JM

Where's the storage?

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As the oil producers wait for the additional barrels to come on-line from OPEC and non-OPEC countries in April where do U.S.producers store their crude with demand in the tank (no pun intended).  Operators are scrambling for tanks - used or abused - to place on their sites to store crude.  Pipelines don't want to accept the crude oil through the pipelines in fear Operators are using them to store.  Pipelines are demanding that end-user contracts be shown before accepting any crude.  Refiners are waiting for the oversupply from U.S. Producers and the Operators are discounting below $20 bbl at Cushing.  I think this will be the biggest and most catastrophic hit to the U.S. oil and gas industry.  We have Presidents, including Trump, who don't understand how difficult it is to bring a barrel to the tank and off the lease to the refinery.  This is March.  April, will be the turning point for O&G when the Saudis, et al begin their war on U.S. producers.  Can the U.S. go back to full dependency on the Middle East?  Will this bring the country back into the wars currently being waged?  I've never been such a pessimist, but this time, it's not looking good.

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12 minutes ago, JoMack said:

As the oil producers wait for the additional barrels to come on-line from OPEC and non-OPEC countries in April where do U.S.producers store their crude with demand in the tank (no pun intended).  Operators are scrambling for tanks - used or abused - to place on their sites to store crude.  Pipelines don't want to accept the crude oil through the pipelines in fear Operators are using them to store.  Pipelines are demanding that end-user contracts be shown before accepting any crude.  Refiners are waiting for the oversupply from U.S. Producers and the Operators are discounting below $20 bbl at Cushing.  I think this will be the biggest and most catastrophic hit to the U.S. oil and gas industry.  We have Presidents, including Trump, who don't understand how difficult it is to bring a barrel to the tank and off the lease to the refinery.  This is March.  April, will be the turning point for O&G when the Saudis, et al begin their war on U.S. producers.  Can the U.S. go back to full dependency on the Middle East?  Will this bring the country back into the wars currently being waged?  I've never been such a pessimist, but this time, it's not looking good.

Was announced the Feds aren't purchasing any of the cheap oil yesterday.

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A barrel of Canadian oil is now worth less than a nice latte or a fast food combo, falling to about US$5 on Friday. With no relief in sight from the impacts of COVID-19 and the Saudi-Russian oil war, negative prices could be on the horizon. 

Western Canadian Select (WCS) crude, the main grade produced in Canada’s energy patch, fell to a record low of US$5.03 on Friday, according to Bloomberg data going back to 2008. The steep decline has energy experts considering another unpleasant rarity for oil. 

“There is no reason to think that oil prices couldn’t go negative for a period of time,” Raymond James analyst Jeremy McCrea told Yahoo Finance Canada. “I would have never considered it before. But in the current context, it’s not out of the realm of possibilities now.”

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There is still a lot of storage available across the globe.

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7 minutes ago, ceo_energemsier said:

There is still a lot of storage available across the globe.

That there is!!! 

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48 minutes ago, Old-Ruffneck said:

That there is!!! 

Where is it? How much volume is available? How soon will it fill up if Russia and Saudi pump all out? What would be the cost of transporting oil for storage at these locations?

Any storage available, close to the ‘source’, will fill up first.

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4 minutes ago, Douglas Buckland said:

Where is it? How much volume is available? How soon will it fill up if Russia and Saudi pump all out? What would be the cost of transporting oil for storage at these locations?

Any storage available, close to the ‘source’, will fill up first.

They've pumped over 1.4bb in yates field alone. Reverse the pumps, throw some valves, pull sucker rods on the oldest stripper wells and there ya have some storage. Stripper wells and abandoned wells in south Texas and Louisiana can be with some work made to take oil back in. A lot of old fields still have good infrastructure or at the least repairable pipelines. If oil is 30 a barrel under our break-even sure looks like we could save a lot of money. Just a thought....

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(edited)

18 minutes ago, Old-Ruffneck said:

They've pumped over 1.4bb in yates field alone. Reverse the pumps, throw some valves, pull sucker rods on the oldest stripper wells and there ya have some storage. Stripper wells and abandoned wells in south Texas and Louisiana can be with some work made to take oil back in. A lot of old fields still have good infrastructure or at the least repairable pipelines. If oil is 30 a barrel under our break-even sure looks like we could save a lot of money. Just a thought....

