Trumps Oil Industry....

[Valerie Williams + 129]

4 hours ago, Wombat said:

It's funny u mention that. U fail to see the connection with ur rig sitting idle and the situation with China? Let me explain. Tom has just started another post in which he mentions that Trump has ordered ur Navy to shoot at any Iranian gunboat. If the Pentagon followed his orders, the Persian Gulf wld be closed and ur oil rig would be put straight back to use. So why won't the Pentagon follow Trump's orders? CHINA! You see, the Pentagon knows that US war with Iran means China can beat US Navy in Asia. As the Pentagon put it, China can put all their forces in a relatively small area, the US cannot. Anyone got the picture yet? China already dictating ur foreign policy?

Look, Don’t tell Iran, but Trump has no problem playing loose cannon on Twitter and the media. Iran hasn’t messed with our boats since he said that.

[Valerie Williams + 129]

1 hour ago, surrept33 said:

Yeah, but who is to blame for this? Without the sheer amount of onshore US tight oil exploitation, I think oil would likely have been north of $100 before COVID and it would probably have attracted a lot of investments offshore.  The closest situation historically would probably be like before 2008. 

The TRRC absolutely has the power to make the more sustainable long term for everyone. The problem (admittedly with a lot of hindsight bias) is that the best time for them to act would probably have been years ago. Their actions would have as a side effect, restricted the total amount of cheap credit flowing to operators that cared about nothing but expansion of production above any other determinants.

Right now, access to new sources of financing is already limited, so I think the effect of restrictions of output is a lot more muted compared to market forces.

I’m not looking for someone to blame. I’m dismayed that Saudi’s recent price gambit was so badly timed that we all got hit with double-whammy of price drop and consumption free fall. Yes, the tight oil producers kept prices low over past few years. Yes, that has competed with my offshore projects. I was only asking why everyone accepts that the onus was on the US to reduce production (pre-pandemic), and not the Saudis. It looked to me like they could have made a little room in the market for US oil.

[Valerie Williams + 129]

56 minutes ago, RSD said:

Aramco's raw cost to produce is about $6/bbl, however to fund the Saudi government keeping the Saudi's in the lifestyle that they are accustomed to needs oil to be at $80/bbl - that $74/bbl is very important to the House of Saud and keeping the Saudi people happy so that coups don't happen...

 

52 minutes ago, El Nikko said:

Saudi has huge social programs to pay for, around half of the country gets free money from the government and I don't think they even pay income tax so while it might be cheap to produce their oil they still need closer to $80 to balance the books.

Oh, I see.

[D Coyne + 305]

23 hours ago, Mike Shellman said:

Dennis, at the end of 2018 the US had somewhere between 38-43G BO of proven, producing oil reserves (PDP). Those PDP reserves grew some in 2019 but are being decimated by 2020 pricing. I truly believe in a price range of $30-40 WTI, about all we can expect for quite a while, I fear, our true PDP reserves provide America with a reserve to production ratio of less than 5, as in 5 years. That should be alarming to all Americans. Its not. 

It's not alarming because of the false narrative of shale oil abundance and the inability to discern from proven producing, probable and "technically recoverable, as yet discovered, requiring much higher oil price" reserve categories. Numerous people contribute to this narrative, including our own government and data sell companies like Rystad and Enverus. Some of it is malicious, I believe. In all cases it is  misleading and confusing to the public and the politicians they elect to engage in energy policies.

Your quote for instance. You fail to classify where those 78G barrels of LTO will come from and how, in God's name, they will be paid for...where the capital will come from to drill hundreds of thousands of more unprofitable shale oil wells to reach that 78G level.  Respectfully, you are adding to the confusion. Your estimate for LTO remaining reserves is 4 times what I believe our total proven producing reserves currently are in all of America's producing basins, conventional and unconventional. The US oil industry is being destroyed at the moment; I am unclear if you fully grasp that and where, if ever, the capital is going to come from for it to recover. Hope for higher oil prices is not a plan.

But when people see 78 billion barrels or 178 billion, or hear "limitless natural resources" and other crap from Washington DC, they think hell, we can isolate ourselves from the rest of the world, become energy independent (regardless of costs), place tariffs on other county's imports to the US, that we can ignore resource waste like flaring, the economic waste of of selling oil below extraction costs, and export all we want, at a financial loss, because we have so much of the stuff.

