Which producers will shut in first?

[Ward Smith + 6,615]

^ I guess my point is, if California has such low demand, your price should be low also. AAA might be giving an average for the whole state.

Actually they are, some places there it's still over $4 per gal

By county pricing

[Dan Clemmensen + 1,011]

12 minutes ago, Ward Smith said:

^ I guess my point is, if California has such low demand, your price should be low also. AAA might be giving an average for the whole state.

Actually they are, some places there it's still over $4 per gal

By county pricing

Take a look at the map more closely, the few counties above $4/gal are extremely low population counties with very few gas stations. They contribute almost no weight to the average. The average appears to be about 20% below a 2 months ago (my wife's guesstimate). But all of this is meaningless: gasoline consumption is no longer elastic with price here. We are about where the rest of the US will be in about ten days: https://91-divoc.com/pages/covid-visualization/

 

[Dan Clemmensen + 1,011]

I'm not an oil person. Can someone please explain the "shut in" process? How expensive is it, and how hard/expensive/possible is it to turn the well back on? Would it be cheaper to simply reduce production to minimal levels at multiple wells, or shut in one well? I'm most;y interested in actual costs, here. If there are considerations about royalties or bonds or other funny money, the industry can ask for some sort of legislative relief and I hope they will get it.

[Ward Smith + 6,615]

23 minutes ago, Dan Clemmensen said:

Take a look at the map more closely, the few counties above $4/gal are extremely low population counties with very few gas stations. They contribute almost no weight to the average. The average appears to be about 20% below a 2 months ago (my wife's guesstimate). But all of this is meaningless: gasoline consumption is no longer elastic with price here. We are about where the rest of the US will be in about ten days: https://91-divoc.com/pages/covid-visualization/

I'm in Washington State. We've had the virus far longer than you have (the first on record in fact). We are ahead of California in timeline, just have a slightly less stupid governor. 

[Ward Smith + 6,615]

5 minutes ago, Dan Clemmensen said:

I'm not an oil person. Can someone please explain the "shut in" process? How expensive is it, and how hard/expensive/possible is it to turn the well back on? Would it be cheaper to simply reduce production to minimal levels at multiple wells, or shut in one well? I'm most;y interested in actual costs, here. If there are considerations about royalties or bonds or other funny money, the industry can ask for some sort of legislative relief and I hope they will get it.

Depends. Some wells are gas drive, some water, some geologic pressure, many a combination of the above. Turning off the pumps (ESP, rod lift, gas lift etc) can be good, unless something goes wrong Downhole, for instance you're making water. Come back in six months and your water cut might be 20:1 instead of 20% when you shut in. There's no monolithic well, each one is unique, with unique properties. It's 100% likely good productive wells will be ruined permanently after shut in. How many I don't know. 

[Dan Clemmensen + 1,011]

5 minutes ago, Ward Smith said:

I'm in Washington State. We've had the virus far longer than you have (the first on record in fact). We are ahead of California in timeline, just have a slightly less stupid governor. 

It's not a contest. We reached 100 cases four days after you did, and our response has been more effective than yours if you are trying to keep score. I'm not. I would happily wish for us to be the laughingstock of the country it that's what it took to stop this thing. If you look at the link I provided, you see that when you were at day 24, you had 340 cases per million population. California is now at day 24 and we have 148 cases per million. Your doubling rate is still higher than ours also. I wish you well. We are all in this together. Texas eight days behind CA and is already at 98 cases per million, if you need a stupid governor to worry about.

[El Nikko + 2,145]

22 minutes ago, Ward Smith said:

Depends. Some wells are gas drive, some water, some geologic pressure, many a combination of the above. Turning off the pumps (ESP, rod lift, gas lift etc) can be good, unless something goes wrong Downhole, for instance you're making water. Come back in six months and your water cut might be 20:1 instead of 20% when you shut in. There's no monolithic well, each one is unique, with unique properties. It's 100% likely good productive wells will be ruined permanently after shut in. How many I don't know. 

