Dept of Energy ditches plans to buy Crude Oil for SPR

[Bob D + 562]

Death to the US Oil Industry

[John Foote + 1,135]

Seriously?

How much of what is spent in active opposition to the budget as passed by congress. Pretty sure the free build-a-wall wall monies were reallocated and any appeals against have it made it through the courts. The entire pay off farmers because of the trade issue with China was done without congressional approval. It was just done. 

Something more going on. 

 

[surrept33 + 609]

I think it was savvy to refill the SPR at market prices, but I don't know how much effect it would have on the US shale industry, either way. Debatedly, the US might not need the SPR as much it used to with a domestic shale industry that is much quickly elastic to price than conventional oil fields, which should soften the blow of price shocks on the high side for the rest of the economy.

[James Regan + 1,776]

I think that's a good signal that they are confident oil prices will continue to drop due to the oversupply , they probably have other things on their minds for now.

Its not looking good for anyone at this point not with the likes of Iran about to start selling crude at serious discounts, with a lift price of $6/Bbl and 10$ discounts off of the benchmarks, same as Nigeria currently selling with an $8 discount. This is turning into a goat roping. CV19 and the price war has dislocated the lesser players who have to do something to make ends meet.

We will very quickly reach a point where we can't physically store any more fluid, the taps will need to be choked back.

I dont think the oil industry has been so disjointed as it is at this moment in time compounded heavily by the pandemic, what's the end game here?

[El Nikko + 2,145]

I understood they dropped it just becasue there was too much time being spent negotiating with the democratic party as they wanted things in return. I'll have to find the article but they said that it could still be done under emergency powers.

[0R0 + 6,251]

3 hours ago, James Regan said:

I think that's a good signal that they are confident oil prices will continue to drop due to the oversupply , they probably have other things on their minds for now.

Its not looking good for anyone at this point not with the likes of Iran about to start selling crude at serious discounts, with a lift price of $6/Bbl and 10$ discounts off of the benchmarks, same as Nigeria currently selling with an $8 discount. This is turning into a goat roping. CV19 and the price war has dislocated the lesser players who have to do something to make ends meet.

We will very quickly reach a point where we can't physically store any more fluid, the taps will need to be choked back.

I dont think the oil industry has been so disjointed as it is at this moment in time compounded heavily by the pandemic, what's the end game here?

Indebted players with high lease costs go belly up and their operations sold on after leases are renegotiated into reorganization or to cash rich companies for stocks and long term bonds. 

Note that a few areas can still sell forward a year ahead and slowly frack away till the well is ready to go in 9-10 months. But for everyone else the oil curve does not pay off till a year or more forward. 

[El Nikko + 2,145]

[Douglas Buckland + 6,308]

Why do people keep saying that the shale oil industry is flexible? I thought that there were big problems with closing in these wells; relative permeability changes when reopening the well, proppant embedment when you shut them in, etc...

Why are these wells more ‘flexible’ than conventional wells?

[0R0 + 6,251]

21 minutes ago, Douglas Buckland said:

Why do people keep saying that the shale oil industry is flexible? I thought that there were big problems with closing in these wells; relative permeability changes when reopening the well, proppant embedment when you shut them in, etc...

Why are these wells more ‘flexible’ than conventional wells?

It isn't the wells that are flexible but the industry, as the wells peak and rapidly fall off, so it is short term production and you can drill first and frac later or frac a DUC. (that doesn't sound quite decent) 

[Douglas Buckland + 6,308]

4 hours ago, 0R0 said:

It isn't the wells that are flexible but the industry, as the wells peak and rapidly fall off, so it is short term production and you can drill first and frac later or frac a DUC. (that doesn't sound quite decent) 

Perhaps, but with rigs and frac equipment stacking out and rig and frac crews getting laid off.... it ain’t gonna be going to  be quick to start back up and ‘drill then frac’ or ‘frac a DUC’ (😂) in the future.

[James Regan + 1,776]

3 hours ago, Douglas Buckland said:

Perhaps, but with rigs and frac equipment stacking out and rig and frac crews getting laid off.... it ain’t gonna be going to  be quick to start back up and ‘drill then frac’ or ‘frac a DUC’ (😂) in the future.

