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Will We Ever See 100$+ OIL?

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11 hours ago, Yoshiro Kamamura said:

AGW is the scientific stance on the subject. In other words - get used to it. It's similar to flatearthers complaining that their discussions are being "hijacked by spherist messiah". 

 

9 hours ago, James Regan said:

Flatearthers and spherists! Your analogy is typically radical and leaves no room for rebuttal. So you win 👌🏻👌🏻

 

I collect Flat Earth memes, I find them amusing.  Because the memes I collect are not made by actual Flat Earth true believers, but by trolls using Flat Earth memes in order to derail discussion threads on unmoderated 8chan forums. 

Some Flat Earth memes deliberately have spelling or typing errors, in an attempt to get unsuspecting noobs to point out the errors and the logical fallacies.  If anyone points out the errors or ridiculousness of the memes, the Flat Earth troll was successful in "sliding" away / distracting from / derailing the discussion at hand.

Why is my comment here about Flat Earth relevant to this thread?

Think about this .... the title of this thread is:

"Will We Ever See 100$+ OIL?"

Does anyone notice the "slide" tactic away from the topic of $100 oil and toward the topics of AGW and "Oil Man Bad" & "Oil Man Stupid" topics?

 

Anyway, have some amusingly awful Flat Earth "slide" bait  : )

Please take note of the general attitude presented in these Flat Earth troll memes that anyone who doesn't believe in Flat Earth doesn't believe in science, and rejects absolute scientific proof of Flat Earth.  (Sound familiar?)

I have more, if anyone wants them for amusement:

 

 

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2 hours ago, Bert said:

I believe the question should be "will we see $200 oil" since we have already seen about $150 oil last time the economy got hot.

It was $142 but who's counting.  

That was when US was importing 15 mm bbl/day

That was when Saudi/OPEC had the world over a barrel (of oil).

Only way Saudis get $100 plus is starting a war.  Like I mentioned. The U.S. President Trump told them his country will not spend Billions to fight their war. 

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2 hours ago, Bert said:

I believe the question should be "will we see $200 oil" since we have already seen about $150 oil last time the economy got hot.

That was when U.S. imported 15 mm bbl/day

That was before U.S figured out tight oil.

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2 minutes ago, Falcon said:

It was $142 but who's counting.  

That was when US was importing 15 mm bbl/day

That was when Saudi/OPEC had the world over a barrel (of oil).

Only way Saudis get $100 plus is starting a war.  Like I mentioned. The U.S. President Trump told them his country will not spend Billions to fight their war. 

Here is one of my old articles from 2015:

Why Oil is Unlikely to Hit $200 in the Next Decade

Recently, OPEC has stated that oil may reach $200 / barrel if investment doesn't continue. I disagree. The price of oil has plummeted 60% recently. The stated objective of OPEC, and specifically Saudi Arabia, is to regain market share. The current glut of oil is deliberate, designed to drive down prices, and cut out the inefficient, high-cost oil producers.

...

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HE’S NOT THE MESSIAH, HE’S A VERY NAUGHTY BOY.

0B5306E0-2FCE-4EC6-BE57-906C8E4DCDB3.jpeg

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I see you've been having fun. Me, I had to google AGW, so that's one new thing I learned today. What did you learn because I see good manners is not among these things for some of you. :) Kudos to some of the others for trying to keep things civil.

I'll now do you one better: When will we see oil at $500? And I'll tell you: when "Keep it in the ground" wins and Big Oil stops pumping at once. Thank you for your attention.

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On 7/11/2019 at 10:15 AM, nathan_john said:

This is what everyone said about nat gas vehicles. When there's not enough infrastructure though it doesn't take over quickly, regardless of a cheaper upfront cost or savings in fuel. This stuff makes sense for city fleets who all fill/charge up at a central hub, like garbage trucks, buses, city employee vehicles, etc. But why would companies pay for a brand new electrical freight truck when they can just maintain their original fleet, and know for a fact that they can fill up on any highway? 

