.

[Old-Ruffneck + 1,235]

2 minutes ago, Douglas Buckland said:

They need to hire AOC to get them out of their finacial bind!

Maybe Elizabeth Warren, she likes giving the cash away lol

[Douglas Buckland + 6,308]

1 hour ago, Falcon said:

WOW ! I didn't realize Oil Price website attracted so many Bernie Sanders voters. 

 

There is hope for you yet!👍🏻

[Douglas Buckland + 6,308]

56 minutes ago, Falcon said:

I'm sorry.  I change my view.  OPEC will save producers. Oil prices will average $87 bbl in 2020.

Just my opinion.

The 'hope for you yet' comment was supposed to go here....fat fingers on the handphone syndrome again.

[Mike Shellman + 548]

8 hours ago, Falcon said:

WOW ! I didn't realize Oil Price website attracted so many Bernie Sanders voters. 

 

Actually I am a very conservative Republican, concerned about poor public opinion, mistrust and a strong anti-oil sentiment in America. I am deeply concerned what all that means for my industry during the next election cycle. I am hopeful that your comments, if anybody reads them, and a lot of the other shale cheerleading that goes on here, are not construed by others to be those of the oil and gas industry's. They are not. Mistruths told about shale oil sustainability and 100 + GBO of remaining shale oil reserves (?!) in America, about shale oil "domination,"  do nothing but destroy the oil industry's credibility and create more mistrust within the general public, which then creates more anti-oil sentiment and ultimate harms the industry... even the shale industry. Capital the shale industry needs to survive on is drying up into nothing mostly because stakeholders are fed up with all the lies. 

OPEC has caused me untold grief in the past 50 years. But I understand hydrocarbon decline, and resource depletion; I understand that for America to be strong, and good, we need abundant, inexpensive oil and natural gas for decades to come. From wherever we can get those resources.

America is blowing thru its expensive, unprofitable shale oil resources like there is no tomorrow while the rest of the world watches, smiles, and saves its lower cost hydrocarbons for the future. For America, that's stupid energy policy. 

 

[Falcon + 222]

On 6/29/2019 at 6:20 AM, Mike Shellman said:

.

Edited July 30, 2019 by Falcon

[Douglas Buckland + 6,308]

Good question, just why did Occidental pay 37 billion dollars for Anadarko? It sure as heck was not for the opportunity to burn through cash on a play that has left others under a mountain of debt. There must be other Anadarko assets which they wanted.

As I have said before, it does not matter who wants to play the shale oil game, whether it is a 'mom & pop' operator or a multinational oil company, you still have to deal with the reality of the fluid dunamics and the geology in place as well as the drastic decline curves requiring constant drilling. You can't change these 'givens'.

[Falcon + 222]

On 6/30/2019 at 12:23 AM, Douglas Buckland said:

.

.

Edited July 30, 2019 by Falcon

[Douglas Buckland + 6,308]

What exactly does "Fluid Dynamics. Not" refer to?

[J.mo + 165]

On 6/28/2019 at 5:25 PM, Mike Shellman said:

That's a difficult task to ask of some folks here, clearly.

Without OPEC production restraint, particularly the KSA, the price of WTI would currently be trading at <$45 and on the express elevator down.

US shale oil represents <8% of total world oil production rates, yet its won? What exactly has it won? Upstream shale oil E&P's, public and private, are over $300 billion dollars in debt...what part of that is so difficult for people to understand? Without OPEC restraint American shale oil would be eating a shit sandwich at the moment. Worse than it already is, please see the chart, below.

Why is OPEC so "restrained" with regard to its short term production levels, do (intelligent) minds ask? Because it has computers! It knows the physical limitations of shale oil, it understands the difference in 2P reserve classifications and TRR reserves at some unknown future, much higher oil prices. Because it knows oil well economics, can read SEC filings, and sees how deeply in debt the shale oil industry is and where it is headed in the future. It knows how deeply in debt America is. The damn America shale oil industry owes 2 times what the KSA's total national debt is; google it!