Do you remember this guy? His suggestions in the video seem sensible. Also in another video he explains how shale wells that have been producing less than a year are ideal to shut in because they don't lose production over time unlike the older ones. Also maybe shutting in for a few days then opening up them back up etc or simply choaking them. It's such a waste to sell oil at cost or a loss to people who will just sit on it and then make a profit later on. He's someone I've followed on LinkedIn for a while now.

 

Edited March 31, 2020 by El Nikko

[Ward Smith + 6,615]

4 minutes ago, Dan Clemmensen said:

It's not a contest. We reached 100 cases four days after you did, and our response has been more effective than yours if you are trying to keep score. I'm not. I would happily wish for us to be the laughingstock of the country it that's what it took to stop this thing. If you look at the link I provided, you see that when you were at day 24, you had 340 cases per million population. California is now at day 24 and we have 148 cases per million. Your doubling rate is still higher than ours also. I wish you well. We are all in this together. Texas eight days behind CA and is already at 98 cases per million, if you need a stupid governor to worry about.

We've been flattening the curve with closed schools etc. The CDC in a case of criminal negligence would not allow the University of Washington medical school to perform its own tests. Then when they couldn't stand it after two weeks of inaction, they risked approbation and performed the test. CDC demanded they stop testing!! The CDC contacted the FDA who likewise demanded they stop testing. This after they found positive Covid19! They risked their medical school qualification to continue testing. Otherwise we'd be even further along in the bad curve. 

There is plenty of blame to go around here. And before everyone blames Trump, these were leftover bunglecrats from the Obama administration. 

[Dan Clemmensen + 1,011]

2 minutes ago, El Nikko said:

Do you remember this guy? His suggestions in the video seem sensible. Also in another video he explains how shale wells that have been producing less than a year are ideal to shut in because they don't lose production over time unlike the older ones. Also maybe shutinng in for a few days then opening up them back up etc or simply choaking them. It's such a waste to sell oil at cost or a loss to people who will just sit on it and then make a profit later on.

I really hope that the speculators who do this get royally screwed, and I think they will, because they will have to pay exhorbitant storage fees.

[El Nikko + 2,145]

1 minute ago, Dan Clemmensen said:

I really hope that the speculators who do this get royally screwed, and I think they will, because they will have to pay exhorbitant storage fees.

Unfortunately there are small companies that can do this I believe, the major storage is getting full but I imagine there's always someone out there than can make a buck.

The best thing for the oil companies right now is to keep it in the ground and I say that as someone who relies on drilling to make a wage.

 

[Dan Clemmensen + 1,011]

2 minutes ago, El Nikko said:

Unfortunately there are small companies that can do this I believe, the major storage is getting full but I imagine there's always someone out there than can make a buck.

The best thing for the oil companies right now is to keep it in the ground and I say that as someone who relies on drilling to make a wage.

 

Now THERE is a government intervention I would be comfortable with. Have the government buy that oil now, but tell the producers to leave it in the ground for later delivery.  It would still be an unholy mess and it would leave an on-paper price-depressing overhang for a long time, but it would flatten that curve.

[Ward Smith + 6,615]

7 minutes ago, Dan Clemmensen said:

Now THERE is a government intervention I would be comfortable with. Have the government buy that oil now, but tell the producers to leave it in the ground for later delivery.  It would still be an unholy mess and it would leave an on-paper price-depressing overhang for a long time, but it would flatten that curve.

There is precedence for doing this. Every year farmers are getting paid not to grow crops. 

[James Regan + 1,776]

Just saw this on another platform, never seen posts like this before, My take away is that we have too much damn oil floating around the planet.

https://www.linkedin.com/feed/update/urn:li:activity:6650660632561537027

[U_P + 22]

9 hours ago, El Nikko said:

Do you remember this guy? His suggestions in the video seem sensible. Also in another video he explains how shale wells that have been producing less than a year are ideal to shut in because they don't lose production over time unlike the older ones. Also maybe shutting in for a few days then opening up them back up etc or simply choaking them. It's such a waste to sell oil at cost or a loss to people who will just sit on it and then make a profit later on. He's someone I've followed on LinkedIn for a while now.

