History Tells Proration Would Cause Chaos In The Texas Oil Patch

[Billyjack + 58]

Assuming the corona scam is ended shortly and demand increases the need for proration will disappear quickly as domestic production will drop 2 to 3 million barrels per day in the next 12 months now that the drilling has ended.

[El Nikko + 2,145]

I've read some positive thoughts about proration, no idea if they are valid but if all companies have to cut/shut in production by a % at least it's done fairly and doesn't destroy smaller companies at the benefit of majors.

I also don't understand why people go on about free markets when the oil industry has never worked like many other businesses, it's more like the metals industry was/is where cartels could destroy competing mines which happened to the UK's tin/copper industry years ago.

I think tariffs are worth looking at as well but at the end of the day if we don't get the economy fired up like yesterday everything is screwed and that's an understatement...could be too late already.

[nsdp + 449]

As some one old enough to have worked summer jobs in oil production for three summers after high school graduation and my first two years in college, my first comment is that the author has a political axe to grind.   He has  never worked a day in his life in a Texas Oil field during proration.   So he doesn't have the ghost of an idea of how it worked.  I worked for Texaco in field offices between semesters at Rice in 1967, 1968 and 1969. Big part of my job was filling out the monthly production reports and doing the data entry on Texaco's production record system.   Most difficult part was making sure that we stayed within the allowables for each at the end of the month for each well.  Brine coprocdution was the biggest problem in lease accounting.   Texaco's reports 50 years ago went into the RRC on computer!  With the internet every producer does it that way now.  With TACC there in Austin,  monthly proration would be about 15 minutes of computer time for those of us who remember how.

Tom you need to do a better job of filtering out BULLSHIT like this story before they get posted.   The issue is whose ox gets gored  economically.  There are no technical issues  that some of us old timers can't deal with  in a couple of weeks.

One other thing, you recover more oil and less brine with proration.   Proration slows salt water intrusion into the well bore.

Edited April 16, 2020 by nsdp
Somethingn the original author ignores.

[BradleyPNW + 282]

On 4/15/2020 at 2:11 PM, Dan Clemmensen said:

EV versus PHEV: I think you are about 3 years behind the curve here. Why should my electric motor be forced to cart around an entire IC drive train that I don't need, just because the dinosaurs in Detroit and especially the auto dealers cannot stand it that I don't want to take my car in for service every 3 months?  3 years ago, maybe the range tradeoff made sense. No longer.

KSA: I evaluate "enemies" by their actions, not by their intentions. If I am threatened by a schizophrenic homeless veteran with PTSD who deserves my sympathy and respect, I am still being threatened and I must still defend myself: he is my "enemy" at that particular instant. KSA threatened us. Again. The threat was overtaken by the pandemic, but it was still a threat and those 14 VLCCs are still on their way here, last I heard.

Partly due to battery cost but also due to infrastructure, PHEVs don't need public charging stations. PHEVs also use small gasoline engines that are cheap to manufacture. It would be much easier to add large fleets of PHEV compared to large fleets of EV. 

EVs are cars for personal benefit. PHEV (+ hybrid) are cars for societal benefit. 

KSA didn't threaten us. To think that you'd need to think all Americans benefit equally from US shale. But it's really just a tiny sector of the much larger US economy. 



 

[Gerry Maddoux + 3,627]

2 hours ago, nsdp said:

One other thing, you recover more oil and less brine with proration.   Proration slows salt water intrusion into the well bore.

I'm not sure I understand. Proration slows salt water intrusion by what, eliminating end-of-life wells from the production supply?

I'm aware that as wells deteriorate there is more salt intrusion into the well bore, which of course pulls in volumes of water. Usually such wells become such a headache they're taken offline. 

[Gerry Maddoux + 3,627]

1 hour ago, BradleyPNW said:

KSA didn't threaten us. To think that you'd need to think all Americans benefit equally from US shale. But it's really just a tiny sector of the much larger US economy. 