Could be Roughneck, not arguing here, but all this takes money which adds to the cost of that ‘cheap’ oil. Someone would need to run the numbers.

Also, just because you pumped a certain amount of oil OUT of these old wells, does not necessarily mean that you can pump the same volume back in!

Edited by Douglas Buckland
Typo

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3 minutes ago, Douglas Buckland said:

Could be Ron, not arguing here, but all this takes money which adds to the cost of that ‘cheap’ oil. Someone would need to run the numbers.

Also, just because you pumped a certain amount of oil OUT of these old wells, does not necessarily mean that you can pump the same volume back in!

I didn't mention California's wells and they have a port to receive tanker loads because the Green-Governor there would shut it down before it had a chance. I think Texas and Louisiana have a large capacity of older fields and even slow pump back in could be worthwhile for USA. 

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13 minutes ago, Old-Ruffneck said:

I didn't mention California's wells and they have a port to receive tanker loads because the Green-Governor there would shut it down before it had a chance. I think Texas and Louisiana have a large capacity of older fields and even slow pump back in could be worthwhile for USA. 

Re-injection is something that needs to be studied, for sure. But once you deplete a reservoir and remove that pressure support from the rock, the overburden will compact the reservoir rock, to some extent, and alter the rock properties.

No doubt it can be done (this is America we are talking about after all!), but it will need to be done properly. 

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1 hour ago, Douglas Buckland said:

Re-injection is something that needs to be studied, for sure. But once you deplete a reservoir and remove that pressure support from the rock, the overburden will compact the reservoir rock, to some extent, and alter the rock properties.

No doubt it can be done (this is America we are talking about after all!), but it will need to be done properly. 

Dude, aren't you a petroleum engineer? This should be right up your wheelhouse. You should be writing a grant proposal right now!

Yes, the rock might have collapsed some, but pumping in a boatload (maybe literally) of oil will cause that rock to Re expand like blowing up a balloon (well, not exactly). We've got loads of data (I'm thinking University of Oklahoma) on disposal wells. Many of them were old production wells.

I know a disposal well operator in Louisiana who made a small killing grabbing the oil that separated to the top of his well, and it was mostly full of frac job flow back. People laughed at him when he put a pump into it. Took a couple years and a lot of doing nothing before nature did most of it for him. It's a purpose drilled disposal well, isn't even in a producing formation, just has nice highway access. 

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😂 Ward, you are showing your age here! My degree does indicate that I am a Petroleum Engineer...but ‘back in the day’ that degree covered drilling, production and reservoir engineering, and you ‘specialized’ in one.

It wasn’t until later that petroleum engineering became synonymous with reservoir engineering.

I actually ‘specialized’ in production, but back in 1984 the only job I could find was with a drilling contractor off the coast of Brazil and I sort of ended up morphing into a drilling hand.

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^

Got to be a lot of difference between simple skimming oil from frack wastewater before you dispose of it and storing oil in an old reservoir.

I made a good chunk of change with frack water. It's laughable now, but there for a while we were merely disposing of the water down a disposal well that we owned. After a month or so of that, the idea that there might be oil in that wastewater hit us right in the head. After that, we made much more money from the skim oil than from furnishing a disposal well. 

Man, storing $20 oil in an old well until conditions improve sounds good but in reality the costs and storage losses, along with almost certainly needed gas lifting are going to cancel out the profits, I think. Further, this current problem is not going to be a long-term situation: someone will go broke with these kind of prices. When that person blinks, the rules change about the time you have your first few million sunk in a storage plan. 

 

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All true Gerry, but I love to see this old school oilfield brainstorming and thinking out of the box!

Speaking of old school, James Regan and I were reminiscing over the phone last night. How many of you drilling hands remember the Geolograph on the drill floor? Or trying to run casing so fast that you essentially ‘colored in’ the chart? Those were the days! 
 

From what I understand now, in this digital, automated day and age, especially offshore, it just isn’t the same game nor near as much fun as it used to be.

James was telling me that guys now carry electronic tally books!

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7 hours ago, Douglas Buckland said:

From what I understand now, in this digital, automated day and age, especially offshore, it just isn’t the same game nor near as much fun as it used to be.

