"Saudi Armada heading to U.S.", "Dumping" is a WTO VIOLATION.

[Dan Clemmensen + 1,011]

7 hours ago, James Regan said:

@Wombat We do flare oil when well testing, ie after we have drilled a wildcat (random Exploration) or an Appraisal well (looking for the peripheral spot where the reservoir ends or is less productive), once the well is drilled out we run a temporary completion string (production gear) to simulate and gather data on the well while actually producing on a exploration rig. We would run it with said string and perforate the well while underbalaced hydrostatically to induce flow. The oil and gas mixtures a flown at certain rates to understand the performance of the well. We flow the well and then shut it in for predetermined periods, while the oil and gas goes to a temporary separation system, well testing set up. This oil and gas is then flared off, we regularly set the sea on fire its not uncommon at start up, this cycle continues for up to a month or more or less.

The well is then secured and capped off, move off location and start again.

Just for the record I am no Drilling Engineer, just monkey see monkey do, if I have said something thats just wrong well I guess I will pay dearly, but thats fine as I love to push buttons and learn, this technique has taught me quite a lot on this forum.

But this is a matter of scale. For testing you probably burn off a few hundred gallons(?) per test well. To make a dent on the global overproduction, you would need to burn off millions of bbl/day, blackening the skies of west Texas with soot reaching across the south as far as the golf courses of Florida., and all for no reason and at extra cost. To just operate each well at minimal production to keep from shutting it in, you need some small number of bbl per well per day. Is that 1 bbl, 10 bbl, 100 bbl?

[James Regan + 1,776]

1 hour ago, Dan Clemmensen said:

But this is a matter of scale. For testing you probably burn off a few hundred gallons(?) per test well. To make a dent on the global overproduction, you would need to burn off millions of bbl/day, blackening the skies of west Texas with soot reaching across the south as far as the golf courses of Florida., and all for no reason and at extra cost. To just operate each well at minimal production to keep from shutting it in, you need some small number of bbl per well per day. Is that 1 bbl, 10 bbl, 100 bbl?

No its definitely not gallons, if we have a well that is being tested it will be tested normally at a choked position 1/16 - 1/8 etc off full choke, from there they will work out the capacity of the reservoir or production rates for one well at 60,000Bbls a day at a 16th your looking at over 3000Bbls, we normally test for 30 day periods offshore, with shut in periods to let the well bore pressure increase, then open up at desired choke setting while flaring off. There are many many methods of well testing its another side of the business which is done by specialists.

During well testing offshore the rig has to be very well protected with water curtains to not damage the rigs structures as the heat is intense, also the noise while flaring off some of these HP/HT (High Pressure/High Temperature) wells is deafening. Its quite humbling to see actually as its very easy to be complacent while drilling any well, its only when you see the size of the flare and the noise of the influx when they open the well to flow that you realise how much pressure is down there. Dont tease the Tiger as we say, respect pressure.

E&P rigs don't like to see oil, if we see oil we are normally in deep dookie, unless flaring during well test, if we see oil at shakers while drilling were in the shit.

[Gerry Maddoux + 3,627]

^

Great photograph! I've never seen that. Thanks.

[Dan Clemmensen + 1,011]

OK, my ignorance of oil wells is even more profound than I thought. (I guess you guys had already figured that out.) I just looked. As of January 2020, There are 173,000 active oil wells in Texas, and they produce 3.4 million bbl/day. That an average of twenty bbl/day per well. I was thinking(?!) in terms of a few thousand. Sorry. So, I guess it would be hard to wander around Texas and simply dial each well back by (say) 50%.

[James Regan + 1,776]

4 minutes ago, Dan Clemmensen said:

OK, my ignorance of oil wells is even more profound than I thought. (I guess you guys had already figured that out.) I just looked. As of January 2020, There are 173,000 active oil wells in Texas, and they produce 3.4 million bbl/day. That an average of twenty bbl/day per well. I was thinking(?!) in terms of a few thousand. Sorry. So, I guess it would be hard to wander around Texas and simply dial each well back by (say) 50%.