Again I don't disagree  with your EV takeover, just disagree with your timeline. You seem confident in your assertions though. Are you shorting oil futures out in 2030 since you think demand will be 2/3 of what it is today? Not being sarcastic, genuinely curious if you think that's a good idea.

 

Also, cars saying they are zero emissions is definitely false advertising. It is on par with Fiji Water saying they were zero emissions because the water they shipped from Fiji was on barges that would have been making those trips anyway.

Nathan-john,

ZEV (zero emissions vehicle) is an EPA category that refers to tailpipe emissions.

see

https://en.wikipedia.org/wiki/Zero-emissions_vehicle

A zero-emissions vehicle, or ZEV, is a vehicle that emits no exhaust gas from the onboard source of power.

See also

https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program

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23 hours ago, Falcon said:

That was when U.S. imported 15 mm bbl/day

That was before U.S figured out tight oil.

Falcon,

Tight oil is likely to peak at about 8 to 10 Mb/d in 2023 to 2027 (depends on how high the peak is which depends on the price of oil, if oil prices remain low ($70/b for Brent or less) the peak is lower and sooner, if oil prices gradually rise to $85/b by 2025 and continue to rise to $100/b by 2035 the we might see the higher peak in 2025, but then output will decline as sweet spots run out of room and the average new tight oil well becomes less productive.  So your fantasy that US tight oil output will increase forever does indeed sound like a JK Rowling novel.  :)

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Falcon,

Note that all of the increase in US tight oil output for the past 8 months has been due to the Permian basin.  The scenarios below are based on actual well costs, royalties, taxes, LOE, G&A expense, average well output, transport cost, and AEO 2018 reference oil price case, with an annual discount rate of 10% and a discounted cash flow analysis on the net revenue of an average Permian well over its life.  I assume wells that have a positive discounted cash flow over their productive life will be completed and those that are zero or negative will not be completed.  I also assume in Jan 2023 that new well EUR will start to decrease so that 240,000 completed wells would have a TRR equal to the USGS mean case of 75 Gb for the Permian basin.

When we take account of the economics using the DCF analysis we get a lower economically recoverable resource(ERR) of 55 Gb with 172,000 to 180,000 total wells completed (varies a bit by case).  The three cases shown below have different rates of development (completion rates are higher in the high case and lower in the low case).  There is a slight variation in ERR from 54 to 56 Gb (the lower peak case has the higher ERR).

perm1907b.png

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13 minutes ago, D Coyne said:

Nathan-john,

ZEV (zero emissions vehicle) is an EPA category that refers to tailpipe emissions.

see

https://en.wikipedia.org/wiki/Zero-emissions_vehicle

A zero-emissions vehicle, or ZEV, is a vehicle that emits no exhaust gas from the onboard source of power.

See also

https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program

D Coyne, I understand that they technically fit the current EPA definition of a zero-emission vehicle. I just think they need to change that definition because it is highly misleading to say that EVs are zero emissions given that over 65% of their power source (electricity) currently comes from coal and nat gas in the US. 

You would never say that the average house or building hooked into the average electric grid is zero emissions. Or that my ICE car is zero-emissions 95% of the time since that's how often it's parked. 

I just think it's misinformation to the public and it attributes to why many don't understand how prevalent fossil fuels are in their daily lives. 

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On 7/11/2019 at 1:55 AM, Bill the Science Nerd said:

Really, and you don’t see how much damage that oil use has already done to the world’s economy?

It is true that we live in a system that is dependent on fossil fuels at the moment, but that absolutely does not need to be the case for much longer, and will cease to be true much faster than most people believe possible.