James was telling me that guys now carry electronic tally books!

Damn kids, spoiled rotten!!1

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I spoke to my independent and he wants to sign an agreement that allows him to shut the wells in as long as oil is under $35.  I think it makes sense not to give away our resources.  If KSA wants to give theirs away, fine.  We are doing our part to cut supply.  This is 5 wells but XTO will continue to produce the 12 wells it operates for us on the other section.  The good thing about working with the indepent is that he is small and so I can talk to him directy, not so with XTO.  They are a big organization and will call you back in 3 weeks if you put in a request for info.

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(edited)

17 hours ago, JoMack said:

As the oil producers wait for the additional barrels to come on-line from OPEC and non-OPEC countries in April where do U.S.producers store their crude with demand in the tank (no pun intended).  Operators are scrambling for tanks - used or abused - to place on their sites to store crude.  Pipelines don't want to accept the crude oil through the pipelines in fear Operators are using them to store.  Pipelines are demanding that end-user contracts be shown before accepting any crude.  Refiners are waiting for the oversupply from U.S. Producers and the Operators are discounting below $20 bbl at Cushing.  I think this will be the biggest and most catastrophic hit to the U.S. oil and gas industry.  We have Presidents, including Trump, who don't understand how difficult it is to bring a barrel to the tank and off the lease to the refinery.  This is March.  April, will be the turning point for O&G when the Saudis, et al begin their war on U.S. producers.  Can the U.S. go back to full dependency on the Middle East?  Will this bring the country back into the wars currently being waged?  I've never been such a pessimist, but this time, it's not looking good.

If Trump allows KSA oil to be dumped in the US, he will lose my support.  I have pretty much been annoyed by his past tweeting about high oil prices but now that they are so low they killing the economy, he isn't interested at all in low prices.  

OTOH, KSA has a very limited amount of oil it can dump on the world.  For the same reason the pipelines are backing up, KSA will not be able to deliver it's oil to the US because there would be no storage for it.  Currently US oil is cheaper than KSA oil so there is no benefit in taking their oil, especially when refinery runs are reduced substantially.  

Edited by wrs
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1 hour ago, wrs said:

OTOH, KSA has a very limited amount of oil it can dump on the world.

In an earlier statement, I suggested that "wait-n-see" just how much he is willing to dump. How many empty VLCC's are empty and how many can he get rounded up? Right now there is no extra ramping up of Saudi oil. If MSB didn't learn from last times dumping to kill Shale then he is more ignorant than I give him credit for. Russia on the other hand usually no bluffing. They will ramp up 250kbpd soon and that is just putting back online what they felt was fair in the OPEC+ deal. So maybe none of the Extra Saudi oil will even come about? MBS is hard to figure out and I still feel 57-58$ for WTI is fair and make everyone happy 'cept the greedy Corporate Mongers.

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I will add this article to this thread also.

https://www.hydrocarbonprocessing.com/news/2020/03/shell-other-oil-companies-seek-less-saudi-crude-in-april-due-to-weaker-demand

Several European and Nordic oil refiners are taking less crude from Saudi Arabia in April, industry sources said, suggesting a lack of demand for the extra supplies the country has offered as it seeks to boost market share............................Shell is among the major oil companies taking less Saudi crude, two industry sources said. One source said companies were seeking to cut their April allocations of Saudi crude by as much as 25%. Shell declined to comment.

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17 minutes ago, wrs said:

I will add this article to this thread also.

https://www.hydrocarbonprocessing.com/news/2020/03/shell-other-oil-companies-seek-less-saudi-crude-in-april-due-to-weaker-demand

Several European and Nordic oil refiners are taking less crude from Saudi Arabia in April, industry sources said, suggesting a lack of demand for the extra supplies the country has offered as it seeks to boost market share............................Shell is among the major oil companies taking less Saudi crude, two industry sources said. One source said companies were seeking to cut their April allocations of Saudi crude by as much as 25%. Shell declined to comment.