I read an article today which implied that KSAs wells are far more of a tap (faucet) on off kind of play, in comparison to Russia, due to weather and temperatures at the well site and the Shale Industry in general who suffer from high start up costs and damage to reservoirs after being shut in.

So what is it, the LTO Industry is back tracking on how the shale patch although regions may differ in general they too were supposed to be on off wells.

It's amazing what will come out of this dip maybe a lot of real truths and whats should be and what shouldn't, Shale oil will take a huge hit and if bailed out will only add fuel on the geopolitical market share war.

Edited March 27, 2020 by James Regan

[El Nikko + 2,145]

9 hours ago, Douglas Buckland said:

Why do people keep saying that the shale oil industry is flexible? I thought that there were big problems with closing in these wells; relative permeability changes when reopening the well, proppant embedment when you shut them in, etc...

Why are these wells more ‘flexible’ than conventional wells?

From David Ramsden-Wood in LinkedIn

 

"A suggestion on how to balance supply and not lose cash flow for the year. If you shut in a well that came on in 2019 while the coronavirus demand shock is here.... when you bring it back on, all my work over 10 years demonstrates that it will take 1.5x the time it was down to get back to the exact same cumulative volume!!

Short term, balancing supply will increase prices. Long term, demand destruction will go away and demand will increase. In both cases prices go up. AND in the current year, a 60 day new well shut in will be at exactly the same cumulative production with flush volumes after its been back on for 90 days!! That means you actually save volumes and increase cash flow. "

It's not my area of expertise at all, I specialise in borehole image interpreation and resitistivy modeling and use that for geosteering.

I honestly think when this is over US shale will be producing much more sensibly which is obviously what everyone wants, I think they have learned their lesson.

[Gerry Maddoux + 3,627]

15 minutes ago, El Nikko said:

I honestly think when this is over US shale will be producing much more sensibly which is obviously what everyone wants, I think they have learned their lesson.

I hope so, but I still remember the bumper stickers during the big bust in the nineties: "Lord, please give us just one more boom. We promise not to piss it away this time."

[El Nikko + 2,145]

12 minutes ago, Gerry Maddoux said:

I hope so, but I still remember the bumper stickers during the big bust in the nineties: "Lord, please give us just one more boom. We promise not to piss it away this time."

I do remember that, shame I didn't listen

I  call it 'the curse of the new kitchen'. We had our first new kitchen fitted at the 2014 and had to stop work when the Saudi's started opening the taps up. A year and a half later all our clients had gone bust. I had a new kitchen fitted in this house at the end of 2018 and look where we are a year and a half later from that.

I feel like I have to take some responsibility for those oil crises and I assure all of you I will never ever have another new kitchen while I am still alive.

[Douglas Buckland + 6,308]

We can only hope that some sanity is injected into the shale oil industry by the double hit of the corona virus and the ‘oil price war’.

Contrary to what many on this forum may think, I am not a ‘shale oil hater’. I don’t want anyone to lose their jobs whether they work for a third party service company, a drilling contractor or an operator.

I think that shale oil will be part of the US oil landscape for years to come...if they learn that they do not operate in a vacuum and that their jobs are not the only ones at risk.

I am a big fan of the smaller operators as opposed to the big outfits, I hope many weather this storm, make the necessary adjustments and come out of this in good shape.

 

 

[Gerry Maddoux + 3,627]

One should note that a barrel of North Dakota Light Sweet traded at $9.97 this morning. 

They say with a 20% drop in demand coming on top of a preexisting glut, storage will be maxed out within three-four months. 

We are very quickly headed toward $5 oil, which will shut in wells. As Douglas Buckland (no fan of shale) has pointed out, when the shale fields shut down, those talented people who make it all happen are going to feel betrayed and deeply scarred by the financial and emotional upheaval in their lives. They're mostly not coming back, should markets finally balance out and shale begin to crank up again.

I am a lifelong Republican but I believe the president has harrumphed "energy independence" while not seeing the unraveling of that very accomplishment (though he did have other matters on his mind). At $5 oil, shale will be basically shut down. And I mean, stopped.