And my views are backed by the best science humanity has ever conducted.

you wear clothes, have a house with shingles, drive a car(ev or not) with tires on it, shampoo, use toothpaste, plastic tupperware, own electronic devices?? that is just some of the daily essential by-products from fossil fuels, fyi...does your "best science" have a replacement to make ALL those products right now ready to go??? so to be frank sir, what do you do for a living?? do you go home every night to your family sit on your big leather couch with your feet up and have family time?? well, i do not...I work 3 months 7 days a week 15-16 hrs a day straight seeing nothing but dust and oil sites for miles.....and I love every minute of it, cause it is what I have chosen to do to provide for my family I see 28 days out of a year....so when you and the like think these stupid ideas to transform from an industry I live for and bleed for with strangers I call brothers(you won't know about that bond) i take great offense and gladly end in kind with shove your "best science".....

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16 hours ago, Marina Schwarz said:

I see you've been having fun. Me, I had to google AGW, so that's one new thing I learned today. What did you learn because I see good manners is not among these things for some of you. :) Kudos to some of the others for trying to keep things civil.

I'll now do you one better: When will we see oil at $500? And I'll tell you: when "Keep it in the ground" wins and Big Oil stops pumping at once. Thank you for your attention.

Marina,

I do not think we will ever see $500/b.  Peak oil price might breach the $150/b mark in 2019$ briefly in 2030 to 2035, but as cost come down for BEVs and NGVs, demand for oil may wane, there will still be some demand for jet fuel and perhaps diesel for water transport, but those might also be replaced by alternatives to oil.  As demand for oil falls there may be less associated natural gas produced, so it is likely natural gas output will also start to fall.  

Eventually oil prices may become quite low as Persian Gulf producers compete for market share in 2035 and beyond.

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(edited)

16 hours ago, D Coyne said:

Falcon,

Tight oil is likely to peak at about 8 to 10 Mb/d in 2023 to 2027 (depends on how high the peak is which depends on the price of oil, if oil prices remain low ($70/b for Brent or less) the peak is lower and sooner, if oil prices gradually rise to $85/b by 2025 and continue to rise to $100/b by 2035 the we might see the higher peak in 2025, but then output will decline as sweet spots run out of room and the average new tight oil well becomes less productive.  So your fantasy that US tight oil output will increase forever does indeed sound like a JK Rowling novel.  :)

Respectfully disagree

Tight oil is NOW at 8 mm bbls/day.

A reasonable projection has tight oil increasing 4 mm bbls/day by 2024. ( I think that's conservative) Then GoM doubling from today's 2 million to 4 mm bbls/day . .  . .  .  .  . 

THAT EQUALS 18 mm bbls/day US PRODUCTION

The IEA Thursday finally reported that their , analysts, and OPEC+ reports of tight supply first 6 months of 2019 were wrong and that world overproduction was 900K a day

IEA WAS WRONG

OPEC WAS MISLEADING (lying)

ORBITAL INSIGHT CORP REPORTS WERE CORRECT EVERY MONTH OF 2019 .

They report on near real-time everyday. By region and by country. But analyst, producers, Investment Banks, OPEC, API all have an agenda. They don't want the truth.

At $60 WTI even the small operators in US shale can make money.  (there are btw 40 to 50 Permian operators with 1 or 2 rigs)

The problem is today's prices of WTI $60 and Brent $66 include a Hormuz limpet mine premium of $5 to $7 per bbl. What if that goes away.

Iran down from 2.5 mm bbls/day to .5. , Venezuela down from 1.8 mm day to 700K. 

The money is drying up for the small producers, most private companies. This could slow the growth in short term.

Tight oil is a disaster, FOR SMALL OPERATORS. Not because can't make money in shale . . . because they thought oil would be $100 bbl and rising and invested accordingly. 

There is a new financing phenomenon. Hedge funds and private equity are financing one off deals.  They are loaning capital on a project by project bases. The key is THEY GET THEIR INVESTMENT + THE AGREED PROFIT PAID OUT FIRST. . . . . the shale operator gets his vig after the hedge fund is fully paid. It seems to be working well.

