby Jesus meant by being your Savior and Chief.

          Maybe someone will invent Christian skylights for caves. We can always hope.

          1. Informations that the world is going away from fossil fuels is just propaganda:

            1. That’s highly misleading: a new competitor always starts small, but grows faster than the dinosaurs it’s replacing. By the time the absolute numbers get large enough to be really noticeable, the legacy industry is a “dead-man walking”.

              We would have seen something very similar 25 years ago in a chart of land lines vs cell phones.

            2. OK, so let’s wait untill renewables (non hydro) take at least 10-20% market share, and then claim that it’s viable energy source for industrial civilization.

            3. Why do we leave out hydro and nuclear?

              Do you consider those to be fossil fuel energy?

            4. Also,

              Non-hydro renewables grew at an average rate of 11% per year from 1965 to 2016. About 50% of primary energy is reached by 2050 if the 1982-2016 rate of increase of primary energy consumption continues through 2050 and the rate of growth of non-hydro renewables also continues. Peak fossil fuels by 2030 with higher prices and lower output means the growth rate of non-fossil fuel energy is likely to accelerate rather than slow down.

              Also in 1970 fossil fuels were about 97% of total primary energy consumption, by 1989 fossil fuels had fallen to 88% of primary energy consumption so about a 9% fall over two decades. As exponential growth of renewables and exponential decline of fossil fuel occurs after 2030, the share of fossil fuel will fall rapidly especially after 2040.

            5. “Non-hydro renewables grew at an average rate of 11% per year from 1965 to 2016. ”

              No, they did not. Renewables (non hydro) grew ZERO, because FF share is as it was. You can also claim that Play Station 4 grew by 100% during these years, and therefore PS 4 will replace FF, but it doesn’t change situation, that we are dependent on FF as much, as 3 decades ago.

        3. Yes, eastern China, India, parts of Europe, Russia the US are blocking lots of sunlight with their SO2 emissions, mostly from coal. Over East Asia it amounts to about -6 w/m2.

  19. https://www.expressnews.com/business/eagle-ford-energy/article/West-Texas-faces-a-labor-shortage-12794254.php

    https://www.mysanantonio.com/business/eagle-ford-energy/article/Dallas-Fed-Oil-and-gas-activity-in-Texas-12788591.php

    https://www.iea.org/newsroom/news/2018/march/commentary-infrastructure-investments-key-to-unlocking-more-us-oil-supply.html

    I don’t think the number of rigs will decrease much, as they continue to add DUCs to the list, toward which time the E&Ps think things will change, but according to the Dallas Fed, big growth is not expected for the first quarter from the Permian. It certainly wasn’t for January, seeing as how Texas production actually dropped, or at least flat. Seems like the E&Ps have once again snatched defeat from the jaws of victory. Even if they can increase production, they are looking at higher costs, and a pending discount to oil sales from the pipeline issues.

    In the meantime prices will rise, as it will become apparent that shale growth has real limitations, most of which are not directly related to the price of oil in the near future.

  21. Total crude oil production in January was 68,199 kb/day up +235 month/month, up +672 from the average in 2017
    The UK’s bounce after the Forties outage in December was +287 to 1,012 kb/day in January. Average in 2017 was 892 kb/day.

    1. Hi Energy News,
      Thanks for collecting the data to make this graph. I wonder if Ron (or Denis if he has access to it) could you provide you with the data for his old graph of World Crude Only Production, to extend the time line. I know there will probably be a bit of a discontinuity changing data sets, but it would be really interesting to see where we are in relation to the undulating plateau beginning 2005 (13 years ago now!) when peak oil awareness really kicked off.
      Cheers, Phil

  22. VENEZUELA’S PRODUCTION COLLAPSE FUELED BY CHALLENGING RESERVOIRS AND UNDERINVESTMENT

    The collapse of the Venezuelan economy has been fed by a continuing drop in crude oil production. The country’s annual production has gone from an estimated 2.86 million barrels per day (mmbd) in 2010 to 2.07 mmbd in 2017. The steepest production declines in the country have occurred in the mature fields of the Maracaibo and East Venezuela basins.

    This collapse in production has been somewhat mitigated by crude oil production growth in the Orinoco Belt but as the central government has increasingly required more funds to manage the country’s economic crisis and to comply with scheduled debt payments, the capital expenditure allocated to development of Petróleos de Venezuela, S.A.’s (PDVSA’s) upstream projects has dwindled.

    https://www.offshore-technology.com/comment/venezuelas-production-collapse-fueled-challenging-reservoirs-underinvestment/

    Foreign companies don’t have access to much of the available resource base at the moment.

