Oil at $40

[William Edwards + 708]

7 minutes ago, wrs said:

Your communication has failed then because you are the one talking about an OIL PRICE, singular.  I fail to see the value in arguing about hypothetical models that don't begin to address reality either so I will forgo further discussion of this due to the futility thereof.

Do not feel bad. The complexity of the oil pricing mechanism has repelled most participants in the industry, in spite of the reality that it exists and is functioning, even as we converse. In a similar vein, few of us delve deeply into Einsteins work on relativity.

[ceo_energemsier + 1,818]

The oil prices have been on a roller coaster ride, stabilizing within a price band for a short time then see sawing again. However , so many factors are in play right now and for the next 4-6 months that indicate the prices will remain (for WTI NYMEX) in the 50-58$/bbl range if they dip from the current 60$/bbl range.

If the prices happen to get to 40$/bbl, it will be fine, it just just thin the herd out  and the survival of the fittest (the lowest cost acquisition, best and highest use of technology across the board to acquire, find, drill and develop mantra companies) will be the flavor of the day, week, month, year or years to come.

I hear all the hype about the breakevens 60-65$/bbl etc, but thinking logically, once the wells have been drilled and completed and have recovered a certain amount of oil (and as per the folks -ive on shale), these wells produce very high volumes (then decline fast, it is true to an extent), so during the high volume production period, the costs of drilling and completing the well are recovered and start paying off.

I know this because I have had the experience of dealing with  over 3,000 shale wells from prospect generation, acquisition, geotech work (prospect sub surface mapping 2D-3D seismic, gravity , geochem and geophysics, complete funding, drilling , complete , production and asset development and exit)  . The costs keep going down and eventually the breakeven is much lower than being stated by some groups.

[Meredith Poor + 897]

2 hours ago, jjj said:

Meredith,

I have never found panels that cheap but let's assume we can. You would need to cover about 1,200 Square Feet of panels to get a gallon of gasoline a day worth's of energy. I use about 5 gallons a day in my household. That would mean 6,000 Square Feet of panels to support my household in transportation alone. Think of the impact that would have to the environment. Basically I would have to cut down all my trees and sterilize 4,000 Square feet of current green around my 2,000 SF house. and this assumes no efficiency loses after the panels.

 

JJJ

20,000 watts / 200 watts per square meter would be 100 square meters or 1100 square feet, pretty much as you describe. Urban homeowners aren't going to put gasoline synthesis equipment in their back yard, garage, or basement anyway. Truck stops are often located in areas where one could pave over a square mile with panels. This is the more likely scenario for 'locally produced' fuels.

[ceo_energemsier + 1,818]

Brent rose $1.68/bbl last week to average $71.16/bbl, almost perfectly in line with our expectations. WTI rose $1.73/bbl to average $64.09/bbl. For the week ahead we expect that Brent and WTI are running out of steam, and could see a contraction. We expect Brent to again average around $71/bbl and be generally rangebound.

While the recent lift in prices has certainly been based in reality, risks to the downside continue to accumulate, and optimism can only take markets so far. Demand appears to be meeting expectations, but the probability of a significant upside surprise is still relatively minimal. Positioning also indicates that traders could begin to engage in profit taking, as the ratio of long to short positions in crude and gasoline has become skewed. 

On the supply side, rumors that the OPEC deal will not be extended in June are becoming more common, with Russia posing a particular problem. While similar reports have emerged in advance of almost every meeting since the deal was struck, they do still bear watching. The supply agreement has existed in one form or another for three years now and some members have voiced impatience and concern about losing market share. Additionally, the US has extended sanctions (some oil-related, some now) against several of the OPEC+ agreement members. Combined with rising US supply, market share concerns could be stronger at this upcoming meeting than any time prior. While we expect cuts to persist, our current global forecast assumes that OPEC production does increase in the latter half of the year; due either to the deal being phased out or simple cheating.

 

 

 

 

[Tom Kirkman + 8,860]

My earlier comment this morning in the $100 oil thread seems just as applicable here in this $40 oil thread... .

https://community.oilprice.com/topic/5619-the-case-for-100-oil/#comment-48214

In my opinion, there are no accurate models for Oil & Gas pricing, as there are simply far too many known and unknown variables.

There is little "rational" reasoning underlying O&G pricing, except it seems to be a bizarre combination of a herd of lemmings and a herd of cats.

The "herd of lemmings" crowd consisting mostly of commodities traders just trying to squeeze out profits from oil price changes, and price changes in oil futures contracts.

The "herd of cats" crowd consisting mostly of oil companies and indie service companies trying to squeeze out some profits from gambling Capex and Opex money on projected demand by fickle oil consumers.

Everyone seems to have their own disparate theory as to how much oil will be needed globally in the medium term, and how much it will cost to extract, and how much they can sell their crude oil for, and will Mainstream Media's negative bludgeoning of the Oil & Gas industry affect cash flow from investors, and wars and rumors of wars and GDPs and darn near everything including the refrain to Alice's Restaurant Massacre making up a bubbling, boiling cauldron of uncertainty.

On the bright side, in my exceedingly strong opinion, global demand for Oil & Gas is not going away any time soon.  Maybe in a Century or so.  Maybe.

 

[J.mo + 165]

28 minutes ago, Tom Kirkman said:

My earlier comment this morning in the $100 oil thread seems just as applicable here in this $40 oil thread... .

https://community.oilprice.com/topic/5619-the-case-for-100-oil/#comment-48214

In my opinion, there are no accurate models for Oil & Gas pricing, as there are simply far too many known and unknown variables.