Best performers.

Tight oil b/e = $20's.  (EXXON say they can get to $15 b/e)

GoM oil b/e = $30 ( and they think they can go lower.)

These are best case today.  But look at Hess in the Bakken they are now getting 55% return on $50 oil.   .  .  .  . and that's not the Permian 

Everyone wants to speculate when tight oil peaks .  .  .  .  .  .  What producers will soon focus on is WHEN DOES OIL PEAK DEMAND HAPPEN ?  

Peak demand will happen and plateau sooner then most understand. 

Smart producers are pumping while the price is good.  In absence of Mideast war oil price only going down.  

Look at the production estimated of EXXON, CHEVRON, OXY and trading houses like Trafigura over the coming years.  The pipelines and export terminals will be in place shortly.  ALL THE NEW MILLIONS OF BARRELS WILL BE EXPORTED . . . . It will be a buyer's market.  Where does price go then.

 

 

 

Edited by Falcon
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1 hour ago, Falcon said:

The IEA Thursday finally reported that their , analysts, and OPEC+ reports of tight supply first 6 months of 2019 were wrong and that world overproduction was 900K a day

IEA EAS WRONG

I've been saying they've been miscalculating the market for nefarious reasons. IEA is Wrong as is API, trying to artificially inflate numbers to look good for Hedge portfolios, and other investor money grubbing thieves. Smart folks research and do more research. Investing in the "oil-patch" is and always has been high risk. The service industry used to be the safe bet, but even now no guarantees. 

I still don't think EXXon can break-even @ 15.00bbl. Unless the leases and mineral rights were given to them. Even then, no-body works for free.

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(edited)

7 hours ago, Old-Ruffneck said:

I've been saying they've been miscalculating the market for nefarious reasons. IEA is Wrong as is API, trying to artificially inflate numbers to look good for Hedge portfolios, and other investor money grubbing thieves. Smart folks research and do more research. Investing in the "oil-patch" is and always has been high risk. The service industry used to be the safe bet, but even now no guarantees. 

I still don't think EXXon can break-even @ 15.00bbl. Unless the leases and mineral rights were given to them. Even then, no-body works for free.

Agree.  

Don't know if EXXON can get to $15.  

I remember listening to three Bakken producers in 2012.  The question was asked how much it cost them to get the oil out of the ground.  The 3 answers were btw $8 to $12 .  That's just drilling. fracing and completion.  All other overhead including royalties extra.  The Bakken producers would sell the oil at a discount to brokers FOB at the wellhead.  The brokers trucked it to the rail yard put it on unit trains and shipped it to markets. Back then they weren't very efficient.  Many wells refracted today.

EXXON had grandfathered mineral rights in the Permian from itself and Mobil. They bought a large parcel a couple years ago for $25K an acre.

Chevron/Texaco, Conoco and OXY also both had similar holdings in the Permian. 

Low cost or no cost .

 

 

 

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On 7/11/2019 at 1:08 PM, Ward Smith said:

That's a prop plane, not a jet. 8900 pounds of batteries vs takeoff weight of 14k, and no engine yet, but I'd fly it for sure. Thanks for the link. 

PS jets are a much tougher proposition, specifically because of how the turbine functions. The only way forward I see there is replacing the jet fuel with bio jet fuel and compensating for the lost horsepower with shorter range. Not the end of the world, but my first flight wouldn't be to Hawaii

Bio Jet Fuel not as easy as it sounds, it’s almost like blood types for humans.

https://www.opraturbines.com/wp-content/uploads/2018/10/Biofuels-–-Challenges-and-Opportunities-for-Gas-Turbines-OPRA-Turbines-2017.pdf

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Within 10 years, yes. All you need is a Middle east war. The world will go nuclear for Electric in the future as that will be the cheapest and sustainable.