    1. Ven consumption 611K bpd. Production over 2 mbpd.

      Ven govt debt to GDP ratio 28%. US govt debt to GDP ratio over 100%.

      Ven govt debt to GDP ratio has fallen sharply since 2014, despite a drop of GDP. US govt debt to GDP ratio is increasing.

      Those are the numbers. Obfuscate, evade, rationalize as one wishes.

      The media driven demonization is because they do not borrow money. It enrages the NY banks. It’s a thing which, in their perspective, MUST NOT be allowed to get popular, especially when the little they do borrow comes from Russia and China.

    2. The chart has a few mistakes. For example, the bulk of Repsol reserves are located in a large gas field located offshore Paraguaná. This isn’t part of the Maracaibo basin. ENIs reserves listed for Maracaibo are all natural gas in the same field. CNPC Orinoco reserves are way overstated, but that’s more of a technical issue. They book an exagerated recovery factor.

    1. They are talking supply in these charts. We are exporting more, aren’t we?

    2. I just had a look at the numbers (below) it seems that the increase in domestic demand is larger than the increase in exports.

      U.S. Exports of Finished Petroleum Products (Thousand Barrels per Day)
      Jan 2016 3,019
      Jan 2017 3,328
      +309 kb/day year/year

      U.S. Product Supplied of Finished Petroleum Products (Thousand Barrels per Day)
      Jan 2016 16,203
      Jan 2017 16,913
      +710 kb/day year/year

      And products supplied is usually without exports
      https://www.eia.gov/dnav/pet/TblDefs/pet_cons_psup_tbldef2.asp

        1. Yes maybe. As you know there is usually a dip in demand at the start of the year, I was just wondering why it didn’t happen this year.

          1. My guess would be the decrease in unemployment, and the increase in US production.

            1. yes it must be something like increasing employment. The weekly figures say that demand stayed high in March.

            2. I was just looking at seasonal demand (without natural gas = ethane propane butane)

  25. Bahrain Tight Oil

    Manama, Apr. 1 (BNA): The government of Bahrain today announced the discovery of a new tight oil and deep gas resource in the Khaleej Al Bahrain Basin, located off the west coast of the Kingdom.
    The government confirmed that modelling and analytical studies are ongoing, led by Bahrain’s National Oil and Gas Authority (NOGA) working alongside private sector partners, aimed at detailing the ultimate quantity and market value of the find.
    http://www.bna.bh/portal/en/news/834061

  28. March Dallas Fed report on the Permian which includes February. Growth is slowing considerably. We may both be too high, Dennis. The really weird part is that they seem to be using EIA data. The February one says January had a 69k increase, but if it was Eagle Ford had to drop 120k barrels. These estimates vary greatly from the weekly, and I believe the monthly data lowers it even more. Far as I’m concerned, we have no idea what production is until the monthly report, or until I get a copy of that month’s pending data file, and I was about 90k over from my estimate from the pending data file.

    https://www.dallasfed.org/research/indicators/pb/2018/pb1803.aspx

    Repost from earlier from info from the Dallas Fed. The responding companies consensus was while the level of activity and capital expenditures continued to grow, the growth slowed in the first quarter.
    https://m.mysanantonio.com/business/eagle-ford-energy/article/Dallas-Fed-Oil-and-gas-activity-in-Texas-12788591.php

    So, we have a decrease in production the first month, and the level of activity has dropped for the first quarter. Doesn’t sound like a 1.3 million barrel a day yearly increase to me.

    Here they have built up their support staff for the big swell, and then have to cut back until Oct 2019 when new pipelines come on? Or, continue drilling that will result in a big discount? Or, RRC getting fed up with flaring and shutting some down? Or, a combination of all three? Who knows.

    1. Guy,

      It is always guesswork.

      Looking at Ovi’s chart (link below) for US L48 onshore

      http://peakoilbarrel.com/open-thread-petroleum-march-28-2018/#comment-634287

      I see about a 200 kb/d increase in the first quarter of 2017 and 1000 kb/d in the final 3 quarters of 2017, sometimes there is a decrease in output and sometimes the monthly estimates are revised (both higher and lower). I still like 1000 kb/d for US C+C output increase from Dec 2017 to Dec 2018, if oil prices (Brent) rise to $80/b in 2017 US$ by Jan 2019 (average monthly Brent oil price in 2017 US$). If the pipelines are a constraint oil will move by truck or rail or investment will move to other basins, also the frac crew and other constraints may be less of a problem outside of Texas.