 

It would not make much of a difference with these prices and this global excess supply, really. His blog has been suggested on this forum before, I have to say that for the experiences he lists in his CV, the guy has very little clue of internal corporate dynamics around financing and investing decision and how these affect the supply of today and the future. He has not resigned yet to the idea that a blood bath is inevitable. Sometimes denial does take some very grotesque forms...

Edited March 31, 2020 by U_P

[El Nikko + 2,145]

31 minutes ago, U_P said:

It would not make much of a difference with these prices and this global excess supply, really. His blog has been suggested on this forum before, I have to say that for the experiences he lists in his CV, the guy has very little clue of internal corporate dynamics around financing and investing decision and how these affect the supply of today and the future. He has not resigned yet to the idea that a blood bath is inevitable. Sometimes denial does take some very grotesque forms...

Hopefully there won't be a bloodbath but it's very possible with this climate, I think Dave was a geoscientist rather than a corporate guy but I do like his energy and enthusiasm.

Edited March 31, 2020 by El Nikko

[Douglas Buckland + 6,308]

16 hours ago, Jan van Eck said:

While your conclusion is trenchantly accurate, the issue that that would provoke, I would suggest, is that it runs afoul of the rules of the World Trade Organisation [WTO].  Cutting a vendor out of the loop in world trade would be "protectionism," and the tariff or quota would be attacked in suit at the WTO.  And the USA would lose that suit, opening up Washington DC to large damages claims. 

If the USA were to withdraw from the WTO, then that issue would disappear.  And at that point, nothing to stop the USA from issuing a blanket prohibition on foreign oil entering the country without a special exemption permit, that would be controlled in D.C.  And (of course), no permits would ensue. Ha!

Now that is an interesting scenario...

[U_P + 22]

3 minutes ago, El Nikko said:

Hopefully there won't be a bloodbath but it's very possible with this climate, I think Dave was a geoscientist rather than a corporate guy but I do like his energy and enthusiasm.

Well, his last few years he has spent as a corporate guy, so I will let you ponder on that. This business does not need cheerleaders, especially when it comes to long term investment and resource allocation decisions. In my humble opinion the capital desctruction in the upstream space will have to be resolved very soon to have any sort of investable projects in the future. It will take a long time regardless of what producers do now.

[NickW + 2,714]

15 hours ago, Dan Clemmensen said:

Why do we keep talking about the Saudis and Russians? they have basically nothing to do with the current problem, which is the demand crash. The market was (by definition) roughly in physical balance (crude pumped equals crude consumed) in December. The Saudis and Russians are making big talk about increasing production by maybe 2 million bbl/day, but they have not even done that yet. In the mean time demand has already crashed and will continue crash, reaching a crash of perhaps 20 million bbl/day by mid June: more than ten times the Saudi/Russian threats. When storage fills up, the price of newly-pumped crude will be zero. Asked: $5, bid: (no bids). Or worse for some wells, minimal production is necessary to maintain the well and you will pay someone to take it, like natural gas in the Permian. So what are you guys going to do with that crude? This has nothing whatsoever to do with the Saudis and the Russians, it's all about Covid-19. Once crude output is reduced to maybe 75 million bbl/day, it will have to stay there until at least the highest-cost storage is emptied, because the guys who are paying for that storage will be "selling" at or below zero.

great opportunity for Donald to start refilling the SOR using some freshly printed QE money. 

[U_P + 22]

20 minutes ago, NickW said:

great opportunity for Donald to start refilling the SOR using some freshly printed QE money. 

It would not make a difference, it will be burdersome to organise, (it will take quite some time to physically move enough oil in storage), will deeply affect the quality of oil already stored there which is on the heavier side, will compromise salt dome integrity, as the whole thing was not designed to be a used as a metal fuel tank....