Sure they did. A lot of jobs depend on US shale. The trickle-down from that into the general economy is very large. Just a few months ago, what you're saying was more valid: unemployment was nonexistent, the economy was booming. But now we're on the ropes. Today, just today, we crossed the 25 million unemployment mark. And that happened in just a month. Most of those workers cannot be brought back in their former job. This sector--US oil--can still be saved almost in toto. And its trickle-down is more critical than ever.

And the KSA went farther than that. At a time when even the left is saying there's mounting evidence that the virus began in the Wuhan lab, and that Xi hid its ramifications from the world for a couple of weeks, the Saudis are massively discounting oil to China and raising their price to the US. This, from a supposed ally. To not do anything about a flank attack is to say it amounts to nothing, when it actually does. 

[JoMack + 547]

15 minutes ago, Gerry Maddoux said:

Sure they did. A lot of jobs depend on US shale. The trickle-down from that into the general economy is very large. Just a few months ago, what you're saying was more valid: unemployment was nonexistent, the economy was booming. But now we're on the ropes. Today, just today, we crossed the 25 million unemployment mark. And that happened in just a month. Most of those workers cannot be brought back in their former job. This sector--US oil--can still be saved almost in toto. And its trickle-down is more critical than ever.

And the KSA went farther than that. At a time when even the left is saying there's mounting evidence that the virus began in the Wuhan lab, and that Xi hid its ramifications from the world for a couple of weeks, the Saudis are massively discounting oil to China and raising their price to the US. This, from a supposed ally. To not do anything about a flank attack is to say it amounts to nothing, when it actually does. 

Christian and Sitton of the Texas RR Commission talked to representatives of the oil industry on-line yesterday and they appear to be reluctant to prorate production.  Exxon-Mobile is dropping its budget by $30 billion and most of the cut is in the Permian Basin in Texas and New Mexico.  When Abbot sees the crater from revenue to the Texas coffers, how can they prorate oil in Texas.  Harold Hamm told the TRRC that Oklahoma was going to prorate.  But, Oklahoma is no Texas so don't see proration being a plus for Texas or the industry.  SA is "still" producing like a drunken sailor since the OPEC+ agreement isn't in effect until May.  SA owns Motiva (biggest refinery in the U.S.).   We need to look at Motiva since Salman is immature enough to bring in Saudi crude and slam the U.S.  Wonder if Trump would act?  Nationalize?  Build a freaking refinery for heavy crude?  If we're going to use the Defense Act, this is the time to get a new refinery for national security so there's no need to import from Canada/Mexico, et al.  Set a market price for U.S./Mexico/Canada crude and get out of the madness. A dream, but one that should to be discussed since there is no free market in oil and gas. 

[ceo_energemsier + 1,818]

5 minutes ago, JoMack said:

Christian and Sitton of the Texas RR Commission talked to representatives of the oil industry on-line yesterday and they appear to be reluctant to prorate production.  Exxon-Mobile is dropping its budget by $30 billion and most of the cut is in the Permian Basin in Texas and New Mexico.  When Abbot sees the crater from revenue to the Texas coffers, how can they prorate oil in Texas.  Harold Hamm told the TRRC that Oklahoma was going to prorate.  But, Oklahoma is no Texas so don't see proration being a plus for Texas or the industry.  SA is "still" producing like a drunken sailor since the OPEC+ agreement isn't in effect until May.  SA owns Motiva (biggest refinery in the U.S.).   We need to look at Motiva since Salman is immature enough to bring in Saudi crude and slam the U.S.  Wonder if Trump would act?  Nationalize?  Build a freaking refinery for heavy crude?  If we're going to use the Defense Act, this is the time to get a new refinery for national security so there's no need to import from Canada/Mexico, et al.  Set a market price for U.S./Mexico/Canada crude and get out of the madness. A dream, but one that should to be discussed since there is no free market in oil and gas. 

COP has announced they are going to shut in 1/4th of their North American production.

Conoco Slashing North American Output in Biggest Oil Cutback

https://www.bloomberg.com/news/articles/2020-04-16/conocophillips-to-curtail-oil-production-after-crude-s-collapse

 

 

OK, now coming to some of your statements you have made here.

1) All (most) companies are cutting budgets and laying off people not just XOM and the cuts are all over the country and overseas too.

