This article is particularly interesting because it has a closeup of the hole in one of the spherical LNG tanks. The caption reads “The damage inflicted by the Iranian suicide drone on the LNG tank indicates a small warhead and low speed.”
That had been my suspicion when I saw the holes. My thought is that they were short range vehicles (probably multi-rotor helicopters) launched within 5 or 10 miles of the plant…I don’t know how difficult that is tactically, though.
And…you would get the same deformation if you duct-taped an explosive charge to the tank and set it off with a detonator.
Thanks for the link. The article makes reference to Saudi air defences around the attack site. While it’s likely those defenses are in fact there, other images say the same thing, there’s no actual confirmation they were turned on.
Satellites with synthetic-aperture radar can ‘see’ the radar of Patriot and other air-defense systems. None was detected around Abqaiq on this image. So, who knows, lazy troops, sabotage, shitty maintance? https://www.moonofalabama.org/images9/abqaiqdefense3.jpg
There’s some good Twitter stuff on this attack being posted by arms control experts/brainiac types that seem to be educated in a lot of rocket propulsion and telemetry. Worth following I think.
Those tanks are spherical separators that have internal equipment for gas and water knock-out processes. The hole that you see in the shell is just a small portion of the damage done; all the internal equipment is likely destroyed as well. Just patching over the external hole won’t restore the separator to service, as all the internal equipment will have to be removed and replacements reinstalled. I think it is a very big problem that won’t be fixed anytime soon.
Thanks Mike. Interesting to hear that those tanks were worthwhile targets.
There seems to be a lack of any fire at the hole. Were these tanks functioning when hit, or idle/disused, do you think?
I disagree. Spheroids are low pressure equipment and can be fixed soon. This is the job done by Iranians with some dissident Saudi help. They could have very well hit utilities but chose not to do.
US is not a trusted KSA ally especially with Trump. He pulled the rug on Iran sanction just last year. Many of my Saudi colleagues tell me that Trump should not be trusted.
Note that the 20% decrease is from the exaggerated estimated ultimate recovery (EEUR).
If spacing is reduced from 800 feet to 400 feet one would expect lower output.
Somewhat like reducing lateral length from 8000 to 4000 would also reduce output. Probably best measure is output per acre.
The incident last week in Saudi should serve as a small indication of the kind of oil infrastructure disruption we should not be surprised to see in the future on a much larger scale. I am not predicting this as a certainty, but as a scenario with a significant possibility. At any time, at any locale with pipelines, refineries, LNG processing facilities, ports services, storage, etc.
Could be Houston, Dubai, Nigerian Delta, Khurais, or all.
And could be much more extensive than this last small episode.
I know some here would welcome such a disruption for the sake of their own pocket,
but for most the rest this is obviously a big bad deal.
There should be no surprise.
Just like when there was pearl harbor, it should have been no surprise, afterall the USA had a military embargo on Japan for oil in effect at the time.
Many countries have enemies, and many will be in scramble mode as oil peaks.
And so it goes.
I am very interested in how we spend our defense budget. I think we are spending way too much money, and planning for the wrong wars.
I think cyber warfare will be weapon of choice. And the latest Saudi incident shows that big war machines and large numbers of troops may be both expensive and ineffective.
Here’s something to add to the discussion.
“The US is headed for a reckoning between its military ambitions and its budget”
When I was a student a bright fellow student said: The oil price can not be predicted. And by the way, the US can not get bankrupt as the Federal Reserve is too powerful. Still rings true even if this was said 2-3 decades ago. Up to debate of course.
The US oil and gas rig count fell again, decreasing by 18 for the week, according to Baker Hughes, but US oil companies are still pumping oil at record rates.
The total oil and gas rig count now stands at 868, or 185 down from this time last year.
The total number of active oil rigs in the United States decreased by 14 according to the report, reaching 719. The number of active gas rigs decreased by 5 to reach 148.
Oil rigs have seen a loss of 147 rigs year on year, with gas rigs down 38 since this time last year, compared to 858 and 187 active rigs, respectively, at the beginning of the year.
Still, in the United States, weekly oil production is still near an all-time high. So while the number of oil rigs have declined by 158 this year alone, production has grown from 11.7 million bpd at the beginning of the year, to 12.4 million bpd for week ending September 13.
Oil prices were trading slightly up on Friday ahead of the data, with the huge spikes seen earlier in the week in the wake of the attacks on Aramco’s infrastructure now somewhat subdued.
Canada also down 15, over 10%. Doesn’t seem like anyone got a hankering to drill more even with 10% higher prices this week. Curiouser and curiouser…
Concerning “processing” on what is stored.
The US SPR lists content as XXX million barrels “light sweet” and YYY barrels “sour”. That usually refers to sulphur content, but maybe not in this context. When there was a draw on the SPR some years ago for a hurricane interdiction of supply, the draw was later replenished with imported oil, whose “processing” would not be the same.
Odds would seem pretty high there is no processing on what is stored.
Avg price today of SPR oil’s purchase . . . $29/b. “Release” is a sale to refineries, at the current price, so there will be a profit if it’s done soon.
And be aware recovery is not 100%. You have to put more in than you can get out. The SPR has its own less than 100% recovery factor.
A propos SPR recovery factor: why it is not stored in tanks, but it some old mines etc?
It is not stored in old mines. It is stored in hollowed-out salt domes. Some oil is lost but not a lot.
Salt dome storage is by far the most economical way to store oil and natural gas. Tanks are extremely expensive and require constant maintenance.
Yes, I was thinking about old salt mines.
But doesn’t stored oil decay in quality with time, like stored water does? I thought SPR oil is recycled, every 5 years ‘fresh’ oil or so. Someone already has noticed that Trump sold quite a lot of oil from SPR.
Also it was noted that Saudi Arabia goes low on storage every summer.
Why do tanks demand constant maintenance? Is oil corrosive or what? Anyway, nowadays there is surplus of old tankers, could be used for storage.
Yes, I was thinking about old salt mines.
No, old salt mines are something completely different and are not used to store oil.
But doesn’t stored oil decay in quality with time, like stored water does?
I cannot imagine why. It has been in the ground for hundreds of millions of years and not decayed. Why would it decay in a salt dome?
Why do tanks demand constant maintenance? Is oil corrosive or what?
Everything left in the outside weather requires maintenance. Bridges, roads, and tanks. The weather is corrosive.
Anyway, nowadays there is surplus of old tankers, could be used for storage.
The US Government does not have a surplus of old tankers. And old tankers would be a thousand times more expensive than salt dome storage.
Hey, hollowed out salt domes make the perfect storage facility. What is your problem with them?
‘It has been in the ground for hundreds of millions of years and not decayed. ‘
Because it got contaminated by bacteria etc…. In the ground oil was highly pressured and isolated.
‘The weather is corrosive.’
That’s true but not to the extent of demanding constant maintenance. Periodical rather.
PS. How do I get cursive here?
I do not think bacteria attacks petroleum polymers. For instance, you can leave a plastic milk jug in the sun and it will crumble in less than one year. Ultraviolet rays can break down polymers. But bury that jug one foot underground and it will last one million years without damage. Bacteria will not attack it.
I have never heard of oil polymers decaying because of bacterial. I know they have tried to develop polymer eating bacteria to fight oil pollution in the ocean. But I have never heard of them being a problem in oil storage salt domes. But if anyone has any information about this, I would be glad to hear it.
‘The physical and chemical properties of oil residing in reservoir core samples are strongly susceptible to evaporative processes during storage. (…) Although the physical properties of the oil may be compromised during storage, the distributions of the high molecular weight components retain characteristics, similar to a bar code, that are inherited and representative of the original (fresh) core sample.’
Essentially like stale water. Presumably the same water, but not the same after all.
The oil sands in Western Canada and the heavy oils in the Venezuelan Orinoco Basin represent conventional oil which has undergone extensive biodegradation. Flux of meteoric water. Might not be so much of an issue within a salt dome.
OneofEU, On theoildrum you got cursive starting with [I] and ending with [/I], but here it doesn’t work.
Ron, how on your forum ?
Use the less than and greater than symbols.
Thxthat works
Of course no one can predict the future, not even Dennis with his wonderful models. I certainly can’t predict the future. But the recent events in KSA keep bringing a theme to my mind. The basic sequence is that “drone” attack is the point of weakness which brings the folks who are pisssed at the KSA leadership into more active opposition of the regime. From the Houthi’s to the Princes, the guest workers, Shiites, Iranians, women, and the wealthy Saudis, there are a lot of folks who want a change. The iron hands of the Political and Religious leaders have been able to mostly suppress dissent to date.
Recent events show the KSA vulnerabilities, and the response of increasing sanctions on Iran will likely embolden dissent rather than quash it. Of course I am sure KSA will also round up some likely suspects and behead them to keep appearances up. Will they be successful, or will we see another Arab Spring…
Drone Spring maybe 😉
But you are right, generally. Someone who did it obviously wanted to move things forward, not to close anything.
Internal tensions seem to be Achilles heel of KSA. Iran, on the other hand, has been pressed into unity by years and years of sanctions and harassment (which even more significant when you know that its oil provinces are more Arab than Persian).
Primary focus frac spread count is down to 375. Average was 450 last June.
Last year tight oil output increased by 1 Mbpd or more.
Number of completions can decrease 30% in Permian and maintain flat output. So far frack spreads have decreased by less than 20%.
Hi Dennis,
Based on EIA monthly data, lower 48 US oil production has been pretty flat since November 2018. I calculate 9703 kbpd for June and 9539 for Nov. 18, an small increase of 164 or 1.7% over 7 months. While many factors effect production levels, there is nothing more important than the number of frac spreads running.
Primary focus publishes weekly national frac spread counts. You have to pay extra to get info on Permian or other basin counts, and I do not have that information.
Based on their info, I computed an average of 464 spreads in Q4 2018, 447 spreads in Q1 2019, 462 spreads in Q2 2019, 450 in July 2019, 416 in August 2019, and their count had dropped to 375 last week.
With production growth slowing to a crawl, while spreads were around 450 to 460, do you think spreads will have to drop 30% to say 315 before we start seeing production drop?
I expect there is a small time lag between spreads and production so, I expect we will seeing declines when actual September data is released.
July data should be coming out next week. With July spreads averaging 450 I would guess lower 48 onshore to be near steady around 9703. Do you think it will be up appreciably?
Dclonghorn
The drop would be 30% below the Q42018 level so about 325 frack spreads.
I agree this is an important metric. Also note that much of the drop in production growth was due to a slow down in conventional oil completions. This can be seen from sharp drop in vertical oil rig count in the past 52 weeks. About 43%.
Correction.
Vertical oil rigs down by 33% from their 52 week maximum and for horizontal oil rigs the count is down by 21% from the 52 week maximum.
dclonghorn,
Agree output probably flat to up or down 100 kb/d in July would be my guess, not sure if the hurricane had much influence on GOM output, but onshore should not have been affected much so your guess is as good as any.
Btw, max extraction rate from the SPR is 4.4 mbpd. The pumps are among those items needing maintenance.
Concerning defense against small vehicles at low altitude.
As opposed to spending money on defense against cyber attack — and such an attack is unlikely to KSA output Y mbpd instantly.
In general, DOD spending is on people. Salaries, quarters, and there’s even a food allowance. That’s the military personnel. For contractor expenditures it is largely the same, plus healthcare. The salaries in an airplane cost a lot more money than the metal.
Now, it’s not a jobs program, but it’s absolutely correct to note that those salaries generate tax revenue. It all gets more complex from there as military families spend money on cars, back to school sales, and television for the living room.
It’s not a zero-sum game. If you don’t spend money on the military, that doesn’t mean that the money is available for something else. We have a debt. We could pay it down rather than spend elsewhere. And, as we have demonstrated with our hundreds of billions and currently 1 trillion dollar deficit, you can spend the money on the military and anything else you’d like in addition rather than instead.
They all that as it may be spending on Cyber defense clearly would not have stopped those drones.
It would be nice if someone got paid to sweep the streets, and teach children to read and write.
You may say that I’m a dreamer
Money would simply disappear if we used money to pay down debt. It would cause a depression if debt were to be paid down. The problem that rises when less oil arrives is your still pumping debt into the economy and your doing it at an exponential rate as is required in order to avoid debt deflation.
Yet you have less economic activity. So your pumping more dollars into chasing fewer goods and services. But you don’t get inflation. You get stagflation. Economy crumbles and prices rise at same time. Well right up until a good portion of the debt that keeps the economy going forward implodes due to non-payment. It won’t be government debt that implodes though.
It’s one thing to get an oil price spike above $70 or above $100 while there is plenty of oil to go around, that can be handled. Think pre-2009 and 2010-2014. It’s a completely different scenario when you get a oil price spike and there is not enough to go around no matter what you do.
If China for any reason is unable to import enough oil to meet their needs, like drone attacks in Saudi Arabia. Their economy implodes and dominos start falling everywhere globally. Which is a very good reason not to be long oil if your a trader.
Any spike in price due to a shortage will be a short lived event no matter when it finally arrives. Because on the other side of Peak Oil is Less Oil and Less Oil is deflationary as hell.
Best commentary I’ve read coinciding with the way I see the situation, except that somewhere along the process there should be a near-global monetary crisis. It is the inevitable consequence of too much money chasing too few goods in a depressed economy within an international monetary competitive environment.
Yes, it has surpassed the point that it is likley that something like that would happen. But my comment is that I think you underestimate the will to combate this with more currency, which will cause hyperinflation. Or something remotely similar. I repeat the view that if all the five major currencies expand money in the same rate it would get the best result as some sort of stability can be restored. We can endure inflation, but it will be more severe than in the 70’s-80’s and it will be more or less unavoidable in my view. It is a grim view and most don’t want to think in this direction, but that is the price of messing with the oil business cycle and also the financial cycles (low interest rates/QE to repair economic contractions earlier than the case now).
The military is a jobs program of sorts. For as much talk as there is against socialism, that is what the military is. In addition to salaries and a generous retirement if you stay in at least 20 years, there is government healthcare, government housing, government stores, government recreation centers and childcare, government schools on some bases, etc. Maybe we’ll expand the military budget to such an extent that everyone in the country will be part of the defense budget.
My primary concern isn’t the size of the defense budget as such, but how it is being spent to prepare for future wars. I think (and so do others) that we are spending money that enriches some companies, but leaves holes in security.
It’s like that wall. Of all the military threats in the world, Mexico is pretty far down on the list. Yes, we can spend money to build it, and given the choice between more war and the wall, I’ll take the wall. But given what we could be doing, I don’t see the value.
If you are saying debt doesn’t matter, then vastly expand infrastructure and green energy spending. That’s the whole point of the new green deal.
As for Norway concerned, we have our defence policy. But it is insanity for Russia to invade the north of Norway for a number of reasons. So, the government has instead invested a lot in the climate change movement (about 30 BNOK compared to a defense budget of 50 BNOK+). I don’t disagree with the direction, but there is a long way to go. Air travel is targeted now along with plastic abuse coming from the oceans. However, the way the goverment is targeting this the main message will in my mind always be; what are we going to do after peak oil in Norway specifically? Try to do something new maybe within the technology sector. A bit optimistic; we have already tried. Also try to reduce oil consumption, while relaying on hydro and wind power. And this does not work because we have a lot of consumption tied to air travel, sea freight and heavy truck freigh. Norway has developed a luxury economy along with North America, and there really should be a plan B. But we are not there yet; too many obstacles at the moment. Now, America just want to manipulate the oil price back to 60 dollars brent judging by todays movements; until it breaks. Norway is one of the most energy rich countries in the world per capita, but people would not step back in living standard unless subsidied by the government in some way. And I guess the other citizens elsewhere are not too keen to do that either.
If Democrats win next year in the US, green will be the way. But it will not be a walk in the park – I suspect a Trump related crisis is brewing right now.
https://www.upstreamonline.com/rigs-and-vessels/us-oil-drillers-drop-14-rigs/2-1-675976
They exsepect as a result off shale need to set profit and payback to banks, investors first that the decline we see in EIA June monthlies 32k bpd will continue. According to Trumph he assure enough oil from US strategical reserves , he dont want high oil price and seems happy with WTI 50-60 usd even lower. The risk for more attack in Saudi is significant, also they believe there will be a military attack when they find out where the drones where sent from. As a structural Engineer working with oil and gaz projects for decades also design of seperators it seems quite clear the dammages is huge , before this plant can start up lots of equipment need to be exchanged guess many are long lead elements made trough spec i.e , cables , cable trays, walk wayes , monitor systems seems destroyed. Since this was built several years ago it might be difficult to get new compenent and re design , calculations might be needed . This work shall also be done in a site the houties still considder as a goal for future attack and they ask pepole to stay away.
Oil companies drilling so-called child wells in the Permian risk losing 15 to 20 percent of the crude oil that could be recovered otherwise, investment bank Tudor, Pickering, Holt & Co. has said in a presentation seen by Bloomberg.
Child wells are secondary wells drilled close to the first, or parent, well. According to Tudor, Pickering, Holt & Co., the proximity makes the child well a lot less prolific than one further away from the parent. On the other hand, however, if the secondary well is drilled too far from the parent, the driller risks a dry well.
“Child wells get progressively worse relative to their parent well with tighter spacing,” the Houston-based, energy-focused, investment bank wrote. This means wells are at their most prolific in some Goldilocks zone that is neither too close to the parent nor too far from it.
One way to get around this problem is to drill two wells at once. This approach, according to Tudor, Pickering, Holt & Co., ensures better recovery rates closer to the driller’s projections.
The ban knotes that 60 percent of the wells drilled in the Delaware Basin in the Permian last year were child or simultaneously drilled wells, as opposed to the period until 2017, during which most of the wells in the Delaware Basin were parent wells.
“One way to get around this problem is to drill two wells at once. This approach, according to Tudor, Pickering, Holt & Co., ensures better recovery rates closer to the driller’s projections.”
/Scratchy record sound/
Hold on there. This is the first I’ve heard of this strategery.
Is this right?
Is there some magical way that drilling two wells at once avoids the parent-child effect?
Seems more likely to me that all you get are two so-so wells rather than one good one and a bad one that steals a little from the good one.
Yeah. You could drill two wells, one right after the other… Or you could drill two wells at the same time. That would make a difference? Why???
If one drills wells too close together then EUR of the wells will be lower ceteria paribus. Pretty sure any decent petroleum engineer would confirm this assertion.
On the basis of EUR per foot of lateral Permian Basin is already seeing decreasing productivity. It is possible that acres per well have decreased if spacing has decreased by more than the increase in lateral length.
Acres per well would be a very interesting statistic to track.
When you drill one well next to an existing well the first well will have made a pressure sink due to depletion that helps draw some of the frac energy from the daughter well. The idea behind completing them all at the same time is you can get a more complex fracture network and increase the recovery factor of the hydrocarbons in place. Say if you drilled them one at a time, the first well recovers 5% of the oil per X acres (figure about 80) then the next well will recover less as it gets a potentially worse frac, say 4%. It will also impact in an unpredictable way the parent well. I have seen them increase production substantially, or be knocked offline completely. If you complete them both at the same time, there is no pressure sink, so in theory you should be able to get a much more complex fracture network, and maybe recover 6-8% of the hydrocarbon per 80 acres. The big problem is in the long term life of the wells, they are likely to be negatively impacting each other’s reserves. You may only ever be getting the 5% recovery per 80 acres, just you see it sooner. Companies do not report on what is happening long term with their wells or spacing projects, just the new splashy first month. There is always a shiny new project to distract, and no one ever follows up with what happened with that test you did two years ago? Somewhere between half and two thirds of all horizontal wells drilled since 2007 have never turned a profit, and are not likely to in the future. In that way, shale plays are much like old vertical conventional plays, just more expensive.
Thanks JG.
“Co-developing” is another new shaleism. It does not imply two wells be drilled at the same time, only that they be frac’ed at the same time, thus avoiding pressure differentials often seen in the parent/child relationship. We’ve been doing this now for six years already; its called zipper frac’ing. Up to four or five new laterals at a time can be manifolded together and stages at the same TMD (total measured depth) can be frac’ed at the same time. Almost all multiwell pad drilling includes zipper frac’ing. The relationship between parent and child often means a “group” of parent wells and a group of child wells. Unless the shale oil industry can sort out how to frac an entire county at once (give it enough low interest money and it will), this is no fix at all. Its just more bullshit to keep people… hoping.
In the late 1920’s and early 30’s, particularly mid-30’s and the East Texas Field discovery, wells were being drilled too close together resulting in the loss of natural reservoir pressure that resulted in a severe reduction of liquid recovery rates. The Texas RRC stepped into establish rules to prevent this loss, or waste of pressure, to optimize recovery rates of wells, to prevent the unnecessary drilling of wells and to conserve Texas resources for the long haul. Those rules limited the number of wells per acre of land and the distance between wells. It worked, beautifully, for decades and decades, the price of oil was stable, we were ensured of steady production that could be relied on and Texas, for the most part, dictated world prices until 1977-1978.
What’s different today with shale oil? Nothing is different. Shale oil is being over drilled, GOR, a precursor to depletion is going up, flaring is on the rise, productivity is plateauing, decline rates are accelerating and the shale oil industry is getting deeper and deeper in debt. It is completely out of control and needs to be put on a very short leash by regulators, its rate of growth slowed down. Exporting LTO that we cannot use in America’s refineries is a waste of resources that we will need, badly, for decades to come. Everyone with the ability to regulate the shale oil industry is more concerned about short term jobs, tax revenue and ensuing votes that occur to help them get re-elected. Nobody managing America’s hydrocarbon future can think past next week anymore.
“Nobody managing America’s hydrocarbon future can think past next week anymore.”
Ummm, this is the first I’ve heard of anyone managing the countries hydrocarbons. Is there such a program? I was under the assumption its pretty much ‘anything goes’.
Thanks for this Mike.
Thanks Mike great comment.
How does the idea of oil swaps sound?
We don’t have enough ligbt oil refinery capacity for tight oil produced.
Couldn’t government require that for every light barrel exported a heavy barrel must be imported so that the net exports are zero?
Mike,
It would be fine with me if Texas, North Dakota, Colorado, and Wyoming decided to regulate oil and gas production in such a way as to conserve resources as much as possible.
Not sure if you have noticed, but 3 of those 4 states are pretty conservative and lately the conservative mantra has been deregulation and the market knows best.
Not sure what the answer is, but many Texans would prefer that regulators stay away from Texas, or so it seems. I am not from Texas so it is not up to me.
The mechanism and ramification of scarcity is very likely a great deal more direct and immediate than things like measured deflation.
If you have scarcity then someone did not get an order filled. For many countries not getting an order filled will translate immediately to long lines at gas stations and empty shelves at grocery stores. There is no real mechanism in place in those countries to prioritize allocation. The shelves would have to go empty and the riots would have to be underway before governments would realize they need to allocate. Then they have to find the gasoline for themselves and their staff to get to their offices and draft legislation that shuts down non agro business.
All of this would happen long before there is any reported measurement of annual or even monthly inflation or deflation. This for the somewhat obvious reason that the guys whose job it is to take the measurements are out in the streets rioting and looking for food.
How many missed orders does it take for say China to start seizing ships? Obviously if oil can be shipped from Iran to China instead of China seizing ships that will be exactly what happens. Which would pretty much guarantee an escalation of trade war. Pick your poison kind of situation.
Scarcity means price goes up. In a depressed economy prices don’t go up much because of lack of affordability. You don’t get long lines at gas stations and empty selves because people can’t afford things as they become much poorer. Demand craters as the world adapts to less oil through economic destruction. People without work need a lot less oil.
Scarcity means short term price rise and movement to alternatives and efficiency. High oil prices lead to increased exploration and production which leads to gluts on the market.
High prices of the 70’s and early 80s led to a price slump for 15 years, cars got more efficient and ride sharing became more popular. High prices from 2004 to 2014 led to increased production, increased efficiency in transport and the growth of hybrids and EV’s. Now we are in a 5 year slump again. One more lengthy price rise might push alternatives and efficiency to the point of no return for oil as the main transport fuel.
Rock and a hard place time.
Yes.
There is a huge amount of oil consumption that is of very low value – think single passenger commuters in 12 miles per gallon SUVs. A price rise to $125 per barrel would squeeze out much of that low value personal consumption, and freight hauling would out-bid personal consumption.
There might be some disruption in countries that aren’t well organized – in particular, countries that control fuel prices and pay subsidies to importers and distributors to cover the difference. High oil import prices would break the government budget and those countries would have to abruptly raise prices, threatening fuel riots.
Fortunately, some of the major consumers, like China and India, have mostly ended the price controls and subsidies. Countries like Egypt and Venezuela* appear to be determined to destroy themselves with those subsidies.
*Venezuela would get a reprieve if oil prices were to rise sharply, but in the long term they’ve destroyed their economy with a terminal case of Dutch Disease.
The thing that I find bemusing, is that everyone talks about Venezuela massive reserves, yet no one talks about the fact that all these reserves are just like Canadian tar sands and no matter what the price of oil , only so much can be produced daily.Certainly no where near the amount required to offset a 5mmBPD loss in production elsewhere. No current technology in the world can alter this fact.
GF, you are wrong. The boom-bust cycle during the increase in production before peak oil will be very different during the decrease in production after peak oil. Despite the increase in efficiency and the transition to alternatives, the result according to Jevon’s paradox is that we need more oil than ever before, not less. Globalization runs on oil and international commerce is the main source of wealth. Since 2012 the world has been de-globalizing. https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-lakshman-achuthan-business-cycle-ecri-de-globalization-diagnosis-predated-trade-war
After peak oil de-globalization can only accelerate leading to economic contraction. It is hard to think that under economic contraction we will achieve the successful energy transition we couldn’t get under economic expansion. Certainly the transition will be forced on us, but through a strong decrease in energy usage.
the result according to Jevon’s paradox is that we need more oil than ever before, not less
Bingo!
We have a winner—-
” Certainly the transition will be forced on us, but through a strong decrease in energy usage.”
Yes, just what I said, reduction in energy use both inherent to the transistion and systematically applied. As we have discussed here before on this blog just the energy used to produce, refine and transport oil could run all the vehicles if they were electric.
I agree Carlos “Certainly the transition will be forced on us, but through a strong decrease in energy usage.”
But that is not all bad news necessarily.
We could get by with less energy (as GF and others have pointed out).
It will hard, especially if the decline happens suddenly,
and more so for those places that are more heavily dependent on external energy inputs/imports.
If it happens more slowly, the adaptation will be a little smoother.
None the less, difficult when we are so far into an overshoot condition.
Jevons paradox only occurs if prices drop due to reduced demand and there is no shift in demand curve. Technology changes will result in a shift of the demand curve for oil so that at any oil price there will be less demand for oil.
Consider the following thought experiment: petrol price drops by factor of 2, would you increase miles driven by a factor of 2 or more?
I drive an EV and would not change my driving habits if electricity cost fell.
I saw one estimate that elasticity of oil demand is about .3, meaning that if the price of oil doubles, consumption goes down by about 30%.
I don’t know if that was short term or long term – long term elasticity is higher than short term.
This is what happens, and it happens really really fast and the damage lasts for a looong time.
(Save this to your hard drive – it is a story worth remembering.)
The moral: we’re too dependent on oil, and we should reduce our dependence on it ASAP.
Another way of saying it: oil has very high hidden costs due to the risk of inadequate supplies. A war in the Persian Gulf would cause enormous damage. The US has spent trillions on oil wars. The price of oil should include those hidden costs – oil should be more expensive, not less.
Time to move away from oil ASAP.
I agree with that premise. People living in industrialized societies are hooked on oil like a drug, majority without even knowing it.
If we hypothetically followed your view and increased the price of oil (enter specific reasons here) to say 80-90 dollars a barrel for brent. In the current economic climate, a massive recession would be the likely outcome. Some might argue a depression.
We won’t move away from oil. The addiction of humans are too strong and the scariest thing, the standard of living produced by industrial civilization is taken for granted by the masses. It is expected. It will be a rude awakening for those in that state of mind.
Another war in the gulf is inevitable in my view. I hope i am wrong. But the next few “events” might trigger a catastrophic war.
Yeah, another ME war might well happen. I suppose it might be Farmer Mac’s “brick upside the head”.
If we increased the price of oil through taxation, that would reduce imports, which would help oil importers. The additional tax revenue would be used to reduce other taxes and the overall tax burden would stay the same. The standard of living would rise.
If we move away from oil, we’d move to things that are cheaper and safer, like EVs powered by domestic electricity, and we’d eliminate oil imports that transfer income & wealth to oil exporters. Both would reduce costs and raise the standard of living.
I think that any fossil fuel tax should go to building out a renewable energy system and reducing the cost of EV’s.
Any tax that just loops back into the general system gets dispersed to the people and industries that are now causing the problems.
That would work.