      I don’t think anything less than an 800 kb/d increase in US C+C output for the 12 months ending on Dec 31, 2018 is a reasonable estimate, if I am correct that oil prices will rise to $80/b by the end of the year.

      1. Well,”it is always guesswork”. I agree. But if we only address the Permian, I hesitate to imagine the amount of trucks and drivers it would require. One tanker truck holds about 200 barrels. That’s in addition to the shortage of drivers that are already reported. There is some rail, but the trucks have to get it to the railcars. That which can’t be sent by railcar, would need to travel almost 500 miles for disposition., either Houston, Corpus area, or Cushing. Currently, only 4% of US shipment is by truck. Do we have enough trucks? The flaring from that, might be visible from Fort Worth? It is unknown when RRC would tighten down production. When it made the rapid rise up 1 million barrels in 2017, it was not facing any restrictions. other than frac crews. It may be possible, I dunno, but you seem confident. If the E&Ps are truly facing these limitations, and they continue to complete wells to the tune of even 700k bbls a day, then they are gawd awfully stupid to not wait for the infrastructure.

        1. Guym,

          Shipping by truck or rail is the worst option, but may be chosen when pipelines are full, it will depend on cost and prices and alternative possibilities. Permian output increased by about 700 kb/d in the past 12 months (trend line fit to data).

          That’s about 59% of the US LTO increase over the past 12 months (about 1200 kb/d). If the Permian increases by 500 kb/d above Feb output (2.34 Mb/d),will there be enough pipeline capacity? There may be another 500 kb/d of conventional output so about 3.34 Mb/d of capacity is needed. I think there is only around 2.8 Mb/d of oil pipeline capacity as of Dec 2017, so pipelines may be full at present, any extra output needs to go by truck or rail.

          Smart producers that have no pipeline access will slow down any new output or well completion until there is more pipeline capacity.

          It seems there are a variety of pipeline capacity estimates, it is not clear which estimates are definitive.

          1. 2.8 sounds about like what I know of, and then they are adding local refinery capacity and railway capacity, which is a grey area on any graph. I’m just guessing from the EIA stuff and the Fed stuff that it is, at least, 3.2 million, or close, now. Discount has risen from $1 to $5 the latest I heard, which I am guessing puts us at the edge of the refinery capacity. Rail, next. Trucks soon thereafter, but I am sure many are already using that depending on the locations of the well. Mass trucks, next. In other words, yes, I think we are at max until fall 2019. Yes, you’d think they would be smart and back up. But, I think they will push the nickel, and keep going until it’s s mess. They will because they have hedges, and don’t give a damn about anyone else, or the consequences. They have hedges for the gas, they don’t care if it goes negative and is a deduct from the royalty owner. They have the money, screw everyone else. It’s why I have thought about the possibility of large acreage owners possibly developing a wastage suit, or some kind of a gross negligence suit. That ordinarily wouldn’t fly, but if it could be proved that the companies benefited (hedges) while the mineral right owners suffered, then I would think that would stand a chance. But, I’m not a lawyer, so I don’t really know. I may be selling the companies short, as they may be perfectly inclined to share the hedge income with the royalty owner?

            And realistically, they should not be entitled to receive the hedges, if they were the cause of the low price. It’s like burning down your building to get income out of it from the insurance money.

            1. Guym,

              I was wrong about the extra 500 kb/d of conventional Permian output, that output is included in the EIA’s tight oil estimate for the Permian basin, Feb 2018 Permian basin output was about 2340 kb/d according to the EIA’s tight oil estimate, so if the 2800 kb/d pipeline capacity estimate is correct, then another 460 kb/d of Permian output could be accommodated with current pipeline capacity. In 2017 Permian output increased by about 670 kb/d, based on EIA tight oil estimates.

              Output increases in the Permian this year may be lower due to pipeline constraints. Oil prices might also influence completion decisions.