All international oilcos are cutting costs, cutting planned expenses and investments, shutting in production, laying off people.

Some companies are shutting down for the short or mid term or permanently.

 

2) SA will keep producing till the last second on the clock, so they can have those extra barrels and move them around the world in strategic locations , they are staging their oil so when the demand "comes back" its right at the door steps of the buyers and they will be the first to offer here it is.

 

3) Why would the US want to build a refinery for heavy crude? we have plenty of light sweet shale crude!

4) So you want the US Gov to nationalise a foreign country's resource asset? What do you think the Saudi's will do? Wont they move to nationalize the JV's of CVX, COP and XOM and others, they all have many many billions of $$$ worth of oil and gas and petchem JVs in SA.

5) There is also a regional and basin by basin basis crude bencmark(s) for Canadian, and US crude oils and Mexico's crude oil. All these crude oils are far lower in price per barrel than other world benchmarks. So what new benchmarks do you propose?

😏

[nsdp + 449]

1 hour ago, Gerry Maddoux said:

I'm not sure I understand. Proration slows salt water intrusion by what, eliminating end-of-life wells from the production supply?

I'm aware that as wells deteriorate there is more salt intrusion into the well bore, which of course pulls in volumes of water. Usually such wells become such a headache they're taken offline. 

Gerry, Schlumberger's  Oil field Glossary has a diagram for you here.  https://www.glossary.oilfield.slb.com/en/Terms/c/coning.aspx  The faster you produce a well the faster you get salt water intrusion that causes the well to "water out". recover more oil per well with proration  it just takes longer.

MBA's focused on discounted cash flow and not optimal recovery  is why we have the independents living on a knife edge.  Old oil wells produced for 50 years or longer.  . Today's completion techniques want max recovery in 5 years and to hell with what you leave behind.

Edited April 17, 2020 by nsdp

[Dan Clemmensen + 1,011]

3 hours ago, BradleyPNW said:

KSA didn't threaten us. To think that you'd need to think all Americans benefit equally from US shale. But it's really just a tiny sector of the much larger US economy. 



 

KSA's stated goal is to kill shale because it keeps them from returning to OPEC cartel control of the price. They want $100/bbl or higher oil. Shale was capping oil at about $55. If shale dies, that $100/bbl is sure as heck an attack on the US economy as a whole, not on "a tiny sector".  In fact, $100/bbl crude is a drain on the global economy, not just the US economy, and The US consumer will pay a disproportionate part of that $100. 

From an environmental perspective, I suppose I should be cheering to $100/bbl oil, because doubling the price of gasoline would induce more aggressive conservation measures including a move away from IC vehicles. I must admit the one silver lining of the lockdown is the much cleaner air here in the Bay area. But no. If we need to double the price of gasoline, we should tax it instead of sending that money to KSA and Russia and leaving ourselves at the mercy of OPEC+. 

[Dan Clemmensen + 1,011]

3 hours ago, BradleyPNW said:

Partly due to battery cost but also due to infrastructure, PHEVs don't need public charging stations. PHEVs also use small gasoline engines that are cheap to manufacture. It would be much easier to add large fleets of PHEV compared to large fleets of EV. 

EVs are cars for personal benefit. PHEV (+ hybrid) are cars for societal benefit. 
 

An interesting perspective, and it's even true for a fairly short transition period in any given area until the charging infrastructure evolves. But most folks with EVs are able to charge at home for almost all of their charging. Battery cost has dropped dramatically, so range has been going up for cars of the same cost. The TCO for a Tesla Model 3 is lower than the TCO for a Corolla for almost all customers. Until you have lived with an EV, you don't really realize what a nuisance an IC car really is, how much your garage stinks and the hassle of the gas station and Jiffy Lube. Yes large fleets of EVs would require "large" numbers of public charging stations, but that is proceeding apace anyway. If we go back to the beginning of this piece of the discussion, we see that it was about the possible need for a rapid shift away from ICs to electric in response to an accelerated oil supply reduction. Charging infrastructure can grow at least as fast as production of PHEVs.