Instead of recycling fuel & carbon taxes into a “citizen dividend”, you could invest it in renewable energy infrastructure, energy R&D, subsidies for EVs, etc., etc. That would work just as well to prevent any economic harm from new taxes. Heck, the net effect would be stronger economic growth, due to savings from better energy infrastructure (plus, if you cut taxes then some people will just save their tax refunds, instead of spending them – you can’t have that!).
Compensating tax reductions would be a little easier to sell, politically. Maybe a good compromise would be a mix of tax reductions and energy infrastructure investments.
While we are increasing public health and safety, tax the meat, dairy and biofuel industries (including all imports and exports).
Use that money to expand “specialty” crops in an organic and sustainable way. That would reduce demand on oil and natural gas.
I can see taxing farm operations based on their harm to soil, and GHG emissions.
I’m not clear how that would reduce demand for oil & gas.
Organic is not sustainable: it’s a marketing ploy.
You wrote that a few times on theoildrum more than 10 years ago. And now it’s one or two minutes before twelve or maybe after twelve already for avoiding serious problems, unless from somewhere in the next decade on world oilproduction stays at least one decade on an undulating plateau or the climate movement can perform a miracle
Yeah, I’ve heard the same lame bullshit from Nick for about that long also. This is a fella who would not mind total social chaos as long as he got what HE thought was “best” for the world. Of course it is a privileged, city-boy idealism Nick has; he has the money to endure the chaos and that, essentially, is all that matters. Others, those of that have to work for a living, don’t have that privilege and seek a more logical, less emotional course of action, one that would benefit everyone.
Dennis, whatzup with this shit? Do you want to discuss oily stuff here on this side of the tracks or allow the anti-oil crowd to wander back in forth under the auspices of getting rid of oil ASAP as actually being relevant in the peak oil debate? Is that the way you look at it as well? Think about it for a moment; a lot of the answers you so desperately seek about the future of oil can ONLY come from people who understand the oil business…then you let these wanks come around and talk about wanting it all gone, ASAP. Come to think of it, where is Shallow, or Rune, or the LA geologist fella? Everyone that actually knows anything about oil and gas inevitably gets tired of this sort of dung heap and leaves. You need to sort that out, I should think. Or not.
Hmmm. I know what you mean about the two “sides of the tracks”. On the other hand, it’s really very hard to compartmentalize oil vs non-oil. My approach is to try not to say anything controversial unless it’s in reply to something that seems unrealistic. In this case I replied to a comment by Adam Ash, which linked to an article suggesting that our dependence on oil meant roughly that civilization was going to come to an end when we hit Peak Oil.
As for “social chaos” – where did you get that? ASAP doesn’t give a specific timetable. It doesn’t say “overnight”. It says “as soon as possible“. That doesn’t say “chaos” to me.
Finally…an Oil Shock can cause chaos. Rising sea levels cause chaos. Drought causes chaos (and was a primary cause of the Syrian civil war).
Oil wars cause chaos. 2.77 million veterans have served in Iraq and Afghanistan, mostly due to oil: hundreds of thousands have disabilities and severe PTSD. A very large percentage of homeless are veterans.
“An analysis conducted by the RAND Corporation has shed light on the scale of U.S. military deployments since 9/11. Even though deployments abroad represent a key aspect of U.S. military service, they can prove highly disruptive to family life with some spouses reporting that their children experienced behavioral and peer-related problems during those long periods of absence. Since 2001, 2.77 million service members have served on 5.4 million deployments across the world with soldiers from the Army accounting for the bulk of them. Deployed personnel were under 30 years old on average, over half were married and about half had children.
In total, all services contributed 3.1 million troop-years of experience and 58 percent of those years can be attributed to the Army. According to RAND, 1.33 million individuals deployed with the Army between 2001 and 2015 (including the Reserve and National Guard), along with 563,000 from the Navy, 518,000 from the Air Force and 367,000 Marines. Considering the length of the wars in Iraq and Afghanistan, a substantial number of those serving across all services have gone on several deployments. Around 225,000 soldiers who served with the Army deployed at least three times or more.”
Since NickG wrote “Time to move away from oil ASAP.”
It could be interesting if NickG would share with the rest on this board about what steps he and his family has taken to completely move away from oil (or hydrocarbons in general) and its effects and how that has worked out.
Rune,
On the one hand, that’s a somewhat unfair question: it’s far cheaper and easier for the whole society to move on something like this than to ask individuals to sacrifice. I could also just as easily ask you what you’ve done to help starving people in Africa: you know they’re starving, so what are you doing??
But, it’s a partly reasonable question, and the answer is that I’ve worked in my professional life on efficiency projects (lighting, HVAC, building envelope renovation, etc) and governmental policies like carbon taxes and transportation planning. In my personal life I’ve replaced all of the incandescents possible, insulated to the point where I don’t need heat above freezing, use electric trains, live in a walkable neighborhood, and only drive about 800 miles per year in ICE’s.
How has it worked out? Beautifully. My costs are lower, my life is better. Again, I don’t go beyond the reasonable: I don’t avoid ICE vehicles as if it were a religious taboo. Again, I do the reasonably possible.
You agree that Climate Change is a serious risk, right? What have you done to transition away from fossil fuels?
Bravo.
Keep at it Nick, speech suppression and thought suppression are supposedly the antithesis of what America stands for.
Thanks.
You’ve hit the core of what I’m talking about here: ideas, and telling the truth.
I suspect Mike thinks that I’m judging him for being in the oil business. I’m really not. I think his work is honorable and useful.
Let me say that again: *I think producing oil & gas is an honorable and valuable profession.*
What I object to is people saying things that are unrealistic and intended to prevent open policy debate. I object to Exxon and Mobil fighting against good energy policy. I object to the spreading of false information.
Again – I have no problem with people working in oil & gas. I see nothing wrong with receiving royalties from oil. I think that Norway is doing ok: they produce a lot of oil, but they’re setting an example for reducing their consumption of oil.
Nobody is trying to suppress Nick’s freedom of speech; what a bunch of whiny crap that is. The forum was once divided to avoid these sort of “interferences” in debate about important oil and gas matters. I, for instance, have no desire to wander over where the anti-oil, anti-God, anti-conservative, the world is going to hell in a handbasket, Tesla crowd hangs out on the non-petroleum side; what’s the point, to change someone’s mind? Phftttt.
The anti-oil rhetoric, here, is an obvious effort to control the content of the blog, period. So be it. As to you, Nick, knowing what the “truth” is about the real world, from the security of your perfect neighborhood in Mayberry, gimme a break. To get where you think we all need to be you are going to need every drop of oil the world has left, and then some. You should be sending guys like shallow sand Christmas cards every year.
I was not the one who stated; “Time to move away from oil ASAP.”
Your reply just documents you did not understand the full consequences from your own statement.
The subject was not about starving people.
The subject in this thread was not about climate change.
(That belongs in posts/forums that discusses such.)
Again, I was not the one who stated “Time to move away from oil ASAP.”
And for GF, this is not about speech suppression, it is called keeping to the subject.
Rune,
You did move the goal posts by suggesting (hydrocarbons in general). Also ASAP, includes “possible”. Nick seems to be using very little oil for land transport personally, though clearly the food he eats, and the transport of most other goods he might use requires oil for most of the transport by land, air, or water that requires change on a society wide level which might require higher prices and potentially carbon taxes to accomplish.
We will need to transition to some alternative for oil at some point, if the peak in World output of crude plus condensate occurs in the next 5 to 10 years, in my view.
It will not happen overnight and time is getting short.
Rune,
Yes, the subject was indeed the consequences of oil shocks/shortages. The subject (the “thread”) was started by Adam Ash, above.
And if you think that this blog isn’t about the consequences of oil shocks/shortages as well as FF’s environmental impact, then….I’m just baffled. Read some of the posts shown at the top of the page ( ENERGY AND HUMAN EVOLUTION, or
OF FOSSIL FUELS AND HUMAN DESTINY, etc.).
And if you think that forecasting the future of oil (or FF) production can ignore problems of supply security, or pollution (including GHGs), I’m also baffled. If oil had no problems with security of supply, or pollution, it’s future would be very different. For just one example of many, VW would not be telling the world that it’s current generation of internal combustion engines is it’s last.
In other words: It’s not possible to forecast the future of oil without taking into account public policy, and public policy absolutely takes security and pollution into account.
Dennis,
I put in the expression hydrocarbons in general as I got the understanding that one of the big concerns on POB was about greenhouse gas emissions from burning hydrocarbons globally.
Or is it only oil that is bad?
Exactly my point there is a lot of energy from fossil fuels embedded in everything from improving residential insulation (which is good long term) to food and other products and services purchased.
In every transaction some energy input is required.
Using less is good.
Rune,
Yes carbon emissions in general will affect climate change, but that was not really discussed here. Nick said move away from oil ASAP, though at some point (2030 to 2040) other fossil fuels may peak as well so you are certainly correct that eventually there will be a need to move away from hydrocarbons (that is reduce demand for them).
Also correct that it is a challenge to transition to alternative forms of energy so ASAP, realistically is probably about 40 to 60 years, we need to get started as peak fossil fuels probably occurs in 15 to 20 years and decline in output may be relatively steep, so a transition over 40 years would be better than 60 years if we do not want to be faced with a great deal of scarcity from 2060-2080, I will be gone by then, but my children and potential grandchildren will need to face this problem. The earlier we face the problem head on the better off we will be.
Head in the sand helps little.
One of the problems with moving away from oil is figuring out what the people who work in the industry are going to do for a living. Not just directly, but all that is associated with it.
It will destroy the economy of my county, as it will close the oil refinery and shut down the oil production. That will be a loss of over 1,000 jobs in a county of just over 20K people.
It would also close down two auto parts factories here, unless they were completely retro fitted to make electric car parts. Another 600 jobs.
I am also not sure how farming is going to be changed. I hear a lot of talk, not sure how it will work.
Hey, I am not going to argue here. None of the next generation in my extended family wants anything to do with either Ag or oil at this point. They listen to the media and politicians who say we won’t be needing oil soon, that oil will be worthless. They also see how things can go from good to bad so fast in commodity industries. No reason to take on the risk when you are also told that it is destroying the planet and won’t be needed anyway.
I just hope these people wanting the major disruption are correct and that it needs to be done. Because they are necessarily going to have to destroy the way of life where I live to accomplish their goals.
To NickG and others, what is the plan to replace all of those jobs where I live? Should we just accept that 1/2 – 2/3 will leave and the rest will be mostly poor?
I know small town life isn’t for most. But it was a great place to raise kids, 5 minute drive to work, nice to know many of the people you meet on the street. These is also something near about knowing your great – great grandparents came from across the ocean, settled here, and you and your ancestors were able to make a go of it for a few generations.
There has been oil production and refining here for over 100 years. Row crop farming prior to that.
Most city people call me a whiner when I bring this up. Maybe they will understand if the USA tries a dramatic switch off oil, and it doesn’t go as smoothly as promised.
It has taken 7 years to get to where I regularly see 1-2 Tesla’s in the wealthy areas of the cities I travel to. Maybe the next 7 years we will see much more dramatic change.
SS, the scale of the energy transistion alone is gigantic. Jobs will not be the problem since machines are not up to the task, just yet.
The plan in general is to continue replacing workers with machines, robots, and AI, all the way up into the professional levels.
Somehow I doubt if any of this will really get done on a global scale, enough to make any real difference. Most likely the burning will mostly continue, the eco-destruction continue, the fisheries deplete, etc. etc.
The governmental bodies are lying through underestimation and omission, in some cases outright. The big corporations are fighting tooth and nail to continue the legacy industries.
We have been presented with the facts and ways to reduce the loss, suffering and pain of the present and the future but most of the world turned it’s back on the problems and decades later are finally discussing some of them, partially. Not really doing much, but discussing.
So it’s a matter of being screwed or being horribly screwed, flip the coin. Jobs may not be a problem at all in the future.
There are always changes, if you knew your grandparents well, was life the same in your county during their 20s as it was during yours?
The only constant is change. That is just the way it is, some things will never change … (as the song goes)
EVs can be manufactured instead of ICEVs, batteries, solar panels, wind turbines, HVDC transmission lines all will need to be built, homes can be renovated with more insulation and air leaks can be sealed, heat pumps, both air source and ground source could be built and installed.
It was mentioned in an NPR interview by the founder of Southwest Airlines (first time I heard of it). His point was that no company lasts forever.
Dennis. No doubt.
But it seems change by government picking the winners and losers isn’t the best result.
I’ll step off now, the discussion is too far from oil related.
shallow sand,
We could simply let the market choose, worked great from 1929-1932. 🙂
Hmm. What society should due to mitigate the consequences of peak oil seems a fairly central question about peak oil, at least to me.
Also doesn’t demand for oil and what might affect that demand seem related to oil production?
Generally demand for a product is a pretty important subject for a producer.
A final point is that economists believe that taxing a product, (and thus raising its price) is the most efficient way to accomplish the transition.
So I tend to agree that a carbon fee and dividend approach that simply collects the carbon fees and returns the money to the people as a dividend might be the best approach.
Foe those who are fiscal conservatives we could collect the fees and use it to pay down the national debt when the unemployment rate is below 6% and return the money to the people when the unemployment rate is higher than 6%.
I generally agree that the government will not always make the best choices and letting the market decide tends to lead to better outcomes (severe recessions are the exception to this general rule).
Shallow Sand,
You’ve got a good point. Economic transitions can be very painful for people invested in or working in industries that shrink. Farming is a case in point: 150 years ago half the population worked on farms. Now it’s 1%. The gradual decline of farming has taken the form of bankruptcies for the smallest and weakest farmers in a long, continual bleeding process. That’s mighty painful.
So, what do we do? Well, we don’t really want to stop the transition: that might delay the pain a little for people in the legacy industries, but it would make almost everyone poorer and worse off.
But, we can do a lot to help the people affected. At the moment we’re doing very little: Republicans promise to stop the transition, but they can’t – they can only slow it down some. Really, Republicans are lying to rural and oily folks: they’re setting them up for an even worse, abrupt fall in the future, rather than a controlled decline. That’ what happened in the Depression: a serious shortage of money pulled the rug out from all the farmers that were just hanging on, and created a much larger and more painful transition away from horses and towards tractors (the rate of investment in tractors actually increased during the Depression, as farmers struggled to survive by cutting costs!).
If we have a serious oil shock, the car industry will suddenly be unable to sell ICE cars: that’s part of what bankrupted GM in 2007. Higher oil prices would help oil producers temporarily, but would accelerate the move towards EVs and away from oil.
Instead, we could have a planned and gradual transition using carbon taxes and we could target investment in wind and solar power in rural areas: that’s where wind and solar power go, pretty naturally. Especially wind power: Iowa farmers are pretty ecstatic about wind power right now, and East Texas land owners are pretty happy too.
We could help rural folk with the equivalent of the rural electrification projects which happened during the Depression: building infrastructure, installing home insulation, better windows, better HVAC (mostly heat pumps); rooftop PV, training programs for workers in all of these areas etc., etc.
Right now Republicans are giving a few crumbs in the form of temporary rollbacks of regulations (energy savings, methane emissions, etc), and farm subsidies, but they’re basically lying to their voters, and doing very, very little to really help them.
Mike,
This discussion has not focused on religion or politics or Teslas for the most part.
The ASAP part comes from environmental concerns, but even if there was not any environmental damage caused by the petroleum industry (every industry causes damage to the environment) the main point of this blog is a discussion of peak oil.
It seems a logical discussion surrounding the topic of peak oil is what do we do after the peak or how do we prepare for a peak in oil output. My hypothesis is that World oil output is likely to peak between 2023 and 2027 (more than a 68% probability that the centered 12 month average of World C+C output will occur between Jan 2023 and Dec 2027 in my opinion.) So in the mean time something should be done to reduce World demand for oil.
We can ignore the problem and pretend that all is well, but more needs to be done than simply stopping US exports of oil as we use about 17 Mb/d (crude input to refineries), but it is unlikely that US crude output will ever rise above 14 Mb/d (potentially we might reach that level by 2024 with fairly rapid decline in output after that point).
Note also that if all nations decided that they should not export their oil, but conserve their oil resources for only their citizens (as you would prefer for the US), then the US would immediately be short on oil by about 5 Mb/d.
So that suggests we need to find some way to cut oil demand by 30% (if there were suddenly no further imports or exports of C+C to the US).
Any suggestions on how that might be accomplished?
What “discussion” are you referring to, Dennis Coyne? I thought this was the petroleum thread, the question should be what does batteries, EV’s and ‘we need to get off oil ASAP’ have to do with anything on the petroleum thread? Otherwise, about God, guns, whales, ice, the Koch Brothers, evil Republicans from Middle America, etc., you know EXACTLY what I mean. You allow what you do, as moderator, for a reason. It suits your agenda.
You must not lecture me about the environment from your basement in Maine, sir. I am out here in the real world, working; as an oil producer I do not flare gas, meet all EPA methane emissions standards and render all my produced water reusable in such a manner that I can reintroduce it into the ecosystem for the benefit of aquatic life, wildlife and livestock.
I have lived with hydrocarbon decline and depletion for a half century, I am not “ignoring” anything. The first reference you heard of slowing the rate of shale oil growth thru increased State regulations, for the sake of pressure maintenance and conservation, was from me over five years ago.
I advocate strongly for slowing and ultimately ceasing all oil exports from America, that is correct. We are the largest consuming country in the world and in spite of all your charts and graphs, shale oil, like 140 years of conventional oil in America, is also finite and our nation will be out of the stuff very soon…or out of the money it takes to extract it. I would like my country, our kids, to be ready for that. If you, on the other hand, want to stand around with your thumb up your ass waiting to run out, being optimistic, driving a Flintstone car, that’s your business.
Because I wish for my country to stop giving its oil away, extracted on credit/debt, does not mean other countries totally dependent on exports will themselves cease exporting to America. They need the money, America will need its oil…and theirs. How in the world did you come up with that argument?
You are very confusing. Which is it; do you want to conserve America’s oil to better facilitate the transition to renewables, or would you rather export it all away to get rid of it…ASAP? All that growth you predict, ALL OF IT, will have to be exported. If that makes sense to you, I can’t help you anymore.
Mike,
I know that you conserve resources, my understanding from reading your blog, is that many others do not.
The discussion was about what to do when the nation faces an oil shock.
Not exporting oil probably doesn’t solve that problem.
I agree we should regulate oil properly as the RRC has done in the past. We could even stop oil exports, matters not to me, I think that’s less of a problem and generally think free trade is a better approach.
As to the charts that you seem to dislike much of that is what I have learned from you and others like George Kaplan, Fernando Leanme, and others who prefer not to be named.
The point of those charts is to show what might occur with a specific set of assumptions.
Well profiles are based on data from shaleprofile. TRR based on USGS estimates.
For the Permian basin I use about $13/b for OPEX, $10 million per well for CAPEX, royalty and taxes at 28.5%, ans transport cost at $5/b. Annual discount rate is 10% and annual interest rate is 7%.
In my standard scenario Brent oil prices gradually rise to $90/bo in 2017$ and wellhead natural gas is sold at $1.50/MCF, the natural gas sales include any NGL sales and this revenue is assumed to offset OPEX.
Using the assumed prices and costs a DCF analysis is done over the life of the well and only those wells with a NPV for future dicounted net revenue that is greater than the capex of 10 million are assumed to be completed. This is the basis of my economically recoverable resource estimates.
The point is precisely to show that tight oil output is likely to peak in roughly 2023 to 2027.
For the mean USGS TRR estimate of 74 Gb for the Permian basin and the medium oil price scenario (peak price og $90/bo in 2017$ from 2027 to 2045) and a medium completion scenario with completions peaking at 725 new wells per month by 2027, peak Permian output of 7 Mbo/d is reached in 2028 with a URR of 60 Gb. A lower oil price scenario with peak price of $60/bo results in far fewer completions with rapid decline after the peak and about 29 Gb for URR.
I doubt oil prices will be that low long term. Though it is obvious that future oil prices cannot be predicted on that point we might agree.
Sorry to have offended you.
I try to minimize the moderation. Also I cannot be looking at the blog full time.
Mike,
We could certainly choose not to export oil, that comes down to laws that are passed by Congress and signed by the President.
Generally I agree with the conservative viewpoint that government interference in the economy should be kept to a minimum unless there is a clear benefit to government regulation (in the case of air and water pollution for example).
I can easily create scenarios where there is very little growth in output. Such scenarios seem less likely to me, a lot of infrastructure is being built to export oil, so hoping that will not occur seems unrealistic from my perspective.
The problem you never address is what to do when we reach peak oil. You suggest I am too optimistic, not sure exactly what you mean, but let’s assume this means my scenarios are too optimistic, generally they point to a peak in World C+C output of 2025, let’s be more pessimistic and say it will be 2022 or even 2018. How does not exporting oil solve this problem? Currently we can import as much as we need and generally I believe mineral owners should be able to sell their minerals to whoever they choose. Kind of a bedrock principle of a free society.
I certainly agree tight oil is a drop in the bucket and US tight oil is likely to be no more than a cumulative output of 86 Gb, the US has crude input to refineries of 6.2 Gb per year so 86 Gb is roughly 14 years of US consumption (at current rates of input to refineries of around 17 Mb/d).
Scenario below has relatively constant completion rate from July 2019 to June 2026, URR is 86 Gb, total horizontal wells completed is 361,000 from June 2006 to Dec 2049. Peak is 8300 kb/d+/-50 kb/d from 2022 to 2026.
click on chart for larger view.
I get a kick out of my lecture to you on the environment, it was a short lecture that assumed the petroleum industry does no damage to the environment, I missed the recent discussion on Kochs, whales, evil Republicans, guns, God, ice, and other matters perhaps you can point me to where I can find that in this thread, besides your comment and this one.
My agenda is to promote a discussion of future problems and how we might address those problems. The scenarios attempt to show that under a realistic set of assumptions peak oil is likely to occur in the near future, many do not believe this. A second big problem is mostly discussed elsewhere, but I try to refrain from addressing that here.
I realize in hindsight that any mention of the environment might constitute a “lecture”. 🙂
Mike, DC,
This is off topic but relevant for me:
Rystad seems to be quoted increasingly in various professional and media channels. Their product seems to me to be fairly uniformly unrealistic and over-optimistic. What do you two think?
Thanks.
I agree their estimates are too optimistic. To get something similar to their Permian basin “base case scenario”, one needs to assume that the TRR is similar to the USGS F5 case, that is there should be a 95% probability that the TRR will be less than the F5 estimate.
Using that for the base case is absurd, this is what happens when economists do the estimates rather than petroleum engineers. 🙂
Adam,
Please post these kinds of comments in the non Petroleum thread (this week it would be under the Electric Power Monthly thread). Responses to these types of posts should be something like, I will respond in the other thread.
Most of the oil industry professionals are not interested in what to do after peak oil occurs, or perhaps don’t agree that it will occur, though if that is the case they rarely state their case on this blog.
That is the reason we have a Petroleum and Non-Petroleum thread.
Though I can certainly see the point of view that what we do after we reach peak oil seems related to petroleum, oil people want to focus on oil production and perhaps natural gas production and thing that are directly related to that, everything else is non-petroleum.
There seems to have been a lot of discussion here about the KSA oil infrastructure attack, and it’s effects. Maybe oil folks are more interested in short term oil shocks than in the larger, longer term ones…
Abject apologies Master! I was responding (helpfully, and in context, I thought) to Watcher’s comment re what happens when ‘…someone did not get an order filled’ and a region misses out on its daily dollop of an essential global commodity which we sadly pay less for than we pay for bottled fresh water from the same shop. I underestimated how far in random directions the community could run with the realities of September 2000. Will try to do better..
Adam ash,
For what its worth i thought your link was very interesting and could have started an interesting discussion, now it was used as a stepping stone to get traction and start preaching the usual stuff and apparently this is ok.
I guess it will be more of this stuff in future and less of great posters like Mike, and i dont blame him.
I used to come to this site for some years before i made my first own post and i did the “ctrl+f”mike”” as it was quite obvious even from the nose bleed section who the guy with real knowledge was and who the internet knowledge guys where.
It wasn’t random, it was looked at as an opportunity to push an agenda, keeping to your own side probably gets boring when you have that religious urge to preach. ??
To those who produce oil,
A discussion of what might be done after oil peaks is of no interest, is that correct?
Just curious, do you guys also not want to talk about when a peak might occur?
Do you think there will be a peak?
If yes, when?
Thanks.
Dennis.
I’d like more facts backing up how best to transition.
Which I know it is easy for me to say, when maybe I don’t even understand the facts, or ignore facts that are posted.
You post a lot of scenarios. Which is fine, but they are educated guesses.
Maybe it’s just too hard to see into the future.
I am just observing. I’m limited by where I am, what I know (and what I don’t, which I admit is a lot!).
I realize jobs and industries are constantly changing. My profession has changed radically since I went to college and began working.
I also realize jobs and industries completely disappear.
I just think maybe we all need to keep more of an open mind.
For example, to keep this post somewhat concerned with oil.
I suspect we are decades away from developing non -FF methods regarding some forms of transport and some products? So, if we ban fracking, what happens with those?
Who should pay a carbon tax? The producers, the refiners, the consumers, all of the above?
Obama seemed to have an, “all of the above” energy plan. Was that in error?
Greencar Congress is a good leading edge technology site. I don’t think an all of the above approach was wrong back in 2009. Not anymore. There are clearly feasable alternative now.
shallow sand,
Determining the best way to transition always involves guess work as it occurs in the future and there are no future facts, until we get there. All facts are historical, so we look at what has happened and make a guess about the future based on past historical experience.
I don’t think fracking should be banned and just like the Trump wall that Mexico would pay for, this is a promise that it highly unlikely to be kept.
On the carbon tax, the first purchaser of the mined product should pay the tax which will then be passed on to the final consumer, or what ever method it administratively most simple. No I think Obama’s all of the above strategy made sense, but it would be best to couple with a carbon tax in my view.
The transition will take many decades, probably 5 decades to reduce fossil fuel energy use to under 10% of total energy use. Pretty difficult to forecast one month ahead, more difficult to figure out 50 years ahead. Think back to when you were 10 years old, when I do the same I am pretty sure I could not have envisioned the world as it is today.
Likewise any guess of 20, 40, or 60 years into the future is likely to badly wrong. Not a lot of facts to point to there.
“Obama seemed to have an, “all of the above” energy plan. Was that in error?”
Always remember that the largest growth of oil production and gas production occurred during his time in office.
He was probably the closest to representing the public in general we will get, though that made him look like a fence sitter trying to please both sides.
Yes, the “all of the above” energy plan was a huge error since it dramatically slowed down renewable energy growth.
But Obama was pragmatic, not a visionary or a strong leader. His balancing act placed the Democrats near the center rather than the left. Meanwhile the Republicans were going hard right, meaning a shift to the right in general.
He did try to clean up coal but that has faded.
Adam,
I guess it is difficult to guess what direction a discussion will take.
I agree the discussion is interesting and I prefer a discussion with many different points of view, but there are many who disagree with my perspective.
Haven’t heard a lot of realistic proposals from the oil producers only that any proposals that they hear are unrealistic.
Would love to hear a realistic proposal, stopping the export of oil doesn’t really seem like it would help very much, it might reduce tight oil output and might also cause oil prices to rise, that is a positive result.
It still would leave the World short of oil in the next 5 to 10 years, that does seem like a problem worth discussing.
Suppose some simply hope the free market solves the problem on its own. Seems unlikely to me.
🙂 ‘…stopping the export of oil…
I don’t think that will help much, although when viewed from a hundred years hence how the oil and coal burning gets stopped may not matter much.
In the short term tho, if any semblance of social order is to be sustained, the only ‘safe’ way forward to a lower-carbon-emitting future is via demand destruction with the individual energy consumer.
I grumble when Greenpeace pickets another coal mine – its not the miner’s fault, its the fault of those who buy and burn the coal. Its not the oilman’s fault, its the fault of those who by and burn the fuel.
At the individual level governments can do a lot to swing people’s choices, and to support changes to less harmful (however you may define that!) ways of doing things. Support for uptake of good technology and discouragement of bad. Support for job training to transfer skills from bad to good jobs etc.
I understand that in WWII the entire USA car production was swapped onto producing planes etc. An instantaneous policy decision which completely changed the nation’s main industrial systems from one mode to another within a matter of days and weeks.
Imagine if a Trump or a Macron bought all the fossil-fuel business leaders into a room and told them “You have until Thursday to come back to me with a plan to replace 50% of your production (50 million barrels a day equivalent, plus coal) with energy systems which emit no more than 25% that of oil at lower price per kWhe, or I will increase your income and company tax by a factor of ten, and if you haven’t sorted it by Thursday week I will do it again.” and on the same day he tells the nation “The government has agreed with all opposition parties to form a united coalition government to meet this emergency. We will subsidise good business and penalise bad businesses. We will subsidise good jobs and penalise bad jobs. We will subsides training for a low-carbon life, we will penalise training for bad. We will do this by using carrot and stick rebates and taxes, with minimal net cost to the taxpayer. It will be an exciting ride to a new way of doing things, and we will ensure that nobody gets left behind. But woe betide he who seeks to stand in our way!”