This is a grave mistake. I think, for instance, if Americans understood how precarious our oil future truly is they would forget the free enterprise crap (and trust me, after 50 years of producing oil and gas, it IS crap) and they would be very much in favor of proration  and/or increasing well spacing in Texas, and Oklahoma and North Dakota and everywhere else. And they would demand that exports be stopped immediately.  

Thanks, as always, for your support.

 

Mike,

You are correct, I failed to state my price assumptions, which are the STEO April 2020 prices and the AEO 2020 reference oil price case beyond that.

Generally you do not give out any price assumptions, here you mention $30-$40/bo, which coincides with the STEO (they actually have prices from 20 to 43 similar to your estimate). The AEO 2020 price estimate is at link below

https://www.eia.gov/outlooks/aeo/data/browser/#/?id=12-AEO2020&region=0-0&cases=ref2020&start=2018&end=2050&f=A&linechart=ref2020-d112119a.54-12-AEO2020&ctype=linechart&sourcekey=0

If we assume $30-40 per barrel until 2040, we might not see more than 10 Gb produced after Dec 2019.

I do not know future oil prices, but my expectation is that oil will become scarce when the World economy recovers.

So a minimum of 10 Gb and a maximum of perhaps 100 Gb, my best guess is 78 Gb if the AEO reference oil price case is correct. I assume WTI oil prices increase linearly from $43/b in Dec 2021 to $76/bo in July 2024, then the scenario below is followed.

[Tom Kirkman + 8,860]

56 minutes ago, El Nikko said:

Saudi has huge social programs to pay for, around half of the country gets free money from the government and I don't think they even pay income tax so while it might be cheap to produce their oil they still need closer to $80 to balance the books.

$80 - $90, last time I estimate a few years back.

[RSD + 41]

30 minutes ago, Valerie Williams said:

Look, Don’t tell Iran, but Trump has no problem playing loose cannon on Twitter and the media. Iran hasn’t messed with our boats since he said that.

Wait til Ramadan finishes... Iranians aren't going to start a war on the first day of Ramadan...

[D Coyne + 305]

22 hours ago, Valerie Williams said:

"They" say a crisis is when reality fails to meet expectations, and that is what the whole industry is dealing with now. But this isn't just a belt-tightening phase to get through a cyclical downturn. It's an existential crisis. The company I work for laid off 75% of employees during the downturn that lasted (for us, at least) from 2015 to 2018. I've never seen a slow period last that long before. I still work in a building with A LOT of empty desks. We are considered a very financially stable company, but I'm not sure even we will come through the other side of this one. We were just this past year starting to recover from 2015, then BAM! 2020.

The point is, everyone is talking about the Saudis as if they are just doing their thing, benevolently. But this attitude will mean that in a crisis of this magnitude, the only one left standing will be the Saudis. This is not making them the bad guy or the scapegoat - it's just reality. It costs them SO much less over there to produce, because it's just geographically easier to do. The result of this is that after this crisis, are we prepared to live in a world where the Saudi's own all the energy? Do we really think we shouldn't try to find a way to mitigate that?

Valerie,

The pandemic will end, consumption will increase close to previous levels and note that of 83 Mb/d of C+C output at the recent peak 12 month average output level, the Saudis and Russia produced about 20 Mb/d, OPEC plus Russia produced maybe 45 Mb/d of C+C at the recent peak, so still 38 Mb/d needed by the World.  There will be a need for off shore deepwater, and by 2024 oil prices are likely to be $75/bo with prices rising quickly from $43/b at the end of 2021 to $76/bo by mid 2024, I expect by 2022 or 2023 there will be plenty of demand relative to supply of oil.

Also keep in mind the Saudi reserves may be over stated, probably more like 150 Gb of 2P reserves rather than the 250 of proved reserves they claim to have.

[James Regan + 1,776]

51 minutes ago, Valerie Williams said:

You know, we “Yanks” used to have a better sense of humor. I don’t know, but the past several years, as an American, it seems we’re getting kicked in the teeth daily - and mostly by our OWN DANGED MEDIA! I’m afraid it’s made us more prickly these days, and I hate that for us. Sorry if we can’t take a joke, Wombat. Unless your joke was truly horrible. Was it horrible? Well, I missed it, so...