In my opinion, we will be horribly susceptible to any market price at that point, or even outright embargoes. Putin must be laughing into his cups right now. But the prince? He has helped create a nightmare for his country. He may be past the point to salvage it. 

[Gerry Maddoux + 3,627]

3 minutes ago, Douglas Buckland said:

I am a big fan of the smaller operators as opposed to the big outfits, I hope many weather this storm, make the necessary adjustments and come out of this in good shape.

I know your tone by now and believe you really mean that. I feel the same way. In the above, which I was writing as you were writing your post, when I referred to you as (no fan of shale), I didn't mean to be disparaging, just using it as an indicator of hands-on experience. Okay?

[Douglas Buckland + 6,308]

24 minutes ago, Gerry Maddoux said:

I hope so, but I still remember the bumper stickers during the big bust in the nineties: "Lord, please give us just one more boom. We promise not to piss it away this time."

All I’m asking for is one more good consulting contract/adventure in some ‘hazardous’ third world location, preferably dirt rigs....and I will quietly slide into retirement.

Just one more...🙏🏻

[Douglas Buckland + 6,308]

1 minute ago, Gerry Maddoux said:

I know your tone by now and believe you really mean that. I feel the same way. In the above, which I was writing as you were writing your post, when I referred to you as (no fan of shale), I didn't mean to be disparaging, just using it as an indicator of hands-on experience. Okay?

No worries! I realize that historically my posts would make people think I was anti-shale, while the reality is that I am very pro-oilfield.

[Gerry Maddoux + 3,627]

22 minutes ago, Douglas Buckland said:

All I’m asking for is one more good consulting contract/adventure in some ‘hazardous’ third world location, preferably dirt rigs....and I will quietly slide into retirement.

Just one more...🙏🏻

I hope you get it!

[El Nikko + 2,145]

25 minutes ago, Douglas Buckland said:

We can only hope that some sanity is injected into the shale oil industry by the double hit of the corona virus and the ‘oil price war’.

Contrary to what many on this forum may think, I am not a ‘shale oil hater’. I don’t want anyone to lose their jobs whether they work for a third party service company, a drilling contractor or an operator.

I think that shale oil will be part of the US oil landscape for years to come...if they learn that they do not operate in a vacuum and that their jobs are not the only ones at risk.

I am a big fan of the smaller operators as opposed to the big outfits, I hope many weather this storm, make the necessary adjustments and come out of this in good shape.

 

 

I think many who are in the shale oil industry would agree and if they don't they should.

I didn't start out in shale, and I actually miss the much more high tech stuff we used to do on the offshore and remote desert locations where we used high end tools. Shale is extremely low-end from the formation evaluation side of things. Occasionally we get a resistivity job but those tools are not really designed for drilling in a formation that is conductive and the geosteering isn't really 'proactive' in the same way an azimuthal (or regular) resistivity tool in sand can show an approaching bed of conductive shale 20ft above and below it.

I'll post a couple of snapshots from what those tools can do in the right formation, it is really cool.

[Shrev94412 + 3]

45 minutes ago, Gerry Maddoux said:

One should note that a barrel of North Dakota Light Sweet traded at $9.97 this morning. 

They say with a 20% drop in demand coming on top of a preexisting glut, storage will be maxed out within three-four months. 

We are very quickly headed toward $5 oil, which will shut in wells. As Douglas Buckland (no fan of shale) has pointed out, when the shale fields shut down, those talented people who make it all happen are going to feel betrayed and deeply scarred by the financial and emotional upheaval in their lives. They're mostly not coming back, should markets finally balance out and shale begin to crank up again.

I am a lifelong Republican but I believe the president has harrumphed "energy independence" while not seeing the unraveling of that very accomplishment (though he did have other matters on his mind). At $5 oil, shale will be basically shut down. And I mean, stopped.

In my opinion, we will be horribly susceptible to any market price at that point, or even outright embargoes. Putin must be laughing into his cups right now. But the prince? He has helped create a nightmare for his country. He may be past the point to salvage it. 