Dan not at all, I don't think Ignorance is the right word to use, in fact in your case its interesting to be able to share information which we take for granted. Remember I am no production guru Im just passing on my experience while well testing as part of the drill crew, well testing on an exploration rig like in the photo is one of the most dangerous things we do, it requires a lot of equipment brought on board and a great deal of planning and mitigation.

But it does give you some pride when you stick a bit in the mud and go through right to test the well, we don't normally have a test program we may batch drill to a certain point and then a platform will come in over our batch drilled manifolds and run subsea production trees or a fixed leg platform built for production and work over will be put in place.

i think a reduction would come from wells which are under performing and concentrate on the wells that are producing well. In reality we don't know what they will do to make everyone happy, is it possible yes, but will need consessions from all sides, its easy to say lets all cut by 10% but its more complicated than that, hence the strong push back from all concerned, but the Industry needs to get on the same train as its leaving the station quickly destination Jeopardy.... 

[BenFranklin'sSpectacles + 762]

7 hours ago, Wombat said:

If that is the prevailing attitude, the Pentagon may as well go to drone warfare only. Would save an absolute fortune and be ten times as effective?

They're already headed in that direction.  That, and replacing conventional operations with small, elite units.  As far as I could tell, the conventional units just aren't effective any more. 

[BenFranklin'sSpectacles + 762]

7 hours ago, Wombat said:

I agree. Have always said the modern western economy is a ponzi scheme, but if you think property is a real, productive asset, I think you will find it performs just as poorly as the stock market over the next decade.

I wasn't referring to "real estate" as people normally invest in it.  I'm talking about owning land you raise your own food on or owning a business that provides some necessary service.  Those whose services are in demand will watch their wages rise with the coming inflation.  Everyone else is screwed. 

[Dan Clemmensen + 1,011]

1 minute ago, BenFranklin'sSpectacles said:

They're already headed in that direction.  That, and replacing conventional operations with small, elite units.  As far as I could tell, the conventional units just aren't effective any more. 

Conventional units are trained and equipped to take and hold ground, and they are very effective at that mission. If that is not the mission, then they are the wrong units. What, specifically, is the military mission for the US in the middle east? Is there a specific, non-vague, mission that the US should do that "small elite units" can do? Note that bullshit like "win the peace", "win hearts and minds", and "build democracy" are not valid military missions. At best they are diplomatic or political missions where the military might or might not  be a useful tool in the early phases. If the military is still needed after the first year, the mission, not the military, has failed.

[Dan Clemmensen + 1,011]

1 hour ago, James Regan said:

i think a reduction would come from wells which are under performing and concentrate on the wells that are producing well. In reality we don't know what they will do to make everyone happy, is it possible yes, but will need consessions from all sides, its easy to say lets all cut by 10% but its more complicated than that, hence the strong push back from all concerned, but the Industry needs to get on the same train as its leaving the station quickly destination Jeopardy.... 

My concern is that, while this may make tactical economic sense for each individual producer in the very short term, it might make more sense for the industry as a whole and for the country's economy and security to do just the opposite. Leave all 150,000 or so marginal wells functioning as they are, and throttle some or all of the 23,000 high-producing wells back by 50%. Less overall work to do, and much more easily managed, which allows a more agile response when consumption resumes and/or OPEC+ trys to screw with supply, up or down. I speculate that the problem is that there is no fiscal or market mechanism in place to allow this. Basically, the marginal wells would need to accept prices at or even slightly below their lifting costs to pay the big guys to back off. Since this entire grand scheme is in support of national energy security, the federal government should pay for part of it. the feds might also have to use war powers to suspend some contractual obligations for the duration of the demand crash in order to enable this substitution of oil from the marginal sources for the contractually-obligated oil from the biggies.

[Gerry Maddoux + 3,627]

On 4/9/2020 at 12:47 PM, Dan Clemmensen said:

This looks like an ideal situation for some arbitrage: Someone who needs to pump a little bit to keep a wall alive should be willing to pay one of the privileged  producers to back off from max to a lower volume still above its own min)  and transfer the pipe and storage allocations.