Valerie I think you have hit the nail on the head, I have only worked with good old boys, the alabama mafia, koonases the whole gambit, mostly the deep southern boys and gals (mostly boys), I was the loan Limey on a rig full of Yanks (they hated that term) but the sense of humour was dynamite no limits, give as good as you get. Maybe we are confusing the audience here with a working rig, onboard same shit different accent. I think the USA has become polarised to the point of quasi civil war, families who dont speak because one has a different political persuasion than the other its almost laughable but not because it's really there. This is not just a US phenomenon Brexit did the same in the UK and still has fall out. Im hoping that this CV19 shitstorm and time for reflection may have guided some of us to humanity and even some nostalgia fuelled making up. I certainly have started to reflect a little. Hence my Beautiful Letter I wrote to you, a very beautifully written letter, no-one does a beautiful letters like I do, your was good but mine was better.......😂

[D Coyne + 305]

22 hours ago, Valerie Williams said:

Hmmm. You don't sound like someone having an existential crisis. Maybe I am panicking a bit. I didn't lose my job through the last downturn, but there are much fewer of us to choose from this time around.

The US will probably never be able to match production that way. When I start one of my projects, it will be years before the machinery goes into service. There is no way to match that to the market. You just have to hope that the cyclical ups and downs will average out your initial labor and material investment. The Saudis have the advantage of a single point of control. But all the wealth that comes from that is also concentrated with the Saudi Royal family and their chosen few. I'll take the boom and bust model over that any day.

I have to say, you guys are all very zen about the motives of the Saudis. I hope you're right. It's just that, like on D Coyne's chart showing Saudi production levels over time, why do you suppose they maintain it at that level? Why not less? Is it not that at that level, they know it's just high enough to make it cost-prohibitive for the US to compete? And just low enough that the rest of the world will not become resentful and go to war with them?

Valerie,

Saudis have tried to balance the market so that supply and demand match, much as Texas did from 1945 to 1971 through proration.  Lately it has been tough to do because someone produced an extra 7 Mb/d above what they had been producing before, accounting for 84% of the World increase in C+C output, then the citizens of that nation turn around and say "others" are overproducing.  Not particularly logical, at least from my perspective.  Add to this that since 2014 that nations oil producers have been racking up huge levels of debt in the process.  A shovel is not the proper tool to get out of a deep hole. 

[Tom Kirkman + 8,860]

1 hour ago, Valerie Williams said:

You know, we “Yanks” used to have a better sense of humor. I don’t know, but the past several years, as an American, it seems we’re getting kicked in the teeth daily - and mostly by our OWN DANGED MEDIA! I’m afraid it’s made us more prickly these days, and I hate that for us. Sorry if we can’t take a joke, Wombat. Unless your joke was truly horrible. Was it horrible? Well, I missed it, so...

As a moderator here, I rarely remove comments.  This morning I stopped a brewing insult fest before it got started, as the receiving party would not be happy if he saw it.  Anyway, the kerfuffle is over with now.  Everyone's playing nice again.

[D Coyne + 305]

1 hour ago, Valerie Williams said:

Wait. What?
Maybe I’m wrong, but all the reading I’ve done so far has led me to believe that in the Middle East, their break-even oil price is $10-15/bbl. Shale needs $25-30/bbl to break even, and I know personally that my company doesn’t start to get orders for work until the price is $55-60/bbl and looks to hold stable for a while.

Valerie,

Breakeven for the average tight oil well drilled in the US is more like $65/bo.  Saudis need higher prices to balance their budget, the oil finances all government spending so their fiscal breakeven is something like $70/bo.  For may of the middle east exporters it is a similar story, perhaps for all of OPEC.  That is why they limit output, though it is not clear they can easily expand production as they have done in the past.  For excellent tight oil analysis see

https://runelikvern.online/?s=likvern

[D Coyne + 305]

55 minutes ago, Valerie Williams said:

I’m not looking for someone to blame. I’m dismayed that Saudi’s recent price gambit was so badly timed that we all got hit with double-whammy of price drop and consumption free fall. Yes, the tight oil producers kept prices low over past few years. Yes, that has competed with my offshore projects. I was only asking why everyone accepts that the onus was on the US to reduce production (pre-pandemic), and not the Saudis. It looked to me like they could have made a little room in the market for US oil.