OPEC is giving the US LTO industry just enough rope to hang itself. And that is EXACTLY what the US shale oil industry is doing. Hanging itself, please see chart below.

Shale oil has not "won" anything. Its gross mismanagement will, in 5-6 years, cause America to ultimately ... lose.

Wake up people. Quit with all the Trump loving, America first BS, OPEC-hating-at-all-cost garbage and look what is going to happen in just a few years as America's shale resources deplete. Think that is not going to happen? Take a look at the oldest shale oil play in America, the Eagle Ford. Its on its last legs. Only people with NO experience in the oil business believe this boom, has legs. Phfftttttt.

Shale oil is a speed bump along the long road of resource depletion. In the end, cheap oil wins, not expensive shale oil dependent on credit/debt.  

Is it un-American not to believe in the shale revolution? Its actually really un-American, and dumb, really dumb, to not want our last remaining hydrocarbon resources to be managed better. 

 

If you are so convinced this is the case, Mike then why are you not shutting down your wells and counting your enormous future fortune?

[ceo_energemsier + 1,818]

Regardless of what one says about shale, it sure has created and caused a lot of stir and a lot of sleepless nights and heartburn for too many globally. Russia from 2010s-2014 spent a lot of $$$ in EU and the US and maybe Canada too, to portray shale in a bad light and spread disinformation and create chaos because they were afraid of losing influence by losing market share to shale.

___________________

Shale Fight Makes OPEC Accept Lowest Market Share Since 1991

 

 

 

(Bloomberg) -- For almost three decades, OPEC has always pumped at least 30% of the world’s crude oil, creating an informal floor for Saudi Arabia and its allies in the cartel. The level has survived everything from wars and economic crises to terrorist attacks and diplomatic spats.

Yet, with OPEC set to extend output cuts for the rest of the year and potentially into early 2020, its share of the oil market is all but certain to drop below 30% for the first time since 1991, according to Bloomberg News calculations.

The sliding market share of the Organization of Petroleum Exporting Countries, which meets in Vienna on Monday, highlights how the cartel keeps giving ground to rising U.S. shale production in pursuit of higher prices.

“For Saudi Arabia, the oil policy right now is 100% revenues,” said Amrita Sen, chief analyst at consultant Energy Aspects Ltd. “But if inventories don’t fall and prices don’t rise, the policy is not sustainable.”

Saudi Arabia and Russia agreed on Saturday to push for an extension of the current OPEC+ production cuts for the rest of the year and potentially all the way to March 2020, making the outcome of next week’s gathering in Vienna of OPEC and non-OPEC oil ministers all but a foregone conclusion.

Bloomberg calculated OPEC’s market share by measuring crude production from the cartel -- which is subject to output caps -- but not condensates and other natural gas liquids that are excluded from the quotas. Monthly OPEC output was then measured against quarterly global oil demand as estimated by the International Energy Agency.

OPEC nations are bearing the burden of the market-share loss unevenly. Under U.S. sanctions, Tehran and Caracas have seen their production collapse, lightening the effort other members had to make to support high oil prices. Since December, Iranian and Venezuelan output has fallen by almost 1 million barrels a day, hitting its lowest level in about 40 years, according to Bloomberg News estimates.

Other OPEC nations have avoided trouble by simply flouting the rules, virtually pumping at will. Iraq, for example, produced 4.7 million barrels a day in May, matching a record it set in December.

But Saudi Arabia, the group’s most important member, is having to make deeper cuts than initially planned, reducing output recently to 9.7 million barrels a day, well below the level of 10.3 million a day it agreed with its OPEC partners.

The deeper Saudi cuts show Riyadh is willing to cross previous red lines. Khalid Al-Falih, the Saudi oil minister, said in a speech in 2017 that the kingdom wouldn’t fight a structural change in the market and “bear the burden of free riders,” warning it wouldn’t cut its output unilaterally.

But the loss of market share shouldn’t be a huge surprise. Ali Al-Naimi, the previous oil minister who ran Saudi oil policy for two decades, warned about the risk soon after his forced retirement. Al-Falih reversed Al-Naimi’s strategy of pump-at-will, designed to curtail the growth of shale production, opting instead to sacrifice market share to lift prices.