    1. Definitely some stories behind the story in this article. Where is XTO? They are a top ten producer, and not even listed. Exxon will probably be conservative. Why don’t they do it in regard to top ten, or twenty producers? Apache is top ten, and they project a decrease in production. Why? Because their big play now is the Alpine High, and very gassy. Energen is in the top ten and project a decine. Endeavor nor Kinder Morgan are not listed, either. Kinder Morgan should have the main info on pipeline status. Many questions on their selection and presentation.

    2. They are just naively optimistic I think. Or the BOE factor means it is much natural gas included in the numbers. To have a look at a more unbiased (still consensus influenced) view at 2018, then maybe the OPEC march 2018 report is worth to take a look at.

      “US oil production in 2018 is anticipated to grow 0.52 mb/d from dec 2017 to dec 2018 due to the high baseline.

      Total growth US yoy 1.41 mb/d (very different from dec 2017 to dec 2018 estimate as it is an annual average). Conventional NGL growth is 0.42 mb/d and GOM growth is going to cancel the decline in conventional output according to their view. Tight oil to grow 1.05 mb/d yoy, Permian 0.72 mb/d, Bakken 0.10 mb/d, Eagle Ford 0.09 mb/d, others 0.14 mb/d (the last number not unreasonable considering Oklahoma, Colorado and Idaho growth).”

      No matter how you put it, the “keep oil prices low at all cost policy” is going to fail due to the high demand it causes. The US demand is very high so far in 2018, maybe some causes may be rebuilding due to hurricanes, consumption due to more logistics from oil drilling and economic growth in general. And globally growth is higher in Asia, Africa, South America, Eastern Europe and also in oil exporting countries (hmm not in Venezuela, but in most). Going by the 50% rule, 4% gdp growth globally should cause 2% oil demand growth, we are almost there; 1.8-1.9 mb/d is the target approaching right now. So the lazer focus on keeping oil prices down to secure economic growth is certain to fail, and late 2018 and coming into 2019 this will be more certain in public view as well, imo. The shale oil expansion can continue in 2019 at a lower rate, but I don’t see how it is not going to hit a ceiling in 2020. This is most likley going to coincidence with a major economic recession, and mark the failed policy to encourage building up fossil fuel infrastructure in developing countries.

    3. This was just in the WSJ. Since it is behind a paywall, I won’t bother with the link.

      “Big oil is starting to think small.

      Once defined by massive spending and ambitious exploration, some of the world’s biggest energy companies have begun to preach frugality. Investors increasingly favor producers that promise to increase cash payouts, rather than boosting spending to drill for more oil.

      The best-performing major U.S. oil producer by share price increase in the past year isn’t Exxon Mobil Corp. or Chevron Corp., but ConocoPhillips, a company that has reduced its size and prioritized share buybacks and dividends over growth in recent years. Its shares have risen 29%, beating the S&P 500 and significantly outperforming the company’s U.S. rivals. Shares of Exxon, which recently laid out plans to increase spending by 25% or more beginning in 2020, have fallen by about 9% in that time.”

      1. ConocoPhillips has publicly stated it does not intend to grow its acquisitions in the Permian until infrastructure is in place. What a novel concept!

  31. 2018-04-03 (Platts) Iraq’s Cabinet on Sunday approved a five-year plan calling for the country to boost its nationwide oil production capacity to 6.5 million b/d by 2022, up from 5 million b/d currently.
    Iraq is technically supposed to restrict actual production to 4.35 million b/d, under OPEC’s output restraint deal agreed in late-2016, which runs through 2018.
    Iraq last week said it would put 11 oil fields and blocks up for auction in a rushed bidding round that is supposed to take place on April 15 and is intended to increase production from discovered but dormant or underdeveloped fields.
    https://www.platts.com/latest-news/oil/baghdad/iraq-aims-for-65-mil-bd-crude-oil-production-27946626

  32. Brazil – forecast production growth for 2018, the average is approx +0.24 million barrels per day. Brazil has a lot of projects waiting to start. And if the price of oil is high enough, then what doesn’t start in 2018 is going to start in 2019, likely another +0.6?

    EIA STEO, 2018: +0.12 million barrels per day
    Rystad Energy, 2018: +0.23 million barrels per day
    IEA, 2018: +0.35 million barrels per day
    IEA chart on Twitter: https://pbs.twimg.com/media/DZ1ZbaAVMAAOnoD.jpg

    2. Decline is going to bite I think, so 0.6 mb/d growth in 2019 may be a bit too high. Still reasonable to assume higher growth in 2019 than 2018.

