U.S. Shale Output may Start Dropping Next Year

[David Jones + 84]

For anyone that is interested, here's an example of the state of batteries for electric vehicles in 2001 and what the goals were at the time (can be found with a google search limited to 2000-2001). That's less than 20 years ago (Idaho National Laboratory):

https://avt.inl.gov/sites/default/files/pdf/fsev/batteries.pdf

According to the above, current (at the time) batteries can only store enough energy for 50-150 miles of range. The current state of lithium polymer is given as 150wh/kg, the goal back then was to achieve 200 miles of range and 200wh/kg. This was in 2001, many car makers have either already managed/surpassed this range or are soon releasing far greater ranges.

Today, the Tesla Model 3 manages 325 miles, more than double the possible (according to the above) range back in 2001. Along this development trajectory, in 20 years vehicles with costs of about 50k equivalent will have ranges of 600 miles or more.

If 250wh/kg has been available for the past 20 years, then the "long term goal" as the article above puts it of 200wh/kg would be useless. Nobody sets long term goals that are lower than currently available technology.

I have to wonder what kind of mind it takes to come to a different conclusion than the above.

[Jeff_Calgary + 68]

7 hours ago, D Coyne said:

Wastral,

So far methane hydrates are not economically competitive, soon PV solar costs will fall to a level that shale gas will no longer be competitive either.  In the areas with the best solar resources, new natural gas power plants can no longer compete, meanwhile PV solar costs continue to fall.

Last I checked the sun went out at night. So you need the gas plants and the solar plants. So is the solar all in cost competitive with just the gas fuel and engine exchange cost? That is the comparison.

Edited March 19, 2019 by Jeff_Calgary

[eivindrj + 1]

On 3/18/2019 at 12:37 AM, Tom Kirkman said:

I just can't see WTI going above $50 and staying above $50 in the long term.

Obviously, I could be wrong.

I see, but if shale production drops, why would the price get negatively effected? if production drops wont that lead to less supply to the market then again bullish for price?

[NWMan + 89]

take a look at a motorway in the states, thousand and thousands of cars, trucks etc.. all powered by hydrocarbons.  Think of the amount of energy being produced and used to move those vehicles.  Think of all the motorways.  This gives an idea of the scale of the energy requirement.  To me, if we replaced all these vehicles over night with EV, just think of the changes required to the power output of our local electrical grid system to charge them all.  In the UK the grid sometimes runs close to maximum by people turning on kettles for a cup of tea during adverts.  Every one will have an EV and just take it home and plug it in at night and in the morning we will all get up and set off down the motorway to LaLa land!  We might all get to LaLa land but not in 10 years time and not using renewable energy.

[footeab@yahoo.com + 2,187]

6 hours ago, David Jones said:

If 250wh/kg has been available for the past 20 years, then the "long term goal" as the article above puts it of 200wh/kg would be useless. Nobody sets long term goals that are lower than currently available technology.

I have to wonder what kind of mind it takes to come to a different conclusion than the above.

You love tilting at windmills and moving goal posts don't you?  I have never said 250Wh/kg batteries have existed for the last 20 years.  Chemical theory says so...

200?  Yes.

Here are the cummulated average statistics for Lithium energy density.  https://batteryuniversity.com/index.php/learn/archive/battery_statistics

Fig 7

Next is where we are today and theoretical in the future:

https://inventuspower.com/wp-content/uploads/2017/01/Annual-Update-on-Lithium-Ion-Battery-Technology.pdf

Pg. 7 and 8.

EDIT: bottom link was bad.

 

Edited March 20, 2019 by Wastral

[Tom Kirkman + 8,860]

3 hours ago, eivindrj said:

I see, but if shale production drops, why would the price get negatively effected? if production drops wont that lead to less supply to the market then again bullish for price?

Good observation.

But the shale production / price "see saw" has so far tended to gravitate toward $50.

 

[David Jones + 84]

8 hours ago, Wastral said:

You love tilting at windmills and moving goal posts don't you?  I have never said 250Wh/kg batteries have existed for the last 20 years.  Chemical theory says so...