[ceo_energemsier + 1,818]

This is without proration:

 

Bloomberg) -- No one is feeling the pain of an oil collapse more than the shale producers. Except, perhaps, their suppliers.

Take Stacy Locke, chief executive officer for Pioneer Energy Services Corp. Locke says he had no choice but to abandon drilling in the Bakken shale basin after roughly 20 years there as plunging oil prices slashed activity, and a major customer in the region -- Whiting Petroleum Corp. -- went bankrupt. The end result of a tough year for oil: Pioneer will lose the last 6 rigs it has in the Bakken, with each one ending jobs for 20 or so workers.

Since the start of 2019, the oilfield services sector has lost almost 50,000 jobs, or about 13% of its workforce. Meanwhile, the falloff in fracking -- the technology used to shake loose oil from shale -- is forecast to face its worst year ever with at least half of all work expected to be ended by July 1, according to Citigroup Inc. The domino effect for workers across a wide spectrum of companies can be devastating, said Skip Locken, Pioneer’s vice president of drilling operations.

“There are so many different companies that are involved in drilling one well,” said Locken, a North Dakota native who’s worked with Whiting as a client for a dozen years. “It comes down to the person that brings water out to employees on the rig, or toilet paper, paper towels, oil, gas, cement, or who do the fracking and the logging.”

Contractors hired to map underground pockets of oil, drill new wells and open them are expected to be among the hardest hit in the energy industry as producers slam on the brakes to survive a crude-price crash triggered by a demand-destroying pandemic and a battle for market share between Saudi Arabia and Russia. Although the world’s biggest producers agreed to a global output cut last weekend, it hasn’t been enough to boost prices from the doldrums.

“It’s just terribly painful,” said Locke, whose own company filed for chapter 11 restructuring in March, about a month before Whiting’s move. “When the big ones fall, that’s really pretty catastrophic.”

Whiting’s bankruptcy filing alone has undercut rig operators, water haulers, chemical providers and other contractors large and small. Four of the world’s biggest servicers are each owed more than $1 million, with Schlumberger Ltd. and Halliburton Co. carrying unsecured claims of more than $8 million a piece.

Investors will get their first look at the first-quarter financial damage on Friday when Schlumberger, the world’s biggest oil services provider, reports earnings. Halliburton and Baker Hughes Co. will follow next week.

On Monday, Baker Hughes announced it will write down $15 billion in value from two of its biggest business units. That followed announcements over the past month from rivals Schlumberger and Halliburton of furloughs, salary reductions and job cuts.

After averaging less than three bankruptcies a quarter for all of 2018 and the first half of 2019, the oilfield services sector finally hit its debt wall, according to Haynes & Boone LLP. Now the hired hands of the oil patch are averaging more than eight filings over each of the past three quarters.

“I think we’re going to have quite a few bankruptcies this go around,” Locke said by telephone. “Our experience in the Bakken, after 15-20 years up there is probably over for drilling, which is really really sad.”

To combat that, some explorers such as Parsley Energy Inc. have have asked their contractors to help them cut as much as 25% from their oilfield costs. But industry consultant Rystad Energy estimates that explorers may only be able to get about half that, with so little for the servicers to give up this time around.

The last time that oil prices tanked, from more than $100 a barrel in 2014 to roughly $26 in 2016, service companies gave up major concessions to their customers, partly to keep market share. Now companies such as Patterson-UTI Energy Inc. and RPC Inc. are working from a new playbook: scrapping excess frack pumps for the first time ever, turning instead to idle gear in a pinch.

“When a pump breaks, I drag the truck off to the side and I go grab another one that was working last time I had it on a job, put it in line and run that till it breaks,” Richard Spears, an industry consultant who’s worked in and around the oil patch for decades, said on a recent Evercore ISI webinar.

“You can do this incredible discounting as long as you’ve got idle equipment that was in good shape,” he said. “But eventually you burn through even all that.”

[surrept33 + 609]

On 4/15/2020 at 4:11 PM, Dan Clemmensen said:

EV versus PHEV: I think you are about 3 years behind the curve here. Why should my electric motor be forced to cart around an entire IC drive train that I don't need, just because the dinosaurs in Detroit and especially the auto dealers cannot stand it that I don't want to take my car in for service every 3 months?  3 years ago, maybe the range tradeoff made sense. No longer.