  33. Petrobras Historical E&P CAPEX Nominal to 2017
    Nominal hit a peak in 2013 of US$ 27.6 billion, down to 12.4 in 2017

  34. http://www.naturalgasintel.com/articles/113505-permian-oil-pipelines-racing-to-beat-2018-19-output-surge-says-raymond-james

    Raymond James sees an 800k increase Jan to Dec in the Permian, and discusses pipeline constraints and local refinery capacity. That puts it at my high, and your low, Dennis. Although, you expect more out of other fields than the Permian to make up your 1000k barrel estimate. Although, per the article, other pipeline constraints like the Gulf (Eagle Ford) or Cushing (Anadarko) can influence this estimate. The 1.3 million by EIA and IEA are unrealistic, and Fitch’s 1.7 is defying reality. I still believe all of these estimates can be damaged by gas pipeline takeaway. Plus, we are in the beginning, and it is starting rather slow. How much? Quien Sabe.

    Overall, though, if we accept your 1000k barrel increase estimate, its far from enough for world supply, and I am not sure 1000k barrels a day can make it out the front door (shipping). Around 2 million barrels a day export seems to be the high. so far, and we are averaging just over 1.5 million a day. Significant improvements to ports are not due until 2020. We may wind up with an increase in inventory, while the world drops. As even if it made it out the front door, it would be insufficient to cover the expected 1.5 million demand increase (which I think is really 1.7), and I don’t see much happening elsewhere, except possible big drops.

    1. Maybe they’ll export by rowboat. 🙂

      Some oil may be able to go to Canada or Mexico by pipeline or rail and there could be a reduction of imports and tweaking of refineries to take US crude. Hard to figure how it all works out, but I do not expect all of the US increase to occur in the Permian basin, I expect a 480 to 720 kb/d increase from the Permian basin (from my low to high estimate, with about 60% of the increase coming from the Permian basin). Any Bakken increases can go to east or west coast refineries and DJ output could also go to west coast, perhaps some Permian output can go to Mexico or move to east coast refineries if there is no way to export from the US.

      1. Rowboats are good to get on top of it, if it gets over 1.2 million. Or, they could fill the sinkholes they are creating there as a holding tank.

  36. IHS Markit – World (39 companies) conventional drilling by spud date. If it wasn’t for the increase in US LTO there would be an oil supply deficit by now.

    1. There is an oil supply deficit – stocks have been drawn down. Those figures indicate a deficit in attractive exploration prospects and a growing deficit to come.

  39. Hey, I saw some discussion above between Mike and Dennis.

    Keep in mind Mike is a conventional producer located in the state (Texas) with two of the three 1 million plus BOPD shale basins.

    So, US shale has affected Mike more than just in terms of volatile oil prices. When shale surges, the cost of everything oil related near it surges too. Shale is simply the biggest oil promotion the world has ever seen. It is as if a USA oil promoter’s wildest dream came true. Wall Street has ridden this deal very hard. Wish there was a way to determine how many commissions, bonuses, etc have been skimmed off the top.

    We are in an area where shale has been attempted, sort of, and really didn’t work. So although our costs have went up some since 2016 lows, likely not anything like in TX. Stripper producers just generally want to be left alone. We aren’t putting a strain on local resources and infrastructure. The days of the oil promoters we saw in the 1980s are gone in the stripper fields. Almost all the hucksters have long ago moved to shale.

    What we have left around here are local people, operating wells, many times on land they own. Some farmers who also own oil wells, for example. A couple guys have small drilling rigs and drill wells for themselves and others when prices are high. A few own service rigs and make their living that way, which is a hard way. Many pumpers out every day of the year, be it 0 F or 100 F, checking over and maintaining the facilities. A few roustabouts doing the repairs the pumpers need help with. Some electricians, tank truckers, hot oilers, acidizers, and a handful of equipment and chemical reps. Pretty solid but boring stuff around here. Can’t tell a growth story like shale can.

    $55-65 WTI has been a very good thing for us. I suspect conventional onshore US producers with little to no debt are happy with this price.

    The issue is, it seems in the larger energy space, is a tremendous amount of debt has been required, be it oil, gas, coal, solar or wind.

    Are governments just going to keep printing money so these energy sources can keep producing more energy for a growing world population?

    We have no debt because of good timing, but also because we are satisfied with little or no production growth in good times, and our production has dropped since 2014.