“Anybody who thinks he or any country is going to influence the price in today’s environment is out of his mind,” Al-Naimi told the Financial Times in 2016. “I have no idea why they want a reversal because a high price will definitely bring more crude to the market and OPEC will further lose [market] share.”

With oil-demand growth weakening due to the impact of the U.S.-China trade war and U.S. shale set to grow strongly in the second half of this year and beyond, Saudi Arabia and OPEC face the prospect of extending their cuts into next year or even 2021, deepening the loss of market share still further.

“At a minimum, OPEC has to sustain the present cuts through to the end of 2020,” said Simon Flowers, chairman of consultant Wood Mackenzie Ltd. “OPEC’s got a tricky job.”

It’s a lower-for-longer oil-production scenario that suggests that OPEC is aiming for a price that’s too high. Although Saudi Arabia shies away from price targets, it needs $70-$80 a barrel to meet the kingdom’s fiscal requirements. But by pursuing that price, it’s boosting not just shale, but also deepwater exploration.

According to the International Monetary Fund, Riyadh needs $85 a barrel to finance its budget, compared with an average of $78 during the 2000-2015 period.

 

 

So far, Riyadh has avoided a reckoning thanks to unusually high demand growth and the help of the American sanctions on Caracas and Tehran. But the longer the cartel keeps production cuts in place, the more evident it becomes that the strategy relies on strong demand, sanctions and outages. Take away one of those elements, and Riyadh will face a difficult choice: cut deep, or accept lower prices.

“OPEC’s balancing act gets harder in face of weak demand,” said Bassam Fattouh, head of the Oxford Institute for Energy Studies. “OPEC hopes that it does not have to confront this choice anytime soon, though this is beyond its control.”

Riyadh has signaled it would rather lose further market share than embark on another pump-at-will oil policy. Each time that the kingdom has shifted policy toward fighting for market share -- in 1986, 1998 and 2014 -- oil prices have collapsed.

For now, it has the support of Russia, with President Vladimir Putin announcing on Saturday that he’s agreed with Saudi Crown Prince Mohammed Bin Salman to extend the OPEC+ agreement.

Yet Moscow is starting to worry about the strategy. Since both countries came together in late 2016 to manage the oil market, they have privately disagreed about the ideal level for prices.

Putin brought the conflict into the open in early June, explaining that “there are some disagreements” between Moscow and Riyadh “that stem from a different understanding of what can be called a fair price.”

Putin went further: “Look at the price per barrel of oil that is used to calculate, say, the budget of Saudi Arabia. It is much higher than what we use. Ours is $40 per barrel, and their price is higher. That is why, of course, they want to keep the price higher.”

https://finance.yahoo.com/news/shale-fight-forces-opec-accept-230100486.html

[BenFranklin'sSpectacles + 762]

On 6/28/2019 at 8:29 AM, Tom Kirkman said:

Ah yes, the Hamster Wheel of Debt, powered by lemmings who see a cliff to run toward.

I am strongly pro - oil & gas.  But U.S. Shale Oil industry simply doesn't make economic sense to me.  Mostly still losing money after a decade of "innovation". 

Reminds me of Elon Musk.  Burning through cash, but investors still throw money at him.  I don't get it.

I can't speak to the shale oil industry, but I can say a little about Tesla. 

Let's preface this with some perspective: to those who are convinced that short-term profits are the holy grail of business analysis, I would point out that Amazon was "unprofitable" for 20 years before everyone realized it had become a giant.  The "losses" weren't due to a poor business model; they were the result of cunning reinvestment. 

Now let's talk about Tesla's role in the automotive industry.  The US automotive industry is bloated, inefficient, saddled by unions, mired in incompetence, etc.  There's much progress to make in automotive, but existing US automotive companies are incapable of making it.  Progress required a new entrant, and Musk knew that. 