Since the flow of oil is dynamic, and since this Saudi stunt was precipitous, with a 50% drop in oil prices, there is no time for negotiation, arbitrage, secondary tactics--nothing to do but fall back. 

Trump is just now getting it. When he tweeted repeatedly for the Saudis to pump and dump, to lower the price of global oil, he had no idea what he was doing. He has horrible advisers, mostly from Exxon. 

This is a national disaster, pegged right on the heels of another disaster. As the president dithers, or manages a horrible deal, rigs are being laid down for a good long slumber--many will never rise. Drillers are going broke and workers are being laid off from good jobs. This did NOT have to happen. There are many people who could help the president maneuver this land mine. The person not to do this is Exxon, Saudi's partner for 90 years (joint venture SABIC, SAMREF, YANPET). 

They weren't known as Exxon Aramco for nothing!

[Dan Clemmensen + 1,011]

35 minutes ago, Gerry Maddoux said:

Since the flow of oil is dynamic, and since this Saudi stunt was precipitous, with a 50% drop in oil prices, there is no time for negotiation, arbitrage, secondary tactics--nothing to do but fall back.

In the very short term, "arbitrage" would have to be done at the "local" level by individual mid-stream operators of truck fleets or operators of collector pipelines. As a complete outsider I have no idea how this can be made to work. My model would have Joe the truck fleet operator (or John the local pipeline guy) call up a bunch of the marginal guys and say "do you want to make a deal that will let you keep pumping for just you lifting cost, or do you want to stop pumping?" A bunch of guys totalling X bbl/day say "keep pumping", Joe or John calls up high-producing Mack and says "will you curtail by X bbl/day  so I can supply X bbl/day instead? I'll pay you." Mack takes a look at this an sees a small profit, so he says "sure Joe" and Joe executes the deal with his trucks or pipeline. All parties make slightly more money (lose slightly less money) than they otherwise would if someone was forced to shut in.  I'm sure this is so grossly oversimplified as to be unworkable, but it would happen bottom-up, not top down, so it could be implemented in a full-distributed manner at the local level where I suspect there is a lot more camaraderie than you find on in corporate offices or on the trading floor.

[Douglas Buckland + 6,308]

7 hours ago, Dan Clemmensen said:

But this is a matter of scale. For testing you probably burn off a few hundred gallons(?) per test well. To make a dent on the global overproduction, you would need to burn off millions of bbl/day, blackening the skies of west Texas with soot reaching across the south as far as the golf courses of Florida., and all for no reason and at extra cost. To just operate each well at minimal production to keep from shutting it in, you need some small number of bbl per well per day. Is that 1 bbl, 10 bbl, 100 bbl?

It seems that you think that you can dial in ANY production from a well, anything above zero (shut-in) and the well will not be damaged. Not so.

Furthermore, at any production level you would still need to keep the downstream infrastructure on-line. These costs generally do not decrease with the volume of production.

[Dan Clemmensen + 1,011]

3 minutes ago, Douglas Buckland said:

It seems that you think that you can dial in ANY production from a well, anything above zero (shut-in) and the well will not be damaged. Not so.

Furthermore, at any production level you would still need to keep the downstream infrastructure on-line. These costs generally do not decrease with the volume of production.

Doug, I know that I don't know this stuff. I now know that Texas has 173,000 active wells. If there is any workable production level between "shut in" and "max" for some wells, then you can in theory fine tune the total production to wherever you wish from max down to that level, by choosing a percentage of wells to turn down. This entire idle armchair speculation is not useful at all unless there is  some monetary advantage in avoiding shut ins. If no advantage, then just start shutting in wells until you reach the required production curtailment. As an industry, you have no alternative to curtailment in Texas, because storage has already filled up, according to another commentator on this thread.