With the right signals and a clear national goal and commitment, the free market can be pointed in the right direction for the greater good.
(Hope this response is in the correct thread!)
There is no law of the universe that says scarcity leads to higher prices.
There are many examples of this not happening. The obvious first one is the price of oil in the US from 1941 to 1945. Oil was rationed. That’s what you do when something is scarce. The price did not increase.
Price gouging laws are on the books in many states. Try to double the price of emergency items as a hurricane approaches, you will be prosecuted and lose proceeds, so the prices don’t gouge.
Money is created from thin air by central banks. It can’t possibly adhere to any laws of nature like gravity or electromagnetics. It’s a substance whose value is found only in the minds of counterparties. Stop thinking there need be any hard and fast behavior it will have.
It’s scientific method. When you have a hypothesis saying scarcity leads to higher prices, and experiments shows even just one time it did not happen, the hypothesis fails. Find another hypothesis.
Watcher, scarcity leads to higher prices in an open market. Obviously, if there are rationing or price controls, scarcity will make little difference. And I know of no one who claims it is a physical law of nature. It is just common sense. If you want something that is in short supply, you will have to bid the price up.
It’s scientific method. When you have a hypothesis saying scarcity leads to higher prices, and experiments shows even just one time it did not happen, the hypothesis fails.
No one on earth would make such a stupid claim, especially when rationing or price controls are a possibility. You are inventing a straw man just so you can slay him. Good gravy man, what’s your point? What are you trying to prove?
The SEC says price determines the quantity of oil reserves on a balance sheet, which is a rather big determinant of the value of an oil company.
That price is determined either whimsically or by random events, but more powerfully by decree (or even annexation). The SEC changed its Reserves Declaration rules to say price that moment, if the price is rising and high, vs the average price over many months or even quarters if the price is low and falling. So even they contort themselves around this arbitrary number called price and don’t use some more direct supply or demand parameter to determine Reserves. Why not wonder about that?
As for hypotheses that encounter negative experimental results being proven invalid, that’s somewhat not a concept of my invention.
Retreating to the sanctuary of free or open markets is like saying you were the first to climb Mt Everest, along such and such a route on such and such a day of a given season while wearing particular boots. You can’t start to restrict circumstance to protect a hypothesis that has obviously failed.
The SEC says price determines the quantity of oil reserves on a balance sheet, which is a rather big determinant of the value of an oil company.
Really now? The SEC is determining the value of an oil company? I had no idea that was part of their job. I always thought that the value of any company, with publically traded stock, was determined by the price of their stock times the number of shares held by the stockholders.
Well hell, dumbass me.
Watcher
The law of supply and demand only applies under certain conditions. Much like Newton’s laws only applying in certain frames of reference.
In any experiment certain parameters are carefully controlled.
Pretty basic science.
Supply and demand, and a dynamic system of floating prices that reflect real economic costs, are an element of a well managed economy. Sadly, there are a lot of badly managed economies out there. Venezuela, Russia and KSA come to mind.
Oil exports seem to be harmful to their host countries, in the long run – it tends to cause corruption, static and rigid economies, and terminal Dutch Disease (kind’ve like the US’s Old South under slavery). Norway seems to be an exception, with their sovereign wealth fund.
Thats grasping at straws Watcher.
When there is scarcity, the item becomes harder to get. Period.
Getting that fully repaired in 9 days seems a bit optimistic.. isn’t construction time on these facilities years and that looks like extensive damage.. 2 weeks repair.. i guess its just to pick up standard parts at local hardware store and bolt it in where the old one was..
1 tower please..
holes facing west….
“holes facing west…”
Sneaky Iran! Must have shot their missiles and drones the long way and gone clean around the earth.
That’s all the proof Pompeo apparently needs.
It surprises me to see people indicate that the direction of impact has a relation to the origin of flight of drones (or cruise missiles).
These flying machines can change direction, in fact it is easy to program a complex flight plan with a drone. You can program in a very complex GPS or map based flight plan in less than a minute.
Why are people overlooking this simple aspect? Seems that analytic/logic based thought is depleting resource.
So Iran has done this to make the majority of people think it was NOT Iran.
The Houthis likely did it, i.e. launch site from their territory, with assistance from Hezbollah and Iran. The missiles approached the target from the west north west because that’s where the radar vulnerability was. Drones and CM’s can fly squiggly line and circles on a map. This attack flew a ‘button-hook to the left’ like flight pattern, i.e. launched from the south, and then came in on target from the west north west.
Patriots have a 120* detection and engagement envelope. Buqayq facilities air defense systems had 2 Patriots (which weren’t always “on”, particularly on weekends). So that covers 240* only. The Skyguard and the Shahine SAMs augmenting the Patriots are insufficient against Drones/CM’s i.e. detection is not always early enough to engage.
Why?
Because what you are proposing introduces vast operational complexities and risks.
Not that it can’t be done, just that it would be very unlikely to re-program 100% of your missiles and drones to all circle about and come in from the opposing direction “just to confuse everyone”
Meanwhile you risk being detected, losing the element of surprise, and of other various other targeting errors and risks.
If that were the case, then why not program them to come in from every possible direction? Or just quarter around? Why make all of them go 180 degrees? Because you enjoy high risk challenges?
The simplest and safest way to target using missiles is the straight shot (after maybe a few hooks and jags to avoid known radar coverage, human detection, etc). This gives you the best operational chances at success. Otherwise you have to fly very far out of your way to circle back for a reasonable targeting approach.
Chris- drone navigation programming is far advanced from what you seem to know. I’ve watched some amateurs quickly program and execute complex flight paths in less than a minute.
Here are two entry level services/products available to any customer. This is the tip of the iceberg in this sector-
We saw “evidence” (assuming those weren’t pieces from earlier attacks) of fixed wing drones and cruise missiles.
What, pray tell, does a remotely piloted quad copter (via RF) have in common with a low cross section, short winged cruise missile operating from a combination of inertial tracking and GPS?
Not much, I’d wager
Check out the total surface area available for steering…just a couple of stubby little horizontal stabilizers that double as elevators.
Flying at speed, those are gonna a take a good long while to turn that thing 180 degrees.
“Check out the total surface area available for steering…just a couple of stubby little horizontal stabilizers that double as elevators.
Flying at speed, those are gonna a take a good long while to turn that thing 180 degrees.”
Chris, I can tell you are not a pilot. It’s the angle of banking that determines the rate of turn for a given speed. Planes don’t steer around a turn like a car.
Weird. And all this time I thought mass, speed and airfoil surface area had something to do with “rate of turn” for an object in flight.
Thanks for setting us all straight with your superior knowledge of flight.
Now we all know that it is only “banking angle” that matters.
Chris, I believe you know that hardware was not what I was sharing. Strange for you to divert.
I was giving you a hint of the guidance software available for un-manned vehicles, whether they be something you can hold in your hand, like a hummingbird drone, or something as big as a cruise missile.
The guidance software is available to anyone to purchase. It is considered entry level at this point.
You can launch from a boat heading due east, and tell it to impact a building at 17.5 ft above ground level, at a downward angle of 37 degrees, with a 329 degree approach angle.
You pick your own machine. No guidance necessary after launch.
Chris Martenson,
What is the source of the picture? The missile looks like the Quds 1, a Houthi modification of the Iranian Ya Ali (sp.?).
Saudis claimed that both Khurais and Abqaiq plants started at least partially. But a clever guy LLY tweeted that since press was allowed in without any safety gear and H2S monitor yesterday, he says it is impossible that the plants started even partially. He works with rotating machines in KSA and his comment is such a commonsense item. The safety standards adopted by big giants such as SABIC and Aramco are equal to and in many cases better than US standards. I do not think the plant will start by end of September and that is an optimistic scenario. Crude outage should be at least 97 MM barrels. Also remember this is a double whammy because products are not produced either. The world inventory draw of crude and product will draw at least 200 MM barrels by September.
Yes, likely that KSA understate how long repairs will take. Rystad provide three scenarios of lost oil production during maintenance up to end of 2019, approx. 80mb (low), 130 mb (base) and 200mb (high).
I haven’t seen any estimate of lost NG output and if this will affect their domestic power production. Presumably they will have to resort to using more oil (hence export less) or import NG – do they have the infrastructure required to do so?
Munitions can be maneuvered. But the whole matter is somewhat suggestive.
There is no reason an autonomously guided vehicle can’t fly to a target and then circle around to hit from a different direction. In the world of JDAM, this is called compassionate targeting, where a target is near a hospital and to avoid debris splash hitting the hospital the bomb maneuvers to hit from the hospital’s direction. This is pretty standard Boeing stuff and not new at all for anyone.
But . . . such programming would require testing on a simulator and they aren’t cheap. If simulation facilities have been built that’s pretty ominous for future targeting.
At some point an easier answer will have to be explicitly excluded, namely that guidance transitioned to remote piloting in terminal phase and some guys on a nearby rooftop watched downlink from the drone’s camera and maneuvered to hit wherever they wanted. Should be an easy exclusion. Either there are camera parts in the debris or not.
OTOH I guess if it was me I would add some camera parts and maybe even an antenna or two on the vehicle just to deceive analysis.
I doubt premium rates , money will do much difference. At least now contractors have started to look at the job abd what need to be done. Perhaps within 1 week they have a plan and the time it will take to build up again the parts that was hit. I think planning of demolish of old item might take 2 weeks and 2 weeks more to renove them from site. Thoose 4 weeks could ve used to design installment, order new item, drawings it might need additional 2 week. Than items need to be built at spec This might take 3-6 months even they work day and night. When the new tower, seperators will be at site the installation job could start. When finish, cable trays, walk ways, instruments need to be mounted. This is a huge job and the houties have told new attack are on its way…
It would be a pretty good idea right about now to stop thinking in terms of Saudi Arabia as the only possible target. Anywhere there is an oil source or intermediate collection locale can be targeted.
By anyone.
HSC.
Houston Ship Channel.
Oh, btw, even remote piloting is going to be challenged to hit exactly the same place on those four spherical tanks. Assuming those photos are legit.
One way you can get those 4 holes is taping a small radio transmitter to that spot and have the vehicle home on that.
Or tape a bomb there and just fly drones in hitting something nearby.
It wasn’t remote piloting. Whatever on earth do you keep going on about remote piloting for? Go read up on drone warfare and see if you can figure out another way suicide drones know how to MORE reliably get to targets. Pilots suck dude.
If there was a laser designator crew on the target perhaps they fired a few ATGM to muddy the waters. Quds Force would pull this off half asleep. Keep it simple.
Here’s an interview with Lawrence Wilkerson, former Chief of Staff to Colin Powell. Interesting tidbit mentioned on his gaming out assassination of MBS and a rapid collapse of the House of Saud.
So the Saudis were talking as if they had repairs availabile off the shelf and this turns out to not be the case. How surprising.
Believing the Clown Prince is not wise.
Carter Doctrine
1980 – 2019
R.I.P.
I see two opposing forces pulling the price of oil in two different directions.
If if takes 8 months to bring Saudi production back online storage won’t cover a time period that long. Who’s to say other oil infrastructure in other places besides Saudi Arabia won’t also get attacked in a similar manner. Saying they hate each other in that part of the world in putting it mildly.
Then there is China and a trade war. China may run a huge surplus with the US but with the rest of the world China has a huge trade deficit. The only thing keeping them treading above water is that trade surplus with the US. Without it their current account goes deeply negative. Rising oil prices will only make things worse in regards to their current account. Makes it less likely that they can afford to agree to anything. They run a fiscal deficit thats 10% of GDP. So twin deficits. Think Argentina but much larger.
China might agree to something during trade talks but under no circumstances in their view can the trade surplus with the US narrow. Which is a problem for the current administration. Trade war could easily get way worse than it is currently. Which would point towards lower oil price.
What’s crazy is if China gave Trump what he wanted. China would have to devalue their currency 30-50% against the dollar. To just stay afloat. Which would put a lot of upward pressure on the dollar. If they didn’t devalue they’d just implode and you’d see demand for oil and all commodities fall. Think deflationary Tsunami that originates in China and washes up on every shore but particularly in places like Germany who’s already on verge of recession.
I highly doubt an agreement can be reach so tariffs will like be increased at each and every failure to come to an agreement.
“with the rest of the world China has a huge trade deficit.”
Overall China has a trade surplus of ~350 billion USD/year. OECD countries are China’s main clients.
Europe isn’t the rest of the world. China imports a huge amount of raw materials and energy products to create stuff to send to US and EU. and also to continue building cities where only a few people live. Iron ore, oil, coal, natural gas, and food are a few items on that list.
If the trade surplus with the US goes away they are screwed. China desperately needs US dollars contrary to what a lot of people believe. Only way they continue getting the dollars they need is through trade. Without those dollars they can’t run a currency peg. Their currency has a lot less value without that peg.
That currency peg keeps a whole of Chinese people employed.
China isn’t in desperate need of Euro’s btw.
Speaking of currency pegs. Saudi Arabia is also has a peg to the US dollar. If it takes 8 months to get that oil flowing again that peg will come under stress as they will use those dollar reserves they have.
It is always the same with China, they really need to trade, even if they like to pretend that they are a semi-autarkic Heavenly Abode.
The old Silk Road wasn’t really to get silk to Europe, but horses to China. China exchanged silk and lacquerware for horses with nomads, who later traded silk further, as they really did not enjoy silk so much (silk is not good for riding etc).
Dean Fantazzini says Texas took a huge hit in July.
Hi Ron,
I asked Fantazzini on Twitter if the July decrease was from Permian, Eagle Ford or other. What do you think, Ron?
Fantazzini twitter reply
If we consider last 12 months, 24 months , and 36 months of vintage data and compare with last month corrected and EIA for Texas oil and condensate we get the chart below.
The 12 month estimate is closest to the EIA estimate and historically this estimate has been best for most of Dr. Fantazzini’s estimates.
According to Fantazzini, Texas C&C production is on a plateau.
Tony,
Perhaps he thinks the past 24 months of vintage data gives the best estimate, that shows a plateau. Also using the most recent 12 months and throwing out the estimate for the most recent two months estimates(which tend to be less stable) also shows a plateau from November 2018 to May 2019. I tend to agree with GuyM that the EIA monthly estimates are pretty darn good and the corrected 12 month vintage data estimate matches the EIA monthly estimate fairly closely, so that seems like the best way to do the estimate in my opinion.
Could be related to shut-ins offshore but certainly no sign of a monthly increase in shale that would offset such.
The Texas RRC data does not include the Gulf of Mexico. It does include all shale oil produced in Texas.
As GuyM keeps hammering on the EIA monthly estimates are best.
The RRC data for individual wells is great but there is a lot of missing data. I think an estimate using the most recent 12 months of vintage data is better than last month vintage estimate or using all vintage data.
The graph if correct will significant increase the drop of 32k bpd from June. This seems more like -150k only in July from Texas and deflict related to EIA estimate seems to soon exseed 500 k bpd. This might show the oil majours are adjusting their investment budgets because off low oil price gives low or no profit , return to owners/ dividend…
If we assume the same development will continue the rest of the year and oil price remain in 50-60 WTI usd range US oil production will end at 11.53 Mbpd , EIA Exspect 12.45 Mbpd and that is a difference of 920 k bpd. If the global oil consuption increase by 1,2 % or about 100k monthly that means 500k in 5 months. Perhaps than we could hope gradualy higher oil prices from 2019.
Ron,
Is that chart crude only? The oil+ condensate sheet is the one to use, that would be more comparable to EIA C+C output.
It is “DATA ULTIMO 48 CORRECTED (ALL DATA VINTAGE)”.
The “ULTIMO 48” is the RRC.
So you tell me what it is. I just assumed it was all data. But I could be wrong. I have been wrong before. Once in 1968, I thought I had made a mistake, but I was wrong, I had not made a mistake at all. 😉
Ron look at the sheet names, there is oil_v, condensate_v, and oil+cond which adds the oil and condensate estimates together.
so the “all data vintage” estimate takes the average of data sets from Jan 2014 to July 2019 and does this separately for the oil and condensate data. The ultimo 48 is indeed the RRC estimate for oil in this case, but you should add the condensate data as well.
Ron,
If you compare your chart with Dean’s Oil+Condensate chart (look at value for July and compare) it is clear they are different. The difference is condensate output, in Dean’s chart it is included, in your chart it is not.
1991 — High Seas: A computer error sinks a Norwegian offshore oil platform; damages are nearly $1 billion.
Whatever they are, they are well informed people. Unlike many others, who wrote about refineries, they know it were oil processing plants.
So they really must be accredited.
It seems that there will be no contract for the transit of Russian gas through Ukraine:
1) Moscow. September 18th. INTERFAX.RU – The Bulgarian gas transportation operator Bulgartransgaz, after almost six months of administrative proceedings and judicial red tape, was able to sign a contract for the construction of a gas pipeline, which the country called the Balkan Stream, with the Arkad consortium.
Consortium Arkad as part of Italian Arkad ABB S.p.A. and the Saudi Arkad Engineering & Construction Company was chosen the winner of the contract in April, but the signing of the contract became possible only after on Monday the Supreme Administrative Court of Bulgaria terminated the appeal of this public procurement.
The Bulgartransgaz release says that a 474-kilometer gas pipeline with a diameter of 1,200 mm will run from the Turkish border to Serbia. In the first 250 days, 308 km will be built from the Polski Senovets compressor station to the Serbian border. For the remainder of the contract execution period (its total period is 615 days), the remaining 166 km of the route will be built. The total contract value is 1.1 billion euros (excluding VAT).
2) Hungary is waiting for Vladimir Putin in Budapest in October 2019 to discuss gas issues
Nur Sultan. The Hungarian side is awaiting the visit of Russian President Vladimir Putin to Budapest in October 2019. This was announced by the Chairman of the Hungarian National Assembly, Laszlo Köver.
“In October, we are waiting for Mr. President of the Russian Federation to pay a visit to Budapest,” Koever said, and noted that the leaders of Russia and Hungary – President Vladimir Putin and Prime Minister Viktor Orban – “have developed good, trusting personal relationships.”
In July, it was reported that the Russian leader could visit Budapest on October 30, 2019, TASS writes. During a visit to Budapest, negotiations are expected between Putin and Orban. The parties intend to discuss issues of gas supplies, cooperation in the field of nuclear energy.
The EU has pressured Denmark to obstruct completion of Nord stream 2. The routing would go through Denmark territorial waters. Nord stream 2 will finish this year if the direct route is permitted. Otherwise sometime next year.
If obstacles can be thrown up in front of a pipeline to Germany, you can rest assured that the EU will obstruct any attempt by Hungary to circumvent the Ukraine. They will fail but you’re not going to see gas bypassing Ukraine anytime soon.
“The EU has pressured Denmark to obstruct completion of Nord stream 2.”
Not really. EU is divided on NS2. Germany is in favor of it, Poland objects. Denmark’s position has probably more to do with its close ties to US than EU. US is strongly against.
In the end, whether or not NS2 is build will depend on what Berlin decides. This has been clear from the start. Other countries will only be able to delay it, like Denmark.
In fact, in the medium term, gas production opportunities in Russia are limited:
90% of gas is produced in a small territory in Western Siberia and it will not be possible to increase production there for the next 5-8 years (new fields are in the sea, it is long and expensive to develop). Russia is negotiating the construction of a gas pipeline from Western Siberia to China. This will lead to production shortages .
China was to buy gas from Turkmenistan…. Incidentally, Russia again buys gas from Turkmenistan, too.
This is dangerous for Russia. If Russia builds this pipe, it will have no excuse NOT to sell gas to China.
But Turkmenistan gas is big – not enough for China?
Anyway, the fact that Russia buys Turkmen gas too may be an early harbinger of at least local gas shortages in Russia itself.
Really? I guess something like the Shtokman field in the Barents sea can only be developed with a major Capex outlay and a strong LNG market (and free trade I might add). Or a really long pipeline journey, which is more inflexible. The Turkmenistan land locked resources must be able to be released with a reasonable pipeline transfer fee? If not multiple pipelines would be built if the gas is needed in China for example. The question with land locked resources extends to Iran for the part that is not South Pars. (Which together with Qatars North Dome should be a major “port” for a future LNG market I suppose). It is not possible to not make reasonable transfer fee deals with regards to pipelines, if the major gas resources are really needed and the market really functions; i.e. prices are high enough over an extended period of time.
It is a dangerous thing that markets don’t function properly I might add. The uneducated meddling in the energy markets must stop. A bit of meddling it has always been, but the market must function or it makes long term investments impossible. And everything breaks down as a result.
Opritov Alexander,
There is also the developing LNG resource in the Arctic, which ships on the Northern Sea Route. There is expansion going on there.
Yes, of course it is. Apparently LNG projects will be
continue to expand.This is due to the uncertainty of pipeline transportation contracts, the revision of concluded contracts, a large number of disputes. With LNG, this factor is minimal, in addition, export directions can be changed depending on the situation …
” gas production opportunities in Russia are limited”
Agree but north stream 2 is not constructed to satisfy increased demand. There is overcapacity in existing pipelines. Yes there is a problem with old and leaking pipes but this could be fixed. North stream 2 is constructed to circumvent Ukraine and make them redundant. Just look at how north stream 1 has changed utilization of the pipes that pass through Ukraine.
Norway’s NG production is more or less peaking right now so imports from Russia will probably be more important in the next decades or so than in the past.
The pipeline will pass through Bulgaria to Serbia, then Hungary and Slovakia.
As for Bulgaria, it seems everything has already been decided, contracts have been signed, pipes have been imported, and in early 2020 it will be put into operation.
There is a good chance that Nord Stream2 will not be launched on time.
And most likely transit through Ukraine will stop or only continue in 2020. Well, of course, of course, and a new contract, only the volumes will be 15-30% of the old.
The writing on the wall was when Turkey allowed a chance to supply gas to Turkey, giving it access to 80 million potential consumers in 2016.
Once realizing they will be left out for the sake of shenanigans in Brussels, Balkan countries decided to join in and ensure they would continue having a secure natural gas supply. You got to eat every day.
So South Stream still happened, although a tiny bit delayed and in a slightly different form. At this point Greece is out of the picture from the original plan, and Italy, Austria have to decide if they have plans to live another day and get line extended from Hungary.
“According to our records, more than 90% of the wells completed after 2017 are located in the core areas only. Operators have learned to drill only the best parts of the Williston Basin and avoid the less mature noncore areas. However, after calculating the infill potentials of all areas, we predict that by 2021 there will be no well locations left for future drilling in the core areas. Assuming a constant current drilling rate of 120 wells per month, the total field oil rate in the Bakken will reach record level of about 1.6 million bbl/d in 2021. Without further drilling, production will decline by one-half within a year. Later, operators will be forced to drill in the less productive, high watercut noncore areas along the edges of the Williston Basin. Our findings suggest that policy-makers should not assume that the shale oil boom in the Bakken will last for several decades longer. We recommend that operators not focus only on increasing the initial oil rate. Maintenance of reservoir pressure above the bubble point by preventing over-drilling is key to increasing ultimate oil recovery.”
Great paper thank you.
Note that they present an optimistic scenario with URR of 13 Gb, my guess is that there will be fewer wells completed in the non-core areas when reasonable economic assumptions are applied to the analysis. Probably 8 to 9 Gb is a more reasonable economically recoverable estimate.
Also it seems unlikely that only the core areas will see wells completed and then industry players will switch all production to the noncore areas, I imagine as there are fewer new locations available to drill in the core areas that there will be a gradual shift to the non-core areas, in addition there is no doubt gray areas between the core and non-core areas where average new well EUR is at intermediate values between the core and non-core average well so there may be less of a step change and a more gradual transition in new well EUR over time.
In my opinion this is already happening.
Looking at Ennos sight the quality of wells hasn’t increased this year by the usual amount. So better technic, more experience together wasn’t able to increase the amount / well. It’s only the starting amount, but for all the USA.
So something is happening out there.
When you think the above scenario can’t have an exact year.
Company A has core area until year 2025
Company B until 2018 …. uups
Company C has never had any – already bottom up.
The turnaround is when there are more B than A – and this is slow. Not a pumping until 2021 and a sharp decline. That’s completely unrealistic.
Eulenspiegel,
Yes for Permian basin the new well EUR has been fairly constant from 2016 to 2018, but average lateral length has been increasing so EUR normalized for lateral length (EUR per foot of lateral) has been decreasing since 2016 in the Permian Basin.
For the Bakken it looks like EUR has been increasing, but this is due to high grading where only the sweet spots are seeing completions and they are quickly running out of room in the sweet spots for new wells.
There could be a dramatic fall in new well EUR as the sweet spots get fully drilled, but producers may decide to increase the completion rate as they move to the non-core areas so output may drop fairly gradually.
– Well productivity growth is already flat the last 2 years.
– Producers are very different – the best has the double per well production than the average lot. So the best from the cake is already with very few companies
I picked out one from the median companies by choice, Newfield
They drilled 20 holes this year – and they are already worse then the last 2 years. Not bad wells, but getting worse.
Drilling more always works to hold up production – if you have the money.
Oil prices are collapsing again – here in finanction newspapers the reason is surging shale output and if this fails the SPRs will be released by Trump to keep prices low.
Interesting
When I look at shale profile I see strong growth in well productivity from 2015 to 2018. Too early to judge 2019 wells.
Eulenspiegel,
Correction, yes relatively flat EUR growth from 2017 to 2018 only a 10% increase.
well profiles Bakken 2015-2018 from shaleprofile.com
month 15 cumulative
2015 118 kb
2016 145 kb
2017 181 kb
2018 199 kb
increase from 2015 to 2018 is 69%, an average annual rate of increase of 19% per year from 2015 to 2018 for 15 month cumulative output. In 2018 the increase was slower, only a 10% increase from 2017 to 2018, so it is correct that the rate of increase has slowed relative to 2016 (23%) and 2017 (25%). Note that if we look at 32 month cumulative to compare 2015 and 2016 the increase is 19%, and if we look at 20 month cumulative to compare 2016 an 2017 the increase is 23%. Ideally we would compare at 36 or even 60 months, but we will have to wait for those comparisons.
I recently estimated the EUR for the average 2015 Bakken well and if we assume the well is shut in at 5 b/d the EUR is 326 kb at 259 months, terminal decline of 12% is assumed and that begins at 92 months. Hyperbolic fit after month 5 to month 92 for barrels per month given with Arps hyperbolic with q=21278, b=0.9906, and d=0.24388. after month 92 use monthly exponential decline of 0.9894.
Older estimate for 2016 well, EUR=362 kb at 254 months and 5 b/d, terminal decline of 12% annually begins at month 106.
q=20318, b=0.85,d=0.1764 for months 5 to 105.
2017 well EUR 358 kb at 253 months and 5 bo/d output terminal decline at 10% annual rate starting at 171 months, hyperbolic from month 5 to start of exponential decline q=39251, b=0.6416, d=0.23417
2018 well I use shaleprofile data up to month 17 and then the 2017 hyperbolic well profile from month 18 to month 171 with 10% annual decline rate from month 172 to month 223 when output falls to 5 bo/d, EUR is 376 kbo for the average 2018 well.
Thank you for looking more exact. They are still growing, only some companies are already shrinking.
So a few good years are left at the top of productivity. Time to earn the money now.
Probably useful to see this latest in carefully calculated this or that for the Bakken, but we’ve been seeing this stuff for quite a few yrs now. Some say more will flow than industry estimates. Some say less will flow than industry estimates.
Odds are pretty good they will all be wrong. Every single one.
Finally
They’re still well short of the votes they need, but the ground is suddenly shifting.
Pelosi has been very cautious.
The Senate is filled with sociopaths, and Trump can do anything without consequences.
Let’s see how this unfolds. Late Stage Capitalism was never going to be good.
I felt back in June and July my girl wanted to wait until after the summer vacation to land this thing right into the hight of the election. I guess I should have put this on the atheist communist Tesla side.
Pepsi, Pepsi Lite
Huntington beach
Yes that’s correct, unless you just want to troll.
Not relevant to petroleum.
When you say “late stage”, do you mean 2, 20, 200 or 2000 years ?
now—
hint: 7.7 billion homo sapiens in a collapsing ecosystem, and Co2 levels that no human has encounter before.
Mass extinction currently happening, first one in 65 million years.
I lived in Huntington Beach– in 1967.
Sounds like you’re thinking “late-stage industrial civilization”.
PS- a nice little history on SK
PSS- were we fighting for freedom in the Korean War? If so, whose?