200?  Yes.

Here are the cummulated average statistics for Lithium energy density.  https://batteryuniversity.com/index.php/learn/archive/battery_statistics

Fig 7

Next is where we are today and theoretical in the future:

https://inventuspower.com/wp-content/uploads/2017/01/Annual-Update-on-Lithium-Ion-Battery-Technology.pdf

Pg. 7 and 8.

EDIT: bottom link was bad.

 

There's one thing that people with your frame of mind are good at and that is to pull the rest of us into wasteful discussions that defy common sense in their existence. I shouldn't have to point out what I'm about to point out to you.

You seem to have trouble reading charts properly or understanding the different elements involved. The red line in the chart related to energy density is for wh/l (volumetric energy density) not wh/kg (gravimetric energy density) which is the green line. If you read a little more carefully instead of focusing on engaging me as confrontationally as possible in the hope that this will somehow change the outcome of this "discussion" (that wont make any difference since my understanding of the situation is based on available data and not connected to any kind of emotional state), you'll see that the energy density I have been talking about in all my posts is in fact the wh/kg value and regardless, one of your main assertion is that battery energy densities have not improved for the past 20 years. The information you linked says otherwise (Figure 7 clearly shows exactly what I said above, about 150wh/kg in 2000/2001 and 2005 is under 200wh/kg, probably around 180/190 which is, surprise surprise, about 4%-5% annual improvement from 2000). In addition to the fact that the chart does not actually register 200wh/kg if you look closely, 2005 - 2018 is in fact 13 years not 20 years. As many in your frame of mind, BS acrobatics is the most commonly used tool in conversation.

As for the second link, battery technology is not solely focused on the current lithium chemistries and thinking that somehow lithium tech will reach a dead end due to limitations of current tech and that'll be it for battery gravimetric energy density progress is simply blind. Batteries are generic energy storage devices, they are not fixed to any specific chemistry, that is their actual major advantage over fossil fuel based systems which are unlikely to be viable if a situation ever develops where they would have to be created, not extracted. In some ways, this situation has already arrived. Many of you here just don't want to confront it.

[butasha + 123]

I don’t doubt  that electric car sales are up and increasing. What we seldom see in the discussion is the fact that suv and truck sales are up as well. At least here on the US anyway.

https://www.foxnews.com/auto/ford-boosting-production-of-expedition-and-lincoln-navigator-suvs

[ceo_energemsier + 1,818]

U.S. Gulf Coast becomes net oil exporter in late 2018

In the last two months of 2018, the U.S. Gulf Coast exported more crude oil than it imported.

Monthly net trade of crude oil in the Gulf Coast region—the difference between gross exports and gross imports—fell from a high in early 2007 of 6.6 million barrels per day (bpd) of net imports to 0.4 million bpd of net exports in December 2018. As gross exports of crude oil from the Gulf Coast hit a record 2.3 million bpd, gross imports of crude oil to the Gulf Coast in December—at slightly less than 2.0 million bpd—were the lowest level since March 1986.

 

Several continuing trends pushed crude oil exports higher and imports lower and resulted in the Gulf Coast (defined as Petroleum Administration for Defense District or PADD 3) becoming a net crude oil exporter in the last two months of 2018.

U.S. crude oil production, particularly in the U.S. Gulf Coast region, has increased in recent years. In November 2018, U.S. Gulf Coast crude oil production set a new record of 7.7 million bpd. The increased production is mostly of light, sweet crude oils, but U.S. Gulf Coast refineries are configured mostly to process heavy, sour crude oils. This increasing production and mismatch between crude oil type and refinery configuration allows for more of the increasing U.S. crude oil production to be exported.

As a result, in late 2018, U.S. gross crude oil exports reached new record highs. Because more than 90 percent of U.S. crude oil exports leave from the U.S. Gulf Coast, crude oil exports from the region also set a record high of 2.3 million bpd in December. In each of the last three months of 2018, the U.S. Gulf Coast exported more than 2 million bpd.