They did make room from 2008 to 2014, they got sick of it and stopped making room in late 2014, prices dropped and US output dropped, then when they tightened up again US output surged again, Russia got sick of giving up market share to the US and balked at more cuts, this pissed off the Saudis and they retaliated against the Russians with a price war, US got caught in crossfire.  Badly timed I agree, all of it pales in comparison to a 30 to 40 Mb/d drop in World oil demand, that is the real problem and lack of storage.  Output will need to be cut back until the pandemic subsides.  It is very likely we will resume things too quickly and see a second or third wave, until the disinfectant injections are perfected. 

[Dan Warnick + 6,100]

20 hours ago, El Nikko said:

Now is the time for drinking and smoking as much as you can ram down your throat because....

Who f**king gives a sh*t at this point 😂🤣😂

This is the apocalypse

and it really is lol

Okay, El Nikko, I waited a day to ask:  you were two sheets to the wind when you typed that, weren't you?  

[Dan Warnick + 6,100]

1 hour ago, RSD said:

Pizza!

Toga Parties!

[Valerie Williams + 129]

9 hours ago, Wombat said:

All the more reason to buy a friggin Tesla??????????

Only if you truly think electricity can be scaled to replace carbon fuels.

[Valerie Williams + 129]

1 hour ago, RSD said:

Wait til Ramadan finishes... Iranians aren't going to start a war on the first day of Ramadan...

*shudder* Well, we'll see. I hate this war sh*t.

Edited April 25, 2020 by Valerie Williams

[Valerie Williams + 129]

1 hour ago, D Coyne said:

Valerie,

The pandemic will end, consumption will increase close to previous levels and note that of 83 Mb/d of C+C output at the recent peak 12 month average output level, the Saudis and Russia produced about 20 Mb/d, OPEC plus Russia produced maybe 45 Mb/d of C+C at the recent peak, so still 38 Mb/d needed by the World.  There will be a need for off shore deepwater, and by 2024 oil prices are likely to be $75/bo with prices rising quickly from $43/b at the end of 2021 to $76/bo by mid 2024, I expect by 2022 or 2023 there will be plenty of demand relative to supply of oil.

Also keep in mind the Saudi reserves may be over stated, probably more like 150 Gb of 2P reserves rather than the 250 of proved reserves they claim to have.

So, I need to keep my head down and avoid the axe for about 3 years. LOL. Maybe can be done. I don't think my company is going to go under, or at least I think we're stronger than most. It'll be mighty uncomfortable for awhile.

I've made a lot of noise about losing my job. Fact is, my machine design skills translate to many other industries. I haven't always worked in oil & gas, and I can make another transition. It's just that I like this job, these coworkers, and this company. I would hate to leave.

[Valerie Williams + 129]

1 hour ago, James Regan said:

Valerie I think you have hit the nail on the head, I have only worked with good old boys, the alabama mafia, koonases the whole gambit, mostly the deep southern boys and gals (mostly boys), I was the loan Limey on a rig full of Yanks (they hated that term) but the sense of humour was dynamite no limits, give as good as you get. Maybe we are confusing the audience here with a working rig, onboard same shit different accent. I think the USA has become polarised to the point of quasi civil war, families who dont speak because one has a different political persuasion than the other its almost laughable but not because it's really there. This is not just a US phenomenon Brexit did the same in the UK and still has fall out. Im hoping that this CV19 shitstorm and time for reflection may have guided some of us to humanity and even some nostalgia fuelled making up. I certainly have started to reflect a little. Hence my Beautiful Letter I wrote to you, a very beautifully written letter, no-one does a beautiful letters like I do, your was good but mine was better.......😂

Well of course they did, silly. They ain't no dang Yankees! 🤣

Yeah, we keep telling each other, "Twitter is not the real world" The way it looks on the media and online is just not how it is on the ground. We're all a little confused as to how all this weirdness has happened, and we think maybe it's that all the town kooks that we all used to ignore... well, they all got onto the internet and found each other. They seem like they are more than they are. Unfortunately, the politicians listen to them, so Lord help us!