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16 hours ago, nathan_john said:

D Coyne, I understand that they technically fit the current EPA definition of a zero-emission vehicle. I just think they need to change that definition because it is highly misleading to say that EVs are zero emissions given that over 65% of their power source (electricity) currently comes from coal and nat gas in the US. 

You would never say that the average house or building hooked into the average electric grid is zero emissions. Or that my ICE car is zero-emissions 95% of the time since that's how often it's parked. 

I just think it's misinformation to the public and it attributes to why many don't understand how prevalent fossil fuels are in their daily lives. 

Nathan_john,

Take it up with CARB who really drove the definition, they were concerned with LA smog primarily.  There is no product that is truly zero emissions.  BEVs create equivalent emissions of a 55 MPG vehicle using the average electricity output from the US.  The US grid is using less and less coal which is being replaced with natural gas, wind and solar power.

Costs of solar are expected to continue to fall making coal and even natural gas electric power less and less competitive especially in the US Southwest where solar resources are excellent.  Wind competes very well in the great plains where wind resources are excellent.

If one looks at life cycle emissions, some products will have higher emissions an others lower emissions.

A car charged mostly at home in a home powered primarily with PV panels on the roof would have very low lifetime emissions, but it would not be zero until all use of fossil fuel to produce products in society ceases.  That might be 100 years in the future, or perhaps never.

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(edited)

3 hours ago, Falcon said:

Respectfully disagree

Tight oil is NOW at 8 mm bbls/day.

A reasonable projection has tight oil increasing 4 mm bbls/day by 2024. ( I think that's conservative) Then GoM doubling from today's 2 million to 4 mm bbls/day . .  . .  .  .  . 

THAT EQUALS 18 mm bbls/day US PRODUCTION

The IEA Thursday finally reported that their , analysts, and OPEC+ reports of tight supply first 6 months of 2019 were wrong and that world overproduction was 900K a day

IEA WAS WRONG

OPEC WAS MISLEADING (lying)

ORBITAL INSIGHT CORP REPORTS WERE CORRECT EVERY MONTH OF 2019 .

They report on near real-time everyday. By region and by country. But analyst, producers, Investment Banks, OPEC, API all have an agenda. They don't want the truth.

At $60 WTI even the small operators in US shale can make money.  (there are btw 40 to 50 Permian operators with 1 or 2 rigs)

The problem is today's prices of WTI $60 and Brent $66 include a Hormuz limpet mine premium of $5 to $7 per bbl. What if that goes away.

Iran down from 2.5 mm bbls/day to .5. , Venezuela down from 1.8 mm day to 700K. 

The money is drying up for the small producers, most private companies. This could slow the growth in short term.

Tight oil is a disaster, FOR SMALL OPERATORS. Not because can't make money in shale . . . because they thought oil would be $100 bbl and rising and invested accordingly. 

There is a new financing phenomenon. Hedge funds and private equity are financing one off deals.  They are loaning capital on a project by project bases. The key is THEY GET THEIR INVESTMENT + THE AGREED PROFIT PAID OUT FIRST. . . . . the shale operator gets his vig after the hedge fund is fully paid. It seems to be working well.

Best performers.

Tight oil b/e = $20's.  (EXXON say they can get to $15 b/e)

GoM oil b/e = $30 ( and they think they can go lower.)

These are best case today.  But look at Hess in the Bakken they are now getting 55% return on $50 oil.   .  .  .  . and that's not the Permian 

Everyone wants to speculate when tight oil peaks .  .  .  .  .  .  What producers will soon focus on is WHEN DOES OIL PEAK DEMAND HAPPEN ?  

Peak demand will happen and plateau sooner then most understand. 

Smart producers are pumping while the price is good.  In absence of Mideast war oil price only going down.  

Look at the production estimated of EXXON, CHEVRON, OXY and trading houses like Trafigura over the coming years.  The pipelines and export terminals will be in place shortly.  ALL THE NEW MILLIONS OF BARRELS WILL BE EXPORTED . . . . It will be a buyer's market.  Where does price go then.