As U.S. crude oil production has increased, U.S. total and Gulf Coast region crude oil imports have decreased. In the mid-2000s, when both U.S. total and Gulf Coast region crude oil imports were at their highest, the Gulf Coast accounted for nearly two-thirds of the national total. More recently, as Gulf Coast crude oil imports have declined and other regions such as the Midwest and West Coast (PADDs 2 and 5, respectively) have increased their crude oil imports, the Gulf Coast’s share of total imports has decreased, most recently averaging 32 percent in 2018.

In addition, Gulf Coast gross crude oil imports reached record lows in the final months of 2018, with imports of 1.9 million bpd in December compared with 3.7 million bpd at the same time five years ago. In particular, Gulf Coast crude oil imports from members of the Organization of the Petroleum Exporting Countries (OPEC) fell sharply in the final two months of 2018, from an average of 1.5 million bpd in the first half of 2018 to 1.1 million bpd in December.

The Gulf Coast is the first region to export more crude oil than it imports since the West Coast saw relatively small net exports in the early 1990s. The Midwest now has the highest net imports of crude oil of any PAD District, averaging 2.6 million bpd in 2018.

EIA’s latest Short-Term Energy Outlook forecasts that in 2020 the United States will begin exporting more petroleum and other liquids than it imports on an annual basis—an observation including not only crude oil but also petroleum products and hydrocarbon gas liquids.

[D Coyne + 305]

On ‎3‎/‎19‎/‎2019 at 9:53 AM, Wastral said:

YOur solution is opposite economics... MORE expensive power... Listen to yourself man.  And your math sucks.  A 50KWh battery has a capacity brand new of 40KWh.  Some of which was used getting to work and who says it was charged overnight?  Most likely not, as people will not plug in if they do not have to.  An older battery will have 20KWH useable and last I checked you have to do errands before going home which your wife calls you to do or pick up the kids and you need an extra 50miles, not your 10...  Reality is you can play with about 10KWh of the battery.... Yea, bravo... you can make a $1 a day if you plug, unplug every day....  Yea right, as if a business is going to install a $10,000 dollar upgrade for $1 a day... want to go to the extreme?  $2.  Not your $20. 

Progress in society happens when CHEAPER, more robust solutions occur, not more expensive, time consuming, more complex solution trying to find a problem occur. 

You are also pretending that charging/discharging your battery does not cost you.... Uh... Battery life...  Great you just doubled the number of cycles which means your battery life just got cut in half.  Brilliant...

Wastral,

It is up to the owner of the battery to decide if using the battery for grid  backup makes sense.  If someone anticipates they need to run errands, they would simply reduce the number of kWhr they would sell back to the grid.  Of course the battery life would be reduced, that's why the battery owner would demand a premium, and it would be up to the owner to decide what price is sufficient to make the transaction worthwhile, <I>just like every other market transaction</I>.  The Telsa battery in a model 3 long range can go about 300 miles when charged to 100% when new, the rated efficiency is about 250 wh/mile, so 250 times 300 is 75000 Wh capacity, perhaps the "true" pack capacity is larger, I do not have that information.  If I charge the pack to 80% of capacity I would have about 200 miles of range, travel 10 miles to work and have about 190 miles of range left, if I need 50 miles for errands and reserve (unlikely to be needed), I could safely sell 140 miles or 35 kWh of electricity to the grid.  At peak times grid prices for electricity rise to as much as 50 cents per kWhr, at that price the 35 kWh would net $17.50 for a seller, up to the battery owner to decide if reduced battery life is worth this price. 

As I suggested, most people that own an EV will plug in overnight if they are parked at home as it preserves the battery by using home power to keep the battery at proper temperature etc.  Protects the investment.  

For most people plugging in the car is not very difficult, maybe you are scared of electricity and plugs. 

[D Coyne + 305]

18 hours ago, Tom Kirkman said:

Good observation.

But the shale production / price "see saw" has so far tended to gravitate toward $50.