There is little "rational" reasoning underlying O&G pricing, except it seems to be a bizarre combination of a herd of lemmings and a herd of cats.

The "herd of lemmings" crowd consisting mostly of commodities traders just trying to squeeze out profits from oil price changes, and price changes in oil futures contracts.

The "herd of cats" crowd consisting mostly of oil companies and indie service companies trying to squeeze out some profits from gambling Capex and Opex money on projected demand by fickle oil consumers.

Everyone seems to have their own disparate theory as to how much oil will be needed globally in the medium term, and how much it will cost to extract, and how much they can sell their crude oil for, and will Mainstream Media's negative bludgeoning of the Oil & Gas industry affect cash flow from investors, and wars and rumors of wars and GDPs and darn near everything including the refrain to Alice's Restaurant Massacre making up a bubbling, boiling cauldron of uncertainty.

On the bright side, in my exceedingly strong opinion, global demand for Oil & Gas is not going away any time soon.  Maybe in a Century or so.  Maybe.

 

 

I disagree with that length of time. Being in the business that I'm in, living where I am geographically located, being in the generation that I am, and knowing what I know. I think the next 10-15 years will surprise a lot of people the way new EV tech is produced and adopted. 

I just turned 30 2 weeks ago. I own a very successful retail fueling station, located off a very prominent stretch of highway between the bay area and reno/lake tahoe/truckee. I am not hedging my bets on retiring from this business. I am actively expanding, but it will not be another retail fuel location, unless it is a blockbuster too good to be true. I will likely re visit it at a time, and acquire additional locations, but not before I diversify. 

My location is directly in the line of fire. In California, who is consistently the first to adopt new tech, and my customer base is primarily higher income  bay area thoughorfare. Who are without a doubt the first to go EV. They can afford it, and it is quite blasé.  And we all know how those folk are about their image.. 

There unfortunately will be some major changes during my working tenure. not to mention my generations lack of appreciation for vehicles, or the maintenance involved with ICE vehicles. 

Edited April 16, 2019 by J.mo

[Tom Kirkman + 8,860]

3 hours ago, J.mo said:

I disagree with that length of time. Being in the business that I'm in, living where I am geographically located, being in the generation that I am, and knowing what I know. I think the next 10-15 years will surprise a lot of people the way new EV tech is produced and adopted. 

No issue, I fully expect a majority to disagree with me, and I really don't have any problem with that.  Heck, I encourage dissent.

So about those EVs supposedly killing off demand for oil & gas... a niggling little point to pay attention to and poke around a bit...

What are the primary, raw energy sources which are mainly used to generate all of this massively hyped "green" and "environmentally friendly" electricity used in these "green" and "environmentally friendly" EVs?

Why, thank you very much for asking!  Excellent question! !

EIA: What is U.S. electricity generation by energy source?

n 2018, about 4,178 billion kilowatthours (kWh) (or 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States.¹ About 63% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases). About 20% was from nuclear energy, and about 17% was from renewable energy sources. The U.S. Energy Information Administration estimates that an additional 30 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2018.²

U.S. electricity generation by source, amount, and share of total in 20181
Energy source	Billion kWh	Share of total
Total - all sources	4,178
Fossil fuels (total)	2,651	63.5%
Natural gas	1,468	35.1%
Coal	1,146	27.4%
Petroleum (total)	25	0.6%
Petroleum liquids	16	0.4%
Petroleum coke	9	0.2%
Other gases	12	0.3%
Nuclear	807	19.3%
Renewables (total)	713	17.1%
Hydropower	292	7.0%
Wind	275	6.6%
Biomass (total)	63	1.5%
Wood	41	1.0%
Landfill gas	11	0.3%
Municipal solid waste (biogenic)	7	0.2%
Other biomass waste	3	0.1%
Solar (total)	67	1.6%
Photovoltaic	63	1.5%
Solar thermal	4	0.1%
Geothermal	17	0.4%
Pumped storage hydropower3	-6	-0.1%
Other sources	13	0.3%

 

Ah, but you can rightfully cluck your tongue and scold me for obviously being too closed-minded and concentrating just on U.S. electricity generation.

Seems obvious that other nations have carried the torch of "green" and "environmentally-friendly" generation of electricity far better than the U.S. , what with U.N. environmental plans and Kyoto protoplasmic verbiage and other high-minded Save The Planet values espoused by impeccably honest politicians ( Canada's esteemed Trudeau springs to mind... )

Global Electricity Production by Source

 

Hmmmmm, now waitaminute... ^ this isn't matching what CNN tells me to think...

 

Anyway, rather than me leading you down any wrong and obviously biased and closed-minded paths, I would encourage everyone to do a bit of your own research on what exactly are the primary energy sources used globally to generate electricity. 

< cough >  < hydrocarbons >  < cough >

So that you can better disprove my crazy idea that global demand for oil & gas is simply not going to go away any time soon.  Maybe after a Century or so.  Maybe.

 

Have at it.  Prove me wrong.  And have fun poking around and asking hard questions.

 

global-electricity-production-by-source_v2_850x600.svg

[J.mo + 165]

4 minutes ago, Tom Kirkman said:

No issue, I fully expect a majority to disagree with me, and I really don't have any problem with that.  Heck, I encourage dissent.

So about those EVs supposedly killing off demand for oil & gas... a niggling little point to pay attention to and poke around a bit...