That last bit! Not even Trump could have said it better. It was a bee-yoo-tee-ful letter. Clearly a very expensive letter. Definitely NOT from CHY-NA.

Edited April 25, 2020 by Valerie Williams

[Valerie Williams + 129]

1 hour ago, D Coyne said:

Valerie,

Saudis have tried to balance the market so that supply and demand match, much as Texas did from 1945 to 1971 through proration.  Lately it has been tough to do because someone produced an extra 7 Mb/d above what they had been producing before, accounting for 84% of the World increase in C+C output, then the citizens of that nation turn around and say "others" are overproducing.  Not particularly logical, at least from my perspective.  Add to this that since 2014 that nations oil producers have been racking up huge levels of debt in the process.  A shovel is not the proper tool to get out of a deep hole. 

You're convincing me.

[D Coyne + 305]

15 minutes ago, Valerie Williams said:

So, I need to keep my head down and avoid the axe for about 3 years. LOL. Maybe can be done. I don't think my company is going to go under, or at least I think we're stronger than most. It'll be mighty uncomfortable for awhile.

I've made a lot of noise about losing my job. Fact is, my machine design skills translate to many other industries. I haven't always worked in oil & gas, and I can make another transition. It's just that I like this job, these coworkers, and this company. I would hate to leave.

Hopefully there will be gradual improvement after a vaccine is developed, things may come back pretty quickly once that is achieved and perhaps before if viable treatments are developed.

[D Coyne + 305]

37 minutes ago, Valerie Williams said:

Only if you truly think electricity can be scaled to replace carbon fuels.

Valerie,

Keep in mind, the electricity stored in the battery is at least 85% efficient from outlet to wheel  (similar comparison of gas pump to wheel) vs about 27% for an average ICE vehicle, so roughly 3 times less electrical energy required for land transport, I own a Model 3 in the Northern US and it works very nicely.  Natural gas, wind, solar, hydro and nuclear can provide plenty of energy for EVs.  A widely interconnected grid (which pretty much already exists in the US) may allow wind and solar widely distributed to provide 90% of load hours with minimal natural gas backup, by overbuilding wind and solar to about 2 times average load hours.

https://pubs.rsc.org/en/content/articlelanding/2018/ee/c7ee03029k#!divAbstract

[Valerie Williams + 129]

4 hours ago, Ron Ron said:

Simply, increase the use of electric cars, solar and wind to replace the imported oil. We live in upstate NY.  We installed solar panels ~10 years ago. Our panels generate 99%of the electricity we use, which includes an electric vehicle. Thanks to the EV it took us about 8 years to recoup the cost of the panels. In New York State we have three nuclear power plants that are past their life expectancy. Turns out it is cheaper to replace the power plants with a distributed solar and wind production system than building 2 to 3 new gas fired power plants. 

I want to start by saying that even though I've talked about not wanting my job to go away, I don't want to give the impression that I'm willing to "ruin the planet" for the sake of making more money. I know that's a big political jibe at the oil industry, so let's put it to bed at the outset. Over the past 26 years, I have worked in machine design, but not always in oil and gas. Oil and gas is probably less than half of my experience. I can transition to something else pretty easily, and so can anyone else in the oil industry. Our skills can be repurposed, so we don't need to senselessly pursue oil to the detriment of all else just to survive or make a profit. That being said, I don't think the world has the technological ability right now to transition away from oil and gas, and so there's still work in this area and I really like my company and coworkers right now - so that's my deal.

Here are my concerns with solar and wind:

First, I don't think the output from those technologies can scale large enough to replace oil and gas.

Second, you still can't get the byproducts from wind and solar that you can from oil (that everyone forgets about, but literally every industry depends on - plastics, elastomers, etc.).

Third, solar and wind farms are terrible for the environment. They are having a terrible effect on wildlife and ecosystems wherever they are installed. Now, you can have a debate on which is worse, fossil fuels vs. "renewables", but the idea that the "renewables" are "clean" and fossil fuels are "dirty" is just baseless. And if you expand those installations to the volume needed to replace fossil fuel, the environmental impact would be horrendous.