[Gerry Maddoux + 3,627]

 

5 hours ago, Dan Clemmensen said:

My concern is that, while this may make tactical economic sense for each individual producer in the very short term, it might make more sense for the industry as a whole and for the country's economy and security to do just the opposite. Leave all 150,000 or so marginal wells functioning as they are, and throttle some or all of the 23,000 high-producing wells back by 50%. Less overall work to do, and much more easily managed, which allows a more agile response when consumption resumes and/or OPEC+ trys to screw with supply, up or down. I speculate that the problem is that there is no fiscal or market mechanism in place to allow this. Basically, the marginal wells would need to accept prices at or even slightly below their lifting costs to pay the big guys to back off. Since this entire grand scheme is in support of national energy security, the federal government should pay for part of it. the feds might also have to use war powers to suspend some contractual obligations for the duration of the demand crash in order to enable this substitution of oil from the marginal sources for the contractually-obligated oil from the biggies.

 Dan, the number of ordinary non-oil people that own royalties is probably close to a million. I'm one of them. My grandfather made the Oklahoma Land Rush, roughed it, hung onto the land. He managed to buy some more. His three sons inherited it and they added to it. None of it is what you'd call pretty land. There's oil under it. When we were routinely getting new wells, back in the eighties and nineties, there would be perhaps 200 royalty owners for a conventional 20,000 foot well on a 1280-acre spacing. These small royalty owners used that money to put their kids through school. We didn't get rich from that, but it brought us out of poverty. We didn't work any less because we got a few thousand each year from oil, but we regarded it as a blessing.

This is the part of the very complex oil and gas business in America that President Trump probably has little to no knowledge about--and I'll bet Harold Hamm is educating him. I certainly hope so. Listen to Exxon, who has been a joint venture partner with the Saudis for ninety years or the million royalty owners and another million workers in the petroleum industry in various and sundry jobs? Two million votes?

If we let the Saudis get away with their stunt, this is about so much more than slashing the throats of the shale guys (who are not generally loved but will go down in history as just one more exciting chapter in the oil business). These Saudis pull some sort of stunt every few years, and we have traditionally let them get by with it. This time they massively shorted oil futures, then announced to the world that they were going to flood the market. As oil cratered by nearly 50%, and as the oil and gas stocks lost half their value, the Saudis purchased huge holdings in major European oil companies: Eni, Total, BP, RDS. Now they are ostensibly ready to broker a deal, but starting at their exaggerated level of production. And if we let them do this, they will destroy not only shale but the add-on income to nearly a million mostly farm and ranch folks--or their beneficiaries. But it will absolutely take a knife to the throats of about a million people who work in the petroleum industry. Again, this must add up to about two-million votes.  

I have watched these horrible tribal thugs laughingly mess with American lives since I was six years old. It was fun for them, even though our oil industry worked at the game of oil much harder than any "royal" family. Pure ordinary Americans have made the Saudis rich beyond imagination. Only during the last few years have we remotely threatened their spot as #1 producer. Now they pull this latest trick. When do you say enough?

Right now! Not a single damn American well that is worth a hoot should be shut in, plugged, or choked down. We should produce full out, but try this on, use that oil in our own refineries for our own uses, mixing with it good old heavy (near-bitumen) from friendly Alberta, Canada as feedstock. If we have any left over to export, then put it on the world market. We should encourage a vibrant LNG industry. It's clean and it's cheap.

It's nuts to even consider letting these Saudi thugs get by with wrecking the American petroleum industry just because they can. That's watching the same thing over again, expecting a different result. Only this time, there's even more at stake. This time they're trying to get by with this as America and the world enters a depression.  

Edited April 11, 2020 by Gerry Maddoux

[Dan Clemmensen + 1,011]

4 minutes ago, Gerry Maddoux said:

 

 

I have watched these horrible tribal thugs laughingly mess with American lives since I was six years old. It was fun for them, even though our oil industry worked at the game of oil much harder than any "royal" family. Pure ordinary Americans have made the Saudis rich beyond imagination. Only during the last few years have we remotely threatened their spot as #1 producer. Now they're at the same game, only more viciously. When do you say enough?