What are the primary, raw energy sources which are mainly used to generate all of this massively hyped "green" and "environmentally friendly" electricity used in these "green" and "environmentally friendly" EVs?

Why, thank you very much for asking!  Excellent question! !

EIA: What is U.S. electricity generation by energy source?

n 2018, about 4,178 billion kilowatthours (kWh) (or 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States.¹ About 63% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases). About 20% was from nuclear energy, and about 17% was from renewable energy sources. The U.S. Energy Information Administration estimates that an additional 30 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2018.²

U.S. electricity generation by source, amount, and share of total in 20181
Energy source	Billion kWh	Share of total
Total - all sources	4,178
Fossil fuels (total)	2,651	63.5%
Natural gas	1,468	35.1%
Coal	1,146	27.4%
Petroleum (total)	25	0.6%
Petroleum liquids	16	0.4%
Petroleum coke	9	0.2%
Other gases	12	0.3%
Nuclear	807	19.3%
Renewables (total)	713	17.1%
Hydropower	292	7.0%
Wind	275	6.6%
Biomass (total)	63	1.5%
Wood	41	1.0%
Landfill gas	11	0.3%
Municipal solid waste (biogenic)	7	0.2%
Other biomass waste	3	0.1%
Solar (total)	67	1.6%
Photovoltaic	63	1.5%
Solar thermal	4	0.1%
Geothermal	17	0.4%
Pumped storage hydropower3	-6	-0.1%
Other sources	13	0.3%

 

Ah, but you can rightfully cluck your tongue and scold me for obviously being too closed-minded and concentrating just on U.S. electricity generation.

Seems obvious that other nations have carried the torch of "green" and "environmentally-friendly" generation of electricity far better than the U.S. , what with U.N. environmental plans and Kyoto protoplasmic verbiage and other high-minded Save The Planet values espoused by impeccibly honest politicians ( Canada's esteemed Trudeau springs to mind... )

Global Electricity Production by Source

 

 

But, rather than me leading you down any wrong and obviously biased and closed-minded paths, I would encourage everyone to do a bit of your own research on what exactly are the primary energy sources used globally to generate electricity. 

So you can better disprove my crazy idea that global demand for oil & gas is simply not going to go away any time soon.  Maybe after a Century or so.  Maybe.

 

Have at it.  Prove me wrong.  And have fun poking around and asking hard questions.

 

global-electricity-production-by-source_v2_850x600.svg

I am very familiar with those figures, and I obviously am not a proponent of the switch. However I've been in this business 8 years, I've learned a lot, much has changed, and going through a major recession after high school, and watching prominent boomer companies fail due to lack of adaption has well versed me. 

Fossil fuels, yes will still be used. And still be consumed. Mainly for production of raw material, and by developing countries. The main driver as we all know of crude oil, is refined gasoline and distillate products. The US being a major player in the equation of consumption. It is also a major driver in innovation and adaption, mainly the very first to do so. Just as it did with the industrial revolution and the ushering in of fossil fuels, it will do with the next tech. Just like the internet, smart phones, you name it. Observe the past, and understand that generationally as technology becomes more prevalent, so does the exponential pace of development and adoption. I try to observe boomers and their ways of being set in their ways. Things will remain X way, because that is how it's always been. That hasn't worked quite well for many of them, or their models of business. 

But back to the topic, yes it will be around. But for it to remain, I view sub $50 Brent or less the reasonable number. As the populous ages, Ev adoption will come violently by younger groups, millennials. They love tech, they are very liberal and greenie (unfortunately). So will crude still be used for the next century, I dont disagree with that. But I dont believe it will be the main driver of transportation unless it remains extremely low cost and blatantly economical. Because again, even if it isnt, millennials will over pay by a longshot to go EV. Their spending habits are very different of those of their elders. Image is also important. A strange group if you ask me. 

So to conclude, you drop the consumption of the USA's thirst for refined fuels, that bludgeons demand substantially. To be picked up by other countries lacking the technology of the USA? Certainly so, providing the pressure of politics and policy do not force those nations to skip their industrial revolution phase and use of fossil fuel as a main driver of transportation and growth. The global stage on climate has taken a strong turn since the Obama administration, and again, those pesky millennials. 

 

I read and follow this board daily, multiple times a day btw, and I respect this group as a group i constantly tend to agree with. Other than I feel like a lot of you folks are on the other side of the camp than I lol. I am in the $40 Brent club being the business I'm in.  it appears most here are on the upstream or wall street side. Unfortunately theres never a way to make both sides happy. $120 Brent kills both of us, as it welcomes new tech to erode crude consumption, and extremely cheap oil means, well, there is abundant oversupply which means long term demand is looking to fall off, likely due to new tech. Both kill my heavy investment in retail fueling. 

 

[Tom Kirkman + 8,860]

No worries, @J.mo.  You seem to be explaining your own views just fine so far.  Please feel free to keep voicing your views as you see fit.

And yep, I'm more upstream than anything else, and obviously am rooting for $70 Brent.  You can't please everyone, and it is a waste of time to try to do so.

And maybe have some fun wandering around, exploring on the roads less travelled : )

 

[AcK + 50]

6 hours ago, Tom Kirkman said:

No issue, I fully expect a majority to disagree with me, and I really don't have any problem with that.  Heck, I encourage dissent.

So about those EVs supposedly killing off demand for oil & gas... a niggling little point to pay attention to and poke around a bit...