Unfortunately, building a company from the ground up requires investment.  The automotive industry spent the last century solving specific problems and building specific competencies.  Before Tesla could hit its stride, it had to reproduce in two decades much of what an entire industry accomplished in a century.  No small feat.  E.g. there was much to do about panel gaps on Tesla vehicles, and pundits waxed poetic on how this proved Tesla's incompetence.  Panel gaps aren't a particularly complicated problem, and Tesla solved it.  Now they have that core competence and can compete with other automakers on an equal footing.  It inevitably took a little time and money, but they did it.  That's the story with every problem pundits have whined about. 

As Tesla has been reproducing industry knowledge, it has also been developing new capabilities: batteries, power electronics, motors, over-the-air updates, mobile service teams, autonomous vehicle technologies, increased vehicle longevity, etc.  It's incorrect to think of Tesla as just another car company.  Tesla is spending billions building a foundation for future success.  We've seen the capital expenditures, but we haven't yet seen the payoff.  That's to be expected. 

Finally, Tesla is spending billions building an automotive A-team.  To survive this far, Tesla had to become fiercely competent.  If Tesla survives to profitability, its people will be a force of nature.  The entire automotive industry will be forced to transform its culture just to keep up.  There will be bankruptcies, heavy layoffs, wailing, gnashing of teeth - all the result of laziness, complacency, and incompetence.  The automotive industry is about to change. 

So yes, Tesla has been unprofitable and burned through billions of dollars, but this is the result of investment.  To competent people who have worked in research, development, and manufacturing, the inevitability of that was obvious.  To these competent people, the potential profitability of the final outcome is also obvious - but that's hard to explain to people who don't know how the sausage is made. 

Give it a few more years.  When Tesla hits its stride, the automotive industry is going to have a gut-wrenching, "Oh s***" moment.  That'll be a good show. 

[BenFranklin'sSpectacles + 762]

On 6/29/2019 at 5:20 AM, Mike Shellman said:

America is blowing thru its expensive, unprofitable shale oil resources like there is no tomorrow while the rest of the world watches, smiles, and saves its lower cost hydrocarbons for the future. For America, that's stupid energy policy.

Granted, shale has been unprofitable thus far and may be unprofitable in perpetuity.  However, I think we need to add perspective to this.

First, domestic energy production has value beyond the profits it failed to generate.  It has created jobs, generated tax revenues, reduced dependence on unstable nations, stemmed the flow of wealth to violent ideologies, stabilized oil prices, and could reduce world defense expenditures.  All of that added together may compensate for any losses. 

Second, the industry is still growing and learning.  It may yet produce a profit.  It may achieve lower breakeven prices.  It may discover more oil.  Yes, many companies have gone bankrupt and many investors have lost their shirts - but that's business as usual for new industries/technologies.  E.g. when the railroads were first built, there was massive investment in lines that proved unprofitable, bankruptcies, layoffs - all the things we see with shale today.  Railroads then became profitable, and they're still profitable today.  It remains to be seen if and for how long shale can become profitable, but it's too soon to declare failure. 

Third, we're all conditioned to think of oil as a scarce resource, but what if it's not?  Oil demand is increasing in SE Asia (for the moment), but it's declining in the West.  That's just from improved efficiency, which is ongoing.  We've yet to see the effects of EVs, recycling plastics back into crude, widespread natural gas cars/trucks/trains/ships, etc.  Shale production might begin to decline within a decade, but Western oil demand will certainly begin to decline within a decade.  The worst case scenario is that Western oil production declines in lock-step with Western demand.  That's hardly an apocalyptic scenario. 

Personally, I'd say the shale boom has been eerily well-timed: we're exploiting a resource for short-term gain, exhausting it just as its economic/strategic value disappears.  I wouldn't be surprised to learn the shale boom was planned that way. 

[esgeo + 54]

On 6/30/2019 at 7:23 AM, Douglas Buckland said:

What exactly does "Fluid Dynamics. Not" refer to?

I got some really good advice at the first job I had in the natural resources field.

It was "reality is what happens in the field". 

People constantly praising the virtue and downplaying the detriments of US onshore LTO development seem oblivious to the role physics plays- as if any limitations of physics can be overcome with "better technology" as long as the price environment is right.