KSA: I evaluate "enemies" by their actions, not by their intentions. If I am threatened by a schizophrenic homeless veteran with PTSD who deserves my sympathy and respect, I am still being threatened and I must still defend myself: he is my "enemy" at that particular instant. KSA threatened us. Again. The threat was overtaken by the pandemic, but it was still a threat and those 14 VLCCs are still on their way here, last I heard.

re: PHEV vs BEV, it depends on what objective is being maximized. If it's emissions, then a hybrid might actually be a better choice because of the carbon emissions currently involved in the large amount of batteries needed in a pure BEV:

https://www.emissionsanalytics.com/news/hybrids-are-better

[0R0 + 6,251]

7 hours ago, nsdp said:

MBA's focused on discounted cash flow and not optimal recovery  is why we have the independents living on a knife edge.  Old oil wells produced for 50 years or longer.  . Today's completion techniques want max recovery in 5 years and to hell with what you leave behind.

That is for the next refrack job. After all, the vast majority of the oil stays behind. 

[Tom Kirkman + 8,860]

6 hours ago, Dan Clemmensen said:

KSA's stated goal is to kill shale because it keeps them from returning to OPEC cartel control of the price. They want $100/bbl or higher oil. Shale was capping oil at about $55. If shale dies, that $100/bbl is sure as heck an attack on the US economy as a whole, not on "a tiny sector".  In fact, $100/bbl crude is a drain on the global economy, not just the US economy, and The US consumer will pay a disproportionate part of that $100. 

My opinion on a "Goldilocks" price remains at around $70 Brent.  2 years to 18 months ago I commented ad nauseum about it here.  $100 is too high, and $40 is too low.

[JoMack + 547]

12 hours ago, ceo_energemsier said:

COP has announced they are going to shut in 1/4th of their North American production.

Conoco Slashing North American Output in Biggest Oil Cutback

https://www.bloomberg.com/news/articles/2020-04-16/conocophillips-to-curtail-oil-production-after-crude-s-collapse

 

 

OK, now coming to some of your statements you have made here.

1) All (most) companies are cutting budgets and laying off people not just XOM and the cuts are all over the country and overseas too.

All international oilcos are cutting costs, cutting planned expenses and investments, shutting in production, laying off people.

Some companies are shutting down for the short or mid term or permanently.

 

2) SA will keep producing till the last second on the clock, so they can have those extra barrels and move them around the world in strategic locations , they are staging their oil so when the demand "comes back" its right at the door steps of the buyers and they will be the first to offer here it is.

 

3) Why would the US want to build a refinery for heavy crude? we have plenty of light sweet shale crude!

4) So you want the US Gov to nationalise a foreign country's resource asset? What do you think the Saudi's will do? Wont they move to nationalize the JV's of CVX, COP and XOM and others, they all have many many billions of $$$ worth of oil and gas and petchem JVs in SA.

5) There is also a regional and basin by basin basis crude bencmark(s) for Canadian, and US crude oils and Mexico's crude oil. All these crude oils are far lower in price per barrel than other world benchmarks. So what new benchmarks do you propose?

😏

Just talking Texas since it is the largest oil and gas producer in the U.S.  Of course, the entire industry is cutting production and costs.  When Halliburton lays off 3,500 last month, huge sign there's trouble in the patch.  XTO is so slowing to a trickle in the Permian with Oxy and Parsley following suit.  

We should never have let the Saudis buy out Dutch Shell on Motiva and they produce somewhere in the neighborhood of 680,000 bbls. a day.  Reminds me of Bush deciding at first not to interfere with the Unocal deal between China and Chevron.  He came to his senses and tossed China back to Bejing.   But having a country that is bent on destroying the U.S. oil industry for market share is not what we need and if the price remains below $20, OPEC+ will be importing the 5 million bbls a day we will be losing. 

The purchasers are exporting sweet crude since the refiners retrofitted for heavy crude.  We need to refine all of U.S. crude.  Discounting on crude is the nature of the beast but have a benchmark in our own will give the industry some stability.  

