Shale Oil will it self destruct?

US Shale set to top 14 million Bbls/day 2020 and set to continue increasing. OPEC has the reserves and is undoubtedly sustainable and is able to affect US oil.

US Shale is a free for all market no buffer in place “drill baby drill”. How long can this be sustained?

Is it the attitude to just get it out of the ground as quick as possible and let’s see how long it lasts? Then OPEC take control again?

This happened in the UK North Sea and look at it now, but cross the line into the Norweigan sector and it’s a different story.

Can US shale go on without any controlling group with a responsible agenda?

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With the debt load and unprofitability, sweet spots already drilled, gravity of oil produced, lack of pipeline infrastructure, what to do with the produced gas, sibling well issues, dramatic decline curves, continuous drilling required to maintain a production plateau, etc..., I do not see how the shale oil industry can survive much longer.

I firmly believe that Trump is simply using the 'Shale Oil Miracle' as a policy tool at this point.

This is my opinion and does not necessarily reflect the opinion of this 'station'....

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I think these numbers are a bit off I got them from wikipedia, they are a few years old but should be in the ballpark.

The United states has 36 billion barrels of reserves, and produces 8.8 million barrels a day (out of date by a few years)

At that rate the united states runs out of oil in 10 years. We know that the United states is well above 8.8 million barrels production now. So how long until usa runs out? 7-8 years to go.

Canada runs out in 126 years and Venezuela is good to go for almost 400 years.

Does this even seem right? United states high and dry in less then a decade? Ouch. 

Good thing for old canaduh, keystone xl and trans mountian/west coast variant pipelines should be up and running by then. Keystone can supply the gulf, trans mountian can supply California by tanker, Saudi can have the east coast. 

 

Good thing everything will be electric by then. Semi trucks and planes and all. Lmao. 

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1 hour ago, Keith boyd said:

I think these numbers are a bit off I got them from wikipedia, they are a few years old but should be in the ballpark.

The United states has 36 billion barrels of reserves, and produces 8.8 million barrels a day (out of date by a few years)

At that rate the united states runs out of oil in 10 years. We know that the United states is well above 8.8 million barrels production now. So how long until usa runs out? 7-8 years to go.

Canada runs out in 126 years and Venezuela is good to go for almost 400 years.

Does this even seem right? United states high and dry in less then a decade? Ouch. 

Good thing for old canaduh, keystone xl and trans mountian/west coast variant pipelines should be up and running by then. Keystone can supply the gulf, trans mountian can supply California by tanker, Saudi can have the east coast. 

 

Good thing everything will be electric by then. Semi trucks and planes and all. Lmao. 

Agree @Keith boyd the numbers are hard to find and WikiP is probably better than the numbers we are fed by the AEI or API.

2025 is a date I see a lot for peak shale oil production so given the average life span of two years it also ties into your findings.

Is this part of the renewables plan? That said we are looking at 20 years before first world countries are in a position to show a large segment of transport is renewably fueled. ie no carbon, NG is not renewable as is being commonly touted!

Shale looks like a boom gold rush type phase which is currently serving the needs of the current administration.

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On 7/13/2019 at 4:48 AM, Keith boyd said:

I think these numbers are a bit off I got them from wikipedia, they are a few years old but should be in the ballpark.

The United states has 36 billion barrels of reserves, and produces 8.8 million barrels a day (out of date by a few years)

At that rate the united states runs out of oil in 10 years. We know that the United states is well above 8.8 million barrels production now. So how long until usa runs out? 7-8 years to go.

Canada runs out in 126 years and Venezuela is good to go for almost 400 years.

Does this even seem right? United states high and dry in less then a decade? Ouch. 

Good thing for old canaduh, keystone xl and trans mountian/west coast variant pipelines should be up and running by then. Keystone can supply the gulf, trans mountian can supply California by tanker, Saudi can have the east coast. 

  

Good thing everything will be electric by then. Semi trucks and planes and all. Lmao. 

They don't explore for all the oil up-front.  They explore as needed.  Thus, reserves are continually being replenished, and your analysis is meaningless.  Here's a better question: are there more or less reserves today than there were when fracking started?  Is exploration keeping up with production? 

Electrification and recycling of petroleum products will take an enormous dent out of oil demand.  If we estimate that US shale production will last another 10-20 years, then the time to produce it is now.  Otherwise, we risk stranding the asset. 