Project “Soft Power” @myagkaya_sila
Oceans emit 330 billion tons of CO2 / year
Organic rotting – 220 billion tons
Forest fires – up to 300 billion tons
Man – 8 billion tons, or 1% of the total CO2 emissions on Earth.
Human activity affects the planet no more than the activity of a cockroach on an apartment.
It’s all about ecoactivism.
—-
This is a repost. I did not check.
I just checked. Each one of your figures is off by at least an order of magnitude, sometimes two, and sometimes the truth is literally the opposite. Get out of here.
You know what cycles are?
Ocean is absorbing CO2 now, that’s why it is getting more acid (check great barrier reef).
The other big things are pure cycles – plants grow, plants rot, it’s like a fountain in a pond circling around water.
I don’t know why conservatives are complete deniers – instead of giving conservative answers like technic innovation, fusion / atomic energy, big things.
Follow the money to explain the denialism.
this was already challenged, fossil fuel burning and land use are contributing more like 29 billion tons – and the problem is that this could not be fully absorbed in the normal Co2 circle of Nature (stated only 40% …)
So that leaves a surplus which stays in the atmosphere and it is calculated, that we had an increase of 100ppm in the last 120 years which in normal earth history required 5000-20000 years.
Not my sience, I’m also a bit sceptical in this area, but sounds reasonable – but I’m still convinced that warm phases are better than ice ages and don’t think “the ende is near” only because of this.
– I think overpopulation of the poor (also resulting in Co2) will be the much bigger problem and will not end well for mankind – before the climate is the real challenge.
No one is really doing something about countries in Africa doubling population every 20 years… this growing hordes of poor, uneducated, hungry, agressive and ruthless “zombies” maybe will be the real challenge of the nearer future.
Opritov, do not post such bullshit on this blog unless you have a legitimate source for your data. You just made that shit up. You are a fucking liar.
1.I apologize for the off-topic post
I answered Hightrekker: hint: 7.7 billion homo sapiens in a collapsing ecosystem, and Co2 levels that no human has encounter before.
I do not like targeted propaganda, I’m talking about the harm of CO2.
he certainly is.
But the climate is constantly changing, who knows how small factors will affect it. After 20 years, Germany, Poland, China and Southeast Asia will reduce coal burning by at least 2 times
CO2 will also be reduced.
2. The numbers in my post are certainly not correct. It does not matter. It is difficult to scientifically find the correct data. It is rather a provocation like a joke. I did not insist on them.
3. The problem is CO2-bloated, I don’t understand such a serious attitude to the post. It’s just my position, attitude to the topic, propaganda, excessive attention to a small problem.
4. In any case, thanks for the good comments.
I will no longer write on the site, extraneous topics. Once again, I’m sorry.
All of this discussion should go in other thread.
If this continues to occur, I will need to start banning people.
An off topic comment should be ignored, or at most “discuss in other thread” or off topic as a response.
Dennis,
May i suggest, dont need to ban people simply delete the thread start, including all replies mine and yours included.
Keep doing that untill message sinks in (waste of time posting shit in wrong post on purpose). And then go for the ban on those who still dont get it.
Baggen,
Probably a good idea.
I’m guessing mother earth could support 10 billion for another 100 years. It might not be pretty for most, but who says it is now.
Later
Huntington beach,
Do not post in Petroleum thread unless it is relevant to petroleum.
It’s hard to know what’s “relevant to petroleum” – realistically demand responses, political responses, etc are relevant. There’s a lot of discussion of KSA and it’s politics, for instance. There’s no easy line.
Perhaps a helpful phrasing might be “directly relevant to petroleum production”.
Nick,
One could argue that everything is connected, but comments about impeachment or politics in general should not be on petroleum side.
Yeah.
Seemed like it might help to develop a little bit of guidelines. In particular, it seems like oily folk would prefer to focus on the production & supply side, rather than the consumption and demand side.
“Saudi Arabia’s oil exports are down by about as much as an average 1.5 million barrels a day since its state run oil company was attacked Sept. 14, researchers who track shipping said.
That could speed up a tightening of global oil supplies, even though the U.S., Brazil and other countries are expected to continue to add oil to the global market.
Saudi Aramco’s trading arm has been buying crude from neighboring countries, including Kuwait and United Arab Emirates, among others, to fulfill its commitments, according to Reuters. S&P Global Platts reports that the kingdom is buying diesel fuel from India and the UAE, and is also looking for jet fuel and naphtha.”
This must be a huge hit for KSA’s accounts. The stuff they are buying from other states to on-sell will probably cost them more than they get for it (since it is not the product the customer ordered), so its at best a zero game there. Their income is halved, and they have repairs to do on top of that, and the extremely high risk of more holes in infrastructure anytime it suits their enemies.
The Saudis started with about 50 million bbl in tanks – that’s just 10 days making up 5 mbbl/day (assuming the stuff in the tanks was exportable grade). They are into day 11 now, so their tanks are dry.
The bean counters will be trying to figure out where to spend what cash remains – repairs? new yacht? buy Iranian oil via Iraq at a premium to sell to existing customers at a loss until repairs are completed in a year’s time (5 mbbl per day at a loss of say $5 per bbl for 365 days is an unimaginably big lump of cash to find)? social programmes to improve women’s rights? bomb Yemen some more – perhaps send in the army in tanks as a distraction, they won’t come back? drill new wells in marginal fields? pump more water into existing fields to hasten depletion to make up the shortfall – but its refinery capacity they lack not wellhead flow? repairs? buy more Patriot anti-missile systems (which didn’t work last time), pay more accountants for work on Aramco float? buy tickets and pack bag for unannounced long holiday in a remote location? repairs? pay for armed guards around main desalination plants which provide public water supply? import avgas to supply Dubai International Airport, or close it? repairs?
So many options, so little money, and so little time before the coffers run dry and those citizens of KSA with a grievance (including close relatives of the dear prince who stayed at the Hilton for a while) come to the castle with torches lit and pitchforks sharpened to have a wee chat.
The article says they are prolonging their storage tanks with the on-selling. At great expense no doubt but it buys them some time.
Now if the damage is as some contractors (and pictures…) report and not what the Saudis were claiming, the savings aren’t material long term. It will take a lot of time to demo processing train towers and build new ones on site if they weren’t prepared for it.
Big damage like this in a country like SA – it calls for a makeshift solution, while building some more solid in the meantime.
Some welding here and there, some spare parts, some using of old obsolete machines. And running again. Somehow. Please don’t smoke in a diameter of a mile, taking photos not allowed.
The USA has repaired a bombed aircraft carrier in WW2 with this method – time to pull it of when the nation is in danger (by halving the finances).
So many options, so little money, and so little time before the coffers run dry and those citizens of KSA with a grievance (including close relatives of the dear prince who stayed at the Hilton for a while) come to the castle with torches lit and pitchforks sharpened to have a wee chat.
“Foreign reserve assets of the Saudi Arabian Monetary Agency (SAMA) rose by 1.1 per cent on a monthly basis by the end of April to 1,894.1 billion riyals ($505.1 billion).“
Two years later
Armstrong Energy also has a website. It has more than one page. About 6 sentences are on each page, saying nothing.
Great catches/memory.
Thanks!
Interesting, does not sound like a healthy sector:
“Activity in the oil and gas sector declined in third quarter 2019, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—fell to -7.4 in the third quarter from -0.6 in the second quarter. Oilfield services firms drove the decline, with their business activity index slumping to -21.8 from 6.6.
“Among oilfield services firms, the equipment utilization index plummeted 27 points to -24.0 in the third quarter, its lowest reading since 2016 and suggestive of a large contraction in equipment utilization. ”
Negative survey readings indicate contraction; those above zero suggest expansion.”
Attached is a chart comparing the lower 48 monthly and weekly production, updated to this morning’s EIA report . Production has been flat at 12 kb/d for the last 4 weeks. The monthly data for June and July appear to be averaging the weekly data. The June production of 11.75 kb/d is 0.25 kb/d below September production. Allowing for the hurricane interruption in July, the question is will the September monthly data get to 12.0 kb/d. The latest STEO projection for September is 12.04 kb/d
Page 123 shows total liquids increasing steadily to about 130 mbd in 2050
Here is the EIA IEO 2019 all liquids projection at 127 mbd in 2050. To reach 127 mbd, the EIA assumes that there are huge production increases from OPEC, Brazil, Russia and Canada.
The funny thing is that consumption is projected at 121.5 Mb/d in 2050. The world would be oversupplied by 5 Mb/d under their assumptions.
That’s their dream scenario – oil abundant and dirt cheap. All this fracking and infill drilling is done for a tip.
As today – shale will grow, no matter the oil price. Even at 20$ it will continue growing. At least that’s the narrative.
They are expecting huge production increases from OPEC, Brazil, Russia, and Canada, over and above decreases in oil production from the majority of oil-producing countries who are post-peak…. for the next thirty years???
“During the projection period, crude and lease condensate production
grows by 13 million b/d among OPEC members and 11 million b/d among non-OPEC producers”
“• OPEC crude oil and lease condensate production is largely concentrated in the Middle East, which
increases from 27 million b/d in 2018 to 39 million b/d in 2050, a 44% increase. Production from large,
low-cost oil resources in the Middle East remains a critical part of global crude oil supply during the
projection period. ”
Dont really know what to say about that one..
Would be interesting to narrow it down and see a suggestion from them on witch opec members are going to stand for this increase of 13.. or actually more then 13 to offset decline in others. I assume they do think at least some opec member will decline until 2050.
Perhaps the idea is KSA to the rescue and put some of those magical reserves into production, more then double current (normal) daily output should do it.
It appears that the EIA believes those inflated OPEC reserves claims. I think they are in for a big disappointment.
Ron,
Even too optimistic for me. 🙂
I agree the estimate is not well done, seems an exercise in wishful thinking.
Oil and Gas Support Services Firms said that U.S. oil production is about to fall significantly. The rig count has declined dramatically from one year ago (down 170 rigs), and our customers are not completing wells in order to save cash flow. This all equals a big shift down.
Overall, the sentiment from energy and services companies is down shown by the chart.
Interresting read.
And if this downturn happens, there will be no fast turning back to growing.
Destroyed service companies, indipendent producers will have to be rebuild until the 2018 growth can be archived again.
Other thing: How is this with service companies? When they are money limited, what’s about maintaince of fracking pumps, replacing them with newer more efficent ones (but you need the money first), or new rigs? Money strapped companies normally ride the old stuff until everythings breaks.
Okay, the KSA is going broke theme has re-lifted itself so here are the numbers.
In dollars, KSA spent (govt spending) about $78Billion per quarter this year, year to date. So call it 78 X 3 or $235B in spending. Up to the attack, revenues were about $70B per quarter. So they ran about $24B in deficit up to the attack.
Total debt about $180B.
A legit estimate is a revenue crash in Q4 down to oh, call it $25B. This will generate a 2019 deficit of $77B if they pump not a drop repaired til 1 Jan.
Their SWF has assets of over $500B. With rates near negative many places they damn sure won’t tap the SWF for all of that $77B. They’ll borrow some hahah and if they borrow at a negative rate, they can make a profit on their deficit. I don’t care if that makes no sense or if it offends your sense of what should be logical. Too damn bad. Rates are near zero or negative and they need to borrow.
(If they could get Germany’s -0.5% they could make $385 million by borrowing it all)
They won’t, they’ll borrow about half and tap the SWF for half. It’s only til flow resumes, assuming flow isn’t attacked again as soon as they get it going, and that’s probably Q12020.
So they need $77B. If they tapped the SWF for half they could get about 15 yrs (with the SWF growing the remainder untapped each year.
Note $25B for Q4 would presume flow impacts economic activity in KSA. They do make some tax revenue from non oil sources. $25B is a reasonable number if their flow doesn’t resume out to 1 Jan, but flow is claimed to be likely by November. So 25B is pretty extreme for Q4 total tax revenue.
And so, their plight is likely more benign than needing 77B unconventionally Q4, and $77B is entirely manageable. Further, one can easily imagine suck-ups who would form a queue to lend KSA money at negative rates. hahahahahaha a goodly chunk of them are startups in Silicon Valley on mezzanine from the KSA SWF.
Oh and one more thing. Their SAMA is their central bank. They can QE whatever they need and since they subsidize domestic oil consumption and the riyal is pegged to the USD at 3.75 R/USD (for 3 decades it’s been this, people, and y’all think there are free markets), no one is going to feel it at all. I’ll tell you, the media won’t, and I’m nobody and will stay that way.
BTW this QE option and peg . . . sorta reminds one of China, doesn’t it.
IEA estimates world all liquids reached 100.8 mbd in Aug 2019, an increase from 100.2 mbd in July due mainly to a 0.5 mbd increase in US liquids.
This morning Altacorp issued this:
Our channel checks suggest that E&Ps are sharply cutting back on completion work in Q4/19 and are targeting well cost reductions to the tune of 10%-15% for 2020. Channel checks also suggest that service price reductions in the range of low-to-mid single digits are likely for Q4/19, with E&Ps realizing the remaining benefits through efficiency gains. US land rig activity fell nearly 7% sequentially in Q3/19, and current activity is about 6% below the Q3/19-to-date average. Completion activity has been sharply reduced by E&Ps in September, owing perhaps to corporate goals of staying within capital budgets.
Thus, between the sharp decline in completions and the steady decline in the rig count, I am not sure how the EIA and the IEA are still expecting 1.3M YoY growth in US liquids supply next year. At best, I see 300K to 500K growth. It seems shale can’t handle $57 crude (which is the average WTI price since the start of the year). If oil prices go any lower, US shale growth will go negative next year, already 42% of US shale executives say current prices are too low (https://oilprice.com/Energy/Energy-General/Secret-Survey-US-Shale-In-A-State-Of-Deep-Anxiety.html)
Some known oil analytic told a newspaper that he doubt much off Saudi oil production have been restored and they now have increased production from some other fields that have spare capacity and the rest is comming from storage oil with low quality. According to sources foreign spesialists are sent abd will make 2-3 week to get an overview what need to be done and how long time it will take. There is a significant risk stores will go to low if another attack will happen. I believe the US strategical reserves will be used but I guess this also have a limit. In the mean time all are used to a market that have to much oil and price follows tweets, rumors…
There is talk, with some considerable justification, that SPRs don’t make sense if you have big reserves and big production. The storage is underground, under your own ground, wherever the oil field is.
US SPR has a max flow rate of 4.4 mbpd. The US can produce more than that per day, so why have an SPR? That question only makes sense if consumption is not far above that. Which it is.
SPRs are “Strategic” because they were intended to prevent national foreign policy from being dictated by foreign suppliers. They are not for “emergencies”. They are for an embargo. Amusing that some countries decided to keep their SPR under other country territory, contracting with that country to agree to supply some oil in an emergency. Ha.
But we see now that there will be mission creep. Broad “emergencies” will justify tapping. The drone attack method can be applied anywhere. Emergencies can be generated anywhere.
It is useful to realize this could be a terror weapon. You could turn populations into starvation refugees with this weapon, which could be called one of mass destruction. Hitting the Japanese import terminals will shut off food transport as soon as their SPR drains. Massive aid efforts require getting oil in for food transport. Wherever it comes in, that gets hit again.
Of course, there has to be a purpose to this. A desire to influence policy. Not sure what Japanese policy enrages who enough to justify such a thing. But . . . this is a new WMD.
‘ Not sure what Japanese policy enrages who enough to justify such a thing. But . . . this is a new WMD’
North Korea.
New US tight oil estimates are out see “tight oil estimates by play” at link below
Since Dec 2018 US tight oil has increased by 422 kb/d through August 2019, at the start of the year tight oil output went down, but in the past 6 months tight oil output has increased by 563 kb/d based on the EIA estimate. If the rate of increase of the past 6 months continues for the final 4 months of the year, the increase from Dec 2018 to Dec 2019 would be 797 kb/d.
Most of the increase in output since Dec 2018 has come from the Permian Basin, 399 kb/d or 95% of the total US tight oil increase over the past 8 months.
Attached is the split view of the 2018 and the 2019 LTO production. I have left the original calculated lines untouched so that you can see how the August 2019 production has been revised from the original July data. For instance July production has been revised down by 104 kb/d. While the 2019 line has been left untouched on the chart, the updated slope using the August data has decreased to 82 kb/d/mth from the shown rate of 97 kb/d/mth. The actual production increase from July to August is 90 kb/d, which is slightly higher than the average slope.
The question remains, is the lower 2019 slope of 82 kb/d/mth for 2019 compared to the 153 kb/d/mth in 2018 the result of lower drilling activity or drilling moving to lower quality areas or both.
Ovi,
I get a slope of 89.55 kb/d per month using Feb 2019 to August 2019 data from the most recent data set rather than the 82 kb/d per month you suggest.
When I do the estimates more exactly they coincide pretty closely (using both 7 month and 13 month trendlines and extrapolating to Dec 2019) with an average of 8002 kb/d in Dec 2019 with a low of 7937 kb/d and a high of 8067 kb/d.
Based on that I would revise my guess for US tight oil output in Dec 2019 to 8000+/-70 kb/d.
I still like the low end of this range at 7930 kb/d.
Dennis
When the analysis was first done, I tossed back and forth on whether to start with January or February. In the end I decided to go with January. Unfortunately when the time came to do the post, I forgot to update the text in the chart. So yes if you start with February, the slope is higher than the 82 kb/d/mth that was posted.
As more months are added, the effects of including/excluding January will diminish. Attached is the updated chart which indicates a Dec-19 production of 8.033 Mb/d using the lower slope of 81.7 kb/d/mth.
Ovi,
Ok, it is clear now, I was confused by the x=months from Feb 2019, I had thought that I had previously read that you thought the Jan 2019 point should be left out of the regression, but probably remembered incorrectly.
Thanks for taking the time to clarify, it is nice to have an independent look at this as I often make mistakes that go uncorrected. When you see those please point them out to me and I will do the same if I think I see something amiss in your comments. Looks we are roughly on the same page at about 8 Mb/d of US tight oil output for Dec 2019.
Either we will both be right or both be wrong. 🙂
Dennis
In this production environment of many unknowns that we are trying to analyze, I will be thankful if we come within +/-100 kb/d of 8 Mb/d. I think the increasing decline rates and decreasing number of rigs should push the December numbers below 8 Mb/d.
Thanks for taking the time to check my numbers and forcing me to go back to check them.
Ovi,
Thanks for checking on my work as well, I agree if we are anywhere from 7900 to 8100 kb/d for US tight oil output in Dec 2019 I would say we have done well. I also agree 7900 kb/d is more likely than 8000 kb/d, and 8100 kb/d I would put at 1 in 3 odds or lower, for the reasons stated in your comment, which I agree with 100%.
Note that in the past 12 months (Aug 2018 to Aug 2019) US tight oil output has increased by 978 kb/d.
However, if we fit a trendline to the past 13 months of data and extend the line out to Dec 2019, we get about a 600 kb/d increase in output for Dec 2018 to Dec 2019. Alternatively, if we fit a trendline to the Feb 2019 to Aug 2019 data and extend the trendline to Dec 2019, we get about an 800 kb/d increase in US tight oil output from Dec 2018 to Dec 2019, so perhaps the average of these two estimates with a 200 kb/d window is a decent guess, that is 8000 kb/d +/- 100 kb/d for Dec 2019 US tight oil output. The August 2019 level of US tight oil output is 7700 kb/d according to the latest EIA tight oil estimate.
My intuition suggests 7900 kb/d for US tight oil in in Dec 2019 (which is a 50 kb/d average monthly increase over the next 4 months,) is likely to be the better guess, but my guesses are often incorrect.
Ovi,
Pretty sure it is because legacy decline has increased as completion rate increased strongly in 2018, the increase in the completion rate was the main reason for the steep increase in output in 2018, the completion rate has stopped accelerating and has been relatively constant, possibly even decreasing slightly in 2019, that is the main reason for the slower rate of increase. There may be issues as well with parent child wells etc as productivity per lateral foot has started to decrease in the Permian basin.
The best answer is that both factors are operating, but my guess is the change in completion rate is the dominant story.
Chart below has completion rates and trailing 12 month completion rates. The data up to May 2018 is from shale profile, beyond that the data id a model estimate where the completion rate is chosen to match the model to EIA tight oil estimates by play (not the drilling productivity report).
The model-data match is not perfect, but is fairly good despite the need to estimate completions from June 2018 to August 2019.
For chart above the correlation coefficient from Jan 2010 to August 2019 (monthly data, so 115 months of data) is 0.999693, and R squared (square of correlation coefficient) is 0.999387. I always find it amazing that such a simple model (average well profile convolved with completion rate is the basic model) gives such a good result.
The future scenarios simply guess at future completion rates guided by USGS TRR estimates (F95, mean, and F5) and reasonable economic assumptions gleaned from comments by oil pros like shallow sand and others.
Note that none of these oil pros has reviewed my work, I rely on them to comment when I state my assumptions, when they remain silent I assume they have no objection to the assumptions stated.
Any mistakes are mine alone, all credit goes to the oil pros who have shared their years of wisdom gained through real world experience in the oil industry. Thanks also to Paul Pukite who first pointed out that this model is basically a convolution of two functions. (See http://theoildrum.com/node/10221)
Thank you all!
“The model-data match is not perfect, but is fairly good”
“For chart above the correlation coefficient from Jan 2010 to August 2019 … is 0.999693”
Damn!
The biggest understatement of the current century.
Thanks Hickory, I thought it was ok, but try to be a bit modest. And none of it would be possible without those who have paved the way for me (Paul Pukite, shallow sand, George Kaplan, lots of people from the Oil Drum, it all started with the work of others that I have tried to build upon.)
My first post on tight oil was about 7 years ago on October 3, 2012.
I believe this graph need to be reviced when the EIA monthly data will be issued 30.09.2019….
Freddy,
The monthly estimates do not tell us what the output is in the Permian basin, but if you point out where that data is in the 914, I will use it. So far, besides shaleprofile.com (which has the most accurate data through October 2018), the most recent tight oil estimates with any degree of accuracy are from the “tight oil production estimates by play” spreadsheet which can be found at the page linked below, see third row on the page.
Well I see that only Texas is listed but if the US data 12 082 in June 19 from 12115 Mbpd in May or decline at 32 000 bpd continues at next release that I believe is possible as the decline in active riggs continues and also information issued show the courve related to improvement in drilling process have stopped or at least it is hard to improve this more to save cost, time. I believe the increase of 0.3% in Texas shale oil shows some weakness if it not is caused by lack of pipeline capacity. If permian have a very strong growth in June, July I believe there will be significant increase in Texas oil production . Perhaps we need to wait 1,2 month more as data is delayed and if I remember correct that pipeline opened in August… https://www.eia.gov/petroleum/production/
Dennis, if Texas have growth of 0,3% from May 19 to June 19 that is 12×0,3% = 3,6% during 12 months . The growth from 19 June 2018 to 19 June 2019 was 14,3%. If most of the oil in Texas comes from Permian this might indicate a slowdown or pipeline constraint .
Freddy,
Unfortunately the data is difficult to tack as Permian output is both Texas and New Mexico.
But one would look at Eagle Ford and Permian Basin and then look at Texas and New Mexico. I think you will find that although the tight oil output has increased, that the overall output in these two states added together may be flat or even slightly lower from May to June.
This suggests to me that conventional output is lower, or perhaps the tight oil estimates are incorrect, I agree over time the picture may become clearer, always some guessing as the data is sometimes incorrect and gets revised higher or lower. Lots of mud in the water.
Third planned route
Russian gas in China:
The branch capacity from the Sakhalin-Khabarovsk-Vladivostok gas pipeline to China will be 10 billion cubic meters
September 27 / 15:01
Moscow. The planned branch capacity from the Sakhalin-Khabarovsk-Vladivostok gas pipeline to China is planned at 10 billion cubic meters. The Cabinet of Ministers in the document approved the introduction of a gas pipeline into the territorial planning scheme of the Russian Federation in the field of federal pipeline transport.
Gas pipeline branch from Sakhalin-Khabarovsk-Vladivostok MG to the state border of China. The design average annual gas transportation volume is 10 billion cubic meters. Transportation of natural gas to the People’s Republic of China under an export contract, RIA Novosti writes with reference to the order of the Russian government.
The Sakhalin-Khabarovsk-Vladivostok gas transmission system (GTS) is designed to deliver gas produced on the Sakhalin shelf to consumers in the Khabarovsk and Primorsky Territories. The GTS created the conditions for their large-scale gasification and gas supplies to the countries of the Asia-Pacific region. Earlier, in September 2019, Gazprom announced that the start of operation of the expanded gas pipeline through which gas could go to China as part of the Far Eastern Route project was planned for 2020.
Gazprom at the end of December 2017 signed an agreement with CNPC on the basic conditions for the supply of natural gas from the Far East to China. The companies determined the main parameters for future deliveries: the volume, duration of the contract, and the start date of deliveries. The head of the state energy department of the PRC, Nur Bekri, said that deliveries could reach 5-10 billion cubic meters of gas per year. The presentation of the Ministry of Energy of the Russian Federation said that the export capacity of the gas pipeline would be 8 billion cubic meters of gas per year, deliveries could begin in 2020.
I thought I’d post this again, as the new thread went up while it was in moderation.
Attack on Saudi Oil Refineries Proves the Devastating Potential of Iranian Cruise Missiles
(https://defense-update.com/20190914_aramco_attack.html)
This article is particularly interesting because it has a closeup of the hole in one of the spherical LNG tanks. The caption reads “The damage inflicted by the Iranian suicide drone on the LNG tank indicates a small warhead and low speed.”
That had been my suspicion when I saw the holes. My thought is that they were short range vehicles (probably multi-rotor helicopters) launched within 5 or 10 miles of the plant…I don’t know how difficult that is tactically, though.
And…you would get the same deformation if you duct-taped an explosive charge to the tank and set it off with a detonator.
Thanks for the link. The article makes reference to Saudi air defences around the attack site. While it’s likely those defenses are in fact there, other images say the same thing, there’s no actual confirmation they were turned on.
Satellites with synthetic-aperture radar can ‘see’ the radar of Patriot and other air-defense systems. None was detected around Abqaiq on this image. So, who knows, lazy troops, sabotage, shitty maintance?
https://www.moonofalabama.org/images9/abqaiqdefense3.jpg
There’s some good Twitter stuff on this attack being posted by arms control experts/brainiac types that seem to be educated in a lot of rocket propulsion and telemetry. Worth following I think.
https://www.moonofalabama.org/2019/09/the-crisis-over-the-attack-on-saudi-oil-infrastructure-is-over-we-now-wait-for-the-next-one.html#more
https://twitter.com/DuitsyWasHere/status/1174186756708679681
Those tanks are spherical separators that have internal equipment for gas and water knock-out processes. The hole that you see in the shell is just a small portion of the damage done; all the internal equipment is likely destroyed as well. Just patching over the external hole won’t restore the separator to service, as all the internal equipment will have to be removed and replacements reinstalled. I think it is a very big problem that won’t be fixed anytime soon.
Thanks Mike. Interesting to hear that those tanks were worthwhile targets.
There seems to be a lack of any fire at the hole. Were these tanks functioning when hit, or idle/disused, do you think?
I disagree. Spheroids are low pressure equipment and can be fixed soon. This is the job done by Iranians with some dissident Saudi help. They could have very well hit utilities but chose not to do.
US is not a trusted KSA ally especially with Trump. He pulled the rug on Iran sanction just last year. Many of my Saudi colleagues tell me that Trump should not be trusted.
https://archive.aramcoworld.com/issue/196001/sweetening.up.the.crude.htm
https://www.rigzone.com/news/wire/permian_child_wells_may_cut_oil_recovery_by_20_percent-20-sep-2019-159863-article/
Intetesting new study from Permian regarding impact of child wells. According to this article it also exsplain why number of active riggs continue to decline in Permian. 1 mbpd is lots of oil that might never flow …
Note that the 20% decrease is from the exaggerated estimated ultimate recovery (EEUR).
If spacing is reduced from 800 feet to 400 feet one would expect lower output.
Somewhat like reducing lateral length from 8000 to 4000 would also reduce output. Probably best measure is output per acre.
The incident last week in Saudi should serve as a small indication of the kind of oil infrastructure disruption we should not be surprised to see in the future on a much larger scale. I am not predicting this as a certainty, but as a scenario with a significant possibility. At any time, at any locale with pipelines, refineries, LNG processing facilities, ports services, storage, etc.
Could be Houston, Dubai, Nigerian Delta, Khurais, or all.
And could be much more extensive than this last small episode.
I know some here would welcome such a disruption for the sake of their own pocket,
but for most the rest this is obviously a big bad deal.
There should be no surprise.
Just like when there was pearl harbor, it should have been no surprise, afterall the USA had a military embargo on Japan for oil in effect at the time.
Many countries have enemies, and many will be in scramble mode as oil peaks.