My take, as someone on the exploration side, is that one can certainly make money on the LTO now (while we are exploiting all these "sweet spots"), but you are gonna be hard pressed to profitably make oil with your money later on down the road when what's left is less light and/or more tight (and/or gassy/wet). 

[D Coyne + 305]

On 6/28/2019 at 12:59 PM, ceo_energemsier said:

Shale ,  Another Decade of U.S. Supply Growth

(Bloomberg) -- The U.S. will account for almost a quarter of global oil and gas production by the early 2030s as the shale boom keeps on booming, according to the head of Rystad Energy.

Output from shale including crude oil, condensate and natural gas liquids could climb to as high as 25 million barrels a day, Jarand Rystad, chief executive officer of the research and intelligence company, said in an interview in Kuala Lumpur. The U.S. will likely make up about 23% of global liquids production and pump 27% of the world’s gas by then, he said.

Part of the reason for the expected growth is that companies are getting better at hydraulic fracturing, the process of pumping a mixture of water and sand into a horizontal well to create millions of tiny cracks in the shale rock that allow oil and gas to flow to the surface. Frackers are using more sand, creating more cracks and boosting the productivity of each well, Rystad said.

“It’s about sand, horsepower and water injection,” he said at the Asia Oil & Gas Conference. “Those three parameters are what’s driving activity levels, and those are three times higher today than they were back in 2014.”

Rystad has been a staunch believer in U.S. shale since early this decade when many analysts and OPEC ministers were unconvinced that a natural gas drilling revolution would translate to a surge in oil output. He recalled being labeled “ridiculously too aggressive” in 2012 when projecting shale crude production would grow fourfold to 4 million barrels a day within four years. The forecast was too low and shale has transformed the nation into the world’s biggest producer.

 

Looking ahead, Rystad’s optimism is also based on a recent study he’s done on the so-called parent-child interference issue, a concern that drilling a new well too close to an older one will reduce pressure in the original and cut output. While the results were mixed, overall the study showed that companies can stack wells more densely, creating enough drilling locations to support 10 to 15 more years of output growth, he said.

The shale surge underscores just how far the U.S. industry has progressed since former President George W. Bush promised to cut imports from the Middle East when he declared in 2006 that the country was “addicted to oil.” Now, said Rystad, the world is so dependent on American production that if fracking were ever banned it would cause a global energy crisis.

“Shale has become a drug that the world is addicted to,” Rystad said . “We cannot live without it. We’d never be able to compensate with OPEC and offshore production.”

 

 

 

 

 

 

That chart is not very useful because it includes NGL, what we will be short on in 2025 is crude plus condensate and that is what is needed for transportation fuel (mostly light and middle distillates).

The chart below compares the EIA's AEO 2019 reference scenario for US tight oil output with my own projection based on existing well profile data from shale profile, cost estimates based on comments by oil pros and TRR estimates for tight oil plays from the USGS.  The projection uses actual well costs, LOE, and other costs and assumes associated natural gas and NGL revenue are used to offset LOE,  the EIA's AEO reference oil price scenario is also used for future oil price assumption and a 10% annual discount rate is used to determine the Net Present value of future net revenue from a proposed well, only those wells expected to be profitable based on the assumptions of the model are completed.  The economically recoverable resource (ERR) is less that the technically recoverable resource (TRR) because the TRR makes no oil price or well cost assumptions, but simply assumes oil prices will rise to a level that wells that are technically feasible will be profitable, in practice this assumption often fails and some oil is left in the ground due to lack of profitability.

The URR for the AEO scenario from 2010 to 2050 is 122 Gb (about 12 Gb more than the USGS TRR mean estimate), the more realistic projection has US tight oil URR at 85 Gb with the assumption that Brent oil prices rise to $113/b in 2017$ by 2050 (AEO 2018 reference oil price scenario).