And of course, there's still Canada, offshore, Alaska, and the arctic.  There's plenty of oil to go around; we're no longer shackled to the Middle East. 

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18 hours ago, BenFranklin'sSpectacles said:

They don't explore for all the oil up-front.  They explore as needed.  Thus, reserves are continually being replenished, and your analysis is meaningless.  Here's a better question: are there more or less reserves today than there were when fracking started?  Is exploration keeping up with production? 

Electrification and recycling of petroleum products will take an enormous dent out of oil demand.  If we estimate that US shale production will last another 10-20 years, then the time to produce it is now.  Otherwise, we risk stranding the asset. 

And of course, there's still Canada, offshore, Alaska, and the arctic.  There's plenty of oil to go around; we're no longer shackled to the Middle East. 

Last EIA recoverable US shale reserve estimates at 98 Billion Barrels. . . . .   and they are always conservative.

Most of recent additions in Permian. 

The shale players will go full speed ahead to avoid STRANDED ASSETS.

 

Edited by Falcon
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On 7/13/2019 at 7:18 PM, Douglas Buckland said:

With the debt load and unprofitability, sweet spots already drilled, gravity of oil produced, lack of pipeline infrastructure, what to do with the produced gas, sibling well issues, dramatic decline curves, continuous drilling required to maintain a production plateau, etc..., I do not see how the shale oil industry can survive much longer.

I firmly believe that Trump is simply using the 'Shale Oil Miracle' as a policy tool at this point.

This is my opinion and does not necessarily reflect the opinion of this 'station'.... 

Debt will be wiped out (alone with poor souls holding it), many operators will go bust and their acreage will be picked up by others. Game will continue. Cheap money will only get cheaper and this will force more pension funds to invest into anything which pays higher than zero yield, albeit BBB (over)rated.

Trump talks great deal but have little impact on actions of individual shale players.

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On 7/13/2019 at 7:48 PM, Keith boyd said:

The United states has 36 billion barrels of reserves, and produces 8.8 million barrels a day (out of date by a few years)

USGS puts just Permian reserves at 46.3B bbl https://www.usgs.gov/news/usgs-announces-largest-continuous-oil-assessment-texas-and-new-mexico

Rystad (i you can trust them with anything) suggests US technically recoverable reserves 310B bbl are larger than that of Saudi: https://www.rystadenergy.com/newsevents/news/press-releases/united-states-recoverable-oil/ (I guess they haven't counted Saudi unconventional reserves).

Tad more than 10 years but reserves are finite. Shits me when people talking about peak demand, especially chief economist of certain two letter company - he should know better.

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1 hour ago, DanilKa said:

Those reserves you have mentioned, as you know, Daniel, or technically recoverable, as yet "undiscovered" and subject to much higher oil prices in order for them to be eventually, "economically" recoverable.

Given the current debt and financial status of the shale oil industry I can make a very good argument that the 10.8 billion barrels of oil that has been recovered the past decade....has not been profitable, even at an average WTI price during that period of nearly $74. People not familiar with reserve classifications struggle with this; and well costs, and well economics, because they don't have any experience in it. Most people writing checks to own working interest in shale oil and shale gas wells have an entirely different belief system, I can assure you.  

Granted America is now essentially working on the premise of non-profit capitalism, and lots the those lofty USGS reserves might be recovered, regardless of profitability, but 100 billion barrels of oil, 50 years, energy independence and "putting OPEC in its place" is all really stupid stuff to be saying publically. I rather believe that if people saying that stuff would use their own name when making those sort of claims, we could hold their feet to the fire down the road and they would be a little more careful about what they say. As it is now days, on social media, you can pretty much say whatever bullshit you want. 

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2 hours ago, DanilKa said:

Debt will be wiped out (alone with poor souls holding it), many operators will go bust and their acreage will be picked up by others. Game will continue. Cheap money will only get cheaper and this will force more pension funds to invest into anything which pays higher than zero yield, albeit BBB (over)rated.

Trump talks great deal but have little impact on actions of individual shale players.

The US is essentially printing money to support all this activity.  What happens when there's a bankruptcy?  Does all that printed money simply disappear?  Who actually loses in this scenario?

You could argue that the fracking companies lose, but without the printed money, they never would have existed in the first place.  Even if it's a temporary boom, it's still a net win for the employees of said companies. 