And so it goes.
I am very interested in how we spend our defense budget. I think we are spending way too much money, and planning for the wrong wars.
I think cyber warfare will be weapon of choice. And the latest Saudi incident shows that big war machines and large numbers of troops may be both expensive and ineffective.
Here’s something to add to the discussion.
“The US is headed for a reckoning between its military ambitions and its budget”
https://taskandpurpose.com/military-budget-choices-forsling
When I was a student a bright fellow student said: The oil price can not be predicted. And by the way, the US can not get bankrupt as the Federal Reserve is too powerful. Still rings true even if this was said 2-3 decades ago. Up to debate of course.
U.S. Oil Rig Count Takes Sharp Turn Downward
The US oil and gas rig count fell again, decreasing by 18 for the week, according to Baker Hughes, but US oil companies are still pumping oil at record rates.
The total oil and gas rig count now stands at 868, or 185 down from this time last year.
The total number of active oil rigs in the United States decreased by 14 according to the report, reaching 719. The number of active gas rigs decreased by 5 to reach 148.
Oil rigs have seen a loss of 147 rigs year on year, with gas rigs down 38 since this time last year, compared to 858 and 187 active rigs, respectively, at the beginning of the year.
Still, in the United States, weekly oil production is still near an all-time high. So while the number of oil rigs have declined by 158 this year alone, production has grown from 11.7 million bpd at the beginning of the year, to 12.4 million bpd for week ending September 13.
Oil prices were trading slightly up on Friday ahead of the data, with the huge spikes seen earlier in the week in the wake of the attacks on Aramco’s infrastructure now somewhat subdued.
Canada also down 15, over 10%. Doesn’t seem like anyone got a hankering to drill more even with 10% higher prices this week. Curiouser and curiouser…
Concerning “processing” on what is stored.
The US SPR lists content as XXX million barrels “light sweet” and YYY barrels “sour”. That usually refers to sulphur content, but maybe not in this context. When there was a draw on the SPR some years ago for a hurricane interdiction of supply, the draw was later replenished with imported oil, whose “processing” would not be the same.
Odds would seem pretty high there is no processing on what is stored.
Avg price today of SPR oil’s purchase . . . $29/b. “Release” is a sale to refineries, at the current price, so there will be a profit if it’s done soon.
And be aware recovery is not 100%. You have to put more in than you can get out. The SPR has its own less than 100% recovery factor.
A propos SPR recovery factor: why it is not stored in tanks, but it some old mines etc?
It is not stored in old mines. It is stored in hollowed-out salt domes. Some oil is lost but not a lot.
Salt dome storage is by far the most economical way to store oil and natural gas. Tanks are extremely expensive and require constant maintenance.
Yes, I was thinking about old salt mines.
But doesn’t stored oil decay in quality with time, like stored water does? I thought SPR oil is recycled, every 5 years ‘fresh’ oil or so. Someone already has noticed that Trump sold quite a lot of oil from SPR.
Also it was noted that Saudi Arabia goes low on storage every summer.
Why do tanks demand constant maintenance? Is oil corrosive or what? Anyway, nowadays there is surplus of old tankers, could be used for storage.
Yes, I was thinking about old salt mines.
No, old salt mines are something completely different and are not used to store oil.
But doesn’t stored oil decay in quality with time, like stored water does?
I cannot imagine why. It has been in the ground for hundreds of millions of years and not decayed. Why would it decay in a salt dome?
Why do tanks demand constant maintenance? Is oil corrosive or what?
Everything left in the outside weather requires maintenance. Bridges, roads, and tanks. The weather is corrosive.
Anyway, nowadays there is surplus of old tankers, could be used for storage.
The US Government does not have a surplus of old tankers. And old tankers would be a thousand times more expensive than salt dome storage.
Hey, hollowed out salt domes make the perfect storage facility. What is your problem with them?
‘It has been in the ground for hundreds of millions of years and not decayed. ‘
Because it got contaminated by bacteria etc…. In the ground oil was highly pressured and isolated.
‘The weather is corrosive.’
That’s true but not to the extent of demanding constant maintenance. Periodical rather.
PS. How do I get cursive here?
I do not think bacteria attacks petroleum polymers. For instance, you can leave a plastic milk jug in the sun and it will crumble in less than one year. Ultraviolet rays can break down polymers. But bury that jug one foot underground and it will last one million years without damage. Bacteria will not attack it.
I have never heard of oil polymers decaying because of bacterial. I know they have tried to develop polymer eating bacteria to fight oil pollution in the ocean. But I have never heard of them being a problem in oil storage salt domes. But if anyone has any information about this, I would be glad to hear it.
https://www.sciencedirect.com/science/article/pii/S0016236119302054
‘The physical and chemical properties of oil residing in reservoir core samples are strongly susceptible to evaporative processes during storage. (…) Although the physical properties of the oil may be compromised during storage, the distributions of the high molecular weight components retain characteristics, similar to a bar code, that are inherited and representative of the original (fresh) core sample.’
Essentially like stale water. Presumably the same water, but not the same after all.
The oil sands in Western Canada and the heavy oils in the Venezuelan Orinoco Basin represent conventional oil which has undergone extensive biodegradation. Flux of meteoric water. Might not be so much of an issue within a salt dome.
OneofEU, On theoildrum you got cursive starting with [I] and ending with [/I], but here it doesn’t work.
Ron, how on your forum ?
Use the less than and greater than symbols.
Thx that works
Of course no one can predict the future, not even Dennis with his wonderful models. I certainly can’t predict the future. But the recent events in KSA keep bringing a theme to my mind. The basic sequence is that “drone” attack is the point of weakness which brings the folks who are pisssed at the KSA leadership into more active opposition of the regime. From the Houthi’s to the Princes, the guest workers, Shiites, Iranians, women, and the wealthy Saudis, there are a lot of folks who want a change. The iron hands of the Political and Religious leaders have been able to mostly suppress dissent to date.
Recent events show the KSA vulnerabilities, and the response of increasing sanctions on Iran will likely embolden dissent rather than quash it. Of course I am sure KSA will also round up some likely suspects and behead them to keep appearances up. Will they be successful, or will we see another Arab Spring…
Drone Spring maybe 😉
But you are right, generally. Someone who did it obviously wanted to move things forward, not to close anything.
Internal tensions seem to be Achilles heel of KSA. Iran, on the other hand, has been pressed into unity by years and years of sanctions and harassment (which even more significant when you know that its oil provinces are more Arab than Persian).
Primary focus frac spread count is down to 375. Average was 450 last June.
Last year tight oil output increased by 1 Mbpd or more.
Number of completions can decrease 30% in Permian and maintain flat output. So far frack spreads have decreased by less than 20%.
Hi Dennis,
Based on EIA monthly data, lower 48 US oil production has been pretty flat since November 2018. I calculate 9703 kbpd for June and 9539 for Nov. 18, an small increase of 164 or 1.7% over 7 months. While many factors effect production levels, there is nothing more important than the number of frac spreads running.
Primary focus publishes weekly national frac spread counts. You have to pay extra to get info on Permian or other basin counts, and I do not have that information.
Based on their info, I computed an average of 464 spreads in Q4 2018, 447 spreads in Q1 2019, 462 spreads in Q2 2019, 450 in July 2019, 416 in August 2019, and their count had dropped to 375 last week.
With production growth slowing to a crawl, while spreads were around 450 to 460, do you think spreads will have to drop 30% to say 315 before we start seeing production drop?
I expect there is a small time lag between spreads and production so, I expect we will seeing declines when actual September data is released.
July data should be coming out next week. With July spreads averaging 450 I would guess lower 48 onshore to be near steady around 9703. Do you think it will be up appreciably?
Dclonghorn
The drop would be 30% below the Q42018 level so about 325 frack spreads.
I agree this is an important metric. Also note that much of the drop in production growth was due to a slow down in conventional oil completions. This can be seen from sharp drop in vertical oil rig count in the past 52 weeks. About 43%.
Correction.
Vertical oil rigs down by 33% from their 52 week maximum and for horizontal oil rigs the count is down by 21% from the 52 week maximum.
dclonghorn,
Agree output probably flat to up or down 100 kb/d in July would be my guess, not sure if the hurricane had much influence on GOM output, but onshore should not have been affected much so your guess is as good as any.
Btw, max extraction rate from the SPR is 4.4 mbpd. The pumps are among those items needing maintenance.
Concerning defense against small vehicles at low altitude.
As opposed to spending money on defense against cyber attack — and such an attack is unlikely to KSA output Y mbpd instantly.
In general, DOD spending is on people. Salaries, quarters, and there’s even a food allowance. That’s the military personnel. For contractor expenditures it is largely the same, plus healthcare. The salaries in an airplane cost a lot more money than the metal.
Now, it’s not a jobs program, but it’s absolutely correct to note that those salaries generate tax revenue. It all gets more complex from there as military families spend money on cars, back to school sales, and television for the living room.
It’s not a zero-sum game. If you don’t spend money on the military, that doesn’t mean that the money is available for something else. We have a debt. We could pay it down rather than spend elsewhere. And, as we have demonstrated with our hundreds of billions and currently 1 trillion dollar deficit, you can spend the money on the military and anything else you’d like in addition rather than instead.
They all that as it may be spending on Cyber defense clearly would not have stopped those drones.
It would be nice if someone got paid to sweep the streets, and teach children to read and write.
You may say that I’m a dreamer
Money would simply disappear if we used money to pay down debt. It would cause a depression if debt were to be paid down. The problem that rises when less oil arrives is your still pumping debt into the economy and your doing it at an exponential rate as is required in order to avoid debt deflation.
Yet you have less economic activity. So your pumping more dollars into chasing fewer goods and services. But you don’t get inflation. You get stagflation. Economy crumbles and prices rise at same time. Well right up until a good portion of the debt that keeps the economy going forward implodes due to non-payment. It won’t be government debt that implodes though.
It’s one thing to get an oil price spike above $70 or above $100 while there is plenty of oil to go around, that can be handled. Think pre-2009 and 2010-2014. It’s a completely different scenario when you get a oil price spike and there is not enough to go around no matter what you do.
If China for any reason is unable to import enough oil to meet their needs, like drone attacks in Saudi Arabia. Their economy implodes and dominos start falling everywhere globally. Which is a very good reason not to be long oil if your a trader.
Any spike in price due to a shortage will be a short lived event no matter when it finally arrives. Because on the other side of Peak Oil is Less Oil and Less Oil is deflationary as hell.
Best commentary I’ve read coinciding with the way I see the situation, except that somewhere along the process there should be a near-global monetary crisis. It is the inevitable consequence of too much money chasing too few goods in a depressed economy within an international monetary competitive environment.
Yes, it has surpassed the point that it is likley that something like that would happen. But my comment is that I think you underestimate the will to combate this with more currency, which will cause hyperinflation. Or something remotely similar. I repeat the view that if all the five major currencies expand money in the same rate it would get the best result as some sort of stability can be restored. We can endure inflation, but it will be more severe than in the 70’s-80’s and it will be more or less unavoidable in my view. It is a grim view and most don’t want to think in this direction, but that is the price of messing with the oil business cycle and also the financial cycles (low interest rates/QE to repair economic contractions earlier than the case now).
The military is a jobs program of sorts. For as much talk as there is against socialism, that is what the military is. In addition to salaries and a generous retirement if you stay in at least 20 years, there is government healthcare, government housing, government stores, government recreation centers and childcare, government schools on some bases, etc. Maybe we’ll expand the military budget to such an extent that everyone in the country will be part of the defense budget.
My primary concern isn’t the size of the defense budget as such, but how it is being spent to prepare for future wars. I think (and so do others) that we are spending money that enriches some companies, but leaves holes in security.
It’s like that wall. Of all the military threats in the world, Mexico is pretty far down on the list. Yes, we can spend money to build it, and given the choice between more war and the wall, I’ll take the wall. But given what we could be doing, I don’t see the value.
If you are saying debt doesn’t matter, then vastly expand infrastructure and green energy spending. That’s the whole point of the new green deal.
As for Norway concerned, we have our defence policy. But it is insanity for Russia to invade the north of Norway for a number of reasons. So, the government has instead invested a lot in the climate change movement (about 30 BNOK compared to a defense budget of 50 BNOK+). I don’t disagree with the direction, but there is a long way to go. Air travel is targeted now along with plastic abuse coming from the oceans. However, the way the goverment is targeting this the main message will in my mind always be; what are we going to do after peak oil in Norway specifically? Try to do something new maybe within the technology sector. A bit optimistic; we have already tried. Also try to reduce oil consumption, while relaying on hydro and wind power. And this does not work because we have a lot of consumption tied to air travel, sea freight and heavy truck freigh. Norway has developed a luxury economy along with North America, and there really should be a plan B. But we are not there yet; too many obstacles at the moment. Now, America just want to manipulate the oil price back to 60 dollars brent judging by todays movements; until it breaks. Norway is one of the most energy rich countries in the world per capita, but people would not step back in living standard unless subsidied by the government in some way. And I guess the other citizens elsewhere are not too keen to do that either.
If Democrats win next year in the US, green will be the way. But it will not be a walk in the park – I suspect a Trump related crisis is brewing right now.
https://www.upstreamonline.com/rigs-and-vessels/us-oil-drillers-drop-14-rigs/2-1-675976
They exsepect as a result off shale need to set profit and payback to banks, investors first that the decline we see in EIA June monthlies 32k bpd will continue. According to Trumph he assure enough oil from US strategical reserves , he dont want high oil price and seems happy with WTI 50-60 usd even lower. The risk for more attack in Saudi is significant, also they believe there will be a military attack when they find out where the drones where sent from. As a structural Engineer working with oil and gaz projects for decades also design of seperators it seems quite clear the dammages is huge , before this plant can start up lots of equipment need to be exchanged guess many are long lead elements made trough spec i.e , cables , cable trays, walk wayes , monitor systems seems destroyed. Since this was built several years ago it might be difficult to get new compenent and re design , calculations might be needed . This work shall also be done in a site the houties still considder as a goal for future attack and they ask pepole to stay away.
Another article on “child wells”.
The World’s Top Oil Basin Is Running Out Of Space
Oil companies drilling so-called child wells in the Permian risk losing 15 to 20 percent of the crude oil that could be recovered otherwise, investment bank Tudor, Pickering, Holt & Co. has said in a presentation seen by Bloomberg.
Child wells are secondary wells drilled close to the first, or parent, well. According to Tudor, Pickering, Holt & Co., the proximity makes the child well a lot less prolific than one further away from the parent. On the other hand, however, if the secondary well is drilled too far from the parent, the driller risks a dry well.
“Child wells get progressively worse relative to their parent well with tighter spacing,” the Houston-based, energy-focused, investment bank wrote. This means wells are at their most prolific in some Goldilocks zone that is neither too close to the parent nor too far from it.
One way to get around this problem is to drill two wells at once. This approach, according to Tudor, Pickering, Holt & Co., ensures better recovery rates closer to the driller’s projections.
The ban knotes that 60 percent of the wells drilled in the Delaware Basin in the Permian last year were child or simultaneously drilled wells, as opposed to the period until 2017, during which most of the wells in the Delaware Basin were parent wells.
“One way to get around this problem is to drill two wells at once. This approach, according to Tudor, Pickering, Holt & Co., ensures better recovery rates closer to the driller’s projections.”
/Scratchy record sound/
Hold on there. This is the first I’ve heard of this strategery.
Is this right?
Is there some magical way that drilling two wells at once avoids the parent-child effect?
Seems more likely to me that all you get are two so-so wells rather than one good one and a bad one that steals a little from the good one.
Yeah. You could drill two wells, one right after the other… Or you could drill two wells at the same time. That would make a difference? Why???
If one drills wells too close together then EUR of the wells will be lower ceteria paribus. Pretty sure any decent petroleum engineer would confirm this assertion.
On the basis of EUR per foot of lateral Permian Basin is already seeing decreasing productivity. It is possible that acres per well have decreased if spacing has decreased by more than the increase in lateral length.
Acres per well would be a very interesting statistic to track.
When you drill one well next to an existing well the first well will have made a pressure sink due to depletion that helps draw some of the frac energy from the daughter well. The idea behind completing them all at the same time is you can get a more complex fracture network and increase the recovery factor of the hydrocarbons in place. Say if you drilled them one at a time, the first well recovers 5% of the oil per X acres (figure about 80) then the next well will recover less as it gets a potentially worse frac, say 4%. It will also impact in an unpredictable way the parent well. I have seen them increase production substantially, or be knocked offline completely. If you complete them both at the same time, there is no pressure sink, so in theory you should be able to get a much more complex fracture network, and maybe recover 6-8% of the hydrocarbon per 80 acres. The big problem is in the long term life of the wells, they are likely to be negatively impacting each other’s reserves. You may only ever be getting the 5% recovery per 80 acres, just you see it sooner. Companies do not report on what is happening long term with their wells or spacing projects, just the new splashy first month. There is always a shiny new project to distract, and no one ever follows up with what happened with that test you did two years ago? Somewhere between half and two thirds of all horizontal wells drilled since 2007 have never turned a profit, and are not likely to in the future. In that way, shale plays are much like old vertical conventional plays, just more expensive.
Thanks JG.
“Co-developing” is another new shaleism. It does not imply two wells be drilled at the same time, only that they be frac’ed at the same time, thus avoiding pressure differentials often seen in the parent/child relationship. We’ve been doing this now for six years already; its called zipper frac’ing. Up to four or five new laterals at a time can be manifolded together and stages at the same TMD (total measured depth) can be frac’ed at the same time. Almost all multiwell pad drilling includes zipper frac’ing. The relationship between parent and child often means a “group” of parent wells and a group of child wells. Unless the shale oil industry can sort out how to frac an entire county at once (give it enough low interest money and it will), this is no fix at all. Its just more bullshit to keep people… hoping.
In the late 1920’s and early 30’s, particularly mid-30’s and the East Texas Field discovery, wells were being drilled too close together resulting in the loss of natural reservoir pressure that resulted in a severe reduction of liquid recovery rates. The Texas RRC stepped into establish rules to prevent this loss, or waste of pressure, to optimize recovery rates of wells, to prevent the unnecessary drilling of wells and to conserve Texas resources for the long haul. Those rules limited the number of wells per acre of land and the distance between wells. It worked, beautifully, for decades and decades, the price of oil was stable, we were ensured of steady production that could be relied on and Texas, for the most part, dictated world prices until 1977-1978.
What’s different today with shale oil? Nothing is different. Shale oil is being over drilled, GOR, a precursor to depletion is going up, flaring is on the rise, productivity is plateauing, decline rates are accelerating and the shale oil industry is getting deeper and deeper in debt. It is completely out of control and needs to be put on a very short leash by regulators, its rate of growth slowed down. Exporting LTO that we cannot use in America’s refineries is a waste of resources that we will need, badly, for decades to come. Everyone with the ability to regulate the shale oil industry is more concerned about short term jobs, tax revenue and ensuing votes that occur to help them get re-elected. Nobody managing America’s hydrocarbon future can think past next week anymore.
“Nobody managing America’s hydrocarbon future can think past next week anymore.”
Ummm, this is the first I’ve heard of anyone managing the countries hydrocarbons. Is there such a program? I was under the assumption its pretty much ‘anything goes’.
Thanks for this Mike.
Thanks Mike great comment.
How does the idea of oil swaps sound?
We don’t have enough ligbt oil refinery capacity for tight oil produced.
Couldn’t government require that for every light barrel exported a heavy barrel must be imported so that the net exports are zero?
Mike,
It would be fine with me if Texas, North Dakota, Colorado, and Wyoming decided to regulate oil and gas production in such a way as to conserve resources as much as possible.
Not sure if you have noticed, but 3 of those 4 states are pretty conservative and lately the conservative mantra has been deregulation and the market knows best.
Not sure what the answer is, but many Texans would prefer that regulators stay away from Texas, or so it seems. I am not from Texas so it is not up to me.
The mechanism and ramification of scarcity is very likely a great deal more direct and immediate than things like measured deflation.
If you have scarcity then someone did not get an order filled. For many countries not getting an order filled will translate immediately to long lines at gas stations and empty shelves at grocery stores. There is no real mechanism in place in those countries to prioritize allocation. The shelves would have to go empty and the riots would have to be underway before governments would realize they need to allocate. Then they have to find the gasoline for themselves and their staff to get to their offices and draft legislation that shuts down non agro business.
All of this would happen long before there is any reported measurement of annual or even monthly inflation or deflation. This for the somewhat obvious reason that the guys whose job it is to take the measurements are out in the streets rioting and looking for food.
How many missed orders does it take for say China to start seizing ships? Obviously if oil can be shipped from Iran to China instead of China seizing ships that will be exactly what happens. Which would pretty much guarantee an escalation of trade war. Pick your poison kind of situation.
Scarcity means price goes up. In a depressed economy prices don’t go up much because of lack of affordability. You don’t get long lines at gas stations and empty selves because people can’t afford things as they become much poorer. Demand craters as the world adapts to less oil through economic destruction. People without work need a lot less oil.
Scarcity means short term price rise and movement to alternatives and efficiency. High oil prices lead to increased exploration and production which leads to gluts on the market.
High prices of the 70’s and early 80s led to a price slump for 15 years, cars got more efficient and ride sharing became more popular. High prices from 2004 to 2014 led to increased production, increased efficiency in transport and the growth of hybrids and EV’s. Now we are in a 5 year slump again. One more lengthy price rise might push alternatives and efficiency to the point of no return for oil as the main transport fuel.
Rock and a hard place time.
Yes.
There is a huge amount of oil consumption that is of very low value – think single passenger commuters in 12 miles per gallon SUVs. A price rise to $125 per barrel would squeeze out much of that low value personal consumption, and freight hauling would out-bid personal consumption.
There might be some disruption in countries that aren’t well organized – in particular, countries that control fuel prices and pay subsidies to importers and distributors to cover the difference. High oil import prices would break the government budget and those countries would have to abruptly raise prices, threatening fuel riots.
Fortunately, some of the major consumers, like China and India, have mostly ended the price controls and subsidies. Countries like Egypt and Venezuela* appear to be determined to destroy themselves with those subsidies.
*Venezuela would get a reprieve if oil prices were to rise sharply, but in the long term they’ve destroyed their economy with a terminal case of Dutch Disease.
The thing that I find bemusing, is that everyone talks about Venezuela massive reserves, yet no one talks about the fact that all these reserves are just like Canadian tar sands and no matter what the price of oil , only so much can be produced daily.Certainly no where near the amount required to offset a 5mmBPD loss in production elsewhere. No current technology in the world can alter this fact.
GF, you are wrong. The boom-bust cycle during the increase in production before peak oil will be very different during the decrease in production after peak oil. Despite the increase in efficiency and the transition to alternatives, the result according to Jevon’s paradox is that we need more oil than ever before, not less. Globalization runs on oil and international commerce is the main source of wealth. Since 2012 the world has been de-globalizing.
https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-lakshman-achuthan-business-cycle-ecri-de-globalization-diagnosis-predated-trade-war
After peak oil de-globalization can only accelerate leading to economic contraction. It is hard to think that under economic contraction we will achieve the successful energy transition we couldn’t get under economic expansion. Certainly the transition will be forced on us, but through a strong decrease in energy usage.
the result according to Jevon’s paradox is that we need more oil than ever before, not less
Bingo!
We have a winner—-
” Certainly the transition will be forced on us, but through a strong decrease in energy usage.”
Yes, just what I said, reduction in energy use both inherent to the transistion and systematically applied. As we have discussed here before on this blog just the energy used to produce, refine and transport oil could run all the vehicles if they were electric.
I agree Carlos “Certainly the transition will be forced on us, but through a strong decrease in energy usage.”
But that is not all bad news necessarily.
We could get by with less energy (as GF and others have pointed out).
It will hard, especially if the decline happens suddenly,
and more so for those places that are more heavily dependent on external energy inputs/imports.
If it happens more slowly, the adaptation will be a little smoother.
None the less, difficult when we are so far into an overshoot condition.
Jevons paradox only occurs if prices drop due to reduced demand and there is no shift in demand curve. Technology changes will result in a shift of the demand curve for oil so that at any oil price there will be less demand for oil.
Consider the following thought experiment: petrol price drops by factor of 2, would you increase miles driven by a factor of 2 or more?
I drive an EV and would not change my driving habits if electricity cost fell.
I saw one estimate that elasticity of oil demand is about .3, meaning that if the price of oil doubles, consumption goes down by about 30%.
I don’t know if that was short term or long term – long term elasticity is higher than short term.
This is what happens, and it happens really really fast and the damage lasts for a looong time.
REMEMBER, REMEMBER THE 5TH OF SEPTEMBER, 2000
https://www.resilience.org/stories/2006-09-05/remember-remember-5th-september-2000/
(Save this to your hard drive – it is a story worth remembering.)
The moral: we’re too dependent on oil, and we should reduce our dependence on it ASAP.
Another way of saying it: oil has very high hidden costs due to the risk of inadequate supplies. A war in the Persian Gulf would cause enormous damage. The US has spent trillions on oil wars. The price of oil should include those hidden costs – oil should be more expensive, not less.
Time to move away from oil ASAP.
I agree with that premise. People living in industrialized societies are hooked on oil like a drug, majority without even knowing it.
If we hypothetically followed your view and increased the price of oil (enter specific reasons here) to say 80-90 dollars a barrel for brent. In the current economic climate, a massive recession would be the likely outcome. Some might argue a depression.
We won’t move away from oil. The addiction of humans are too strong and the scariest thing, the standard of living produced by industrial civilization is taken for granted by the masses. It is expected. It will be a rude awakening for those in that state of mind.
Another war in the gulf is inevitable in my view. I hope i am wrong. But the next few “events” might trigger a catastrophic war.
Yeah, another ME war might well happen. I suppose it might be Farmer Mac’s “brick upside the head”.
If we increased the price of oil through taxation, that would reduce imports, which would help oil importers. The additional tax revenue would be used to reduce other taxes and the overall tax burden would stay the same. The standard of living would rise.
If we move away from oil, we’d move to things that are cheaper and safer, like EVs powered by domestic electricity, and we’d eliminate oil imports that transfer income & wealth to oil exporters. Both would reduce costs and raise the standard of living.
I think that any fossil fuel tax should go to building out a renewable energy system and reducing the cost of EV’s.
Any tax that just loops back into the general system gets dispersed to the people and industries that are now causing the problems.
That would work.
Instead of recycling fuel & carbon taxes into a “citizen dividend”, you could invest it in renewable energy infrastructure, energy R&D, subsidies for EVs, etc., etc. That would work just as well to prevent any economic harm from new taxes. Heck, the net effect would be stronger economic growth, due to savings from better energy infrastructure (plus, if you cut taxes then some people will just save their tax refunds, instead of spending them – you can’t have that!).
Compensating tax reductions would be a little easier to sell, politically. Maybe a good compromise would be a mix of tax reductions and energy infrastructure investments.
While we are increasing public health and safety, tax the meat, dairy and biofuel industries (including all imports and exports).
Use that money to expand “specialty” crops in an organic and sustainable way. That would reduce demand on oil and natural gas.
I can see taxing farm operations based on their harm to soil, and GHG emissions.
I’m not clear how that would reduce demand for oil & gas.
Organic is not sustainable: it’s a marketing ploy.
More evidence organic farming is bad.
Time to move away from oil ASAP.
You wrote that a few times on theoildrum more than 10 years ago. And now it’s one or two minutes before twelve or maybe after twelve already for avoiding serious problems, unless from somewhere in the next decade on world oilproduction stays at least one decade on an undulating plateau or the climate movement can perform a miracle
Yeah, I’ve heard the same lame bullshit from Nick for about that long also. This is a fella who would not mind total social chaos as long as he got what HE thought was “best” for the world. Of course it is a privileged, city-boy idealism Nick has; he has the money to endure the chaos and that, essentially, is all that matters. Others, those of that have to work for a living, don’t have that privilege and seek a more logical, less emotional course of action, one that would benefit everyone.
Dennis, whatzup with this shit? Do you want to discuss oily stuff here on this side of the tracks or allow the anti-oil crowd to wander back in forth under the auspices of getting rid of oil ASAP as actually being relevant in the peak oil debate? Is that the way you look at it as well? Think about it for a moment; a lot of the answers you so desperately seek about the future of oil can ONLY come from people who understand the oil business…then you let these wanks come around and talk about wanting it all gone, ASAP. Come to think of it, where is Shallow, or Rune, or the LA geologist fella? Everyone that actually knows anything about oil and gas inevitably gets tired of this sort of dung heap and leaves. You need to sort that out, I should think. Or not.
Hmmm. I know what you mean about the two “sides of the tracks”. On the other hand, it’s really very hard to compartmentalize oil vs non-oil. My approach is to try not to say anything controversial unless it’s in reply to something that seems unrealistic. In this case I replied to a comment by Adam Ash, which linked to an article suggesting that our dependence on oil meant roughly that civilization was going to come to an end when we hit Peak Oil.