 

 

 

Falcon,

US tight oil output is about 7.5 Mb/d (the drilling productivity report includes all output from the tight oil regions, both conventional oil and tight oil)  the EIA tight oil production estimates are far more accurate (they report 7.5 Mb/d in May 2019).

Perhaps we get to 11.5 Mb/d of tight oil output by 2024, that would be a very optimistic scenario and output is likely to decline rapidly after 2026.

I agree peak demand might arrive in 2028 to 2032, which is sooner than most think.  The low breakeven prices are not accurate for the average well, to get breakeven oil prices that low, one has to cherry pick the most productive tight oil wells (top 3% in productivity).

A realistic assessment looks at the average well in the basin, for the Permian basin such a well produces about 400 kbo, I leave out natural gas because much of it is flared, though I reduce LOE in my analysis by about $3/bo to account for average net revenue from associated gas.  The breakeven for the average 2017 Permian basin well is about $65/bo, Chevron has lower breakeven because their NRI is much higher than the average producer.

Keep in mind that both supply and demand will peak, demand falls below supply in 2030 to 2045, depending on the speed of the transition to BEVs and NGVs, my best guess is 2037+/-7.  At that point prices fall at a level that will balance supply and demand, perhaps as low as $20/b, my guess would be $40-50/bo in 2019$ for Brent.

Doubtful GOM output will double, you are forgetting that existing wells decline fairly rapidly, most of the new projects coming online just replace falling output from older projects, more likely that GOM output stays flat through 2028 and starts to decline.

Also as majors take over in Permian they will ramp up more conservatively so doubtful we will see the 4 Mb/d increase in tight oil you expect, Permian is currently around 3.6 Mb/d and might increase to 6.5 Mb/d, but Eagle Ford, Bakken, and other plays will start to decline by 2023, so overall US tight oil output will only increase about 2 Mb/d.

Bottom line, many of the tight oil forecasts simply take rates of increase in 2017 and 2018 and extend these increases into the future.  I do a more bottom up analysis looking at average well productivity and well completion rates as well as anticipating future decreases in new well productivity as sweet spots get saturated with wells.  We are very close to this point in the Eagle Ford and Bakken and may reach that point in the Permian by 2023 or 2024.

On small operators making money in tight oil at $60/b, have you looked at 10Ks of these companies? Not many of the independent producers have positive earnings or even positive free cash flow.

The low breakeven oil price in tight oil is a myth, lies in investor presentations basically.

 

Edited by D Coyne
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1 hour ago, D Coyne said:

Falcon,

US tight oil output is about 7.5 Mb/d (the drilling productivity report includes all output from the tight oil regions, both conventional oil and tight oil)  the EIA tight oil production estimates are far more accurate (they report 7.5 Mb/d in May 2019).

Perhaps we get to 11.5 Mb/d of tight oil output by 2024, that would be a very optimistic scenario and output is likely to decline rapidly after 2026.

I agree peak demand might arrive in 2028 to 2032, which is sooner than most think.  The low breakeven prices are not accurate for the average well, to get breakeven oil prices that low, one has to cherry pick the most productive tight oil wells (top 3% in productivity).

A realistic assessment looks at the average well in the basin, for the Permian basin such a well produces about 400 kbo, I leave out natural gas because much of it is flared, though I reduce LOE in my analysis by about $3/bo to account for average net revenue from associated gas.  The breakeven for the average 2017 Permian basin well is about $65/bo, Chevron has lower breakeven because their NRI is much higher than the average producer.

Keep in mind that both supply and demand will peak, demand falls below supply in 2030 to 2045, depending on the speed of the transition to BEVs and NGVs, my best guess is 2037+/-7.  At that point prices fall at a level that will balance supply and demand, perhaps as low as $20/b, my guess would be $40-50/bo in 2019$ for Brent.