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42 minutes ago, Mike Shellman said:

Those reserves you have mentioned, as you know, Daniel, or technically recoverable, as yet "undiscovered" and subject to much higher oil prices in order for them to be eventually, "economically" recoverable.

Given the current debt and financial status of the shale oil industry I can make a very good argument that the 10.8 billion barrels of oil that has been recovered the past decade....has not been profitable, even at an average WTI price during that period of nearly $74. People not familiar with reserve classifications struggle with this; and well costs, and well economics, because they don't have any experience in it. Most people writing checks to own working interest in shale oil and shale gas wells have an entirely different belief system, I can assure you.  

Granted America is now essentially working on the premise of non-profit capitalism, and lots the those lofty USGS reserves might be recovered, regardless of profitability, but 100 billion barrels of oil, 50 years, energy independence and "putting OPEC in its place" is all really stupid stuff to be saying publically. I rather believe that if people saying that stuff would use their own name when making those sort of claims, we could hold their feet to the fire down the road and they would be a little more careful about what they say. As it is now days, on social media, you can pretty much say whatever bullshit you want. 

Who is putting up the money for these projects?  Is it private investors, or is the US somehow funneling printed money into them? 

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48 minutes ago, BenFranklin'sSpectacles said:

Who is putting up the money for these projects?  Is it private investors, or is the US somehow funneling printed money into them? 

That is the 90 dollar question, but I would surmise the 5 largest banks and the trickle down effect meaning if you invest, have a 401k is paying for all this. Even the poor guy just filling his tank is contributing. Curious to know now that rig count dropping and production rising, is the DUC wells in the thousands getting completed??

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1 hour ago, BenFranklin'sSpectacles said:

The US is essentially printing money to support all this activity.  What happens when there's a bankruptcy?  Does all that printed money simply disappear?  Who actually loses in this scenario?

You could argue that the fracking companies lose, but without the printed money, they never would have existed in the first place.  Even if it's a temporary boom, it's still a net win for the employees of said companies. 

US is printing money; where money flow is decided by the market forces. Investors would eventually be bag holders. Most of unsuspecting folks don't even know how their money are invested; all they know - it's in high-yielding investment grade bonds or dividend-paying equities.

Try to understand how money enters into circulation. "Hidden Secrets of Money" by Mike Malone is a good intro. Its not like Federal reserve is issuing bonds to finance Pioneer. Fed trying to control interest rate and keep unemployment low; they are at a tipping point when traditional tools such as lowering interest rate by 5-6% isn't going to be an option simply because IE is already low and taking it negative opens whole other can of worms. Will be fun to watch from a safe distance; unfortunately any place on Earth is too close to action.

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2 hours ago, Mike Shellman said:

Those reserves you have mentioned, as you know, Daniel, or technically recoverable, as yet "undiscovered" and subject to much higher oil prices in order for them to be eventually, "economically" recoverable.

No argument from me, @Mike Shellman. I agree with pretty much all what you saying, with exception of US shouldn't export (they pretty much had to - due to grade mismatch between production and refining capabilities). I'm also not in US hence care a bit less about its energy security and being a libertarian - let'm dig deeper and pay the piper. Pardon my cynicism...

Good point on reserves definition; economics isn't part of it.

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Why do I find it incredibly shady when US oil reserves get upward revisions? It seem like it’s been happening a lot since the beginning of 2017, could it be part of the bigger Ponzi scheme? 

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4 minutes ago, James said:

Why do I find it incredibly shady when US oil reserves get upward revisions? It seem like it’s been happening a lot since the beginning of 2017, could it be part of the bigger Ponzi scheme? 

Saudi reserves are ~flat for number of years, if that's is of any help.

I've looked at USGS work on Permian briefly; it doesn't seems to be out of place (provided you can find someone to pay for development).

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3 hours ago, DanilKa said:

Saudi reserves are ~flat for number of years, if that's is of any help.

I've looked at USGS work on Permian briefly; it doesn't seems to be out of place (provided you can find someone to pay for development).

they have actually increased due to new finds and new technology increasing recovery factors. But on the main argument / topic shale will be ok as long as cheap credit is available and no big investors pull the plug. but once one investor goes they will all follow suit. over the last year the big guys are buying up acreage and this will lead to controlled extraction. And the reason for that is that the share holders wont allow their main business support something that is draining the profits. Hence the move into Permian by the likes of Exxon and Chevron.