We consume 18 million bbls or oil a day - pre-coronavirus.  Why are we exporting?

[john bozeman + 42]

Every well in Texas has a potential production test done at completion-this used to be a big deal but now it is boiler housed.  We do periodic production capability tests (G-10 for a gas well) on a regular basis for the RRC.  Again, these used to be a pretty big deal but now are boilerhouse. (surely you can figure out boilerhouse).  Every well (or lease) in Texas has monthly production reporting and they check the math-every month.  The rrc has everything it needs for statewide pro-rationing in house today.  My partner has possibly the last well in the state (certainly in district 10) to be actively prorationed and that only stopped a couple of years ago.  Prorationing will not cause "chaos".  It used to be a routine operation to dicker with the RRC about an individual well's production.  No big deal.  Prorationing will not stop drilling, it will slow it down and make people more careful.  Think about it, was there ever a shortage of Texas oil millionaires ?  We need prorationing in Texas regardless of world conditions.  The crazy Permian drilling wasted more gas than anyone can count.  ( I promise you they vented as much or more than was flared).  Unregulated drilling and production has caused the premature P&A of wells (waste) for years.  Ironically, I could still squeeze out a breakeven today if the RRC did not allow the pipelines to steal my gas.  We needed prorationing in the past and we will need it in the future.  All you guys need to read the oilystuff blog and learn something.

[Tom Kirkman + 8,860]

2 minutes ago, john bozeman said:

All you guys need to read the oilystuff blog and learn something.

That's the blog by @Mike Shellman

https://www.oilystuffblog.com/

 

[Gerry Maddoux + 3,627]

18 minutes ago, john bozeman said:

Every well in Texas has a potential production test done at completion-this used to be a big deal but now it is boiler housed.  We do periodic production capability tests (G-10 for a gas well) on a regular basis for the RRC.  Again, these used to be a pretty big deal but now are boilerhouse. (surely you can figure out boilerhouse).  Every well (or lease) in Texas has monthly production reporting and they check the math-every month.  The rrc has everything it needs for statewide pro-rationing in house today.  My partner has possibly the last well in the state (certainly in district 10) to be actively prorationed and that only stopped a couple of years ago.  Prorationing will not cause "chaos".  It used to be a routine operation to dicker with the RRC about an individual well's production.  No big deal.  Prorationing will not stop drilling, it will slow it down and make people more careful.  Think about it, was there ever a shortage of Texas oil millionaires ?  We need prorationing in Texas regardless of world conditions.  The crazy Permian drilling wasted more gas than anyone can count.  ( I promise you they vented as much or more than was flared).  Unregulated drilling and production has caused the premature P&A of wells (waste) for years.  Ironically, I could still squeeze out a breakeven today if the RRC did not allow the pipelines to steal my gas.  We needed prorationing in the past and we will need it in the future.  All you guys need to read the oilystuff blog and learn something.

John, this was a much-needed summation. Thank you, sir, for providing us with the Reader's Digest Condensed Version! Turns out that some of us were blabbering on about something we thought we understood but didn't. (I imagine there's quite a bit of that going on.)

But any cunning linguist would tell you that the term is "boiler-roomed." Since you seem to have a sense of humor, I thought I could point that out--I get it, the data is boiler-roomed to sell it to the TRRC. 

Please keep contributing to our continuing education. Sincerely. 

[ceo_energemsier + 1,818]

4 hours ago, JoMack said:

Just talking Texas since it is the largest oil and gas producer in the U.S.  Of course, the entire industry is cutting production and costs.  When Halliburton lays off 3,500 last month, huge sign there's trouble in the patch.  XTO is so slowing to a trickle in the Permian with Oxy and Parsley following suit.  

We should never have let the Saudis buy out Dutch Shell on Motiva and they produce somewhere in the neighborhood of 680,000 bbls. a day.  Reminds me of Bush deciding at first not to interfere with the Unocal deal between China and Chevron.  He came to his senses and tossed China back to Bejing.   But having a country that is bent on destroying the U.S. oil industry for market share is not what we need and if the price remains below $20, OPEC+ will be importing the 5 million bbls a day we will be losing. 