What are the primary, raw energy sources which are mainly used to generate all of this massively hyped "green" and "environmentally friendly" electricity used in these "green" and "environmentally friendly" EVs?

Why, thank you very much for asking!  Excellent question! !

EIA: What is U.S. electricity generation by energy source?

n 2018, about 4,178 billion kilowatthours (kWh) (or 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States.¹ About 63% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases). About 20% was from nuclear energy, and about 17% was from renewable energy sources. The U.S. Energy Information Administration estimates that an additional 30 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2018.²

U.S. electricity generation by source, amount, and share of total in 20181
Energy source	Billion kWh	Share of total
Total - all sources	4,178
Fossil fuels (total)	2,651	63.5%
Natural gas	1,468	35.1%
Coal	1,146	27.4%
Petroleum (total)	25	0.6%
Petroleum liquids	16	0.4%
Petroleum coke	9	0.2%
Other gases	12	0.3%
Nuclear	807	19.3%
Renewables (total)	713	17.1%
Hydropower	292	7.0%
Wind	275	6.6%
Biomass (total)	63	1.5%
Wood	41	1.0%
Landfill gas	11	0.3%
Municipal solid waste (biogenic)	7	0.2%
Other biomass waste	3	0.1%
Solar (total)	67	1.6%
Photovoltaic	63	1.5%
Solar thermal	4	0.1%
Geothermal	17	0.4%
Pumped storage hydropower3	-6	-0.1%
Other sources	13	0.3%

 

Ah, but you can rightfully cluck your tongue and scold me for obviously being too closed-minded and concentrating just on U.S. electricity generation.

Seems obvious that other nations have carried the torch of "green" and "environmentally-friendly" generation of electricity far better than the U.S. , what with U.N. environmental plans and Kyoto protoplasmic verbiage and other high-minded Save The Planet values espoused by impeccably honest politicians ( Canada's esteemed Trudeau springs to mind... )

Global Electricity Production by Source

 

Hmmmmm, now waitaminute... ^ this isn't matching what CNN tells me to think...

 

Anyway, rather than me leading you down any wrong and obviously biased and closed-minded paths, I would encourage everyone to do a bit of your own research on what exactly are the primary energy sources used globally to generate electricity. 

< cough >  < hydrocarbons >  < cough >

So that you can better disprove my crazy idea that global demand for oil & gas is simply not going to go away any time soon.  Maybe after a Century or so.  Maybe.

 

Have at it.  Prove me wrong.  And have fun poking around and asking hard questions.

 

global-electricity-production-by-source_v2_850x600.svg

@Tom Kirkman First up, thanks for sharing some hard data.

And although that makes the current trend irrefutable, not an exact predictor of future trends. I have a niggling feeling the global electricity production data is skewed by what happen to nuclear last 20-30 years. India (low income) has gone big on renewables last few years - this is despite large coal deposits. Traditionally hydro has been the way to go in India but recently wind/solar have picked up in a big way. Although a nuclear nation, India never really went for nuclear from an electricity standpoint.

South Asia/Africa (next frontier markets) are both warm continents - Solar could be interesting. A century is a very long time.

How does the breakdown of the above data (renewables into nuclear/non-nuclear) look?

[AcK + 50]

Pulled out the data - from your source 😉

Nuclear is the reason - cant go down to zero (maybe) - but other renewables can keep on going up (50% is not out of bounds IMHO, given the experience of low-income, low-investment country such as India). Like I said, a century is a long time.

[Tom Kirkman + 8,860]

2 minutes ago, AcK said:

How does the breakdown of the above data (renewables into nuclear/non-nuclear) look?



Sounds about right to me.  Both India and China have been big users of burning coal for generating electricity.

Burning coal to generate electricity kinda undermines that wholesome "green" EVs image, in my opinion.

[Tom Kirkman + 8,860]

1 minute ago, AcK said:

Pulled out the data - from your source 😉

Nuclear is the reason - cant go down to zero (maybe) - but other renewables can keep on going up (50% is not out of bounds IMHO, given the experience of low-income, low-investment country such as India). Like I said, a century is a long time.



Well done on your critical thinking skills.  We are having a proper, civilized, rational discussion about electricity and hydrocarbons, with neither side freaking out, and both sides using a touch of humor to keep things light.

Waiting now for the inevitable yahoo lemming to come in here and go all Eleventy preachy about CO2 killing the planet or some such hysterical hyperbole.

[Auson + 123]

8 hours ago, Tom Kirkman said:

No issue, I fully expect a majority to disagree with me, and I really don't have any problem with that.  Heck, I encourage dissent.

So about those EVs supposedly killing off demand for oil & gas... a niggling little point to pay attention to and poke around a bit...

What are the primary, raw energy sources which are mainly used to generate all of this massively hyped "green" and "environmentally friendly" electricity used in these "green" and "environmentally friendly" EVs?

Why, thank you very much for asking!  Excellent question! !

