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Bloomberg: shale slowing. Third wave of shale coming.

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(edited)

From Bloomberg article

This third boom will be driven by the international oil majors and will be characterized by a focus on better extraction, rather than rapid output growth. The application of enhanced oil recovery techniques, consolidation of ownership, automation of drilling, and rationalizing of supply chains will increase the volume of oil extracted over the lifetime of a well and reduce costs. But it won’t deliver the same pace of growth as seen recently."

"The recovery rate of oil from shale deposits is typically about 5%-10%, but ConocoPhillips has pushed recovery as high as 20% in some parts of the Eagle Ford shale play in Texas, and it could reach 40% under the right circumstances. The upside to the lifetime recovery rate from Eagle Ford would be huge, potentially extending higher production rates for longer.

The third shale boom is coming. Just don’t expect it to look like the first two."

https://www.bloomberg.com/opinion/articles/2019-10-13/america-s-shale-oil-boom-is-nearly-over

Think about that.  What will these efficiencies do if the U.S.  Shale industry could obtain an average 17% to 20% recovery rate. Who needs 40% like Conoco ?  Many have projected this type of efficiency, it's starting to show .  Give it 2 to 3 years to develop. 

The large producers Exxon, Chevron, Occidental, Conoco, BP, etc plus the large independent are poised and ready to buyout the over leveraged when the time (and price) is right.

After digesting this info it's easy to now understand why Aramco is in such a hurry to issue their IPO.

Edited by Jabbar
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Nice post. They're getting about 20% EUR's up in some of the Williston Basin as well. Indeed, the porosity and "frackability" are about the same between the two basins. All of these people talking about the "death of shale" have presupposed technology making no headway whatsoever. I'm not sure we're ever going to see a reliable recovery much above 20-25% but you're right--that's a game-changer. The elite wells in the Bakken . . . probably just like the Eagle Ford . . . are undergoing near-fracture points, and that's made more difference than Wisconsin White (sand) and millions of gallons of water. Good stuff!

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(edited)

3 hours ago, Gerry Maddoux said:

Nice post. They're getting about 20% EUR's up in some of the Williston Basin as well. Indeed, the porosity and "frackability" are about the same between the two basins. All of these people talking about the "death of shale" have presupposed technology making no headway whatsoever. I'm not sure we're ever going to see a reliable recovery much above 20-25% but you're right--that's a game-changer. The elite wells in the Bakken . . . probably just like the Eagle Ford . . . are undergoing near-fracture points, and that's made more difference than Wisconsin White (sand) and millions of gallons of water. Good stuff!

I wonder how this will affect the expected Shale Industry consolidation ? 

The majors waiting to pick up some of the independents.  The majors don't want the management, the systems, the processes or even all the employees. They are buying the assets.  Just the reserves.  If a certain acreage presently yields  9% and with technology and advanced processes can yield 18% that doubles the value of an independent given a specific price point per barrel.

Does this accelerate the consolidation ?

Or

Do the independents have access to the same technology and streamlined operations and hold out for premium ?

 

_______________________________

The article states even with efficiency will grow at slower pace.

What IF electrification picks up. What if demand drops by as little as 5% (5 million barrels per today's production)

Amazon ordered 100,000 electric delivery trucks from startup Rivian. 

Will governments mandate electric buses like China ?.  Electric commercial vans like Amazon ? Electric State, Community and Federal  Electric Vehicles ? USPS, FEDEX, UPS Electric Vehicles ?

Won't outlaw combustion engines BUT COULD see green governments double, triple or quadruple gasoline taxes.  Same result.

 

 

 

Edited by Jabbar
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Thank you Jabbar - hadn't seen this article, but I've tried to allude to this multiple time when people point to the death of shale.

I can't release numbers, but people are pushing up recovery rates, pushing down costs (operations, cost of capital, DD&A)... I realize many may need $50+/barrel, but many here can be profitable at less than half of that. (Yes, true total costs. May prefer higher, but I already know some doing it - and they're still improving).

Other thing is some people are DRAMATICALLY improving decline curves. I've seen the data to prove it. 

For independents in good position I think this makes their land more valuable, but many are in financial distress, so overall I believe it expedites mergers.

To quote one guy I respect and asked about about this 'They're not desperate enough yet, but you can smell it.'

The strongest players will survive,  the weaker players will push into exploring the marginal plays, the rest will be swallowed.

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(edited)

Uh

1 hour ago, Otis11 said:

Thank you Jabbar - hadn't seen this article, but I've tried to allude to this multiple time when people point to the death of shale.

I can't release numbers, but people are pushing up recovery rates, pushing down costs (operations, cost of capital, DD&A)... I realize many may need $50+/barrel, but many here can be profitable at less than half of that. (Yes, true total costs. May prefer higher, but I already know some doing it - and they're still improving).

Other thing is some people are DRAMATICALLY improving decline curves. I've seen the data to prove it. 

No wonder we see some majors selling their overseas operations in Norway, North Sea, Western Africa , etc.

Russia and China moving into Middle East. 

North America (Canada, Shale, GOM) and South America (Brazil, Argentina, Guyana, Venezuela, Columbia) could become the new Oil Powerhouse.