The purchasers are exporting sweet crude since the refiners retrofitted for heavy crude.  We need to refine all of U.S. crude.  Discounting on crude is the nature of the beast but have a benchmark in our own will give the industry some stability.  

We consume 18 million bbls or oil a day - pre-coronavirus.  Why are we exporting?

Yes, everyone know that all the companies are cutting costs and laying off people and cutting back their production if they cant sustain at these prices and dont have the right hedging done for their production mix.

Yes, the Chinese should not have been allowed to buy Unocal , in the same breath for the same argument or discussion, we can say that we should have never let Toyota, Mazda, Nissan and others build or buy plants in the US? The refiners never retrofitted for heavy crude or rather sour crudes , those old refineries were built and configured for processing sour crudes. Not all sour crudes are heavy FYI.

US refiners for the last several years have added capacity and "retrofitted" their processing systems to process and refine a lot if light shale crude oils.

Using your concept, would leave the world in a closed economy. If we didnt let some country buy or build something in ours, they would let our companies to buy, sell and or build something in their country. I understand the need for national security interests first and self preservation but in the energy business , well rather a fungible energy business that may create isolation. It was congress that revoked the ban on crude oil exports, so go ahead write your Senators and Congress folks to reinstate the ban, dont blame the companies that export. While you are at it, ask them to also ban the export of refined products and petchem since we use a lot of those too.

We already have numerous bench marks for US domestic crude oils. Are you able to provide a benchmark that will take into consideration all the fluctuations in quality and characteristics plus regional and local logistical challenges and make them all even and homogenised?

So we should also stop exporting corn, soybeans, wheat and whatever else we produce in the country but may also import some?

 

[ceo_energemsier + 1,818]

Trump to Lease Oil Storage to Nine Companies

 

(Bloomberg) -- The U.S. Energy Department is negotiating with nine companies to rent about 23 million barrels of oil storage capacity in its Strategic Petroleum Reserve as part of a Trump administration bid to help drain the country’s growing glut of crude.

The Energy Department said most of the oil will be delivered in May and June, with the crude distributed into all four of the reserve’s storage sites in Texas and Louisiana. The agency did not say what companies were involved in the deals or detail the terms of their contracts.

“When producing oil, you have two options -- you either use it or you store it,” Energy Secretary Dan Brouillette said in a news release. “Providing our storage for these U.S. companies will help alleviate some of the stress on the American energy industry and its incredible workforce.”

The Energy Department earlier this month offered to lease as much as 30 million barrels of storage to domestic producers that are struggling to find places to keep excess oil amid an unprecedented collapse in demand caused by the Covid-19 outbreak. Of the original total, 22.8 million barrels were marked for low-sulfur crude, and the rest for high-sulfur oil. The tender offering the storage closed April 9.

The final mix and grade of crudes that would be stored under the leasing initiative were not immediately available.

The oil earmarked for storage under the program will be aggregated from small, medium and large producers, the Energy Department said. Companies can schedule return of their crude through March 2021, subtracting what the agency said would be “a small amount of oil to cover the SPR’s cost of storage.”

President Donald Trump has sought to help America’s shale industry after large swaths of the world shut down to stem the spread of the coronavirus, causing demand to crumble. Trump helped broker a deal among the world’s largest producers to cut crude supplies by 9.7 million barrels a day from May, ending a price war between Saudi Arabia and Russia.

The planned oil leasing will consume roughly a third of spare capacity in the Strategic Petroleum Reserve, which was established after the Arab oil embargo in the 1970s to help the U.S. weather supply shocks.

The Trump administration is still seeking to fill up the rest of the reserve, including by buying domestic crude for the stockpile. An initial proposal to purchase as much as 77 million barrels of crude for the reserve was blocked by Democrats in Congress, though another purchase plan may be revived as part of the next stimulus package.

 

[Mike Shellman + 548]

1 hour ago, john bozeman said:

 We needed prorationing in the past and we will need it in the future.  

Thank you, Mr. Bozeman. I appreciate that. You and Reuters made my week.