Right now! Not a single damn American well that is worth a hoot should be shut in, plugged, or choked down. We should produce full out, but try this on, use that oil in our own refineries for our own uses, mixing with it good old heavy (near-bitumen) from friendly Alberta, Canada as feedstock. If we have any left over to export, then put it on the world market. Let the world market for LNG dictate the demand for it too.

It's nuts to even consider letting these Saudi thugs get by with wrecking the American petroleum industry just because they can. 

As a newbie from the outside, I still agree with you. Screw the Saudis and screw the Russians. They have demonstrated that they cannot be trusted, so using any of their oil at all, at any price down to or even below zero, is dangerous to our country's security.  Cut 'em off and tell that we refuse to allow those 14 VLCCs to dock and offload: they can just sail away with the oil.

BUT: as of right this very moment, and for at least the next three months,  are confronted with an unprecedented demand collapse. Our short-term storage is already full. Until this short term problem is resolved, somebody in going to curtail production in this country because there is no physical place to put it. This is the situation I"m trying to address, not some fantasy agreement between OPEC+ and some random entity  in the US government.

[ronwagn + 6,290]

https://oilprice.com/Energy/Energy-General/Trump-Threatens-Very-Substantial-Tariffs-On-Oil-Imports.html

[ronwagn + 6,290]

6 minutes ago, Dan Clemmensen said:

As a newbie from the outside, I still agree with you. Screw the Saudis and screw the Russians. They have demonstrated that they cannot be trusted, so using any of their oil at all, at any price down to or even below zero, is dangerous to our country's security.  Cut 'em off and tell that we refuse to allow those 14 VLCCs to dock and offload: they can just sail away with the oil.

BUT: as of right this very moment, and for at least the next three months,  are confronted with an unprecedented demand collapse. Our short-term storage is already full. Until this short term problem is resolved, somebody in going to curtail production in this country because there is no physical place to put it. This is the situation I"m trying to address, not some fantasy agreement between OPEC+ and some random entity  in the US government.

https://oilprice.com/Energy/Energy-General/Trump-Threatens-Very-Substantial-Tariffs-On-Oil-Imports.html

[Douglas Buckland + 6,308]

“This is the situation I"m trying to address, not some fantasy agreement between OPEC+ and some random entity  in the US government.”

Okay guys @Gerry Maddoux @Dan Clemmensen I agree with the ‘don’t buy Saudi and Russian oil’ stance, but the ongoing bashing of Trump for trying to sort out a production cut is wearing thin.

Any cut is better than no cut, isn’t it? This is the first attempt at getting something, anything positive done. This is not necessarily the final cut, but at least the players are at the table!

Saying it is not enough to make a difference is like the spoiled brat who gets a bicycle for Christmas, who then goes to his room to pout as it wasn’t THE bicycle he wanted.

Let’s take what we can get now, then keep working the problem!

[Wombat + 1,028]

6 hours ago, BenFranklin'sSpectacles said:

I wasn't referring to "real estate" as people normally invest in it.  I'm talking about owning land you raise your own food on or owning a business that provides some necessary service.  Those whose services are in demand will watch their wages rise with the coming inflation.  Everyone else is screwed. 

I think "debt-deflation" more likely.

[Dan Clemmensen + 1,011]

1 minute ago, Douglas Buckland said:

“This is the situation I"m trying to address, not some fantasy agreement between OPEC+ and some random entity  in the US government.”

Okay guys @Gerry Maddoux @Dan Clemmensen I agree with the ‘don’t buy Saudi and Russian oil’ stance, but the ongoing bashing of Trump for trying to sort out a production cut is wearing thin.

Any cut is better than no cut, isn’t it? This is the first attempt at getting something, anything positive done. This is not necessarily the final cut, but at least the players are at the table!

Saying it is not enough to make a difference is like the spoiled brat who gets a bicycle for Christmas, who then goes to his room to pout as it wasn’t THE bicycle he wanted.

Let’s take what we can get now, then keep working the problem!