Agreed.....our President is being foolish. Not only is he putting America in a position to become vulnerable/dependent on foreign oil again but, he is going to lose the Texas and other oil dependent states vote over his wavering attitude toward oil. Remember the late 1970’s? I also think he forgets that ALL plastic material products come from oil which is just about everything including ventilators. 

Edited March 27, 2020 by Shrev94412

[Gerry Maddoux + 3,627]

^

I'm fairly sure the shale fields will come back . . . at some point. I'm just not sure disenfranchised workers will come back.

The prince obviously sees life through an entirely different prism. Everybody in this business preened and postured for so long that they began to believe their own bullshit. 

And that includes the prince. For some cockeyed reason, he didn't review the experiment his predecessor ran back in 2014. He actually believes that his country can do fine at $25 oil . . . and they might for a period of time. But I don't think he realized that as storage fills up completely, he may be selling oil for $5. He will come out of this--no matter how it turns out--severely crippled. No one will ever trust him again. 

And Putin? Man, he's going to be in a world of hurt. Russia, like the KSA, lives off its oil and gas income. At $5 oil, he is going to starve his people if he doesn't ramp up gas sales. BTW, natural gas prices may be the only beneficiary in this whole rat-killing that is going on. As the US shale fields come to a halt, NG prices will likely rise. But Putin's contracts with Germany and China are (I think) price-fixed. 

Anyway, this is going to be like watching a slow-motion train wreck: mesmerizing, painful, emotional. And if we get out of this--I'm talking about the world--without a war, we're going to be lucky. There is an awful lot of destabilization out there, especially in smaller OPEC countries where living standards are very low. And when Mother Russia begins to feel the pinch, listen for some saber rattling. But the likely explosion is going to be when Iran hits the kingdom via a surrogate. 

[El Nikko + 2,145]

1 hour ago, Gerry Maddoux said:

^

I'm fairly sure the shale fields will come back . . . at some point. I'm just not sure disenfranchised workers will come back.

The prince obviously sees life through an entirely different prism. Everybody in this business preened and postured for so long that they began to believe their own bullshit. 

And that includes the prince. For some cockeyed reason, he didn't review the experiment his predecessor ran back in 2014. He actually believes that his country can do fine at $25 oil . . . and they might for a period of time. But I don't think he realized that as storage fills up completely, he may be selling oil for $5. He will come out of this--no matter how it turns out--severely crippled. No one will ever trust him again. 

And Putin? Man, he's going to be in a world of hurt. Russia, like the KSA, lives off its oil and gas income. At $5 oil, he is going to starve his people if he doesn't ramp up gas sales. BTW, natural gas prices may be the only beneficiary in this whole rat-killing that is going on. As the US shale fields come to a halt, NG prices will likely rise. But Putin's contracts with Germany and China are (I think) price-fixed. 

Anyway, this is going to be like watching a slow-motion train wreck: mesmerizing, painful, emotional. And if we get out of this--I'm talking about the world--without a war, we're going to be lucky. There is an awful lot of destabilization out there, especially in smaller OPEC countries where living standards are very low. And when Mother Russia begins to feel the pinch, listen for some saber rattling. But the likely explosion is going to be when Iran hits the kingdom via a surrogate. 

The houthis have been firing missiles at oil instilations again in the last few days so yeh absolutely

Imagine what would happen if we all pulled out of the ME lol

[surrept33 + 609]

4 hours ago, Gerry Maddoux said:

^

I'm fairly sure the shale fields will come back . . . at some point. I'm just not sure disenfranchised workers will come back.

 

 

I think it'll be interesting to watch the next commodity upcycle and see how much (the long term trend) in mechanization/automation (either via newly commodified machines or software) will reduce any labor crunch and reduce the incentives for people to jump into or back into the oil field. Of course, for people with scarce relevant expertise there should be a lot of opportunity and commensurate wage intensives. The large cities in Texas are much more well diversified than they used to be and places like Houston should weather the downturn fine. In rural areas I think there is fewer opportunities so more of a captive labor pool, but as the industry focuses on automation to reduce costs during regimes of high labor costs, I think there might be fewer high paying jobs in the oil field in the future, but those jobs might get higher paying.