 

Tom,

Mostly when there has been oversupply, from 2011-2014 the average price was more like $110/b, so perhaps prices gravitate to 110+50 divided by 2 or $80/b?

[D Coyne + 305]

On ‎3‎/‎19‎/‎2019 at 10:04 AM, Wastral said:

And current Lithium is 250 and has been so for a LONG time...  So one of us "clearly not up to date with your info"

Of course that is not what you actually get after you add reality: Battery case, BMS etc. 

The 500... HAHAHAHA, one layer of graphene which cannot take a current... ok.  The world is waiting, and has been waiting for multi layer graphene for structures(far more $$$) and batteries for many decades now. 

Wastral,

Density is less important than cost in dollars per Wh.

See

https://www.teslarati.com/tesla-tsla-skeptic-changes-tune-model-3-battery-costs/

Tesla has costs down to $111/kWhr.  Cost will continue to fall.

Widely dispersed wind and solar reduces the intermittency problem as wind and solar ramp up to a capacity of 2 to 3 times average load and reduce the need for storage or backup power.

http://www1.udel.edu/udaily/2013/dec/renewable-energy-121012.html

[GeoSciGuy + 74]

On ‎3‎/‎13‎/‎2019 at 10:41 AM, Mike Shellman said:

@GeoSciGuy I have a dissenting opinion of the long term sustainability of shale oil in America that is based on a long oily career, lots of research, lots of communication and study with really smart economists, reservoir engineers and brilliant data hounds. Oil well economics is not difficult to understand, you must simply want to understand. It helps, tremendously, to be in the oil business with a check book. I've been labeled a communist before because I don't buy into the shale oil bullshit; a pessimist and a cynic doesn't phase me. One cannot drill the dry holes I've drilled in my career and not be an eternal optimist.

CVX and XOM are not knights on shiny white horses; they will struggle with marginally (un) profitable shale oil wells, same as the rest, just make it up on the downstream side. Those two corporations have 3MM acres of very high NRI acreage to drill; the idea that they will want to merge or acquire other troubled corporations in the Permian, with looming debt maturities, low NRI's, drilling commitments and SEC 5 year rules that will most certainly lead to massive reserve impairments... is just more hope. Like higher oil prices, or more "technological breakthroughs." 

I am a realist and care deeply about my country and its hydrocarbon future. Reserve growth, much like economic growth, based on debt is fake. Its artificial, and therefore unsustainable. My industry needs to start telling the truth about shale economics and about the definition of "technically recoverable, as yet undiscovered, economic at some unknown price" oil reserves and what it will actually cost Americans to recover those reserves. So we can be ready. Our kids deserve that. 

 

 

 

 

 

  

You just admitted that "unprofitable" upstream shale oil becomes profitable when vertically integrated with downstream refining.

 

[Tom Kirkman + 8,860]

5 hours ago, D Coyne said:

Tom,

Mostly when there has been oversupply, from 2011-2014 the average price was more like $110/b, so perhaps prices gravitate to 110+50 divided by 2 or $80/b?

Nope.  $50 is the most often price bandied about by the bulk of the independent U.S. Shale Oil producers for at least half a year now.  $50 - ish WTI price range has been advised by many independent operators as the deciding point of whether they will increase drilling new wells or hold back and wait for higher prices.

This $50 decision point range was not made by me.  I have nothing to do with this $50 - ish range deciding factor for go/no go of new drilling.

I'm simply observing the big picture from afar, of what has been happening in general, and what has been reported.

These observations don't fit neatly into an Excel spreadsheet or a graph, both of which can be wildly manipulated at will.

Anyone can search for and download for free a pdf of the classic book "How to Lie with Statistics".