I'm sorry if it appeared be be bashing President Trump. It was not intended that way. The "fantasy" Is the complete mismatch between the proposed curtailment and the magnitude of the consumption collapse. No agreement is necessary or relevant. We and everybody else will be forced to curtail by the lack of storage. You can't pump it if there's no place to put it.

[Wombat + 1,028]

5 hours ago, Dan Clemmensen said:

My concern is that, while this may make tactical economic sense for each individual producer in the very short term, it might make more sense for the industry as a whole and for the country's economy and security to do just the opposite. Leave all 150,000 or so marginal wells functioning as they are, and throttle some or all of the 23,000 high-producing wells back by 50%. Less overall work to do, and much more easily managed, which allows a more agile response when consumption resumes and/or OPEC+ trys to screw with supply, up or down. I speculate that the problem is that there is no fiscal or market mechanism in place to allow this. Basically, the marginal wells would need to accept prices at or even slightly below their lifting costs to pay the big guys to back off. Since this entire grand scheme is in support of national energy security, the federal government should pay for part of it. the feds might also have to use war powers to suspend some contractual obligations for the duration of the demand crash in order to enable this substitution of oil from the marginal sources for the contractually-obligated oil from the biggies.

Dan, relax. The Fed is buying junk bonds now. Not just airlines + hotels, but oil + gas as well.

[Dan Clemmensen + 1,011]

1 minute ago, Wombat said:

Dan, relax. The Fed is buying junk bonds now. Not just airlines + hotels, but oil + gas as well.

You are talking about bookkeeping. I'm talking (blabbering) about how to avoid damage to the wells during a short-term physical curtailment required because there is no place to put the oil. I hope the industry wants to implement the curtailment in the way that allowed the quickest and least costly return to full production as consumption returns to normal. That Fed policy can possibly enable this if the bonds are used correctly.

[Wombat + 1,028]

1 minute ago, Dan Clemmensen said:

You are talking about bookkeeping. I'm talking (blabbering) about how to avoid damage to the wells during a short-term physical curtailment required because there is no place to put the oil. I hope the industry wants to implement the curtailment in the way that allowed the quickest and least costly return to full production as consumption returns to normal. That Fed policy can possibly enable this if the bonds are used correctly.

Dan, the Permian has wasted many billions of dollars worth of gas by flaring. A few more billion wasted by shutting older wells won't hurt. In fact, they get "gassier" as they age so the reduction in flaring may be just the tonic for the gas side of the business which is suffering even more severely? Swings and round-abouts buddy.

[Douglas Buckland + 6,308]

14 minutes ago, Dan Clemmensen said:

I'm sorry if it appeared be be bashing President Trump. It was not intended that way. The "fantasy" Is the complete mismatch between the proposed curtailment and the magnitude of the consumption collapse. No agreement is necessary or relevant. We and everybody else will be forced to curtail by the lack of storage. You can't pump it if there's no place to put it.

Correct! So why pump at all if storage is maxed out! This constant pumping while the world was over supplied was what was keeping prices down even before the pandemic caused the massive decline in demand!

I can understand having a ‘cushion’ of storage, but we are way beyond that. If farmers find themselves in an over supplied corn market, do they keep growing corn?

Let’s suppose that there was a global ‘shut-in’, how long would it take, even with the present demand destruction, to dry up the glut? Anyone have an answer?

Why can’t we all take the hit now (it’s coming anyway), dry up all the surplus oil and reset the industry?

[Wombat + 1,028]

15 hours ago, BenFranklin'sSpectacles said:

Drawing paychecks and gaining educational benefits, mostly.  I imagine they also function as a tripwire, deterrent, or some such, but that role has become increasingly debatable. 

I've noticed that the US is slowly withdrawing troops and equipment from parts of the Middle East: the nukes were removed from Incerlik, bases in Iraq have been abandoned, command and control functions in the UAE were returned to the states, there's a serious effort to withdraw from Afghanistan, etc.  It's possible the US has recognized the pointless expense of defending the Middle East, but change takes time. 

Does anyone else have information on US military presence changes around the world? 

They are all being re-deployed from ME and Afghanistan in preparation for the fight here in Asia region.