In any case oil prices are too low/and erratic now for large capital projects in the conventional sphere. At some point the under investment will hit hard, and shale wont be capable of supporting that shortage. In fact Shale as it is now is making that problem all the more severe every quarter that passes with underinvestment in conventional.

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On 7/14/2019 at 9:15 PM, Mike Shellman said:

Those reserves you have mentioned, as you know, Daniel, or technically recoverable, as yet "undiscovered" and subject to much higher oil prices in order for them to be eventually, "economically" recoverable.

Given the current debt and financial status of the shale oil industry I can make a very good argument that the 10.8 billion barrels of oil that has been recovered the past decade....has not been profitable, even at an average WTI price during that period of nearly $74. People not familiar with reserve classifications struggle with this; and well costs, and well economics, because they don't have any experience in it. Most people writing checks to own working interest in shale oil and shale gas wells have an entirely different belief system, I can assure you.  

Granted America is now essentially working on the premise of non-profit capitalism, and lots the those lofty USGS reserves might be recovered, regardless of profitability, but 100 billion barrels of oil, 50 years, energy independence and "putting OPEC in its place" is all really stupid stuff to be saying publically. I rather believe that if people saying that stuff would use their own name when making those sort of claims, we could hold their feet to the fire down the road and they would be a little more careful about what they say. As it is now days, on social media, you can pretty much say whatever bullshit you want. 

Permian added 40 + new private producers in last 6 months.

Saudi's al-Falih wants to wait out the demise of US shale.  I love it , keep cutting OPEC.  

Yes, lot of the producers that loaded up on debt are going away.  Many will reorganize and screw equity holders. 

Shale is not going away.

Edited by Falcon

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1 hour ago, JR EWING said:

over the last year the big guys are buying up acreage and this will lead to controlled extraction. And the reason for that is that the share holders wont allow their main business support something that is draining the profits. Hence the move into Permian by the likes of Exxon and Chevron.

Interesting perspective. Think there is some truth there.

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20 hours ago, BenFranklin'sSpectacles said:

They don't explore for all the oil up-front.  They explore as needed.  Thus, reserves are continually being replenished, and your analysis is meaningless.  Here's a better question: are there more or less reserves today than there were when fracking started?  Is exploration keeping up with production? 

Electrification and recycling of petroleum products will take an enormous dent out of oil demand.  If we estimate that US shale production will last another 10-20 years, then the time to produce it is now.  Otherwise, we risk stranding the asset. 

And of course, there's still Canada, offshore, Alaska, and the arctic.  There's plenty of oil to go around; we're no longer shackled to the Middle East. 

How do you 'explore as needed'? Do you think that exploration, in and of itself, yields reserves? Exploring is just what it says, you are looking for something with no guarantee that you will find it.

You then extrapolate your previous misconception and say, "Thus, reserves are continually being replenished." 

Most exploration is performed by seismic studies. You really can not determine a meaningful 'reserves' number unless you then drill the prospect and test it.

Exploration drilling, generally speaking, has been on hold globally due to the price of oil and the volatility of the price since the present slump took hold.

Seismic studies and exploration drilling are expensive with the risk of not findind any reserves which are volumetrically and financially feasible in today's market.

Finally, I would like to know what fracking has to do with reserves? Does fracking somehow increase the original oil in place? When do you assume fracking started? The hydraulic fracturing process and technology has been utilized for at least the past 50 years!

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1 hour ago, Rasmus Jorgensen said:

Interesting perspective. Think there is some truth there.

along with that they are taking this acreage due to fact that when the deficit due to lack of upstream investment comes to the fore next or year after they will have a supply that can switch on reasonably quickly while also availing of much higher prices associated with same, so its an investment to offset the lack of investment in large capital conventual projects

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1 hour ago, Douglas Buckland said:

How do you 'explore as needed'? Do you think that exploration, in and of itself, yields reserves? Exploring is just what it says, you are looking for something with no guarantee that you will find it.

 You then extrapolate your previous misconception and say, "Thus, reserves are continually being replenished." 

Most exploration is performed by seismic studies. You really can not determine a meaningful 'reserves' number unless you then drill the prospect and test it.

 Exploration drilling, generally speaking, has been on hold globally due to the price of oil and the volatility of the price since the present slump took hold. 