    It doesn’t appear the world can get by on less energy for the foresable future. So I guess more money needs to be printed?

    Lastly, US non-oil producers, which make up 99.9999% population, tend to view all oil producers the same. Especially those in government.

    There is no reason I can see that our wells cannot produce oil for another 100+ years. That oil can be used for many non transportation related products. Nothing wrong with that, IMO. Try telling that to the Sierra Club,etc. To them, all of us are producing poison.

    1. Printing money creates inflation. Central banks possess $22 trillion in financial assets according to Nomi Prins http://www.nomiprins.com/. That’s about 10% of total world financial assets. My sister and her husband just sold a house in LA. Bought for less than $100,000 in 1990, sold last month for $1.5 million. Not reflected in inflation statistics, but a huge distortion in relative wealth in my view. Probably unstable. We’ll see what happens the next time WTI crosses $100/barrel.

      1. Hi Schinzy,

        I disagree.

        Printing too much money causes inflation. Generally a little bit of inflation (2% annual rates) is not a problem, if money creation matches the real rate of growth of the economy plus 2%, then inflation will be about 2%.

        Housing prices are pretty ridiculous in many parts of California. Near Palo Alto, it’s tough to find a decent house for under one million from what I have heard.

        1. Hi Dennis,

          I believe that current high asset prices are due to money creation by central banks. The money they create is used to buy financial assets which drives up the price of all financial assets including houses in key cities such as London and Los Angeles. Because asset prices are not included in general measures of inflation, this does not show up in inflation statistics. It does however cause much distortion in many asset prices. Inflation has always been a tricky way of lowering wages. The inflation in house prices lowers the wages of workers by making housing more expensive. I believe (haven’t checked) that 60 years ago a median wage could be used to buy a house in a big city. Not anymore.

    2. Shallow sand,

      I think we need to gradually reduce society’s use of oil for two reasons, peak oil and climate change.

      Despite Mike seeing me with some ulterior motive, the simple fact is that oil will peak and decline and we will need to find some alternative that works.

      Why the incessant need to guess at future output? The peak is determined by oil output.

      Why the need to guess at future oil prices? The price of oil affects profits, costs, and output of oil.

      I also comment on oil price because the EIA thinks oil prices will be $55-57 per barrel until the end of 2019 (per STEO). At that price only stripper wells make money, the average US LTO well will not be profitable at that price level.

      See https://fred.stlouisfed.org/series/M2SL

      This gives US money supply from 1959 to Jan 2018.

      Chart below fits an exponential trend line to the 1995 to 2018 data, the growth rate has been pretty consistent since 1995 at 6.1% per year, from 1959 to 2018 the average growth rate in the money supply was higher at 6.6% per year. The economy grows, money gets “printed”. This has been going on for a long time. 🙂

      I do not view oil producers as the enemy, despite what Mike believes.

  40. By EIA numbers there have been eighty-four countries that have ever produced more than 10 kbpd for average yearly C&C. Of these only nine are not currently past peak production (i.e. produced more on average in 2017 than in any previous year). These were: Brazil, Canada, Congo, Ghana, Iran, Iraq, Kazakhstan, Russia, and Turkmenistan.

    Congo and Ghana are probably going to show a peak between 2017 and 2019, and Kashagan may start a bumpy plateau this year or next, but Uganda, Kenya and Guyana are likely to be added to the countries with new peaks in the near future. Iran and Iraq may be able to increase production in coming years, but it is far from certain at the moment as they need outside investment, which currently is not exactly flooding in, while western IOCs are tending to pull back as their returns there are less than their investors are looking for.

    There were three other countries with average production above 100 kbpd that increased production in 2017 compare to 2016: Libya, Nigeria, and USA. Nigeria and Libya had significant disruptions from internal conflicts in 2016. There were also minor increases in six others countries, but these really just represent noise in the overall production figures: Chad, Cote d’Ivoire, Italy, Pakistan, Peru, and Trinidad and Tobago. Canada, Brazil, Nigeria, UK and USA might be the only significant producer countries that show an increase in 2018 compare to 2017, based on projects due to ramp-up, and Canada, UK and Nigeria will have difficulty sustaining any rise into 2019.