EIA: What is U.S. electricity generation by energy source?

n 2018, about 4,178 billion kilowatthours (kWh) (or 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States.¹ About 63% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases). About 20% was from nuclear energy, and about 17% was from renewable energy sources. The U.S. Energy Information Administration estimates that an additional 30 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2018.²

U.S. electricity generation by source, amount, and share of total in 20181
Energy source	Billion kWh	Share of total
Total - all sources	4,178
Fossil fuels (total)	2,651	63.5%
Natural gas	1,468	35.1%
Coal	1,146	27.4%
Petroleum (total)	25	0.6%
Petroleum liquids	16	0.4%
Petroleum coke	9	0.2%
Other gases	12	0.3%
Nuclear	807	19.3%
Renewables (total)	713	17.1%
Hydropower	292	7.0%
Wind	275	6.6%
Biomass (total)	63	1.5%
Wood	41	1.0%
Landfill gas	11	0.3%
Municipal solid waste (biogenic)	7	0.2%
Other biomass waste	3	0.1%
Solar (total)	67	1.6%
Photovoltaic	63	1.5%
Solar thermal	4	0.1%
Geothermal	17	0.4%
Pumped storage hydropower3	-6	-0.1%
Other sources	13	0.3%

 

Ah, but you can rightfully cluck your tongue and scold me for obviously being too closed-minded and concentrating just on U.S. electricity generation.

Seems obvious that other nations have carried the torch of "green" and "environmentally-friendly" generation of electricity far better than the U.S. , what with U.N. environmental plans and Kyoto protoplasmic verbiage and other high-minded Save The Planet values espoused by impeccably honest politicians ( Canada's esteemed Trudeau springs to mind... )

Global Electricity Production by Source

 

Hmmmmm, now waitaminute... ^ this isn't matching what CNN tells me to think...

 

Anyway, rather than me leading you down any wrong and obviously biased and closed-minded paths, I would encourage everyone to do a bit of your own research on what exactly are the primary energy sources used globally to generate electricity. 

< cough >  < hydrocarbons >  < cough >

So that you can better disprove my crazy idea that global demand for oil & gas is simply not going to go away any time soon.  Maybe after a Century or so.  Maybe.

 

Have at it.  Prove me wrong.  And have fun poking around and asking hard questions.

 

global-electricity-production-by-source_v2_850x600.svg

Tom,

 I fear that the mass adoption ( even if its only attempted adoption ) and legislation of E.Vs will require even more hydrocarbons. mining, production, scraping of old fossil fuel burners, charging points, grid and power generation expansion. Then some more batteries in a few years time. Or just dump the 3 year old E.V. for the latest model on a contract plan monthly deal. Stick it in landfill, buy consume more more ! Its just not in the slightest bit green sorry.

[Jan van Eck + 7,558]

1 hour ago, Tom Kirkman said:

Waiting now for the inevitable yahoo lemming to come in here and go all Eleventy preachy about CO2 killing the planet or some such hysterical hyperbole.

No need to wait, Tom, here I am!  Now, here is why WTI oil is headed for twenty seven bucks:   

First up, that EV car thing is not going to happen as fast as might be surmised, for the elemental reason that they cost too much. Further, the biggest cost by far in auto operation is not the fuel nor the complications of repairing the ICE engine.  It is far more prosaic: the mundane application of vast amounts of salt on the road surfaces, in the misguided idea that this gets you a bare road with no ice and snow.  All that salt gets in everywhere and rusts everything to oblivion.  An auto in the Rust Belt will start to perforate in two years flat. Think about the implications of that. 

Second up, the big shift will not be to EVs, it will be to electric bicycles, electric motorcycles, and electric sidecars. And manual bicycles, the really cheap versions. Cheap to buy, and cheap to run.  The planet is going broke from debt overload, so chopping expenses will be the mantra of the millennial generation - not virtue signaling. Nobody has the money for virtue signaling any more.

Third, the next big push will be in building construction, likely using cross-laminated timber.  That is the way forward to net-zero-energy, in that energy losses for buildings (thus needing heat) in colder climates flows from two points:  convective losses, and radiative losses.  If you build with steel and concrete, or homes with concrete or stick-built wood, then your convective losses can be stayed by wrapping the building in a sheet of plastic, and putting caulking around the windows, that sort of thing. But you are not stanching the radiative losses.  Solid lumber is an effective barrier to heat transfer by radiation.  Will CLT take off as the new building material?  I am betting it will. Buildings have already been constructed up to 19 stories, all CLT, no steel. 

Fourth, you will see both heat and power industries being dominated by new nuke reactor designs.  Those will be yet another disruptor technology, and slash the demand for oil for space heating.   How fast will all this happen?  Very fast.

[Jan van Eck + 7,558]

17 hours ago, William Edwards said:

In a similar vein, few of us delve deeply into Einsteins work on relativity.

Sure we do, William.  Nothing quite like musing on all that over morning tea and biscuits.  Much to the chagrin of the dog, who would prefer to go outside and chase the squirrels.  Oh, well. 

[Mike Shellman + 548]

18 hours ago, William Edwards said:

Do you see a problem here?

Yes, sir, beginning and ending with how few Americans fully understand well economics, decline, depletion, the cost of long term reserve replacement and, most importantly, reserve classifications and the price of oil necessary to actually extract those reserves. Nobody in Washington DC has a clue. 

Much like the term "breakeven" and other shaleisms, a "marginal barrel" has ten different meanings and is otherwise a meaningless metric. The cost of a barrel of oil in the world is manipulated at will, fabricated, can be adjusted for socioeconomic reasons, has now more to do with the cost of capital than every before in oil history, and is lied about for political and foreign policy reasons constantly. It changes every day. I agree with you, sir, the true marginal barrel lies in the KSA, or most likely in Burgan.