Doubtful GOM output will double, you are forgetting that existing wells decline fairly rapidly, most of the new projects coming online just replace falling output from older projects, more likely that GOM output stays flat through 2028 and starts to decline.

Also as majors take over in Permian they will ramp up more conservatively so doubtful we will see the 4 Mb/d increase in tight oil you expect, Permian is currently around 3.6 Mb/d and might increase to 6.5 Mb/d, but Eagle Ford, Bakken, and other plays will start to decline by 2023, so overall US tight oil output will only increase about 2 Mb/d.

Bottom line, many of the tight oil forecasts simply take rates of increase in 2017 and 2018 and extend these increases into the future.  I do a more bottom up analysis looking at average well productivity and well completion rates as well as anticipating future decreases in new well productivity as sweet spots get saturated with wells.  We are very close to this point in the Eagle Ford and Bakken and may reach that point in the Permian by 2023 or 2024.

On small operators making money in tight oil at $60/b, have you looked at 10Ks of these companies? Not many of the independent producers have positive earnings or even positive free cash flow.

The low breakeven oil price in tight oil is a myth, lies in investor presentations basically.

 

Great post. Lot of good data. I agree to a lot . . . . I disagree with a lot.

The data we all is all speculative . .   by even the so called "experts".

Investment Bank Morgan Stanley says Peak Demand 2025. Who knows ?

Pioneer Resources CEO said last month, " US would be producing 14 to 15 million barrels a day now if we had the pipelines"  Maybe.

Chevron CEO when asked if the Permian will be productive for years he answered, " No . . . . .for decades".  That's at least 20 years.

Your 3% oil reserve production was the norm in 2013.  Many are getting 9 to 11% now. Several producers confident will get to high teens.

The tight oil producers will change. The equity holders are out of luck.  All but the larger companies shareholders will be screwed. Many bankruptcies already this year. Number of recapitalized without the debt burden.

Will see more hedge fund financing on project by project basis. They get their principle and profit back before producer gets a penny. Nobody wants to " invest" in oil.  But willing to trade or finance short term projects.

In the short term it will be interesting to watch what happens when the 3 Permian  pipelines start to flow 2020. Nobody can stop that. This will be very telling.

Saudi/OPEC failed to squash shale when they tried in 2014/2015.  But things are different now.  They could knock out the weak sisters . They would have to take oil down to $30s.  Might work now, but will it really address their problem. They just might do that. It's between starting a Mideast war or kill off small shale players.  Personally I don't think it will work.  

 

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On 7/12/2019 at 12:39 AM, Marina Schwarz said:

I see you've been having fun. Me, I had to google AGW, so that's one new thing I learned today. What did you learn because I see good manners is not among these things for some of you. :) Kudos to some of the others for trying to keep things civil.

I'll now do you one better: When will we see oil at $500? And I'll tell you: when "Keep it in the ground" wins and Big Oil stops pumping at once. Thank you for your attention.

Dear Miss Marina;

First. I do try to remain well-mannered.  It would not be Good Form to be otherwise. 

Second, there are very practical reasons why $500/bbl oil, calculated in 2019 dollars  (i.e. not inflated away, Venezuela style),  is not going to happen.  To illustrate, take the instance of jet-fuel.  Let us assume that, properly calibrated, a refinery can extract 50% jet fuel for each barrel input, and that the balance is low-value material.  Thus effectively, at 42 gal/bbl, you extract 21 gal of jet-fuel, which you could sell at $500., or roughly $25 per gallon.  Now today, jet fuel typically runs around $1.87/gal, wholesale (bulk) ex-Louisiana.  Remember that back around 1975 the price was about thirty cents.  So the price of jet-fuel to the air carriers would go up by a factor of twelve.  Your airline ticket just went up by an equal amount.  Are you going to do a trans-Atlantic trip, now running about $1,000, for $12,000?  No?  OK, so there goes your air travel industry, and there goes your extensive aircraft manufacturing industry, and you develop internal economic collapse. 