Fourth, you have the duck curve (https://en.wikipedia.org/wiki/Duck_curve), and all the batteries in your EV. All "renewable" energy sources require battery backup because the supply cannot be controlled; you have to accumulate it and store it. Batteries are far worse for the environment than oil and gas ever was.

https://eandt.theiet.org/content/articles/2016/10/lithium-ion-batteries-found-to-produce-toxic-gases/

https://www.treehugger.com/corporate-responsibility/living-with-the-side-effects-of-lithium-ion-batteries.html

https://www.forbes.com/sites/jamestaylor/2017/08/17/batteries-impose-hidden-environmental-costs-for-wind-and-solar-power/#1bdb7f26b4e1

Fifth, batteries, part 2: Slave labor. Seriously, everybody needs to quit being mad about slavery hundreds of years ago and be mad about slavery right now.

https://www.theguardian.com/global-development/2016/jan/19/children-as-young-as-seven-mining-cobalt-for-use-in-smartphones-says-amnesty

https://medium.com/thebeammagazine/cobalt-the-toxic-hazard-in-lithium-batteries-that-puts-profit-before-people-and-the-planet-ae5a63e0f57c

But replacing the nuclear plants - that's a shame, b/c nuclear is one technology that might wean us off fossil fuels (except for the by-products). Now, I have ZERO skills in that industry, so I really would be out of a job. 🙂

Thought of another one: Sixth, does anyone know how much of the raw materials for batteries and solar panels exist? Do we even know if the planet can support the manufacture of enough of them?

Edited April 25, 2020 by Valerie Williams

[El Nikko + 2,145]

1 hour ago, Dan Warnick said:

Okay, El Nikko, I waited a day to ask:  you were two sheets to the wind when you typed that, weren't you?  

Damn right 😂

Who cares anymore, no work, no economy and no hope

I've always fancied trying the benefit lifestyle 😂

[Valerie Williams + 129]

41 minutes ago, D Coyne said:

Valerie,

Keep in mind, the electricity stored in the battery is at least 85% efficient from outlet to wheel  (similar comparison of gas pump to wheel) vs about 27% for an average ICE vehicle, so roughly 3 times less electrical energy required for land transport, I own a Model 3 in the Northern US and it works very nicely.  Natural gas, wind, solar, hydro and nuclear can provide plenty of energy for EVs.  A widely interconnected grid (which pretty much already exists in the US) may allow wind and solar widely distributed to provide 90% of load hours with minimal natural gas backup, by overbuilding wind and solar to about 2 times average load hours.

https://pubs.rsc.org/en/content/articlelanding/2018/ee/c7ee03029k#!divAbstract

Quote

Abstract

We analyze 36 years of global, hourly weather data (1980–2015) to quantify the covariability of solar and wind resources as a function of time and location, over multi-decadal time scales and up to continental length scales. Assuming minimal excess generation, lossless transmission, and no other generation sources, the analysis indicates that wind-heavy or solar-heavy U.S.-scale power generation portfolios could in principle provide ∼80% of recent total annual U.S. electricity demand. However, to reliably meet 100% of total annual electricity demand, seasonal cycles and unpredictable weather events require several weeks’ worth of energy storage and/or the installation of much more capacity of solar and wind power than is routinely necessary to meet peak demand. To obtain ∼80% reliability, solar-heavy wind/solar generation mixes require sufficient energy storage to overcome the daily solar cycle, whereas wind-heavy wind/solar generation mixes require continental-scale transmission to exploit the geographic diversity of wind. Policy and planning aimed at providing a reliable electricity supply must therefore rigorously consider constraints associated with the geophysical variability of the solar and wind resource—even over continental scales.

Without purchasing the document, I can only think that the Abstract appears to support what I said to Ron Ron in the last comment. And, it's only talking about current electrical demand. What about when you convert all vehicles to electricity? What about when everything else that uses fossil fuels converts to electricity?

To be sure, in my reply to Ron Ron, I talked about "right now" and "not yet". It's not as if I think we'll never figure it out. We just haven't yet.

Edited April 25, 2020 by Valerie Williams

[James Regan + 1,776]

2 hours ago, Dan Warnick said:

Toga Parties!

ok apart from Roads, Pizza and Toga Parties, what did the Romans ever do for us...?