The mostly costly barrel of oil is not in Canada, it is the American shale oil barrel, particularly now that upstream public and private LTO industry has to shoulder the burden of something like $300 billion dollars of long term debt. Anadarko, for instance, is $15B in debt and paid something over $800MM in interest in 2018. The real cost of deleveraging the shale oil industry's debt and being able to stand on its own financial feet, without credit, to replace reserves in the future, is actually over $85.  I always get a kick out of easy it is for people to ignore the absolute horror of servicing debt from volatile revenue and ultimately paying that debt back from assets that decline in value 83% the first 3 years they are on the shelf, then 12-18% each year thereafter. 

Why then is the most costly  barrel of oil in the world flooding the worldwide market at the moment? Because of short term greed, the liability of interest on debt, loan covenants, drilling commitments and retained acreage clauses in oil and gas leases, and damn poor, short sighted leadership on the Federal and State level. In other words, America has its head up its ass. Using the false premise of shale oil abundance as a foreign policy tool is poor energy policy. OPEC is far from stupid, it understands the American shale oil phenomena quite well and is content with conserving its hydrocarbon resources while America drains its as fast as it can... on credit. OPEC knows it will be back in the drivers seat before you know it.

I hope you are well, William Edwards. Set 'em straight. 

 

 

 

 

[ceo_energemsier + 1,818]

DUG Permian: Speakers Point To Basin's Power, Shale's Realites

Updated: Producers discuss opportunities and investment in the Permian Basin during DUG Permian.

Editor’s note: This article was updated at 11:55 a.m. CST and is a developing story. Check back for updates throughout the day.

FORT WORTH, Texas—Some call it, “OPEC’s worst nightmare.” No, not a Trump tweet storm about oil prices, but rather the crude production in the Permian Basin. “The prolific Permian Basin is producing more than 4 million barrels per day. That’s more than any OPEC country except Saudi Arabia,” said Steve Toon, editor-in-chief of Oil and Gas Investor magazine and the host for the 14th edition of Hart Energy’s DUG Permian Basin at the Fort Worth Convention Center April 16.

“And, there’s more to come,” Toon continued, pointing out that the Permian’s growth is likely to increase even more now that the oil majors such as Chevron and Shell have made inroads into the basin.

Chevron’s blockbuster acquisition of Anadarko Petroleum last week promises to change the landscape of the basin, Toon said.

More than 2,000 industry professionals gathered for the second day of the conference, which kicked off on April 15 with a trio of tracks aimed at some of the basin’s most pressing issues: sand, produced water, and mineral rights.

Telling The Permian Story

Denzil West, Admiral Permian Resources, kicked of the producers’ panel. He revealed his company produces 18,000 net Boe/d. He said Admiral has drilled 23 wells, solidified Wolfcamp A results, developed multiple zones and installed centralized gas lift on its acreage.

He said he’s excited that Admiral has taken an area the dubiously thought of and is now at full pad development.

Ryan Keys, who co-founded Triple Crown Resources in 2017, said E&P companies are not doing a good job of communicating its value proposition to generalist investors. He said the current sentiment in the investment world in that the oil and gas companies are a bit of a pariah.

He added that the full cycle returns are what the generalist investor is interested in.

Industry Leadership

Earlier, Greg Armstrong, the retired head of Plains All-American Pipeline, sat down for a one-on-one with Hart Energy’s Paul Hart. Armstrong received Hart Energy’s Industry Leadership Award.

Among the topics he discussed was Plains All-American’s executive transition, early retirement, and the growth of Plains. He offered that he thinks oil production in the Permian will creep up to 7 million barrels per day over the next five years.

Joseph Markman will have more details on HartEnergy.com.

Long, Strange Trip

U.S. was built on the efforts of wildcatters. One of the earliest in the shale game, Floyd Wilson, now with Falconer Oil & Gas, addressed the crowd with a look at the changing nature of the game in U.S. shale.

“Today in our industry, early wildcatting efforts has been replaced by technological advancement,” Wilson said during the opening keynote. “We’re still wildcatting, just in a modern way. We are finding new frontiers and we are tripping over them every day.”

“Wildcatting is bigger, better, stronger,” he continued.

Wilson allowed that a big difference in the basin these days is need for investment and the realities that come with it. “Money always comes with the expectation of reasonable return,” he said.

He added that operating within cashflow, a common demand from investors, is difficult in shale exploration, but there’s no way around it.

“It can’t really be done in the shale business in the early stages,” he said of operating within cashflow. “It can be over time, however.”

Dealmaking

Mike Wichterich, Three Rivers, addressed the question many people have right now. When will public capital return to oil and gas? While he didn’t offer they answer, he did point out the issue.

“Wall Street hates us right now. We are sitting in limbo, but you know that,” he told the audience. “When will Wall Street come back?”

He pointed out that, “They don’t care about making money. They care about beating the S&P 500. Our industry doesn’t have a history of doing that,” he said.

But the panelists on the dealmaking panel, also including Kaes Van’t Hof, Diamondback Energy, and Mohit Singh, BPX Energy, agreed that there is hope. Specifically, they pointed out to last Friday’s Chevron deal for Anadarko Petroleum as a good sign for the Permian Basin and the industry as a whole.

“Chevron saw something public markets weren’t seeing and that woke everyone up,” said Van’t Hof. “It’s a good sign that that a supermajor saw something that the public markets didn’t.

“It’s a great sign for M&A,” he continued. “That’s what drives A&D, a healthy equity market.”

Singh said the landscape is changed now and he expect the A&D market to look different at this time next year.

Singh also gave an update on BPX’s onboarding of the BHP assets it purchased last year. The company took over the assets on March 1. Singh said the acquisition gives it a Permian position and that the company will focus on the Permian Basin, Eagle Ford, and Haynesville. Everything else will be sold.