If the estimates for demand destruction of around 18-20mbd, it's going to be a hard sell and ramp up production for the Saudes. I think they're pissed because USA smoked em in production and would like to do anything to hurt the US oil market. [MY] personal feelings towards the whole middle east is none can truly be called a friend to the US and will shank ya in the back soon as you walk away from the negotiating tables. Just my opinion. There are other heavy crudes we are using now and Saudi oil is down to less than 200kbpd I do believe was latest figure. Canadian oil is at all time high, but their government is sorta like California and would like to ween itself away. Trudeau is young and not too smart.

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14 hours ago, Douglas Buckland said:

All true Gerry, but I love to see this old school oilfield brainstorming and thinking out of the box!

Speaking of old school, James Regan and I were reminiscing over the phone last night. How many of you drilling hands remember the Geolograph on the drill floor? Or trying to run casing so fast that you essentially ‘colored in’ the chart? Those were the days! 
 

From what I understand now, in this digital, automated day and age, especially offshore, it just isn’t the same game nor near as much fun as it used to be.

James was telling me that guys now carry electronic tally books!

d8euhww-a1edb3f7-a768-4734-948d-78b54779

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Pipelines Ask U.S. Oil Drillers to Curb Output as Tanks Fill Up

 

 

American pipeline operators have begun asking oil producers to voluntarily ratchet back their output in the clearest sign yet that a growing glut of crude is overwhelming storage capacity.

Plains All American Pipeline LP, one of the biggest shippers of crude in the U.S., sent a letter this week asking its suppliers to scale back production. The notice came from the company’s marketing unit that buys and sells oil to customers. A Texas oil regulator said Saturday that drillers were getting similar notices from pipeline operators.

The messages signal the oil market is fast approaching the moment traders have been warning about -- when crude supplies overflow storage tanks and pipelines as the coronavirus pandemic drags down oil demand by the most in history.

“We are sending this proactive request to our suppliers to ask that you take steps to reduce oil production in response to the pandemic,” Houston-based Plains said in the letter obtained by Bloomberg.

Plains didn’t immediately have comment on its request. The company sent a separate letter requiring customers to prove they have a buyer or place to offload the crude they’re shipping, according to people familiar with the matter. Enterprise Products Partners LP put out a similar call, one person said. The firm didn’t immediately have comment. The idea is to prevent anyone from parking oil in pipelines.

Physical Prices

On Saturday, Ryan Sitton, a member of the Texas Railroad Commission that regulates the state’s oil industry, said he’d heard that “some Texas producers are starting to get letters from shippers (pipelines) asking for oil production cuts because they are out of storage.”

There were already signs that North America’s storage system was nearing its limit. On Friday, prices for physical delivery of several key crude grades in North America plunged to the lowest levels in decades.

West Texas Intermediate crude in the heart of the Permian shale region plunged to $13.01 a barrel, the lowest since 1999. West Canada oil crude neared $5 a barrel. Trading house Mercuria Energy Group Ltd. bid just 95 cents for Wyoming Asphalt Sour, a dense oil used mostly to produce paving bitumen, and said the same barrel was bid at below zero earlier this month.

U.S. oil refiners have been cutting back on the amount of crude they buy and process as lockdowns across the nation keep cars off the road, sending gasoline demand plummeting. Retail pump prices have, in some places, fallen below $1 a gallon.

U.S. shale producers have begun to throttle back drilling, but it could take weeks if not months before that translates into a meaningful decline in oil production. Meanwhile, Cushing, Oklahoma -- a major oil-storage hub -- is already more than half full.

Sitton has been pushing a plan that would have Texas imposing limits on its crude production as part of a deal with the Organization of Petroleum Exporting Countries. “We need to get in front of this,” he said on Twitter Saturday.

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5 hours ago, Ward Smith said:

d8euhww-a1edb3f7-a768-4734-948d-78b54779

We had Siemens ones in our mudlogging cabins back in the day, they were a bit more advanced than that with all the gas and pit levels etc and they were in colour!

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I see some chance of introducing US VIF to curb oversupply, and to help pay for capacity of US in-ground and onshore storage while the middle east turns on itself.

another way to apply pressure to MbS and have him pay for it.

 

 

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33 minutes ago, El Nikko said:

We had Siemens ones in our mudlogging cabins back in the day, they were a bit more advanced than that with all the gas and pit levels etc and they were in colour!

Spoiled. I still remember the knowledge box in the dog house ;)

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