But most of all, to put it into context, read this: https://www.oilystuffblog.com/single-post/2020/03/15/The-SPR-Fiasco

There are no shortcuts out of this, like there are no shortcuts out of wars...

[James Regan + 1,776]

7 minutes ago, U_P said:

It would not make a difference, it will be burdersome to organise, (it will take quite some time to physically move enough oil in storage), will deeply affect the quality of oil already stored there which is on the heavier side, will compromise salt dome integrity, as the whole thing was not designed to be a used as a metal fuel tank....

But most of all, to put it into context, read this: https://www.oilystuffblog.com/single-post/2020/03/15/The-SPR-Fiasco

There are no shortcuts out of this, like there are no shortcuts out of wars...

Although interesting that letter has been written by a moron or do Government write official letters with slang. Maybe they do, just an observation.

If a government official in the UK would have written that it would have been filed accordingly after reading the first sentence.

SPR- Can handle the crude has been doing so for a long time, getting it out is another story.....

[U_P + 22]

6 minutes ago, James Regan said:

Although interesting that letter has been written by a moron or do Government write official letters with slang. Maybe they do, just an observation.

If a government official in the UK would have written that it would have been filed accordingly after reading the first sentence.

SPR- Can handle the crude has been doing so for a long time, getting it out is another story.....

By handling I do no mean physically containing it, I mean leaving it without major chemical contamination that would make it "difficult" to process by refiners:

https://www.popularmechanics.com/technology/infrastructure/a19634690/us-poisoned-crude-oil/

Again there are no shortcuts!

Edited March 31, 2020 by U_P

[Ward Smith + 6,615]

On 3/30/2020 at 4:34 PM, Dan Clemmensen said:

Take a look at the map more closely, the few counties above $4/gal are extremely low population counties with very few gas stations. They contribute almost no weight to the average. The average appears to be about 20% below a 2 months ago (my wife's guesstimate). But all of this is meaningless: gasoline consumption is no longer elastic with price here. We are about where the rest of the US will be in about ten days: https://91-divoc.com/pages/covid-visualization/

 

$4.79 a gallon in kalifornistan

[John Foote + 1,135]

$1.79 and lower near my place in Texas. Dam thing is I'm not driving enough to use it. Filled up two weeks ago and still have 7/8ths a tank.

[Ward Smith + 6,615]

13 hours ago, James Regan said:

Although interesting that letter has been written by a moron or do Government write official letters with slang. Maybe they do, just an observation.

If a government official in the UK would have written that it would have been filed accordingly after reading the first sentence.

SPR- Can handle the crude has been doing so for a long time, getting it out is another story.....

@Mike Shellman used to post a lot here, he got sick of some of the interlocutor's comments and hasn't been back. He's no moron but I do have some issues with his math. The upper part in blue (on my screen) is the only govt letter, his commentary (in black) is below. 

I worked as a roughneck on the first SPR well. We were extremely careful to limit our water while drilling including using reverse circulation. However, for reasons unknown they're screwing up the salt domes now by pumping 7.5 bbls of water in for every bbl of oil they push out. Obviously the salt liquifies from the water input, corrupting the dome. 

The @U_P article talks about customers complaining about sulfur, but that's after they offloaded from a ship. Who's to say whether the sulfur was on that ship to begin with? My guess, they played some games to get a better price. 

[James Regan + 1,776]

5 minutes ago, Ward Smith said:

used to post a lot here, he got sick of some of the interlocutor's comments and hasn't been back. He's no moron but I do have some issues with his math. The upper part in blue (on my screen) is the only govt letter, his commentary (in black) is below. 

Hands up, the letter was perceived as an official letter including the black text. My apologies if I offended Mike or others. The letter is easily misled as an official document hence the reply.

I will willingly wear the tinfoil moron hat for the next week, or just keep it on.

Sincerely

James