Seismic studies and exploration drilling are expensive with the risk of not findind any reserves which are volumetrically and financially feasible in today's market.

Finally, I would like to know what fracking has to do with reserves? Does fracking somehow increase the original oil in place? When do you assume fracking started? The hydraulic fracturing process and technology has been utilized for at least the past 50 years! 

I'll make this simple for you:

1)  Oil production is ongoing and costs money.
2)  Discovery of new reserves is ongoing and costs money.
3)  The people discovering new reserves won't want to invest in discovery if they already have decades of reserves.  The future is unpredictable that far out.  Thus, they'll set a target for how much reserve they need.  If reserves fall short, they'll increase discovery activities.  If reserves get too large, they'll pare back discovery activities. 

Thus, it's inaccurate to say the US only has X years of oil.  We don't know that.  What we do know is that we've discovered quite a bit, it's probable we'll discover more, and no one can say exactly how much that is.  Predictions of doom are unnecessary. 

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1 hour ago, JR EWING said:

along with that they are taking this acreage due to fact that when the deficit due to lack of upstream investment comes to the fore next or year after they will have a supply that can switch on reasonably quickly while also availing of much higher prices associated with same, so its an investment to offset the lack of investment in large capital conventual projects

So basically shale fills the gap? Sorry but I don’t see that happening, shales condition is worsening as the months go on and it’s best days are over with. 

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(edited)

13 hours ago, Mike Shellman said:

Those reserves you have mentioned, as you know, Daniel, or technically recoverable, as yet "undiscovered" and subject to much higher oil prices in order for them to be eventually, "economically" recoverable.

Given the current debt and financial status of the shale oil industry I can make a very good argument that the 10.8 billion barrels of oil that has been recovered the past decade....has not been profitable, even at an average WTI price during that period of nearly $74. People not familiar with reserve classifications struggle with this; and well costs, and well economics, because they don't have any experience in it. Most people writing checks to own working interest in shale oil and shale gas wells have an entirely different belief system, I can assure you.  

Granted America is now essentially working on the premise of non-profit capitalism, and lots the those lofty USGS reserves might be recovered, regardless of profitability, but 100 billion barrels of oil, 50 years, energy independence and "putting OPEC in its place" is all really stupid stuff to be saying publically. I rather believe that if people saying that stuff would use their own name when making those sort of claims, we could hold their feet to the fire down the road and they would be a little more careful about what they say. As it is now days, on social media, you can pretty much say whatever bullshit you want. 

The technically recoverable resources (TRR) mean estimate by the USGS for the Midland and Delaware basins (including Spraberry trend, Wolfcamp, and Bonespring) is about 75 Gb when we include proved reserves and cumulative production through the end of 2017. (Data available for reserves and cumulative production were only available through these dates when these USGS assessments were completed.) When we consider economically recoverable resources (ERR) using the EIA's AEO 2018 reference oil price scenario for future oil prices, the total drops to 56 Gb for ERR.  A low oil price scenario where Brent oil prices remain $70/b or lower in 2017 $ (WTI $62/bo or less) would result in an ERR for the Permian basin of 34 Gb, note that about 4.4 Gb of tight oil has been produced from the Permian basin from 2010 to mid 2019 and about 1 Gb was produced in the past 12 months.  Low and high (AEO reference case) oil price Permian basin scenarios shown in chart below.

Note that the rest of US tight oil peaks by 2023 and starts to decline, by 2025 the increases in Permian output are less than the decreases in other plays for the high oil price case so overall US tight oil peaks in 2025.  For the low price case the declines for other US tight oil plays are steeper after 2021 so the peak for the low price case occurs in 2022 for US tight oil.

permian1907b.png

Edited by D Coyne
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On 7/14/2019 at 12:51 PM, Falcon said:

Last EIA recoverable US shale reserve estimates at 98 Billion Barrels. . . . .   and they are always conservative.

Most of recent additions in Permian. 

The shale players will go full speed ahead to avoid STRANDED ASSETS.

 

The EIA's AEO 2019 has tight oil output from 2000 to 2050 at 121 Gb.  That estimate is about 13 Gb more than the USGS mean TRR estimate, it is far from conservative, it is wildly optimistic, especially after 2023, up to that point it looks pretty reasonable.

The EIA estimate for economically recoverable resources is about 36 Gb too high from 2023 to 2050.

aeo2019 tight oil.png

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