    Peak oil theory states that any well, field, basin, country, play or planet will eventually reach an ultimate peak and then, on average, will decline. Really that is all it says, it makes no prediction about timing, or that half of reserves are produced at the peak, or about logistics curves, or reserve growth, or that there needs to be monotonic rises and falls either side of the overall maximum. It is really simply a statement that oil is a finite resource, on any timescale that is meaningful to the human experience, and takes a bit of effort to extract. There cannot be a peak demand that is, somehow, a different kind of peak (Hubbert’s peak was as much about demand as supply: he assumed nuclear power would take over from oil and, partly in consequence, mentioned, but specifically excluded, shale oil and tar sands). The idea that recent history means peak oil is a discredited theory is nonsense, the main revelation is that, so far, even the difficult oil has proved just too good compared to the available alternatives.

    1. George. Thank you for the above post.

      It got me to thinking about USA fields and how many of those are past peak.

      There are many, many fields in USA, many are extremely small. It would be very interesting to see the statistics as to the percentage of USA fields past peak.

      Likewise, would be interesting to see this for Russia and other major producers in the world, field by field, to see how many are on the downward side of production.

      As to my comment above, I am hopeful the wells in our little field continue to be viable to produce oil for uses other than road transport, assuming road transport is some day successfully transitioned away from FF, in the coming decades.

      Last I have read, road transport makes up about 50% of worldwide oil demand.

    2. That is probably the BEST gestaltic overview I have read, ever. Thanks, George.

      1. Yes, very good overview. Kind of what doomed the TOD blog was an incessant pushing of the symmetric Hubbert Logistics peak-oil profile. It has turned out to be more complicated than that, and with better data coming out of some regions, especially the LO, we are better able to monitor and follow the details of the decline roller-coaster.

  41. I guess that they’re trying to save money in the GoM

    2018-04-04 (Reuters) – The Trump administration heralded the government’s sale last month of U.S. drilling leases in the Gulf of Mexico as a bellwether.
    Reuters examined the acreage offered and leased, and nearly all the purchases show big drillers stuck closest to existing infrastructure, shunning the most far-flung areas.
    Map = http://fingfx.thomsonreuters.com/gfx/rngs/USA-OFFSHORE-LEASES/010061C92W8/USA-OFFSHORE-LEASES.jpg
    “It kind of looks like they’re just shoring up their existing prospects right now,” said John Filostrat, a spokesman for the U.S. Bureau of Ocean Energy Management, the division of Interior that manages the auctions. Filostrat said the administration is still optimistic about future auctions and believes more auctions are needed to show the current trends.
    https://www.reuters.com/article/us-usa-offshore-leases/oil-giants-stay-in-their-own-backyards-in-u-s-auction-idUSKCN1HB0EN

    1. Seems stupid for the government to sell US assets at a low price rather than wait until there is more interest in them. Why offer them for sale now?

  42. Bahrain oil minister at press conference – discovery named Khalij al Bahrain
    Bahrain oil discovery: P50 reserve best technical estimates: OOIP 81.5 billion barrels of shale oil. P50 estimate of associated gas: OGIP 13.7 Trillion cf. Halliburton will drill two wells this year.
    Bahrain discovery has gas component, estimated between 10 and 20 tcf. Schlumberger & Halliburton submitted interest to develop gas.
    Looking to bring oil and gas to market within 5 years.

    LTO good fracture characteristics, good porosity
    press conference slide https://pbs.twimg.com/media/DZ71nS4WkAA2QTG.jpg

    No recovery factor given?

    If initial estimates are right: https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves

    1. Given 5-10% recovery factor commonly used for US shale we are talking about up to 8 billion barrels of recoverable oil.

      1. How can recovery be predicted with any sort of accuracy when there have been almost no shale wells run through to end of life anywhere in the world? And how can the extent of the productive zone be known when only a few wells have been drilled, almost certainly right in the middle of the formation where you’d expect the best prospectivity to be?

        When a conventional well is drilled the rock pulled up is the same stuff from which the oil will be produced so properties like porosity and permeability can be tested. Seismic gives good approximation for the extent of the productive area and a water contact gives the extent downwards. None of that works for fracked wells because the production properties depend on the fracking so can’t be directly measured.

        1. Precedent:

          Oman has a basin in which an estimated 21 billion barrels exists. Recoverable quote: 1.2 billion

          Jordan’s Wadi Sirhan basin 4 billion barrels. Recoverable: 100 million

    1. Loop loaded another VLCC last week. 2million/7=286k, but 1,889 is pretty healthy for the ports.

Comments are closed.