[esgeo + 54]

6 minutes ago, D Coyne said:

The economically recoverable resource (ERR) is less that the technically recoverable resource (TRR) because the TRR makes no oil price or well cost assumptions, but simply assumes oil prices will rise to a level that wells that are technically feasible will be profitable, in practice this assumption often fails and some oil is left in the ground due to lack of profitability.

 

This is the fundamental divide as I see it. From a total qualitative standpoint, the point at which Energy Return on Energy Invested (ERORI) becomes <1:1 (i.e., takes more energy to drill/complete/produce a well than energy resource it actually produces), the value of that hydrocarbon resource as an energy source is inferior to any other energy source that can be harnessed/produced with an ERORI >1:1.  Obviously there are additional values of hydrocarbons for their material properties (transportability, feedstock, etc...), but based on simple supply and demand economics, one would expect anemic price support for a commodity that can be replaced by cheaper alternatives. To put a finer point on it, improved completion techniques are necessary because the hydrocarbon resource that is still in the ground requires a much more substantial energy investment to exploit than the hydrocarbons that have already been produced.  

[James Regan + 1,776]

Make hay while the sun shines should be the mantra! Shale has still to prove itself and as the US is still not a net exporter a lot of hype is riding on the back of this untested reserve.

Would you invest in Shale Oil ? Ask yourself this question and you will have a good idea of how healthy this niche is.

If the Dem-bots win 2020 the shale industry will be under pressure from all angles and you will find that the organization that is frivolously being discarded may well become your savior again.

OPEC didn’t ride in on a camel yesterday unlike US Shale which has ridden in and is shooting up the saloon.

[D Coyne + 305]

40 minutes ago, esgeo said:

This is the fundamental divide as I see it. From a total qualitative standpoint, the point at which Energy Return on Energy Invested (ERORI) becomes <1:1 (i.e., takes more energy to drill/complete/produce a well than energy resource it actually produces), the value of that hydrocarbon resource as an energy source is inferior to any other energy source that can be harnessed/produced with an ERORI >1:1.  Obviously there are additional values of hydrocarbons for their material properties (transportability, feedstock, etc...), but based on simple supply and demand economics, one would expect anemic price support for a commodity that can be replaced by cheaper alternatives. To put a finer point on it, improved completion techniques are necessary because the hydrocarbon resource that is still in the ground requires a much more substantial energy investment to exploit than the hydrocarbons that have already been produced.  

From a society-wide view, EROEI analysis is useful, but for an individual industry it is not.

The reason an oil company exists is not to produce energy, it is to produce profits.  Nobody in the oil industry knows or cares what the EROEI of the oil or any of the other inputs to the oil production process is.  It is all about dollars and cents and has very little to do with energy in and energy out.  There are lots of profitable products produced which have an EROEI<1, oil is no different.

[JR EWING + 123]

On 6/28/2019 at 2:29 PM, Tom Kirkman said:

Ah yes, the Hamster Wheel of Debt, powered by lemmings who see a cliff to run toward.

I am strongly pro - oil & gas.  But U.S. Shale Oil industry simply doesn't make economic sense to me.  Mostly still losing money after a decade of "innovation". 

Reminds me of Elon Musk.  Burning through cash, but investors still throw money at him.  I don't get it.

Its subsidized by fed. Obviously if it wasnt it would be gone by now

[John Foote + 1,135]

You folks do realize this subsidized debt thing, it’s a lot more than shale. It’s becoming a cornerstone of the American economy. And the bedrock of the Federal budget.

[Rasmus Jorgensen + 1,169]

On 6/30/2019 at 6:23 AM, Douglas Buckland said:

Good question, just why did Occidental pay 37 billion dollars for Anadarko? It sure as heck was not for the opportunity to burn through cash on a play that has left others under a mountain of debt. There must be other Anadarko assets which they wanted.

pretty simple - the execs, directors and advisors that put this deal together made a lot of money on the deal. 

There's a discipline of economics that discusses the psychology of investment. And there is very good evidence that investors value a small potential upside much higher than a real risk of downside - i.e. when you are in trouble then double.

p.s. I actually think the Anadarko deal is good the O&G industry as a whole, but that is a different discussion.