Permian Power, Part 2

The U.S. production potential surprised OPEC, said Tom Petrie, Petrie Partners, in a talk about geopolitics. He said the U.S. oil production is at almost 12 million barrels per day and quite possibly still growing.

“It’s likely to provide a challenge to both Russia and Saudi Arabia, a extraordinary event,” Petrie said.

He said Russia and Saudi Arabia need oil price to be at $80 per barrel when you look at all of the economics. The U.S remains competitive at $65 or higher. Petrie said OPEC’s viability is increasingly questionable below $50.                    

DUG Permian continues through the day. Check back for additional updates.

[ceo_energemsier + 1,818]

https://www.reuters.com/article/us-usa-oil-productivity/u-s-shale-output-forecast-to-hit-record-8-46-million-bpd-in-may-eia-idUSKCN1RR20S

[ceo_energemsier + 1,818]

12 hours ago, Tom Kirkman said:

No issue, I fully expect a majority to disagree with me, and I really don't have any problem with that.  Heck, I encourage dissent.

So about those EVs supposedly killing off demand for oil & gas... a niggling little point to pay attention to and poke around a bit...

What are the primary, raw energy sources which are mainly used to generate all of this massively hyped "green" and "environmentally friendly" electricity used in these "green" and "environmentally friendly" EVs?

Why, thank you very much for asking!  Excellent question! !

EIA: What is U.S. electricity generation by energy source?

n 2018, about 4,178 billion kilowatthours (kWh) (or 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States.¹ About 63% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases). About 20% was from nuclear energy, and about 17% was from renewable energy sources. The U.S. Energy Information Administration estimates that an additional 30 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2018.²

U.S. electricity generation by source, amount, and share of total in 20181
Energy source	Billion kWh	Share of total
Total - all sources	4,178
Fossil fuels (total)	2,651	63.5%
Natural gas	1,468	35.1%
Coal	1,146	27.4%
Petroleum (total)	25	0.6%
Petroleum liquids	16	0.4%
Petroleum coke	9	0.2%
Other gases	12	0.3%
Nuclear	807	19.3%
Renewables (total)	713	17.1%
Hydropower	292	7.0%
Wind	275	6.6%
Biomass (total)	63	1.5%
Wood	41	1.0%
Landfill gas	11	0.3%
Municipal solid waste (biogenic)	7	0.2%
Other biomass waste	3	0.1%
Solar (total)	67	1.6%
Photovoltaic	63	1.5%
Solar thermal	4	0.1%
Geothermal	17	0.4%
Pumped storage hydropower3	-6	-0.1%
Other sources	13	0.3%

 

Ah, but you can rightfully cluck your tongue and scold me for obviously being too closed-minded and concentrating just on U.S. electricity generation.

Seems obvious that other nations have carried the torch of "green" and "environmentally-friendly" generation of electricity far better than the U.S. , what with U.N. environmental plans and Kyoto protoplasmic verbiage and other high-minded Save The Planet values espoused by impeccably honest politicians ( Canada's esteemed Trudeau springs to mind... )

Global Electricity Production by Source

 

Hmmmmm, now waitaminute... ^ this isn't matching what CNN tells me to think...

 

Anyway, rather than me leading you down any wrong and obviously biased and closed-minded paths, I would encourage everyone to do a bit of your own research on what exactly are the primary energy sources used globally to generate electricity. 

< cough >  < hydrocarbons >  < cough >

So that you can better disprove my crazy idea that global demand for oil & gas is simply not going to go away any time soon.  Maybe after a Century or so.  Maybe.

 

Have at it.  Prove me wrong.  And have fun poking around and asking hard questions.

 

global-electricity-production-by-source_v2_850x600.svg

To further add to the facts you brought forth: Transportation needs for fuels increased!!

I do  not see EV's causing any meaningful dent in the demand of hydrocarbon transportation fuels. India, China and emerging and developing nations demands for transportation fuels will grow more rapidly.

"The transportation sector grew by about 140,000 b/d in 2018 as a result of increased demand for fuels such as petroleum diesel and jet fuel,” EIA said. "

____________________________________________________________________________

 

EIA data: US reached record energy consumption

U.S. energy consumption set a record in 2018, increasing by 4 percent above 2017 levels and 0.3 percent above the previous record set in 2007, according to new data from the U.S. Energy Information Administration.

Natural gas consumption was the rising star amongst all energy types. Coal consumption dropped by 4 percent. Compared to 2017, natural gas consumption rose 10 percent. Natural gas appears to be on the sharpest increase rise, followed by a similar rise in usage for both petroleum and renewables. Nuclear consumption has stayed flat since roughly 2000.

For petroleum, the U.S. consumed 500,000 b/d more in 2018 than 2017 for a total of 20.5 million barrels per day. “Growth was driven primarily by increased use in the industrial sector, which grew by about 200,000 b/d in 2018. The transportation sector grew by about 140,000 b/d in 2018 as a result of increased demand for fuels such as petroleum diesel and jet fuel,” EIA said.

Natural gas reached a record consumption total in 2018 at 83.1 billion cubic feet/day. Weather

related factors causing the need for heat and air conditioning was the main reason for the record year. “As more natural gas-fired power plants came online and existing natural gas-fired power plants were used more often, natural gas consumption in the electric power sector increased 15 percent from 2017 levels to 29.1 Bcf/d,” EIA said.