Only people still able to monetize the shale oil phenomena and hiding behind the guise of "free enterprise" are opposed to proration in Texas and almost none of them have any thing actually vested in the long term health of the Texas oil and gas industry. Its incredible to me how a sector like shale oil, born and spoon fed on socialized capital, with no regulations to speak of, is opposed to proration, or putting shale development back on reasonable spacing between wells... yet whine like little girls for other forms of government handouts. I've never known a fraction of my industry to have received so much "help" over the years and still not been able to make any money. The idea it might now be paid by Trump not to drill wells makes me want to move to Paraguay. 

Proration is easy to implement, as you correctly point out; Texas operators already have to comply with well allowables and balancing sales to those allowables each month anyway. Gas in already prorated in the Panhandle; the TRRC knows how to do that and can get it up and rolling in a few months. Leasehold matters, hedge pledges, pipeline contracts, all that would easily and legally take a back set to proration. The prevention of waste and the conservation of resources is part of the Texas Constitution and outlined in the Texas Natural Resource Code. Its the law. Those laws have not been upheld the past 15 years and its time to reimplement them, in their entirety. If led to its own self serving, fiscal irresponsibility, the shale oil sector will drain Texas plum dry in the next 5 years...and still not make any money doing it. 

Thank you again, sir. And Tom, thank you. 

 

[john bozeman + 42]

Gerry-I always heard "boilerhouse" in the forty or so years I've worked in the industry.  I've always thought it might have come from the steam drilling rig and pumping house days when, if it was cold, a lazy guy would just write up his production report or drilling log indoors in the warm boilerhouse instead of going outside and taking actual measurements.  I am a bit of a student of oil and gas history (another great reason to try oilystuff).  I'm afraid I have probably too much to say about all this but, it seems that my big mouth is the only effective tool I have left (and I have the waistline to prove it).  johnb

[Gerry Maddoux + 3,627]

4 minutes ago, john bozeman said:

erry-I always heard "boilerhouse" in the forty or so years I've worked in the industry.  I've always thought it might have come from the steam drilling rig and pumping house days when, if it was cold, a lazy guy would just write up his production report or drilling log indoors in the warm boilerhouse instead of going outside and taking actual measurements.  I am a bit of a student of oil and gas history (another great reason to try oilystuff).  I'm afraid I have probably too much to say about all this but, it seems that my big mouth is the only effective tool I have left (and I have the waistline to prove it).  johnb

HaHa, well I can live with boilerhouse, because you seem to have the facts in your wheelhouse to back up your lingo. 

There are all sorts of people on this board: communists, socialists, real oilmen, make-believe oilmen, curiosity-seekers, cultists, young whippersnappers and old people trying to escape the virus. We need reliable wisdom. 

On this board we have one guy who goes by the handle of ORO. I know nothing of his past but he is pretty close to being a polymath. The interesting thing is, like you, he is no show-off but just writes his piece and lets it talk for him. 

I grew up on the "other side" of the Panhandle and have followed that stuff in the Granite Wash for many years, yet I had no idea of proration. Please, if you have the time, cut loose on us. Most of us could use a little deep-conditioning with the truth. 

[john bozeman + 42]

FYI- last week I got an oil purchase contract cancellation from Plains All American covering a little bit of production we have in Oklahoma.  I called the guy to ask what gives and he said "nothing to worry about, just a formality".  It was effective May 1st so I asked if he would take a load before then and he said "sure".  Then I asked if I could sell a load after may 1st and he said "absolutely not, I can't take any oil without a contract."   A few days later he sent me his "new" negotiated terms.  Plains will pay me the index price (a geographic-area price, in this case Western Oklahoma and close in price/quality to WTI) less $17.79.  So my current sales price for Western Oklahoma oil is approx 50 cents/bbl.  Actually, my personal biggest concern is that gas takes are likely to go to zero.  Raw gas from the wellhead is a mix of methane and heavier "liquids".  This are separated at field plants.  If there is no place for the liquids to go, the pipes will have to stop taking my gas and then my revenue is zero.  Good thing I started hoarding whiskey when all those idiots bought up all the toilet paper.  johnb