Now let's look at cargo vessels such as containerships.  A 16,000+ TEU containership costs today around $7 million to fuel up.  Run the price of marine gasoil up by a factor of ten and your fuel bill to cross the Pacific just went to $70 million a trip.  Is the revenue basis there to support that?  Of course not.  There goes your shipping industry, your ship-building industry, and your harbor ports industry. 

The net result:  small local segregated  economies, nobody trading, nobody travelling, a bit like Europe during the ravages of the Black Death, the plagues of 1348.  And that is why oil never reaches anywhere close to $500.  Cheers. 

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$100 oil in the next five years? No. KSA wants $70+ oil, and they also don’t want to kill the golden goose. Also the lemmings in the shale patch can’t seem to stop. Those two reasons alone are probably enough to ensure no $100 oil. 

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7 minutes ago, Steve Pipkin said:

$100 oil in the next five years? No. KSA wants $70+ oil, and they also don’t want to kill the golden goose. Also the lemmings in the shale patch can’t seem to stop. Those two reasons alone are probably enough to ensure no $100 oil. 

Now add that nowhere else on earth have they started using horizontal drilling/fracking combo yet.  Yea yea, in small sections.  You can't tell me the USA is the only place with shale oil pockets....

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4 hours ago, Falcon said:

Great post. Lot of good data. I agree to a lot . . . . I disagree with a lot.

The data we all is all speculative . .   by even the so called "experts".

Investment Bank Morgan Stanley says Peak Demand 2025. Who knows ?

Pioneer Resources CEO said last month, " US would be producing 14 to 15 million barrels a day now if we had the pipelines"  Maybe.

Chevron CEO when asked if the Permian will be productive for years he answered, " No . . . . .for decades".  That's at least 20 years.

Your 3% oil reserve production was the norm in 2013.  Many are getting 9 to 11% now. Several producers confident will get to high teens.

The tight oil producers will change. The equity holders are out of luck.  All but the larger companies shareholders will be screwed. Many bankruptcies already this year. Number of recapitalized without the debt burden.

Will see more hedge fund financing on project by project basis. They get their principle and profit back before producer gets a penny. Nobody wants to " invest" in oil.  But willing to trade or finance short term projects.

In the short term it will be interesting to watch what happens when the 3 Permian  pipelines start to flow 2020. Nobody can stop that. This will be very telling.

Saudi/OPEC failed to squash shale when they tried in 2014/2015.  But things are different now.  They could knock out the weak sisters . They would have to take oil down to $30s.  Might work now, but will it really address their problem. They just might do that. It's between starting a Mideast war or kill off small shale players.  Personally I don't think it will work.  

 

Thanks Falcon,

We don't really know OOIP for tight oil plays, so anyone claiming 10% recovery or whatever is blowing smoke.

What we do have is data on average new well productivity, we can fit the first 12 to 24 months of output data for the average well to an Arps hyperbolic to the data using a least squares non linear fit to estimate ultimate recovery.  For older plays such as the Eagle Ford and North Dakota Bakken when we normalize for lateral length we find average well productivity has been flat for several years.  As the sweet spots (core or most productive area of the play) become saturated with wells and wells are completed in peripheral areas the ultimate recovery of the average well will decrease and profits will be lower for any given price level.

This is likely to occur soon in the Bakken and Eagle Ford and likely explains the lower completion rates in those plays, for the Permian this is likely to occur in 2023 in a high completion rate scenario and in 2025 in a low completion rate scenario with my best guess being 2024 for a medium completion rate scenario.

Most of the expert predictions by CEOs and consultants trying to please the oil industry.

Nobody in the oil industry wants to believe this, but US tight oil will peak in 2025.  As for the rest of the World, development will be much slower than the US, doubtful we will see the fast ramp up in tight oil that was seen in the US anywhere else in the World.

If you have never seen it check shaleprofile,com.

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