In the U.S., unconventional oil production accounts for roughly 8.3 million barrels of oil per day. The Bakken is pumping 1.3 mbpd, the Permian 4.0 mbpd, and Eagle Ford 1.4 mbpd.

In 2018, the U.S imported 24.841 quadrillion Btu and exported roughly 21 quadrillion Btu, for a shortfall of 3.6 quadrillion Btu.

 

[ceo_energemsier + 1,818]

On 4/13/2019 at 11:32 PM, Marina Schwarz said:

I risk bursting @Tom Kirkman's $70 bubble but, well, there's talk about $40 for a barrel of Brent. Anyone else having a deja vu? 

Energy survey shares insight on drilling, market outlook

A first quarter energy survey completed by the Federal Reserve Bank of Kansas City shows that while energy related activity in Colorado, Wyoming, Oklahoma and the northern half of New Mexico was flat at the end of 2018, the energy landscape looks different this year.

Better commodity prices are the main driver, coupled with a fairly balanced global supply and demand market, according to the team at the Tenth Federal District Reserve.

The surveyors provided a summary of the special questions asked to drillers, operators, service firms and others related to the energy sector.

 

Summary: This quarter firms were asked what oil and natural gas prices were needed for drilling to be profitable on average across the fields in which they are active (in alternate quarters they are asked what price they need for a substantial increase in drilling). The average oil price needed was $52 per barrel, with a range of $30 to $85. This average was down slightly from $55 in the third quarter of 2018, but matched the price reported in the first quarter of 2018. The average natural gas price needed was $3.02 per million Btu, with responses ranging from $1.50 to $5.00. Firms were again asked what they expected oil and natural gas prices to be in six months, one year, two years, and five years. Expected oil prices increased since the last quarter and were above the average price needed to be profitable. The average expected WTI prices were $60, $61, $65, and $72 per barrel, respectively. However, natural gas price expectations decreased. The average expected Henry Hub natural gas prices were $2.85, $2.91, $3.05, and $3.18 per million Btu, respectively. Firms were also asked about their expectations for access to pipeline capacity in the next 6 to 12 months. More than 62 percent of energy contacts expect pipeline capacity to increase either significantly or slightly in the next year. Less than 12 percent of firms expect pipeline capacity to decrease. Finally, respondents were asked about drilled but uncompleted (DUC) wells. Around 20 percent of firms indicated their number of DUC wells had increased compared to a year ago, while only around 8 percent expect their number of DUC wells to increase in the next 6 to 12 months.

In addition to the summary of survey answers, the new Q1 energy report also included several selected comments, including the following (all source names were not included).

“We are focusing on what we control, shoring up and improving our equipment, hoping that translates towards better efficiency, and doing so from cash flow and without taking on debt. Regardless of energy prices over the next 6 months, we want to reduce debt and be better positioned to ride out another downturn in pricing should that occur.”

“The market seems to have found a healthy supply and demand balance. That balance is being driven by oil supply being reduced from OPEC and demand remaining stable in spite of economic growth concerns.”

“There is little lag between increased commodity prices and the ability to ramp up oil production, leading to more production and lower prices. It seems the market is able to reach supply-demand equilibrium (barring one-off geo-political events) much more quickly. Drilling and completion technology has led, again, to rapid production. Companies can simply move more quickly on shale plays with greater success.”

“Commodity prices are the key determinant in any activity (capital expenditure changes). Most likely no change if prices are higher, and significantly lower prices would create a reduction in activity.”

 

[Old-Ruffneck + 1,246]

https://oilprice.com/Energy/Oil-Prices/Oil-Could-Fall-To-40-If-OPEC-Abandons-Its-Deal.html

Reading for your pleasure!!! And for arguments sake 🙂

[William Edwards + 708]

On 4/16/2019 at 9:36 AM, Jan van Eck said:

Sure we do, William.  Nothing quite like musing on all that over morning tea and biscuits.  Much to the chagrin of the dog, who would prefer to go outside and chase the squirrels.  Oh, well. 

True, Jan. But you must admit that you are not the typical participant.

[wrs + 893]

No risk of $40 oil this week anyway, US production dropped and inventories fell across the board with both gasoline and oil inventories now below the 5 year average.  Only 6mmbbl/day were imported last week and I recall back when we had lower for longer that there were plenty of weeks during Feb-Apr when the imports were well into the 8mmbbl/day range.  So the strategy by KSA of not sending much oil to the US is working.  In addition, imports from Venezuela are at zero for the last month and Iraq is only about 150kbbl/day now while many other ME producers are at near zero as well.  Apparently the US either doesn't want imported crude or it's being shunned by outside producers.  The main importer to the US now is Canada, still over 3mmbbl/day.

Imagine what the storage numbers would look like without that Canadian oil sands oil.  Without that oil, Cushing would be empty by now.

[William Edwards + 708]

14 hours ago, Old-Ruffneck said:

https://oilprice.com/Energy/Oil-Prices/Oil-Could-Fall-To-40-If-OPEC-Abandons-Its-Deal.html

Reading for your pleasure!!! And for arguments sake 🙂

Recent history suggests that US production continues to grow at today's prices. Inventory data suggest that the world is adequately supplied with OPEC "underproducing" by two million barrels a day. It might be interesting to imagine the price profile if OPEC, with or without Russia, decided to try to regain that two million barrels a day of market share. The key question is "Where would they put that unwanted two million barrels a day of unwanted production, and how low must they drop the price to try to force it into the market?"