As for “social chaos” – where did you get that? ASAP doesn’t give a specific timetable. It doesn’t say “overnight”. It says “as soon as possible“. That doesn’t say “chaos” to me.
Finally…an Oil Shock can cause chaos. Rising sea levels cause chaos. Drought causes chaos (and was a primary cause of the Syrian civil war).
Oil wars cause chaos. 2.77 million veterans have served in Iraq and Afghanistan, mostly due to oil: hundreds of thousands have disabilities and severe PTSD. A very large percentage of homeless are veterans.
“An analysis conducted by the RAND Corporation has shed light on the scale of U.S. military deployments since 9/11. Even though deployments abroad represent a key aspect of U.S. military service, they can prove highly disruptive to family life with some spouses reporting that their children experienced behavioral and peer-related problems during those long periods of absence. Since 2001, 2.77 million service members have served on 5.4 million deployments across the world with soldiers from the Army accounting for the bulk of them. Deployed personnel were under 30 years old on average, over half were married and about half had children.
In total, all services contributed 3.1 million troop-years of experience and 58 percent of those years can be attributed to the Army. According to RAND, 1.33 million individuals deployed with the Army between 2001 and 2015 (including the Reserve and National Guard), along with 563,000 from the Navy, 518,000 from the Air Force and 367,000 Marines. Considering the length of the wars in Iraq and Afghanistan, a substantial number of those serving across all services have gone on several deployments. Around 225,000 soldiers who served with the Army deployed at least three times or more.”
https://www.forbes.com/sites/niallmccarthy/2018/03/20/2-77-million-service-members-have-served-on-5-4-million-deployments-since-911-infographic/#5e7fb04650db
Mike, well put.
Since NickG wrote “Time to move away from oil ASAP.”
It could be interesting if NickG would share with the rest on this board about what steps he and his family has taken to completely move away from oil (or hydrocarbons in general) and its effects and how that has worked out.
Rune,
On the one hand, that’s a somewhat unfair question: it’s far cheaper and easier for the whole society to move on something like this than to ask individuals to sacrifice. I could also just as easily ask you what you’ve done to help starving people in Africa: you know they’re starving, so what are you doing??
But, it’s a partly reasonable question, and the answer is that I’ve worked in my professional life on efficiency projects (lighting, HVAC, building envelope renovation, etc) and governmental policies like carbon taxes and transportation planning. In my personal life I’ve replaced all of the incandescents possible, insulated to the point where I don’t need heat above freezing, use electric trains, live in a walkable neighborhood, and only drive about 800 miles per year in ICE’s.
How has it worked out? Beautifully. My costs are lower, my life is better. Again, I don’t go beyond the reasonable: I don’t avoid ICE vehicles as if it were a religious taboo. Again, I do the reasonably possible.
You agree that Climate Change is a serious risk, right? What have you done to transition away from fossil fuels?
Bravo.
Keep at it Nick, speech suppression and thought suppression are supposedly the antithesis of what America stands for.
Thanks.
You’ve hit the core of what I’m talking about here: ideas, and telling the truth.
I suspect Mike thinks that I’m judging him for being in the oil business. I’m really not. I think his work is honorable and useful.
Let me say that again: *I think producing oil & gas is an honorable and valuable profession.*
What I object to is people saying things that are unrealistic and intended to prevent open policy debate. I object to Exxon and Mobil fighting against good energy policy. I object to the spreading of false information.
Again – I have no problem with people working in oil & gas. I see nothing wrong with receiving royalties from oil. I think that Norway is doing ok: they produce a lot of oil, but they’re setting an example for reducing their consumption of oil.
Nobody is trying to suppress Nick’s freedom of speech; what a bunch of whiny crap that is. The forum was once divided to avoid these sort of “interferences” in debate about important oil and gas matters. I, for instance, have no desire to wander over where the anti-oil, anti-God, anti-conservative, the world is going to hell in a handbasket, Tesla crowd hangs out on the non-petroleum side; what’s the point, to change someone’s mind? Phftttt.
The anti-oil rhetoric, here, is an obvious effort to control the content of the blog, period. So be it. As to you, Nick, knowing what the “truth” is about the real world, from the security of your perfect neighborhood in Mayberry, gimme a break. To get where you think we all need to be you are going to need every drop of oil the world has left, and then some. You should be sending guys like shallow sand Christmas cards every year.
I was not the one who stated;
“Time to move away from oil ASAP.”
Your reply just documents you did not understand the full consequences from your own statement.
The subject was not about starving people.
The subject in this thread was not about climate change.
(That belongs in posts/forums that discusses such.)
Again, I was not the one who stated
“Time to move away from oil ASAP.”
And for GF, this is not about speech suppression, it is called keeping to the subject.
Rune,
You did move the goal posts by suggesting (hydrocarbons in general). Also ASAP, includes “possible”. Nick seems to be using very little oil for land transport personally, though clearly the food he eats, and the transport of most other goods he might use requires oil for most of the transport by land, air, or water that requires change on a society wide level which might require higher prices and potentially carbon taxes to accomplish.
We will need to transition to some alternative for oil at some point, if the peak in World output of crude plus condensate occurs in the next 5 to 10 years, in my view.
It will not happen overnight and time is getting short.
Rune,
Yes, the subject was indeed the consequences of oil shocks/shortages. The subject (the “thread”) was started by Adam Ash, above.
And if you think that this blog isn’t about the consequences of oil shocks/shortages as well as FF’s environmental impact, then….I’m just baffled. Read some of the posts shown at the top of the page ( ENERGY AND HUMAN EVOLUTION, or
OF FOSSIL FUELS AND HUMAN DESTINY, etc.).
And if you think that forecasting the future of oil (or FF) production can ignore problems of supply security, or pollution (including GHGs), I’m also baffled. If oil had no problems with security of supply, or pollution, it’s future would be very different. For just one example of many, VW would not be telling the world that it’s current generation of internal combustion engines is it’s last.
In other words: It’s not possible to forecast the future of oil without taking into account public policy, and public policy absolutely takes security and pollution into account.
Dennis,
I put in the expression hydrocarbons in general as I got the understanding that one of the big concerns on POB was about greenhouse gas emissions from burning hydrocarbons globally.
Or is it only oil that is bad?
Exactly my point there is a lot of energy from fossil fuels embedded in everything from improving residential insulation (which is good long term) to food and other products and services purchased.
In every transaction some energy input is required.
Using less is good.
Rune,
Yes carbon emissions in general will affect climate change, but that was not really discussed here. Nick said move away from oil ASAP, though at some point (2030 to 2040) other fossil fuels may peak as well so you are certainly correct that eventually there will be a need to move away from hydrocarbons (that is reduce demand for them).
Also correct that it is a challenge to transition to alternative forms of energy so ASAP, realistically is probably about 40 to 60 years, we need to get started as peak fossil fuels probably occurs in 15 to 20 years and decline in output may be relatively steep, so a transition over 40 years would be better than 60 years if we do not want to be faced with a great deal of scarcity from 2060-2080, I will be gone by then, but my children and potential grandchildren will need to face this problem. The earlier we face the problem head on the better off we will be.
Head in the sand helps little.
One of the problems with moving away from oil is figuring out what the people who work in the industry are going to do for a living. Not just directly, but all that is associated with it.
It will destroy the economy of my county, as it will close the oil refinery and shut down the oil production. That will be a loss of over 1,000 jobs in a county of just over 20K people.
It would also close down two auto parts factories here, unless they were completely retro fitted to make electric car parts. Another 600 jobs.
I am also not sure how farming is going to be changed. I hear a lot of talk, not sure how it will work.
Hey, I am not going to argue here. None of the next generation in my extended family wants anything to do with either Ag or oil at this point. They listen to the media and politicians who say we won’t be needing oil soon, that oil will be worthless. They also see how things can go from good to bad so fast in commodity industries. No reason to take on the risk when you are also told that it is destroying the planet and won’t be needed anyway.
I just hope these people wanting the major disruption are correct and that it needs to be done. Because they are necessarily going to have to destroy the way of life where I live to accomplish their goals.
To NickG and others, what is the plan to replace all of those jobs where I live? Should we just accept that 1/2 – 2/3 will leave and the rest will be mostly poor?
I know small town life isn’t for most. But it was a great place to raise kids, 5 minute drive to work, nice to know many of the people you meet on the street. These is also something near about knowing your great – great grandparents came from across the ocean, settled here, and you and your ancestors were able to make a go of it for a few generations.
There has been oil production and refining here for over 100 years. Row crop farming prior to that.
Most city people call me a whiner when I bring this up. Maybe they will understand if the USA tries a dramatic switch off oil, and it doesn’t go as smoothly as promised.
It has taken 7 years to get to where I regularly see 1-2 Tesla’s in the wealthy areas of the cities I travel to. Maybe the next 7 years we will see much more dramatic change.
SS, the scale of the energy transistion alone is gigantic. Jobs will not be the problem since machines are not up to the task, just yet.
The plan in general is to continue replacing workers with machines, robots, and AI, all the way up into the professional levels.
Somehow I doubt if any of this will really get done on a global scale, enough to make any real difference. Most likely the burning will mostly continue, the eco-destruction continue, the fisheries deplete, etc. etc.
The governmental bodies are lying through underestimation and omission, in some cases outright. The big corporations are fighting tooth and nail to continue the legacy industries.
We have been presented with the facts and ways to reduce the loss, suffering and pain of the present and the future but most of the world turned it’s back on the problems and decades later are finally discussing some of them, partially. Not really doing much, but discussing.
So it’s a matter of being screwed or being horribly screwed, flip the coin. Jobs may not be a problem at all in the future.
https://www.youtube.com/watch?v=P92hbxzSA08
Shallow sand,
There are always changes, if you knew your grandparents well, was life the same in your county during their 20s as it was during yours?
The only constant is change. That is just the way it is, some things will never change … (as the song goes)
EVs can be manufactured instead of ICEVs, batteries, solar panels, wind turbines, HVDC transmission lines all will need to be built, homes can be renovated with more insulation and air leaks can be sealed, heat pumps, both air source and ground source could be built and installed.
There is much to be done.
Have you heard of United States Leather Company?
https://en.wikipedia.org/wiki/United_States_Leather_Company
It was mentioned in an NPR interview by the founder of Southwest Airlines (first time I heard of it). His point was that no company lasts forever.
Dennis. No doubt.
But it seems change by government picking the winners and losers isn’t the best result.
I’ll step off now, the discussion is too far from oil related.
shallow sand,
We could simply let the market choose, worked great from 1929-1932. 🙂
Hmm. What society should due to mitigate the consequences of peak oil seems a fairly central question about peak oil, at least to me.
Also doesn’t demand for oil and what might affect that demand seem related to oil production?
Generally demand for a product is a pretty important subject for a producer.
A final point is that economists believe that taxing a product, (and thus raising its price) is the most efficient way to accomplish the transition.
So I tend to agree that a carbon fee and dividend approach that simply collects the carbon fees and returns the money to the people as a dividend might be the best approach.
Foe those who are fiscal conservatives we could collect the fees and use it to pay down the national debt when the unemployment rate is below 6% and return the money to the people when the unemployment rate is higher than 6%.
I generally agree that the government will not always make the best choices and letting the market decide tends to lead to better outcomes (severe recessions are the exception to this general rule).
Shallow Sand,
You’ve got a good point. Economic transitions can be very painful for people invested in or working in industries that shrink. Farming is a case in point: 150 years ago half the population worked on farms. Now it’s 1%. The gradual decline of farming has taken the form of bankruptcies for the smallest and weakest farmers in a long, continual bleeding process. That’s mighty painful.
So, what do we do? Well, we don’t really want to stop the transition: that might delay the pain a little for people in the legacy industries, but it would make almost everyone poorer and worse off.
But, we can do a lot to help the people affected. At the moment we’re doing very little: Republicans promise to stop the transition, but they can’t – they can only slow it down some. Really, Republicans are lying to rural and oily folks: they’re setting them up for an even worse, abrupt fall in the future, rather than a controlled decline. That’ what happened in the Depression: a serious shortage of money pulled the rug out from all the farmers that were just hanging on, and created a much larger and more painful transition away from horses and towards tractors (the rate of investment in tractors actually increased during the Depression, as farmers struggled to survive by cutting costs!).
If we have a serious oil shock, the car industry will suddenly be unable to sell ICE cars: that’s part of what bankrupted GM in 2007. Higher oil prices would help oil producers temporarily, but would accelerate the move towards EVs and away from oil.
Instead, we could have a planned and gradual transition using carbon taxes and we could target investment in wind and solar power in rural areas: that’s where wind and solar power go, pretty naturally. Especially wind power: Iowa farmers are pretty ecstatic about wind power right now, and East Texas land owners are pretty happy too.
We could help rural folk with the equivalent of the rural electrification projects which happened during the Depression: building infrastructure, installing home insulation, better windows, better HVAC (mostly heat pumps); rooftop PV, training programs for workers in all of these areas etc., etc.
Right now Republicans are giving a few crumbs in the form of temporary rollbacks of regulations (energy savings, methane emissions, etc), and farm subsidies, but they’re basically lying to their voters, and doing very, very little to really help them.
Mike,
This discussion has not focused on religion or politics or Teslas for the most part.
The ASAP part comes from environmental concerns, but even if there was not any environmental damage caused by the petroleum industry (every industry causes damage to the environment) the main point of this blog is a discussion of peak oil.
It seems a logical discussion surrounding the topic of peak oil is what do we do after the peak or how do we prepare for a peak in oil output. My hypothesis is that World oil output is likely to peak between 2023 and 2027 (more than a 68% probability that the centered 12 month average of World C+C output will occur between Jan 2023 and Dec 2027 in my opinion.) So in the mean time something should be done to reduce World demand for oil.
We can ignore the problem and pretend that all is well, but more needs to be done than simply stopping US exports of oil as we use about 17 Mb/d (crude input to refineries), but it is unlikely that US crude output will ever rise above 14 Mb/d (potentially we might reach that level by 2024 with fairly rapid decline in output after that point).
Note also that if all nations decided that they should not export their oil, but conserve their oil resources for only their citizens (as you would prefer for the US), then the US would immediately be short on oil by about 5 Mb/d.
So that suggests we need to find some way to cut oil demand by 30% (if there were suddenly no further imports or exports of C+C to the US).
Any suggestions on how that might be accomplished?
What “discussion” are you referring to, Dennis Coyne? I thought this was the petroleum thread, the question should be what does batteries, EV’s and ‘we need to get off oil ASAP’ have to do with anything on the petroleum thread? Otherwise, about God, guns, whales, ice, the Koch Brothers, evil Republicans from Middle America, etc., you know EXACTLY what I mean. You allow what you do, as moderator, for a reason. It suits your agenda.
You must not lecture me about the environment from your basement in Maine, sir. I am out here in the real world, working; as an oil producer I do not flare gas, meet all EPA methane emissions standards and render all my produced water reusable in such a manner that I can reintroduce it into the ecosystem for the benefit of aquatic life, wildlife and livestock.
I have lived with hydrocarbon decline and depletion for a half century, I am not “ignoring” anything. The first reference you heard of slowing the rate of shale oil growth thru increased State regulations, for the sake of pressure maintenance and conservation, was from me over five years ago.
I advocate strongly for slowing and ultimately ceasing all oil exports from America, that is correct. We are the largest consuming country in the world and in spite of all your charts and graphs, shale oil, like 140 years of conventional oil in America, is also finite and our nation will be out of the stuff very soon…or out of the money it takes to extract it. I would like my country, our kids, to be ready for that. If you, on the other hand, want to stand around with your thumb up your ass waiting to run out, being optimistic, driving a Flintstone car, that’s your business.
Because I wish for my country to stop giving its oil away, extracted on credit/debt, does not mean other countries totally dependent on exports will themselves cease exporting to America. They need the money, America will need its oil…and theirs. How in the world did you come up with that argument?
You are very confusing. Which is it; do you want to conserve America’s oil to better facilitate the transition to renewables, or would you rather export it all away to get rid of it…ASAP? All that growth you predict, ALL OF IT, will have to be exported. If that makes sense to you, I can’t help you anymore.
Mike,
I know that you conserve resources, my understanding from reading your blog, is that many others do not.
The discussion was about what to do when the nation faces an oil shock.
Not exporting oil probably doesn’t solve that problem.
I agree we should regulate oil properly as the RRC has done in the past. We could even stop oil exports, matters not to me, I think that’s less of a problem and generally think free trade is a better approach.
As to the charts that you seem to dislike much of that is what I have learned from you and others like George Kaplan, Fernando Leanme, and others who prefer not to be named.
The point of those charts is to show what might occur with a specific set of assumptions.
Well profiles are based on data from shaleprofile. TRR based on USGS estimates.
For the Permian basin I use about $13/b for OPEX, $10 million per well for CAPEX, royalty and taxes at 28.5%, ans transport cost at $5/b. Annual discount rate is 10% and annual interest rate is 7%.
In my standard scenario Brent oil prices gradually rise to $90/bo in 2017$ and wellhead natural gas is sold at $1.50/MCF, the natural gas sales include any NGL sales and this revenue is assumed to offset OPEX.
Using the assumed prices and costs a DCF analysis is done over the life of the well and only those wells with a NPV for future dicounted net revenue that is greater than the capex of 10 million are assumed to be completed. This is the basis of my economically recoverable resource estimates.
The point is precisely to show that tight oil output is likely to peak in roughly 2023 to 2027.
For the mean USGS TRR estimate of 74 Gb for the Permian basin and the medium oil price scenario (peak price og $90/bo in 2017$ from 2027 to 2045) and a medium completion scenario with completions peaking at 725 new wells per month by 2027, peak Permian output of 7 Mbo/d is reached in 2028 with a URR of 60 Gb. A lower oil price scenario with peak price of $60/bo results in far fewer completions with rapid decline after the peak and about 29 Gb for URR.
I doubt oil prices will be that low long term. Though it is obvious that future oil prices cannot be predicted on that point we might agree.
Sorry to have offended you.
I try to minimize the moderation. Also I cannot be looking at the blog full time.
Mike,
We could certainly choose not to export oil, that comes down to laws that are passed by Congress and signed by the President.
Generally I agree with the conservative viewpoint that government interference in the economy should be kept to a minimum unless there is a clear benefit to government regulation (in the case of air and water pollution for example).
I can easily create scenarios where there is very little growth in output. Such scenarios seem less likely to me, a lot of infrastructure is being built to export oil, so hoping that will not occur seems unrealistic from my perspective.
The problem you never address is what to do when we reach peak oil. You suggest I am too optimistic, not sure exactly what you mean, but let’s assume this means my scenarios are too optimistic, generally they point to a peak in World C+C output of 2025, let’s be more pessimistic and say it will be 2022 or even 2018. How does not exporting oil solve this problem? Currently we can import as much as we need and generally I believe mineral owners should be able to sell their minerals to whoever they choose. Kind of a bedrock principle of a free society.
I certainly agree tight oil is a drop in the bucket and US tight oil is likely to be no more than a cumulative output of 86 Gb, the US has crude input to refineries of 6.2 Gb per year so 86 Gb is roughly 14 years of US consumption (at current rates of input to refineries of around 17 Mb/d).
Scenario below has relatively constant completion rate from July 2019 to June 2026, URR is 86 Gb, total horizontal wells completed is 361,000 from June 2006 to Dec 2049. Peak is 8300 kb/d+/-50 kb/d from 2022 to 2026.
click on chart for larger view.
I get a kick out of my lecture to you on the environment, it was a short lecture that assumed the petroleum industry does no damage to the environment, I missed the recent discussion on Kochs, whales, evil Republicans, guns, God, ice, and other matters perhaps you can point me to where I can find that in this thread, besides your comment and this one.
My agenda is to promote a discussion of future problems and how we might address those problems. The scenarios attempt to show that under a realistic set of assumptions peak oil is likely to occur in the near future, many do not believe this. A second big problem is mostly discussed elsewhere, but I try to refrain from addressing that here.
I realize in hindsight that any mention of the environment might constitute a “lecture”. 🙂
Mike, DC,
This is off topic but relevant for me:
Rystad seems to be quoted increasingly in various professional and media channels. Their product seems to me to be fairly uniformly unrealistic and over-optimistic. What do you two think?
Thanks.
I agree their estimates are too optimistic. To get something similar to their Permian basin “base case scenario”, one needs to assume that the TRR is similar to the USGS F5 case, that is there should be a 95% probability that the TRR will be less than the F5 estimate.
Using that for the base case is absurd, this is what happens when economists do the estimates rather than petroleum engineers. 🙂
Adam,
Please post these kinds of comments in the non Petroleum thread (this week it would be under the Electric Power Monthly thread). Responses to these types of posts should be something like, I will respond in the other thread.
Most of the oil industry professionals are not interested in what to do after peak oil occurs, or perhaps don’t agree that it will occur, though if that is the case they rarely state their case on this blog.
That is the reason we have a Petroleum and Non-Petroleum thread.
Though I can certainly see the point of view that what we do after we reach peak oil seems related to petroleum, oil people want to focus on oil production and perhaps natural gas production and thing that are directly related to that, everything else is non-petroleum.
Good clarification.
Actually, I looked back over the comments and realized I was wrong: this thread started not with Adam but with Watcher talking about oil shocks: http://peakoilbarrel.com/open-thread-petroleum-sept-20-2019/#comment-688417
There seems to have been a lot of discussion here about the KSA oil infrastructure attack, and it’s effects. Maybe oil folks are more interested in short term oil shocks than in the larger, longer term ones…
Abject apologies Master! I was responding (helpfully, and in context, I thought) to Watcher’s comment re what happens when ‘…someone did not get an order filled’ and a region misses out on its daily dollop of an essential global commodity which we sadly pay less for than we pay for bottled fresh water from the same shop. I underestimated how far in random directions the community could run with the realities of September 2000. Will try to do better..
Adam ash,
For what its worth i thought your link was very interesting and could have started an interesting discussion, now it was used as a stepping stone to get traction and start preaching the usual stuff and apparently this is ok.
I guess it will be more of this stuff in future and less of great posters like Mike, and i dont blame him.
I used to come to this site for some years before i made my first own post and i did the “ctrl+f”mike”” as it was quite obvious even from the nose bleed section who the guy with real knowledge was and who the internet knowledge guys where.
It wasn’t random, it was looked at as an opportunity to push an agenda, keeping to your own side probably gets boring when you have that religious urge to preach. ??
To those who produce oil,
A discussion of what might be done after oil peaks is of no interest, is that correct?
Just curious, do you guys also not want to talk about when a peak might occur?
Do you think there will be a peak?
If yes, when?
Thanks.
Dennis.
I’d like more facts backing up how best to transition.
Which I know it is easy for me to say, when maybe I don’t even understand the facts, or ignore facts that are posted.
You post a lot of scenarios. Which is fine, but they are educated guesses.
Maybe it’s just too hard to see into the future.
I am just observing. I’m limited by where I am, what I know (and what I don’t, which I admit is a lot!).
I realize jobs and industries are constantly changing. My profession has changed radically since I went to college and began working.
I also realize jobs and industries completely disappear.
I just think maybe we all need to keep more of an open mind.
For example, to keep this post somewhat concerned with oil.
I suspect we are decades away from developing non -FF methods regarding some forms of transport and some products? So, if we ban fracking, what happens with those?
Who should pay a carbon tax? The producers, the refiners, the consumers, all of the above?
Obama seemed to have an, “all of the above” energy plan. Was that in error?
Greencar Congress is a good leading edge technology site. I don’t think an all of the above approach was wrong back in 2009. Not anymore. There are clearly feasable alternative now.
shallow sand,
Determining the best way to transition always involves guess work as it occurs in the future and there are no future facts, until we get there. All facts are historical, so we look at what has happened and make a guess about the future based on past historical experience.
I don’t think fracking should be banned and just like the Trump wall that Mexico would pay for, this is a promise that it highly unlikely to be kept.
On the carbon tax, the first purchaser of the mined product should pay the tax which will then be passed on to the final consumer, or what ever method it administratively most simple. No I think Obama’s all of the above strategy made sense, but it would be best to couple with a carbon tax in my view.
The transition will take many decades, probably 5 decades to reduce fossil fuel energy use to under 10% of total energy use. Pretty difficult to forecast one month ahead, more difficult to figure out 50 years ahead. Think back to when you were 10 years old, when I do the same I am pretty sure I could not have envisioned the world as it is today.
Likewise any guess of 20, 40, or 60 years into the future is likely to badly wrong. Not a lot of facts to point to there.
“Obama seemed to have an, “all of the above” energy plan. Was that in error?”
Always remember that the largest growth of oil production and gas production occurred during his time in office.
He was probably the closest to representing the public in general we will get, though that made him look like a fence sitter trying to please both sides.
Yes, the “all of the above” energy plan was a huge error since it dramatically slowed down renewable energy growth.
But Obama was pragmatic, not a visionary or a strong leader. His balancing act placed the Democrats near the center rather than the left. Meanwhile the Republicans were going hard right, meaning a shift to the right in general.
He did try to clean up coal but that has faded.
Adam,
I guess it is difficult to guess what direction a discussion will take.
I agree the discussion is interesting and I prefer a discussion with many different points of view, but there are many who disagree with my perspective.
Haven’t heard a lot of realistic proposals from the oil producers only that any proposals that they hear are unrealistic.
Would love to hear a realistic proposal, stopping the export of oil doesn’t really seem like it would help very much, it might reduce tight oil output and might also cause oil prices to rise, that is a positive result.
It still would leave the World short of oil in the next 5 to 10 years, that does seem like a problem worth discussing.
Suppose some simply hope the free market solves the problem on its own. Seems unlikely to me.
🙂
‘…stopping the export of oil…
I don’t think that will help much, although when viewed from a hundred years hence how the oil and coal burning gets stopped may not matter much.
In the short term tho, if any semblance of social order is to be sustained, the only ‘safe’ way forward to a lower-carbon-emitting future is via demand destruction with the individual energy consumer.
I grumble when Greenpeace pickets another coal mine – its not the miner’s fault, its the fault of those who buy and burn the coal. Its not the oilman’s fault, its the fault of those who by and burn the fuel.
At the individual level governments can do a lot to swing people’s choices, and to support changes to less harmful (however you may define that!) ways of doing things. Support for uptake of good technology and discouragement of bad. Support for job training to transfer skills from bad to good jobs etc.
I understand that in WWII the entire USA car production was swapped onto producing planes etc. An instantaneous policy decision which completely changed the nation’s main industrial systems from one mode to another within a matter of days and weeks.
Imagine if a Trump or a Macron bought all the fossil-fuel business leaders into a room and told them “You have until Thursday to come back to me with a plan to replace 50% of your production (50 million barrels a day equivalent, plus coal) with energy systems which emit no more than 25% that of oil at lower price per kWhe, or I will increase your income and company tax by a factor of ten, and if you haven’t sorted it by Thursday week I will do it again.” and on the same day he tells the nation “The government has agreed with all opposition parties to form a united coalition government to meet this emergency. We will subsidise good business and penalise bad businesses. We will subsidise good jobs and penalise bad jobs. We will subsides training for a low-carbon life, we will penalise training for bad. We will do this by using carrot and stick rebates and taxes, with minimal net cost to the taxpayer. It will be an exciting ride to a new way of doing things, and we will ensure that nobody gets left behind. But woe betide he who seeks to stand in our way!”
With the right signals and a clear national goal and commitment, the free market can be pointed in the right direction for the greater good.
(Hope this response is in the correct thread!)
You never know—–
https://uploads.disquscdn.com/images/969ce97a241dfe4346576dd32acf45bb54cfa6d5bb6e297b829b67ece0ef77e8.jpg?w=800&h=536
There is no law of the universe that says scarcity leads to higher prices.
There are many examples of this not happening. The obvious first one is the price of oil in the US from 1941 to 1945. Oil was rationed. That’s what you do when something is scarce. The price did not increase.
Price gouging laws are on the books in many states. Try to double the price of emergency items as a hurricane approaches, you will be prosecuted and lose proceeds, so the prices don’t gouge.
Money is created from thin air by central banks. It can’t possibly adhere to any laws of nature like gravity or electromagnetics. It’s a substance whose value is found only in the minds of counterparties. Stop thinking there need be any hard and fast behavior it will have.
It’s scientific method. When you have a hypothesis saying scarcity leads to higher prices, and experiments shows even just one time it did not happen, the hypothesis fails. Find another hypothesis.
Watcher, scarcity leads to higher prices in an open market. Obviously, if there are rationing or price controls, scarcity will make little difference. And I know of no one who claims it is a physical law of nature. It is just common sense. If you want something that is in short supply, you will have to bid the price up.
It’s scientific method. When you have a hypothesis saying scarcity leads to higher prices, and experiments shows even just one time it did not happen, the hypothesis fails.