[ceo_energemsier + 1,818]

https://www.reuters.com/article/us-enterprise-prodt-oil-exports/enterprise-cme-to-hold-second-electronic-auction-of-u-s-crude-for-export-idUSKCN1R12N8

[ceo_energemsier + 1,818]

https://finance.yahoo.com/news/oil-prices-running-last-big-104251847.html#

[ceo_energemsier + 1,818]

Let the consolidation/acquisitions begin!! Increased company values, increasing the valuation and high grading of assets, better efficiencies, lower costs, the list goes on. The sharks are going to be on a feeding frenzy, good assets good companies will get gobbled up.

https://finance.yahoo.com/news/sm-energy-carrizo-may-combine-134701023.html

[DanilKa + 443]

On 3/21/2019 at 8:19 AM, GeoSciGuy said:

You just admitted that "unprofitable" upstream shale oil becomes profitable when vertically integrated with downstream refining.

 

this is not what @Mike Shellman wrote and if you are reading between lines - you are looking at the wrong text.

Majors are in Shale Oil because they are not finding reserves to replace production. This happens for two reasons, IMO - 1) days of easy to find oil are gone and 2) not spending enough money on exploration isn't helping.

Shale is a fantastic resource to book - low geological risk, slight manipulation of the recovery factor yields big gain (because its dismal to start with). Only problem - profitability is marginal at best at current oil prices. Nothing $100 oil can't fix, although argument goes that it wasn't profitable back when oil was above $100.

[Rasmus Jorgensen + 1,169]

10 hours ago, DanilKa said:

Majors are in Shale Oil because they are not finding reserves to replace production. This happens for two reasons, IMO - 1) days of easy to find oil are gone and 2) not spending enough money on exploration isn't helping.

I actually think majors are in shale due to the short cycle. 

Think about it - how long time and how big upfront investment would it take build 600k - 1 mio bbl of offshore production? A lot longer than it takes in the Permian, that's for sure.

10 hours ago, DanilKa said:

Only problem - profitability is marginal at best at current oil prices. Nothing $100 oil can't fix, although argument goes that it wasn't profitable back when oil was above $100.

Everybody is forgetting cost of capital when it comes to conventional and offshore projects. 

[D Coyne + 305]

On ‎3‎/‎20‎/‎2019 at 9:41 PM, Tom Kirkman said:

Nope.  $50 is the most often price bandied about by the bulk of the independent U.S. Shale Oil producers for at least half a year now.  $50 - ish WTI price range has been advised by many independent operators as the deciding point of whether they will increase drilling new wells or hold back and wait for higher prices.

This $50 decision point range was not made by me.  I have nothing to do with this $50 - ish range deciding factor for go/no go of new drilling.

I'm simply observing the big picture from afar, of what has been happening in general, and what has been reported.

These observations don't fit neatly into an Excel spreadsheet or a graph, both of which can be wildly manipulated at will.

Anyone can search for and download for free a pdf of the classic book "How to Lie with Statistics".

Tom,

I will go with those in the know like oil producers from Texas such as Mike Shellman, based on his analysis and my own using data from shaleprofile.com and typical tax rates, royaty rates, transport costs, well costs and a discount rate of 10% and an interest rate of 7.4% the breakeven oil price for an average 2017 Permian well is about $62/b in 2018$ at the refinery gate.

So your often claimed 60 to 65 per barrel estimate makes sense, but $50/b is based on hype by tight oil companies so that their stock price does not plummet.  Soon investors will realize those CEOs are naked. 

As the majors take over in the Permian basin (where 66% of the US tight oil increase has occurred since 2015) they will apply more discipline and likely will not be completing many wells when oil prices are below $62/b.

Also keep in mind that in every oil play the best areas are developed first, over time average well productivity per foot of lateral will eventually decrease.  Based on the experience of the Bakken, this is likely to occur in the Permian basin by 2023 at the latest.

As average new well EUR starts to decrease the breakeven oil price will increase.  In addition water is pretty scarce in West Texas and New Mexico and this scarcity may drive up completion costs over time raising the average cost of a new well (currently full cycle cost is about $10 million on average in the Permian basin (Mike Shellman estimates about 10.5 million, if I remember correctly.)

[D Coyne + 305]

On ‎3‎/‎19‎/‎2019 at 4:38 PM, Jeff_Calgary said:

Last I checked the sun went out at night. So you need the gas plants and the solar plants. So is the solar all in cost competitive with just the gas fuel and engine exchange cost? That is the comparison.