No one on earth would make such a stupid claim, especially when rationing or price controls are a possibility. You are inventing a straw man just so you can slay him. Good gravy man, what’s your point? What are you trying to prove?
The SEC says price determines the quantity of oil reserves on a balance sheet, which is a rather big determinant of the value of an oil company.
That price is determined either whimsically or by random events, but more powerfully by decree (or even annexation). The SEC changed its Reserves Declaration rules to say price that moment, if the price is rising and high, vs the average price over many months or even quarters if the price is low and falling. So even they contort themselves around this arbitrary number called price and don’t use some more direct supply or demand parameter to determine Reserves. Why not wonder about that?
As for hypotheses that encounter negative experimental results being proven invalid, that’s somewhat not a concept of my invention.
Retreating to the sanctuary of free or open markets is like saying you were the first to climb Mt Everest, along such and such a route on such and such a day of a given season while wearing particular boots. You can’t start to restrict circumstance to protect a hypothesis that has obviously failed.
The SEC says price determines the quantity of oil reserves on a balance sheet, which is a rather big determinant of the value of an oil company.
Really now? The SEC is determining the value of an oil company? I had no idea that was part of their job. I always thought that the value of any company, with publically traded stock, was determined by the price of their stock times the number of shares held by the stockholders.
Well hell, dumbass me.
Watcher
The law of supply and demand only applies under certain conditions. Much like Newton’s laws only applying in certain frames of reference.
In any experiment certain parameters are carefully controlled.
Pretty basic science.
Supply and demand, and a dynamic system of floating prices that reflect real economic costs, are an element of a well managed economy. Sadly, there are a lot of badly managed economies out there. Venezuela, Russia and KSA come to mind.
Oil exports seem to be harmful to their host countries, in the long run – it tends to cause corruption, static and rigid economies, and terminal Dutch Disease (kind’ve like the US’s Old South under slavery). Norway seems to be an exception, with their sovereign wealth fund.
Thats grasping at straws Watcher.
When there is scarcity, the item becomes harder to get. Period.
Currrent tidbits. 9/21/19
https://www.moonofalabama.org/
Video showing dammages in Saudi plant
https://www.wsj.com/video/an-inside-look-at-saudi-aramcos-damaged-oil-facilities/7E1E689F-8C11-42F1-A6B3-A5E7D3CBDFD7.html
Getting that fully repaired in 9 days seems a bit optimistic.. isn’t construction time on these facilities years and that looks like extensive damage.. 2 weeks repair.. i guess its just to pick up standard parts at local hardware store and bolt it in where the old one was..
1 tower please..
holes facing west….
“holes facing west…”
Sneaky Iran! Must have shot their missiles and drones the long way and gone clean around the earth.
That’s all the proof Pompeo apparently needs.
It surprises me to see people indicate that the direction of impact has a relation to the origin of flight of drones (or cruise missiles).
These flying machines can change direction, in fact it is easy to program a complex flight plan with a drone. You can program in a very complex GPS or map based flight plan in less than a minute.
Why are people overlooking this simple aspect? Seems that analytic/logic based thought is depleting resource.
So Iran has done this to make the majority of people think it was NOT Iran.
The Houthis likely did it, i.e. launch site from their territory, with assistance from Hezbollah and Iran. The missiles approached the target from the west north west because that’s where the radar vulnerability was. Drones and CM’s can fly squiggly line and circles on a map. This attack flew a ‘button-hook to the left’ like flight pattern, i.e. launched from the south, and then came in on target from the west north west.
https://twitter.com/FieldMarshalPSO/status/1174276585672888320
Patriots have a 120* detection and engagement envelope. Buqayq facilities air defense systems had 2 Patriots (which weren’t always “on”, particularly on weekends). So that covers 240* only. The Skyguard and the Shahine SAMs augmenting the Patriots are insufficient against Drones/CM’s i.e. detection is not always early enough to engage.
Why?
Because what you are proposing introduces vast operational complexities and risks.
Not that it can’t be done, just that it would be very unlikely to re-program 100% of your missiles and drones to all circle about and come in from the opposing direction “just to confuse everyone”
Meanwhile you risk being detected, losing the element of surprise, and of other various other targeting errors and risks.
If that were the case, then why not program them to come in from every possible direction? Or just quarter around? Why make all of them go 180 degrees? Because you enjoy high risk challenges?
The simplest and safest way to target using missiles is the straight shot (after maybe a few hooks and jags to avoid known radar coverage, human detection, etc). This gives you the best operational chances at success. Otherwise you have to fly very far out of your way to circle back for a reasonable targeting approach.
Chris- drone navigation programming is far advanced from what you seem to know. I’ve watched some amateurs quickly program and execute complex flight paths in less than a minute.
Here are two entry level services/products available to any customer. This is the tip of the iceberg in this sector-
https://www.dronedeploy.com/solutions/drone-services/
https://www.pix4d.com/product/pix4dcapture
Hickory,
why are you posting videos of quad copters?
We saw “evidence” (assuming those weren’t pieces from earlier attacks) of fixed wing drones and cruise missiles.
What, pray tell, does a remotely piloted quad copter (via RF) have in common with a low cross section, short winged cruise missile operating from a combination of inertial tracking and GPS?
Not much, I’d wager
Check out the total surface area available for steering…just a couple of stubby little horizontal stabilizers that double as elevators.
Flying at speed, those are gonna a take a good long while to turn that thing 180 degrees.
“Check out the total surface area available for steering…just a couple of stubby little horizontal stabilizers that double as elevators.
Flying at speed, those are gonna a take a good long while to turn that thing 180 degrees.”
Chris, I can tell you are not a pilot. It’s the angle of banking that determines the rate of turn for a given speed. Planes don’t steer around a turn like a car.
Weird. And all this time I thought mass, speed and airfoil surface area had something to do with “rate of turn” for an object in flight.
Thanks for setting us all straight with your superior knowledge of flight.
Now we all know that it is only “banking angle” that matters.
Chris, I believe you know that hardware was not what I was sharing. Strange for you to divert.
I was giving you a hint of the guidance software available for un-manned vehicles, whether they be something you can hold in your hand, like a hummingbird drone, or something as big as a cruise missile.
The guidance software is available to anyone to purchase. It is considered entry level at this point.
You can launch from a boat heading due east, and tell it to impact a building at 17.5 ft above ground level, at a downward angle of 37 degrees, with a 329 degree approach angle.
You pick your own machine. No guidance necessary after launch.
Chris Martenson,
What is the source of the picture? The missile looks like the Quds 1, a Houthi modification of the Iranian Ya Ali (sp.?).
Saudis claimed that both Khurais and Abqaiq plants started at least partially. But a clever guy LLY tweeted that since press was allowed in without any safety gear and H2S monitor yesterday, he says it is impossible that the plants started even partially. He works with rotating machines in KSA and his comment is such a commonsense item. The safety standards adopted by big giants such as SABIC and Aramco are equal to and in many cases better than US standards. I do not think the plant will start by end of September and that is an optimistic scenario. Crude outage should be at least 97 MM barrels. Also remember this is a double whammy because products are not produced either. The world inventory draw of crude and product will draw at least 200 MM barrels by September.
Lack of Gas in Gas Stations of Saudi Arabia
http://www.english.iswnews.com/7313/lack-of-gas-in-gas-stations-of-saudi-arabia/
Yes, likely that KSA understate how long repairs will take. Rystad provide three scenarios of lost oil production during maintenance up to end of 2019, approx. 80mb (low), 130 mb (base) and 200mb (high).
https://www.rystadenergy.com/newsevents/news/press-releases/rystad-energy-update-on-saudi-arabia/
I haven’t seen any estimate of lost NG output and if this will affect their domestic power production. Presumably they will have to resort to using more oil (hence export less) or import NG – do they have the infrastructure required to do so?
Munitions can be maneuvered. But the whole matter is somewhat suggestive.
There is no reason an autonomously guided vehicle can’t fly to a target and then circle around to hit from a different direction. In the world of JDAM, this is called compassionate targeting, where a target is near a hospital and to avoid debris splash hitting the hospital the bomb maneuvers to hit from the hospital’s direction. This is pretty standard Boeing stuff and not new at all for anyone.
But . . . such programming would require testing on a simulator and they aren’t cheap. If simulation facilities have been built that’s pretty ominous for future targeting.
At some point an easier answer will have to be explicitly excluded, namely that guidance transitioned to remote piloting in terminal phase and some guys on a nearby rooftop watched downlink from the drone’s camera and maneuvered to hit wherever they wanted. Should be an easy exclusion. Either there are camera parts in the debris or not.
OTOH I guess if it was me I would add some camera parts and maybe even an antenna or two on the vehicle just to deceive analysis.
winter is coming……
https://www.wsj.com/articles/aramcos-repairs-could-take-months-longer-than-company-anticipates-contractors-say-11569180194
I doubt premium rates , money will do much difference. At least now contractors have started to look at the job abd what need to be done. Perhaps within 1 week they have a plan and the time it will take to build up again the parts that was hit. I think planning of demolish of old item might take 2 weeks and 2 weeks more to renove them from site. Thoose 4 weeks could ve used to design installment, order new item, drawings it might need additional 2 week. Than items need to be built at spec This might take 3-6 months even they work day and night. When the new tower, seperators will be at site the installation job could start. When finish, cable trays, walk ways, instruments need to be mounted. This is a huge job and the houties have told new attack are on its way…
It would be a pretty good idea right about now to stop thinking in terms of Saudi Arabia as the only possible target. Anywhere there is an oil source or intermediate collection locale can be targeted.
By anyone.
HSC.
Houston Ship Channel.
Oh, btw, even remote piloting is going to be challenged to hit exactly the same place on those four spherical tanks. Assuming those photos are legit.
One way you can get those 4 holes is taping a small radio transmitter to that spot and have the vehicle home on that.
Or tape a bomb there and just fly drones in hitting something nearby.
It wasn’t remote piloting. Whatever on earth do you keep going on about remote piloting for? Go read up on drone warfare and see if you can figure out another way suicide drones know how to MORE reliably get to targets. Pilots suck dude.
https://en.m.wikipedia.org/wiki/Laser_designator
If there was a laser designator crew on the target perhaps they fired a few ATGM to muddy the waters. Quds Force would pull this off half asleep. Keep it simple.
Here’s an interview with Lawrence Wilkerson, former Chief of Staff to Colin Powell. Interesting tidbit mentioned on his gaming out assassination of MBS and a rapid collapse of the House of Saud.
https://youtu.be/lVRjP8g8ejo
It goes well with a Sarah Chayes and Alex De Waal piece from a few years ago:
Start Preparing for the Collapse of the Saudi Kingdom
https://www.defenseone.com/ideas/2016/02/de-waal-and-chayes-saudi-arabia/125953/
So the Saudis were talking as if they had repairs availabile off the shelf and this turns out to not be the case. How surprising.
Believing the Clown Prince is not wise.
Carter Doctrine
1980 – 2019
R.I.P.
I see two opposing forces pulling the price of oil in two different directions.
If if takes 8 months to bring Saudi production back online storage won’t cover a time period that long. Who’s to say other oil infrastructure in other places besides Saudi Arabia won’t also get attacked in a similar manner. Saying they hate each other in that part of the world in putting it mildly.
Then there is China and a trade war. China may run a huge surplus with the US but with the rest of the world China has a huge trade deficit. The only thing keeping them treading above water is that trade surplus with the US. Without it their current account goes deeply negative. Rising oil prices will only make things worse in regards to their current account. Makes it less likely that they can afford to agree to anything. They run a fiscal deficit thats 10% of GDP. So twin deficits. Think Argentina but much larger.
China might agree to something during trade talks but under no circumstances in their view can the trade surplus with the US narrow. Which is a problem for the current administration. Trade war could easily get way worse than it is currently. Which would point towards lower oil price.
What’s crazy is if China gave Trump what he wanted. China would have to devalue their currency 30-50% against the dollar. To just stay afloat. Which would put a lot of upward pressure on the dollar. If they didn’t devalue they’d just implode and you’d see demand for oil and all commodities fall. Think deflationary Tsunami that originates in China and washes up on every shore but particularly in places like Germany who’s already on verge of recession.
I highly doubt an agreement can be reach so tariffs will like be increased at each and every failure to come to an agreement.
“with the rest of the world China has a huge trade deficit.”
Hmm, no. China has a trade surplus with the EU of ~180 billion euros/year.
https://www.statista.com/statistics/257155/eu-trade-with-china/
Overall China has a trade surplus of ~350 billion USD/year. OECD countries are China’s main clients.
Europe isn’t the rest of the world. China imports a huge amount of raw materials and energy products to create stuff to send to US and EU. and also to continue building cities where only a few people live. Iron ore, oil, coal, natural gas, and food are a few items on that list.
If the trade surplus with the US goes away they are screwed. China desperately needs US dollars contrary to what a lot of people believe. Only way they continue getting the dollars they need is through trade. Without those dollars they can’t run a currency peg. Their currency has a lot less value without that peg.
That currency peg keeps a whole of Chinese people employed.
China isn’t in desperate need of Euro’s btw.
Speaking of currency pegs. Saudi Arabia is also has a peg to the US dollar. If it takes 8 months to get that oil flowing again that peg will come under stress as they will use those dollar reserves they have.
It is always the same with China, they really need to trade, even if they like to pretend that they are a semi-autarkic Heavenly Abode.
The old Silk Road wasn’t really to get silk to Europe, but horses to China. China exchanged silk and lacquerware for horses with nomads, who later traded silk further, as they really did not enjoy silk so much (silk is not good for riding etc).
Dean Fantazzini says Texas took a huge hit in July.
Hi Ron,
I asked Fantazzini on Twitter if the July decrease was from Permian, Eagle Ford or other. What do you think, Ron?
Fantazzini twitter reply
If we consider last 12 months, 24 months , and 36 months of vintage data and compare with last month corrected and EIA for Texas oil and condensate we get the chart below.
The 12 month estimate is closest to the EIA estimate and historically this estimate has been best for most of Dr. Fantazzini’s estimates.
According to Fantazzini, Texas C&C production is on a plateau.
Tony,
Perhaps he thinks the past 24 months of vintage data gives the best estimate, that shows a plateau. Also using the most recent 12 months and throwing out the estimate for the most recent two months estimates(which tend to be less stable) also shows a plateau from November 2018 to May 2019. I tend to agree with GuyM that the EIA monthly estimates are pretty darn good and the corrected 12 month vintage data estimate matches the EIA monthly estimate fairly closely, so that seems like the best way to do the estimate in my opinion.
Could be related to shut-ins offshore but certainly no sign of a monthly increase in shale that would offset such.
The Texas RRC data does not include the Gulf of Mexico. It does include all shale oil produced in Texas.
As GuyM keeps hammering on the EIA monthly estimates are best.
The RRC data for individual wells is great but there is a lot of missing data. I think an estimate using the most recent 12 months of vintage data is better than last month vintage estimate or using all vintage data.
The graph if correct will significant increase the drop of 32k bpd from June. This seems more like -150k only in July from Texas and deflict related to EIA estimate seems to soon exseed 500 k bpd. This might show the oil majours are adjusting their investment budgets because off low oil price gives low or no profit , return to owners/ dividend…
If we assume the same development will continue the rest of the year and oil price remain in 50-60 WTI usd range US oil production will end at 11.53 Mbpd , EIA Exspect 12.45 Mbpd and that is a difference of 920 k bpd. If the global oil consuption increase by 1,2 % or about 100k monthly that means 500k in 5 months. Perhaps than we could hope gradualy higher oil prices from 2019.
Ron,
Is that chart crude only? The oil+ condensate sheet is the one to use, that would be more comparable to EIA C+C output.
It is “DATA ULTIMO 48 CORRECTED (ALL DATA VINTAGE)”.
The “ULTIMO 48” is the RRC.
So you tell me what it is. I just assumed it was all data. But I could be wrong. I have been wrong before. Once in 1968, I thought I had made a mistake, but I was wrong, I had not made a mistake at all. 😉
Ron look at the sheet names, there is oil_v, condensate_v, and oil+cond which adds the oil and condensate estimates together.
so the “all data vintage” estimate takes the average of data sets from Jan 2014 to July 2019 and does this separately for the oil and condensate data. The ultimo 48 is indeed the RRC estimate for oil in this case, but you should add the condensate data as well.
Ron,
If you compare your chart with Dean’s Oil+Condensate chart (look at value for July and compare) it is clear they are different. The difference is condensate output, in Dean’s chart it is included, in your chart it is not.
1991 — High Seas: A computer error sinks a Norwegian offshore oil platform; damages are nearly $1 billion.
The truth of the troll…?
https://www.accredited-times.com/2019/09/16/why-the-attack-on-saudi-oil-facilities-wasnt-a-false-flag/
Pretty funny – like the Onion.
Whatever they are, they are well informed people. Unlike many others, who wrote about refineries, they know it were oil processing plants.
So they really must be accredited.
It seems that there will be no contract for the transit of Russian gas through Ukraine:
1) Moscow. September 18th. INTERFAX.RU – The Bulgarian gas transportation operator Bulgartransgaz, after almost six months of administrative proceedings and judicial red tape, was able to sign a contract for the construction of a gas pipeline, which the country called the Balkan Stream, with the Arkad consortium.
Consortium Arkad as part of Italian Arkad ABB S.p.A. and the Saudi Arkad Engineering & Construction Company was chosen the winner of the contract in April, but the signing of the contract became possible only after on Monday the Supreme Administrative Court of Bulgaria terminated the appeal of this public procurement.
The Bulgartransgaz release says that a 474-kilometer gas pipeline with a diameter of 1,200 mm will run from the Turkish border to Serbia. In the first 250 days, 308 km will be built from the Polski Senovets compressor station to the Serbian border. For the remainder of the contract execution period (its total period is 615 days), the remaining 166 km of the route will be built. The total contract value is 1.1 billion euros (excluding VAT).
2) Hungary is waiting for Vladimir Putin in Budapest in October 2019 to discuss gas issues
Nur Sultan. The Hungarian side is awaiting the visit of Russian President Vladimir Putin to Budapest in October 2019. This was announced by the Chairman of the Hungarian National Assembly, Laszlo Köver.
“In October, we are waiting for Mr. President of the Russian Federation to pay a visit to Budapest,” Koever said, and noted that the leaders of Russia and Hungary – President Vladimir Putin and Prime Minister Viktor Orban – “have developed good, trusting personal relationships.”
In July, it was reported that the Russian leader could visit Budapest on October 30, 2019, TASS writes. During a visit to Budapest, negotiations are expected between Putin and Orban. The parties intend to discuss issues of gas supplies, cooperation in the field of nuclear energy.
The EU has pressured Denmark to obstruct completion of Nord stream 2. The routing would go through Denmark territorial waters. Nord stream 2 will finish this year if the direct route is permitted. Otherwise sometime next year.
If obstacles can be thrown up in front of a pipeline to Germany, you can rest assured that the EU will obstruct any attempt by Hungary to circumvent the Ukraine. They will fail but you’re not going to see gas bypassing Ukraine anytime soon.
“The EU has pressured Denmark to obstruct completion of Nord stream 2.”
Not really. EU is divided on NS2. Germany is in favor of it, Poland objects. Denmark’s position has probably more to do with its close ties to US than EU. US is strongly against.
In the end, whether or not NS2 is build will depend on what Berlin decides. This has been clear from the start. Other countries will only be able to delay it, like Denmark.
In fact, in the medium term, gas production opportunities in Russia are limited:
90% of gas is produced in a small territory in Western Siberia and it will not be possible to increase production there for the next 5-8 years (new fields are in the sea, it is long and expensive to develop). Russia is negotiating the construction of a gas pipeline from Western Siberia to China. This will lead to production shortages .
China was to buy gas from Turkmenistan…. Incidentally, Russia again buys gas from Turkmenistan, too.
Yes, of course. China is buying gas from Turkmenistan and Uzbekistan. Nevertheless, Russia is negotiating the construction of a pipe to China along the Northern Route from Western Siberia.
https://www.znak.com/2019-09-10/eksperty_rasskazali_o_plyusah_novogo_marshruta_postavok_gaza_s_yamala_v_kitay
This is dangerous for Russia. If Russia builds this pipe, it will have no excuse NOT to sell gas to China.
But Turkmenistan gas is big – not enough for China?
Anyway, the fact that Russia buys Turkmen gas too may be an early harbinger of at least local gas shortages in Russia itself.
Really? I guess something like the Shtokman field in the Barents sea can only be developed with a major Capex outlay and a strong LNG market (and free trade I might add). Or a really long pipeline journey, which is more inflexible. The Turkmenistan land locked resources must be able to be released with a reasonable pipeline transfer fee? If not multiple pipelines would be built if the gas is needed in China for example. The question with land locked resources extends to Iran for the part that is not South Pars. (Which together with Qatars North Dome should be a major “port” for a future LNG market I suppose). It is not possible to not make reasonable transfer fee deals with regards to pipelines, if the major gas resources are really needed and the market really functions; i.e. prices are high enough over an extended period of time.
It is a dangerous thing that markets don’t function properly I might add. The uneducated meddling in the energy markets must stop. A bit of meddling it has always been, but the market must function or it makes long term investments impossible. And everything breaks down as a result.
Opritov Alexander,
There is also the developing LNG resource in the Arctic, which ships on the Northern Sea Route. There is expansion going on there.
Yes, of course it is. Apparently LNG projects will be
continue to expand.This is due to the uncertainty of pipeline transportation contracts, the revision of concluded contracts, a large number of disputes. With LNG, this factor is minimal, in addition, export directions can be changed depending on the situation …
” gas production opportunities in Russia are limited”
Agree but north stream 2 is not constructed to satisfy increased demand. There is overcapacity in existing pipelines. Yes there is a problem with old and leaking pipes but this could be fixed. North stream 2 is constructed to circumvent Ukraine and make them redundant. Just look at how north stream 1 has changed utilization of the pipes that pass through Ukraine.
Norway’s NG production is more or less peaking right now so imports from Russia will probably be more important in the next decades or so than in the past.
The pipeline will pass through Bulgaria to Serbia, then Hungary and Slovakia.
As for Bulgaria, it seems everything has already been decided, contracts have been signed, pipes have been imported, and in early 2020 it will be put into operation.
There is a good chance that Nord Stream2 will not be launched on time.
And most likely transit through Ukraine will stop or only continue in 2020. Well, of course, of course, and a new contract, only the volumes will be 15-30% of the old.
The writing on the wall was when Turkey allowed a chance to supply gas to Turkey, giving it access to 80 million potential consumers in 2016.
Once realizing they will be left out for the sake of shenanigans in Brussels, Balkan countries decided to join in and ensure they would continue having a secure natural gas supply. You got to eat every day.
So South Stream still happened, although a tiny bit delayed and in a slightly different form. At this point Greece is out of the picture from the original plan, and Italy, Austria have to decide if they have plans to live another day and get line extended from Hungary.
Quite interesting research:
https://www.mdpi.com/1996-1073/12/19/3641/htm
( in pdf: https://www.mdpi.com/1996-1073/12/19/3641/pdf )
“According to our records, more than 90% of the wells completed after 2017 are located in the core areas only. Operators have learned to drill only the best parts of the Williston Basin and avoid the less mature noncore areas. However, after calculating the infill potentials of all areas, we predict that by 2021 there will be no well locations left for future drilling in the core areas. Assuming a constant current drilling rate of 120 wells per month, the total field oil rate in the Bakken will reach record level of about 1.6 million bbl/d in 2021. Without further drilling, production will decline by one-half within a year. Later, operators will be forced to drill in the less productive, high watercut noncore areas along the edges of the Williston Basin. Our findings suggest that policy-makers should not assume that the shale oil boom in the Bakken will last for several decades longer. We recommend that operators not focus only on increasing the initial oil rate. Maintenance of reservoir pressure above the bubble point by preventing over-drilling is key to increasing ultimate oil recovery.”
Great paper thank you.
Note that they present an optimistic scenario with URR of 13 Gb, my guess is that there will be fewer wells completed in the non-core areas when reasonable economic assumptions are applied to the analysis. Probably 8 to 9 Gb is a more reasonable economically recoverable estimate.
Also it seems unlikely that only the core areas will see wells completed and then industry players will switch all production to the noncore areas, I imagine as there are fewer new locations available to drill in the core areas that there will be a gradual shift to the non-core areas, in addition there is no doubt gray areas between the core and non-core areas where average new well EUR is at intermediate values between the core and non-core average well so there may be less of a step change and a more gradual transition in new well EUR over time.
In my opinion this is already happening.
Looking at Ennos sight the quality of wells hasn’t increased this year by the usual amount. So better technic, more experience together wasn’t able to increase the amount / well. It’s only the starting amount, but for all the USA.
So something is happening out there.
When you think the above scenario can’t have an exact year.
Company A has core area until year 2025
Company B until 2018 …. uups
Company C has never had any – already bottom up.
The turnaround is when there are more B than A – and this is slow. Not a pumping until 2021 and a sharp decline. That’s completely unrealistic.
Eulenspiegel,
Yes for Permian basin the new well EUR has been fairly constant from 2016 to 2018, but average lateral length has been increasing so EUR normalized for lateral length (EUR per foot of lateral) has been decreasing since 2016 in the Permian Basin.
For the Bakken it looks like EUR has been increasing, but this is due to high grading where only the sweet spots are seeing completions and they are quickly running out of room in the sweet spots for new wells.
There could be a dramatic fall in new well EUR as the sweet spots get fully drilled, but producers may decide to increase the completion rate as they move to the non-core areas so output may drop fairly gradually.
When you look at North Dakota:
https://shaleprofile.com/2019/09/17/north-dakota-update-through-july-2019/
– Well productivity growth is already flat the last 2 years.
– Producers are very different – the best has the double per well production than the average lot. So the best from the cake is already with very few companies
I picked out one from the median companies by choice, Newfield
They drilled 20 holes this year – and they are already worse then the last 2 years. Not bad wells, but getting worse.
Drilling more always works to hold up production – if you have the money.
Oil prices are collapsing again – here in finanction newspapers the reason is surging shale output and if this fails the SPRs will be released by Trump to keep prices low.
Interesting
When I look at shale profile I see strong growth in well productivity from 2015 to 2018. Too early to judge 2019 wells.
Eulenspiegel,
Correction, yes relatively flat EUR growth from 2017 to 2018 only a 10% increase.
well profiles Bakken 2015-2018 from shaleprofile.com
month 15 cumulative
2015 118 kb
2016 145 kb
2017 181 kb
2018 199 kb
increase from 2015 to 2018 is 69%, an average annual rate of increase of 19% per year from 2015 to 2018 for 15 month cumulative output. In 2018 the increase was slower, only a 10% increase from 2017 to 2018, so it is correct that the rate of increase has slowed relative to 2016 (23%) and 2017 (25%). Note that if we look at 32 month cumulative to compare 2015 and 2016 the increase is 19%, and if we look at 20 month cumulative to compare 2016 an 2017 the increase is 23%. Ideally we would compare at 36 or even 60 months, but we will have to wait for those comparisons.
I recently estimated the EUR for the average 2015 Bakken well and if we assume the well is shut in at 5 b/d the EUR is 326 kb at 259 months, terminal decline of 12% is assumed and that begins at 92 months. Hyperbolic fit after month 5 to month 92 for barrels per month given with Arps hyperbolic with q=21278, b=0.9906, and d=0.24388. after month 92 use monthly exponential decline of 0.9894.
see flow rate equation from link below
https://petrowiki.org/Production_forecasting_decline_curve_analysis#Hyperbolic_Decline
Older estimate for 2016 well, EUR=362 kb at 254 months and 5 b/d, terminal decline of 12% annually begins at month 106.
q=20318, b=0.85,d=0.1764 for months 5 to 105.
2017 well EUR 358 kb at 253 months and 5 bo/d output terminal decline at 10% annual rate starting at 171 months, hyperbolic from month 5 to start of exponential decline q=39251, b=0.6416, d=0.23417
2018 well I use shaleprofile data up to month 17 and then the 2017 hyperbolic well profile from month 18 to month 171 with 10% annual decline rate from month 172 to month 223 when output falls to 5 bo/d, EUR is 376 kbo for the average 2018 well.
Thank you for looking more exact. They are still growing, only some companies are already shrinking.
So a few good years are left at the top of productivity. Time to earn the money now.
Probably useful to see this latest in carefully calculated this or that for the Bakken, but we’ve been seeing this stuff for quite a few yrs now. Some say more will flow than industry estimates. Some say less will flow than industry estimates.
Odds are pretty good they will all be wrong. Every single one.
Finally
They’re still well short of the votes they need, but the ground is suddenly shifting.
https://www.huffpost.com/entry/nancy-pelosi-impeachment-donald-trump_n_5d8a3497e4b0c2a85cb1ce0c
Pelosi has been very cautious.
The Senate is filled with sociopaths, and Trump can do anything without consequences.
Let’s see how this unfolds. Late Stage Capitalism was never going to be good.
I felt back in June and July my girl wanted to wait until after the summer vacation to land this thing right into the hight of the election. I guess I should have put this on the atheist communist Tesla side.
Pepsi, Pepsi Lite
Huntington beach
Yes that’s correct, unless you just want to troll.
Not relevant to petroleum.
When you say “late stage”, do you mean 2, 20, 200 or 2000 years ?
now—
hint: 7.7 billion homo sapiens in a collapsing ecosystem, and Co2 levels that no human has encounter before.
Mass extinction currently happening, first one in 65 million years.
I lived in Huntington Beach– in 1967.
Sounds like you’re thinking “late-stage industrial civilization”.
https://en.wikipedia.org/wiki/Late_capitalism
for example:
The Late Capitalism of K-Pop
https://youtu.be/J8LxORztUWY
PS- a nice little history on SK
PSS- were we fighting for freedom in the Korean War? If so, whose?
Project “Soft Power” @myagkaya_sila
Oceans emit 330 billion tons of CO2 / year
Organic rotting – 220 billion tons
Forest fires – up to 300 billion tons
Man – 8 billion tons, or 1% of the total CO2 emissions on Earth.
Human activity affects the planet no more than the activity of a cockroach on an apartment.
It’s all about ecoactivism.
—-
This is a repost. I did not check.
I just checked. Each one of your figures is off by at least an order of magnitude, sometimes two, and sometimes the truth is literally the opposite. Get out of here.
You know what cycles are?
Ocean is absorbing CO2 now, that’s why it is getting more acid (check great barrier reef).
The other big things are pure cycles – plants grow, plants rot, it’s like a fountain in a pond circling around water.
I don’t know why conservatives are complete deniers – instead of giving conservative answers like technic innovation, fusion / atomic energy, big things.
Follow the money to explain the denialism.
this was already challenged, fossil fuel burning and land use are contributing more like 29 billion tons – and the problem is that this could not be fully absorbed in the normal Co2 circle of Nature (stated only 40% …)
So that leaves a surplus which stays in the atmosphere and it is calculated, that we had an increase of 100ppm in the last 120 years which in normal earth history required 5000-20000 years.
Not my sience, I’m also a bit sceptical in this area, but sounds reasonable – but I’m still convinced that warm phases are better than ice ages and don’t think “the ende is near” only because of this.
– I think overpopulation of the poor (also resulting in Co2) will be the much bigger problem and will not end well for mankind – before the climate is the real challenge.
No one is really doing something about countries in Africa doubling population every 20 years… this growing hordes of poor, uneducated, hungry, agressive and ruthless “zombies” maybe will be the real challenge of the nearer future.
Opritov, do not post such bullshit on this blog unless you have a legitimate source for your data. You just made that shit up. You are a fucking liar.
1.I apologize for the off-topic post
I answered Hightrekker: hint: 7.7 billion homo sapiens in a collapsing ecosystem, and Co2 levels that no human has encounter before.
I do not like targeted propaganda, I’m talking about the harm of CO2.
he certainly is.
But the climate is constantly changing, who knows how small factors will affect it. After 20 years, Germany, Poland, China and Southeast Asia will reduce coal burning by at least 2 times
CO2 will also be reduced.
2. The numbers in my post are certainly not correct. It does not matter. It is difficult to scientifically find the correct data. It is rather a provocation like a joke. I did not insist on them.
3. The problem is CO2-bloated, I don’t understand such a serious attitude to the post. It’s just my position, attitude to the topic, propaganda, excessive attention to a small problem.
4. In any case, thanks for the good comments.
I will no longer write on the site, extraneous topics. Once again, I’m sorry.
All of this discussion should go in other thread.
If this continues to occur, I will need to start banning people.
An off topic comment should be ignored, or at most “discuss in other thread” or off topic as a response.
Dennis,
May i suggest, dont need to ban people simply delete the thread start, including all replies mine and yours included.
Keep doing that untill message sinks in (waste of time posting shit in wrong post on purpose). And then go for the ban on those who still dont get it.
Baggen,
Probably a good idea.
I’m guessing mother earth could support 10 billion for another 100 years. It might not be pretty for most, but who says it is now.
Later
Huntington beach,
Do not post in Petroleum thread unless it is relevant to petroleum.
It’s hard to know what’s “relevant to petroleum” – realistically demand responses, political responses, etc are relevant. There’s a lot of discussion of KSA and it’s politics, for instance. There’s no easy line.
Perhaps a helpful phrasing might be “directly relevant to petroleum production”.
Nick,
One could argue that everything is connected, but comments about impeachment or politics in general should not be on petroleum side.
Yeah.
Seemed like it might help to develop a little bit of guidelines. In particular, it seems like oily folk would prefer to focus on the production & supply side, rather than the consumption and demand side.
“Saudi Arabia’s oil exports are down by about as much as an average 1.5 million barrels a day since its state run oil company was attacked Sept. 14, researchers who track shipping said.
That could speed up a tightening of global oil supplies, even though the U.S., Brazil and other countries are expected to continue to add oil to the global market.
Saudi Aramco’s trading arm has been buying crude from neighboring countries, including Kuwait and United Arab Emirates, among others, to fulfill its commitments, according to Reuters. S&P Global Platts reports that the kingdom is buying diesel fuel from India and the UAE, and is also looking for jet fuel and naphtha.”
https://www.msn.com/en-au/money/markets/saudis-are-exporting-less-crude-to-the-world-market-shipping-data-shows/ar-AAHNd9l
This must be a huge hit for KSA’s accounts. The stuff they are buying from other states to on-sell will probably cost them more than they get for it (since it is not the product the customer ordered), so its at best a zero game there. Their income is halved, and they have repairs to do on top of that, and the extremely high risk of more holes in infrastructure anytime it suits their enemies.
The Saudis started with about 50 million bbl in tanks – that’s just 10 days making up 5 mbbl/day (assuming the stuff in the tanks was exportable grade). They are into day 11 now, so their tanks are dry.
The bean counters will be trying to figure out where to spend what cash remains – repairs? new yacht? buy Iranian oil via Iraq at a premium to sell to existing customers at a loss until repairs are completed in a year’s time (5 mbbl per day at a loss of say $5 per bbl for 365 days is an unimaginably big lump of cash to find)? social programmes to improve women’s rights? bomb Yemen some more – perhaps send in the army in tanks as a distraction, they won’t come back? drill new wells in marginal fields? pump more water into existing fields to hasten depletion to make up the shortfall – but its refinery capacity they lack not wellhead flow? repairs? buy more Patriot anti-missile systems (which didn’t work last time), pay more accountants for work on Aramco float? buy tickets and pack bag for unannounced long holiday in a remote location? repairs? pay for armed guards around main desalination plants which provide public water supply? import avgas to supply Dubai International Airport, or close it? repairs?
So many options, so little money, and so little time before the coffers run dry and those citizens of KSA with a grievance (including close relatives of the dear prince who stayed at the Hilton for a while) come to the castle with torches lit and pitchforks sharpened to have a wee chat.
The article says they are prolonging their storage tanks with the on-selling. At great expense no doubt but it buys them some time.
Now if the damage is as some contractors (and pictures…) report and not what the Saudis were claiming, the savings aren’t material long term. It will take a lot of time to demo processing train towers and build new ones on site if they weren’t prepared for it.
Big damage like this in a country like SA – it calls for a makeshift solution, while building some more solid in the meantime.
Some welding here and there, some spare parts, some using of old obsolete machines. And running again. Somehow. Please don’t smoke in a diameter of a mile, taking photos not allowed.
The USA has repaired a bombed aircraft carrier in WW2 with this method – time to pull it of when the nation is in danger (by halving the finances).
So many options, so little money, and so little time before the coffers run dry and those citizens of KSA with a grievance (including close relatives of the dear prince who stayed at the Hilton for a while) come to the castle with torches lit and pitchforks sharpened to have a wee chat.
Money enough: https://www.middleeastmonitor.com/20190529-saudi-foreign-reserves-rise-1-1-in-april/
“Foreign reserve assets of the Saudi Arabian Monetary Agency (SAMA) rose by 1.1 per cent on a monthly basis by the end of April to 1,894.1 billion riyals ($505.1 billion).“
Blasts from the past:
https://www.forbes.com/sites/ellenrwald/2016/10/06/alaskas-10-billion-barrel-oil-discovery-what-you-need-to-know/#67a909847ef7
It’s 3 yrs later. I’ll save you the bother. Caelus has a website. It’s one page. The cover page. Nothing else.
https://money.cnn.com/2017/03/10/investing/alaska-oil-discovery-repsol-spain/index.html
Two years later
Armstrong Energy also has a website. It has more than one page. About 6 sentences are on each page, saying nothing.
Great catches/memory.
Thanks!
Interesting, does not sound like a healthy sector:
“Activity in the oil and gas sector declined in third quarter 2019, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—fell to -7.4 in the third quarter from -0.6 in the second quarter. Oilfield services firms drove the decline, with their business activity index slumping to -21.8 from 6.6.
“Among oilfield services firms, the equipment utilization index plummeted 27 points to -24.0 in the third quarter, its lowest reading since 2016 and suggestive of a large contraction in equipment utilization. ”
Negative survey readings indicate contraction; those above zero suggest expansion.”
https://www.dallasfed.org/research/surveys/des/2019/1903.aspx
Attached is a chart comparing the lower 48 monthly and weekly production, updated to this morning’s EIA report . Production has been flat at 12 kb/d for the last 4 weeks. The monthly data for June and July appear to be averaging the weekly data. The June production of 11.75 kb/d is 0.25 kb/d below September production. Allowing for the hurricane interruption in July, the question is will the September monthly data get to 12.0 kb/d. The latest STEO projection for September is 12.04 kb/d
https://www.rigzone.com/news/despite_bankruptcies_us_shale_is_not_doomed-25-sep-2019-159894-article/
According to Rystad most US shale Company will be able to pay their depth installment, interest and at same time grow . Other studys shows they are not able to earn money..
Reported SEC-compliant earnings say they are not able to earn money.
‘Saudi oil attacks part of new strategy’
https://youtu.be/SdHHJZW9MjE
EIA IEO 2019 just released
https://www.eia.gov/outlooks/ieo/pdf/ieo2019.pdf
Page 123 shows total liquids increasing steadily to about 130 mbd in 2050
Here is the EIA IEO 2019 all liquids projection at 127 mbd in 2050. To reach 127 mbd, the EIA assumes that there are huge production increases from OPEC, Brazil, Russia and Canada.
The funny thing is that consumption is projected at 121.5 Mb/d in 2050. The world would be oversupplied by 5 Mb/d under their assumptions.
That’s their dream scenario – oil abundant and dirt cheap. All this fracking and infill drilling is done for a tip.
As today – shale will grow, no matter the oil price. Even at 20$ it will continue growing. At least that’s the narrative.
They are expecting huge production increases from OPEC, Brazil, Russia, and Canada, over and above decreases in oil production from the majority of oil-producing countries who are post-peak…. for the next thirty years???
“During the projection period, crude and lease condensate production
grows by 13 million b/d among OPEC members and 11 million b/d among non-OPEC producers”
“• OPEC crude oil and lease condensate production is largely concentrated in the Middle East, which
increases from 27 million b/d in 2018 to 39 million b/d in 2050, a 44% increase. Production from large,
low-cost oil resources in the Middle East remains a critical part of global crude oil supply during the
projection period. ”
Dont really know what to say about that one..
Would be interesting to narrow it down and see a suggestion from them on witch opec members are going to stand for this increase of 13.. or actually more then 13 to offset decline in others. I assume they do think at least some opec member will decline until 2050.
Perhaps the idea is KSA to the rescue and put some of those magical reserves into production, more then double current (normal) daily output should do it.
It appears that the EIA believes those inflated OPEC reserves claims. I think they are in for a big disappointment.
Ron,
Even too optimistic for me. 🙂
I agree the estimate is not well done, seems an exercise in wishful thinking.
Oil and Gas Support Services Firms said that U.S. oil production is about to fall significantly. The rig count has declined dramatically from one year ago (down 170 rigs), and our customers are not completing wells in order to save cash flow. This all equals a big shift down.
This comment is from the recently released Dallas Fed Energy Survey.
https://www.dallasfed.org/research/surveys/des/2019/1903.aspx#tab-comments
Overall, the sentiment from energy and services companies is down shown by the chart.
Interresting read.
And if this downturn happens, there will be no fast turning back to growing.
Destroyed service companies, indipendent producers will have to be rebuild until the 2018 growth can be archived again.
Other thing: How is this with service companies? When they are money limited, what’s about maintaince of fracking pumps, replacing them with newer more efficent ones (but you need the money first), or new rigs? Money strapped companies normally ride the old stuff until everythings breaks.
Okay, the KSA is going broke theme has re-lifted itself so here are the numbers.
In dollars, KSA spent (govt spending) about $78Billion per quarter this year, year to date. So call it 78 X 3 or $235B in spending. Up to the attack, revenues were about $70B per quarter. So they ran about $24B in deficit up to the attack.
Total debt about $180B.
A legit estimate is a revenue crash in Q4 down to oh, call it $25B. This will generate a 2019 deficit of $77B if they pump not a drop repaired til 1 Jan.
Their SWF has assets of over $500B. With rates near negative many places they damn sure won’t tap the SWF for all of that $77B. They’ll borrow some hahah and if they borrow at a negative rate, they can make a profit on their deficit. I don’t care if that makes no sense or if it offends your sense of what should be logical. Too damn bad. Rates are near zero or negative and they need to borrow.
(If they could get Germany’s -0.5% they could make $385 million by borrowing it all)
They won’t, they’ll borrow about half and tap the SWF for half. It’s only til flow resumes, assuming flow isn’t attacked again as soon as they get it going, and that’s probably Q12020.
So they need $77B. If they tapped the SWF for half they could get about 15 yrs (with the SWF growing the remainder untapped each year.
Note $25B for Q4 would presume flow impacts economic activity in KSA. They do make some tax revenue from non oil sources. $25B is a reasonable number if their flow doesn’t resume out to 1 Jan, but flow is claimed to be likely by November. So 25B is pretty extreme for Q4 total tax revenue.
And so, their plight is likely more benign than needing 77B unconventionally Q4, and $77B is entirely manageable. Further, one can easily imagine suck-ups who would form a queue to lend KSA money at negative rates. hahahahahaha a goodly chunk of them are startups in Silicon Valley on mezzanine from the KSA SWF.
Oh and one more thing. Their SAMA is their central bank. They can QE whatever they need and since they subsidize domestic oil consumption and the riyal is pegged to the USD at 3.75 R/USD (for 3 decades it’s been this, people, and y’all think there are free markets), no one is going to feel it at all. I’ll tell you, the media won’t, and I’m nobody and will stay that way.
BTW this QE option and peg . . . sorta reminds one of China, doesn’t it.
Full IEA OMR Sep released to public.
https://www.iea.org/media/omrreports/fullissues/2019-09-12.pdf
IEA estimates world all liquids reached 100.8 mbd in Aug 2019, an increase from 100.2 mbd in July due mainly to a 0.5 mbd increase in US liquids.
This morning Altacorp issued this:
Our channel checks suggest that E&Ps are sharply cutting back on completion work in Q4/19 and are targeting well cost reductions to the tune of 10%-15% for 2020. Channel checks also suggest that service price reductions in the range of low-to-mid single digits are likely for Q4/19, with E&Ps realizing the remaining benefits through efficiency gains. US land rig activity fell nearly 7% sequentially in Q3/19, and current activity is about 6% below the Q3/19-to-date average. Completion activity has been sharply reduced by E&Ps in September, owing perhaps to corporate goals of staying within capital budgets.
The above follows, the ongoing collapse in the rig count (https://oilprice.com/Energy/Energy-General/US-Oil-Rig-Count-Takes-Sharp-Turn-Downward.html)
Thus, between the sharp decline in completions and the steady decline in the rig count, I am not sure how the EIA and the IEA are still expecting 1.3M YoY growth in US liquids supply next year. At best, I see 300K to 500K growth. It seems shale can’t handle $57 crude (which is the average WTI price since the start of the year). If oil prices go any lower, US shale growth will go negative next year, already 42% of US shale executives say current prices are too low (https://oilprice.com/Energy/Energy-General/Secret-Survey-US-Shale-In-A-State-Of-Deep-Anxiety.html)
Most important September report is yet to come on Monday 30/09:
https://www.eia.gov/petroleum/production/
I bet on production decline.
July will be down because of the hurricane. The Monthly Energy Review is projecting July production to be 11,984 kb/d.
Doesn’t seem there is much to fight for in Iran. For all practical reasons, it seems to be kind of Norway in terms of oil exports:
https://www.rcem.eu/views-on-energy-news/iran-opening-up-to-global-oil-renewables/
There you go again.
Some known oil analytic told a newspaper that he doubt much off Saudi oil production have been restored and they now have increased production from some other fields that have spare capacity and the rest is comming from storage oil with low quality. According to sources foreign spesialists are sent abd will make 2-3 week to get an overview what need to be done and how long time it will take. There is a significant risk stores will go to low if another attack will happen. I believe the US strategical reserves will be used but I guess this also have a limit. In the mean time all are used to a market that have to much oil and price follows tweets, rumors…
There is talk, with some considerable justification, that SPRs don’t make sense if you have big reserves and big production. The storage is underground, under your own ground, wherever the oil field is.
US SPR has a max flow rate of 4.4 mbpd. The US can produce more than that per day, so why have an SPR? That question only makes sense if consumption is not far above that. Which it is.
SPRs are “Strategic” because they were intended to prevent national foreign policy from being dictated by foreign suppliers. They are not for “emergencies”. They are for an embargo. Amusing that some countries decided to keep their SPR under other country territory, contracting with that country to agree to supply some oil in an emergency. Ha.
But we see now that there will be mission creep. Broad “emergencies” will justify tapping. The drone attack method can be applied anywhere. Emergencies can be generated anywhere.
It is useful to realize this could be a terror weapon. You could turn populations into starvation refugees with this weapon, which could be called one of mass destruction. Hitting the Japanese import terminals will shut off food transport as soon as their SPR drains. Massive aid efforts require getting oil in for food transport. Wherever it comes in, that gets hit again.
Of course, there has to be a purpose to this. A desire to influence policy. Not sure what Japanese policy enrages who enough to justify such a thing. But . . . this is a new WMD.
‘ Not sure what Japanese policy enrages who enough to justify such a thing. But . . . this is a new WMD’
North Korea.
New US tight oil estimates are out see “tight oil estimates by play” at link below
https://www.eia.gov/petroleum/data.php#crude
Since Dec 2018 US tight oil has increased by 422 kb/d through August 2019, at the start of the year tight oil output went down, but in the past 6 months tight oil output has increased by 563 kb/d based on the EIA estimate. If the rate of increase of the past 6 months continues for the final 4 months of the year, the increase from Dec 2018 to Dec 2019 would be 797 kb/d.
Most of the increase in output since Dec 2018 has come from the Permian Basin, 399 kb/d or 95% of the total US tight oil increase over the past 8 months.
Attached is the split view of the 2018 and the 2019 LTO production. I have left the original calculated lines untouched so that you can see how the August 2019 production has been revised from the original July data. For instance July production has been revised down by 104 kb/d. While the 2019 line has been left untouched on the chart, the updated slope using the August data has decreased to 82 kb/d/mth from the shown rate of 97 kb/d/mth. The actual production increase from July to August is 90 kb/d, which is slightly higher than the average slope.
The question remains, is the lower 2019 slope of 82 kb/d/mth for 2019 compared to the 153 kb/d/mth in 2018 the result of lower drilling activity or drilling moving to lower quality areas or both.
Ovi,
I get a slope of 89.55 kb/d per month using Feb 2019 to August 2019 data from the most recent data set rather than the 82 kb/d per month you suggest.
When I do the estimates more exactly they coincide pretty closely (using both 7 month and 13 month trendlines and extrapolating to Dec 2019) with an average of 8002 kb/d in Dec 2019 with a low of 7937 kb/d and a high of 8067 kb/d.
Based on that I would revise my guess for US tight oil output in Dec 2019 to 8000+/-70 kb/d.
I still like the low end of this range at 7930 kb/d.
Dennis
When the analysis was first done, I tossed back and forth on whether to start with January or February. In the end I decided to go with January. Unfortunately when the time came to do the post, I forgot to update the text in the chart. So yes if you start with February, the slope is higher than the 82 kb/d/mth that was posted.
As more months are added, the effects of including/excluding January will diminish. Attached is the updated chart which indicates a Dec-19 production of 8.033 Mb/d using the lower slope of 81.7 kb/d/mth.
Ovi,
Ok, it is clear now, I was confused by the x=months from Feb 2019, I had thought that I had previously read that you thought the Jan 2019 point should be left out of the regression, but probably remembered incorrectly.
Thanks for taking the time to clarify, it is nice to have an independent look at this as I often make mistakes that go uncorrected. When you see those please point them out to me and I will do the same if I think I see something amiss in your comments. Looks we are roughly on the same page at about 8 Mb/d of US tight oil output for Dec 2019.
Either we will both be right or both be wrong. 🙂
Dennis
In this production environment of many unknowns that we are trying to analyze, I will be thankful if we come within +/-100 kb/d of 8 Mb/d. I think the increasing decline rates and decreasing number of rigs should push the December numbers below 8 Mb/d.
Thanks for taking the time to check my numbers and forcing me to go back to check them.
Ovi,
Thanks for checking on my work as well, I agree if we are anywhere from 7900 to 8100 kb/d for US tight oil output in Dec 2019 I would say we have done well. I also agree 7900 kb/d is more likely than 8000 kb/d, and 8100 kb/d I would put at 1 in 3 odds or lower, for the reasons stated in your comment, which I agree with 100%.
Note that in the past 12 months (Aug 2018 to Aug 2019) US tight oil output has increased by 978 kb/d.
However, if we fit a trendline to the past 13 months of data and extend the line out to Dec 2019, we get about a 600 kb/d increase in output for Dec 2018 to Dec 2019. Alternatively, if we fit a trendline to the Feb 2019 to Aug 2019 data and extend the trendline to Dec 2019, we get about an 800 kb/d increase in US tight oil output from Dec 2018 to Dec 2019, so perhaps the average of these two estimates with a 200 kb/d window is a decent guess, that is 8000 kb/d +/- 100 kb/d for Dec 2019 US tight oil output. The August 2019 level of US tight oil output is 7700 kb/d according to the latest EIA tight oil estimate.
My intuition suggests 7900 kb/d for US tight oil in in Dec 2019 (which is a 50 kb/d average monthly increase over the next 4 months,) is likely to be the better guess, but my guesses are often incorrect.
Ovi,
Pretty sure it is because legacy decline has increased as completion rate increased strongly in 2018, the increase in the completion rate was the main reason for the steep increase in output in 2018, the completion rate has stopped accelerating and has been relatively constant, possibly even decreasing slightly in 2019, that is the main reason for the slower rate of increase. There may be issues as well with parent child wells etc as productivity per lateral foot has started to decrease in the Permian basin.
The best answer is that both factors are operating, but my guess is the change in completion rate is the dominant story.
Chart below has completion rates and trailing 12 month completion rates. The data up to May 2018 is from shale profile, beyond that the data id a model estimate where the completion rate is chosen to match the model to EIA tight oil estimates by play (not the drilling productivity report).
The model-data match is not perfect, but is fairly good despite the need to estimate completions from June 2018 to August 2019.
For chart above the correlation coefficient from Jan 2010 to August 2019 (monthly data, so 115 months of data) is 0.999693, and R squared (square of correlation coefficient) is 0.999387. I always find it amazing that such a simple model (average well profile convolved with completion rate is the basic model) gives such a good result.
Thanks go to Enno Peters at http://www.shaleprofile.com for making the data available.
The future scenarios simply guess at future completion rates guided by USGS TRR estimates (F95, mean, and F5) and reasonable economic assumptions gleaned from comments by oil pros like shallow sand and others.
Note that none of these oil pros has reviewed my work, I rely on them to comment when I state my assumptions, when they remain silent I assume they have no objection to the assumptions stated.
Any mistakes are mine alone, all credit goes to the oil pros who have shared their years of wisdom gained through real world experience in the oil industry. Thanks also to Paul Pukite who first pointed out that this model is basically a convolution of two functions. (See http://theoildrum.com/node/10221)
Thank you all!
“The model-data match is not perfect, but is fairly good”
“For chart above the correlation coefficient from Jan 2010 to August 2019 … is 0.999693”
Damn!
The biggest understatement of the current century.
Thanks Hickory, I thought it was ok, but try to be a bit modest. And none of it would be possible without those who have paved the way for me (Paul Pukite, shallow sand, George Kaplan, lots of people from the Oil Drum, it all started with the work of others that I have tried to build upon.)
My first post on tight oil was about 7 years ago on October 3, 2012.
https://oilpeakclimate.blogspot.com/2012/10/using-dispersive-diffusion-model-for.html
I believe this graph need to be reviced when the EIA monthly data will be issued 30.09.2019….
Freddy,
The monthly estimates do not tell us what the output is in the Permian basin, but if you point out where that data is in the 914, I will use it. So far, besides shaleprofile.com (which has the most accurate data through October 2018), the most recent tight oil estimates with any degree of accuracy are from the “tight oil production estimates by play” spreadsheet which can be found at the page linked below, see third row on the page.
https://www.eia.gov/petroleum/data.php#crude
Well I see that only Texas is listed but if the US data 12 082 in June 19 from 12115 Mbpd in May or decline at 32 000 bpd continues at next release that I believe is possible as the decline in active riggs continues and also information issued show the courve related to improvement in drilling process have stopped or at least it is hard to improve this more to save cost, time. I believe the increase of 0.3% in Texas shale oil shows some weakness if it not is caused by lack of pipeline capacity. If permian have a very strong growth in June, July I believe there will be significant increase in Texas oil production . Perhaps we need to wait 1,2 month more as data is delayed and if I remember correct that pipeline opened in August…
https://www.eia.gov/petroleum/production/
Dennis, if Texas have growth of 0,3% from May 19 to June 19 that is 12×0,3% = 3,6% during 12 months . The growth from 19 June 2018 to 19 June 2019 was 14,3%. If most of the oil in Texas comes from Permian this might indicate a slowdown or pipeline constraint .
Freddy,
Unfortunately the data is difficult to tack as Permian output is both Texas and New Mexico.
But one would look at Eagle Ford and Permian Basin and then look at Texas and New Mexico. I think you will find that although the tight oil output has increased, that the overall output in these two states added together may be flat or even slightly lower from May to June.
This suggests to me that conventional output is lower, or perhaps the tight oil estimates are incorrect, I agree over time the picture may become clearer, always some guessing as the data is sometimes incorrect and gets revised higher or lower. Lots of mud in the water.
Third planned route
Russian gas in China:
The branch capacity from the Sakhalin-Khabarovsk-Vladivostok gas pipeline to China will be 10 billion cubic meters
September 27 / 15:01
Moscow. The planned branch capacity from the Sakhalin-Khabarovsk-Vladivostok gas pipeline to China is planned at 10 billion cubic meters. The Cabinet of Ministers in the document approved the introduction of a gas pipeline into the territorial planning scheme of the Russian Federation in the field of federal pipeline transport.
Gas pipeline branch from Sakhalin-Khabarovsk-Vladivostok MG to the state border of China. The design average annual gas transportation volume is 10 billion cubic meters. Transportation of natural gas to the People’s Republic of China under an export contract, RIA Novosti writes with reference to the order of the Russian government.
The Sakhalin-Khabarovsk-Vladivostok gas transmission system (GTS) is designed to deliver gas produced on the Sakhalin shelf to consumers in the Khabarovsk and Primorsky Territories. The GTS created the conditions for their large-scale gasification and gas supplies to the countries of the Asia-Pacific region. Earlier, in September 2019, Gazprom announced that the start of operation of the expanded gas pipeline through which gas could go to China as part of the Far Eastern Route project was planned for 2020.
Gazprom at the end of December 2017 signed an agreement with CNPC on the basic conditions for the supply of natural gas from the Far East to China. The companies determined the main parameters for future deliveries: the volume, duration of the contract, and the start date of deliveries. The head of the state energy department of the PRC, Nur Bekri, said that deliveries could reach 5-10 billion cubic meters of gas per year. The presentation of the Ministry of Energy of the Russian Federation said that the export capacity of the gas pipeline would be 8 billion cubic meters of gas per year, deliveries could begin in 2020.
New posts are up
http://peakoilbarrel.com/eia-international-energy-outlook-2019-and-oil-shock-model-scenarios/
and
http://peakoilbarrel.com/open-thread-non-petroleum-september-27-2019/