Hi Jeff,

Demand is less at night, there is both wind and solar power and power at a utility scale can be moved east to west and north to south.  Energy can be stored both thermally and chemically.

See

https://www.sciencedirect.com/science/article/pii/S0378775312014759

Abstract

We model many combinations of renewable electricity sources (inland wind, offshore wind, and photovoltaics) with electrochemical storage (batteries and fuel cells), incorporated into a large grid system (72 GW). The purpose is twofold: 1) although a single renewable generator at one site produces intermittent power, we seek combinations of diverse renewables at diverse sites, with storage, that are not intermittent and satisfy need a given fraction of hours. And 2) we seek minimal cost, calculating true cost of electricity without subsidies and with inclusion of external costs. Our model evaluated over 28 billion combinations of renewables and storage, each tested over 35,040 h (four years) of load and weather data. We find that the least cost solutions yield seemingly-excessive generation capacity—at times, almost three times the electricity needed to meet electrical load. This is because diverse renewable generation and the excess capacity together meet electric load with less storage, lowering total system cost. At 2030 technology costs and with excess electricity displacing natural gas, we find that the electric system can be powered 90%–99.9% of hours entirely on renewable electricity, at costs comparable to today's—but only if we optimize the mix of generation and storage technologies.

[D Coyne + 305]

On ‎3‎/‎20‎/‎2019 at 4:06 PM, D Coyne said:

Tom,

Mostly when there has been oversupply, from 2011-2014 the average price was more like $110/b, so perhaps prices gravitate to 110+50 divided by 2 or $80/b?

Hi Tom,

I took the average daily Brent spot price from Jan 1, 2010 to March 18, 2019, it was $80.60/b.  If we take a longer Jan 1, 2008 to March 18, 2019 period for the average Brent price (as most US tight oil has been produced over that period) we find an average price of $80.40/b.

So it would seem that oil prices gravitate to about $80/b rather than $50/b, despite claims that tight oil is profitable at $50/b by tight oil companies.  Those claims are specious.

[DanilKa + 443]

On 3/22/2019 at 6:02 PM, Rasmus Jorgensen said:

Everybody is forgetting cost of capital when it comes to conventional and offshore projects. 

Agree on shorter cycle may be attractive for the majors - helps them to renew resources faster. 

How would cost of capital would be different for the major? I not even sure they have to explain where money are going

[ceo_energemsier + 1,818]

https://www.wsj.com/articles/gm-to-invest-300-million-plans-new-electric-vehicle-at-michigan-plant-11553266522?mod=hp_lista_pos5

 

https://www.reuters.com/article/us-pg-e-us-storage/pge-bankruptcy-threatens-major-battery-storage-project-idUSKCN1R32O3

 

 

 

[GuyM + 7]

Mike S, communist? LOL. I’m a royalty owner, and have many more wells that will eventually come online, so I’d like the money. However, not at the expense of exporting all the oil, when we should know we are running out. Even Patterson now agrees with my estimation that 2018 was peak. We have reached peak, and are probably on a plateau for a few years. After that, it’s Katy bar the doors!

A lot of noise has been made about how many more millions we will export over the next ten years, which will get us past peak shale production (the hamster will eventually wear out). But, they are ignoring the interest that big oil is having in the Permian, and elsewhere. What big oil wants, big oil gets. Much ado has been made of the growth expectations of XTO and Chevron. However, when you look at that growth, it barely covers the recent purchase and conversion of refinery facilities to process LTO. Is big oil going to spend billions on refineries to process the LTO, or to waste the billions by exporting it? My guess is that their production will plateau to match refinery capacity. The longer big oil stays in the LTO fields, the more they will take over. Independents have a very hard time competing against Bubba, and they ARE hurting now, and will continue to hurt. Like Marathon, now, the oil that won’t get used in refineries, will get exported, but it won’t be to the degree that the pundits calculate.

Edited March 24, 2019 by GuyM