 

Edited by Jabbar
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2 hours ago, Jabbar said:

The article states even with efficiency will grow at slower pace.

What IF electrification picks up. What if demand drops by as little as 5% (5 million barrels per today's production)

Amazon ordered 100,000 electric delivery trucks from startup Rivian. 

Will governments mandate electric buses like China ?.  Electric commercial vans like Amazon ? Electric State, Community and Federal  Electric Vehicles ? USPS, FEDEX, UPS Electric Vehicles ?

Won't outlaw combustion engines BUT COULD green governments likely double, triple or quadruple gasoline taxes.  Same result.

Well, all of that's coming, it would seem. Still, the world population is growing at quite a pace, and most of them can't afford EV's. It takes a lot of petroleum products to manufacture an EV, and it's battery too. Then there's cobalt, zinc, lithium, etc. That's all getting cheaper, except cobalt, which is still mainly sourced from mines in the Congo, using scrawny little boys to wriggle down holes and bring it up piecemeal. To charge batteries, you have to use electricity, which comes from a utility plant that uses natural gas as its feedstock (except China where they use coal). Two EV companies went bankrupt this week alone. Tesla could never have survived without governmental subsidies. There are still a lot of problems in the tight oil fields: contaminated water disposal (in some parts of the Permian that's 3 barrels of water for every barrel of oil), lots of natural gas (the world is not going to let them release tons of methane gas into the environment of the Permian forever, even if Mr. Trump will), parent-child pressure sinks, and the like. The break-even point is going to continue to be about $50 for smaller companies, so the super-majors are going to swallow them up. Even smaller companies are going to cannabalize other smaller companies (Parsley just took over Jagged Peak, for example, and Whiting is looking at a small company with great acreage). This thing is going to have to run its course, and a lot of isn't going to be pretty. But in the end, good operators are going to expand production, make money, increase EUR's and improve decline curves. Shale is only part of the picture.

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It's getting close to end of year, budgets exhausted, election year coming and so forth.  Oxy has not slowed down, we are on 6 or 7 frac jobs around Pecos north off 285 on up to north of Orla and they are all going to one location after another, even started fracing some Anadarko locations...After this one we go back south 285, then Orla and to Midland.  Not sure on costs or their breakevens, but they are hammering it down.  May not be very topic related just reporting what one company mentioned is doing from the patch.

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In the long run it doesn’t really matter what efficiencies or technologies you apply at the surface - the shale is still tight and resistant to flow.

Fracturing does create artificial permeability relatively close to the wellbore, but the source rock feeding the fractures has not changed in the least!

Hydraulic fracturing gives you a short term boost in production. When the near fracture source rock has utilized any benefit from the fractures, and the artificial permeability created, you are back where you started and you are once again relying on the low permeability source rock to feed your fractures.

The ONLY way you can possibly maintain production is to constantly drill and frac.

Regardless of the size of the outfits drilling, how deep their pockets are, or the efficiencies and ‘new’ (yet undefined) technologies employed, they will NEVER, alter the decline curve profile. They may push out the initial production rate by a few months, but that is all.

If someone out there disagrees with what I have said, please respond with actual technologies or processes which can, or will, solve the root issue of producing oil from a tight rock.

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(edited)

5 hours ago, Douglas Buckland said:

In the long run it doesn’t really matter what efficiencies or technologies you apply at the surface - the shale is still tight and resistant to flow.

Regardless of the size of the outfits drilling, how deep their pockets are, or the efficiencies and ‘new’ (yet undefined) technologies employed, they will NEVER, alter the decline curve profile. They may push out the initial production rate by a few months, but that is all.

If someone out there disagrees with what I have said, please respond with actual technologies or processes which can, or will, solve the root issue of producing oil from a tight rock.

and your point is ?

Please understand the tight oil business is entirely different than what was the conventional. Spend $6 million pump the oil , drill another

(1) Double yield per acre from 9% to 18% (2) Lower costs (3) sell more oil 

EVERYONE IS HAPPY . . . . . . 

. . . . except you

What's the issue ?

Edited by Jabbar
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You obviously have no grounding in geology, drilling or petroleum engineering.

I was likely drilling wells all over the planet while you were still in high school and I have a degree in petroleum engineering from the CSM.

If your reservoir rock is tight, eventually, regardless of what you do, your production will plummet in each well.

In the case of LTO, it is not only ‘drill, pump, drill again’. You have to perform expensive multistage fracs as well. You’d better hope that your production covers these costs and allows you, at a minimum, to service your debt.

Another issue is where are you going to drill next? Logically you have already drilled the most attractive targets.

But heck, you seem to know more than I do so I’ll just keep quiet...

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6 hours ago, Douglas Buckland said:

You obviously have no grounding in geology, drilling or petroleum engineering.

I was likely drilling wells all over the planet while you were still in high school and I have a degree in petroleum engineering from the CSM.

 

In the case of LTO, it is not only ‘drill, pump, drill again’. You have to perform expensive multistage fracs as well. You’d better hope that your production covers these costs and allows you, at a minimum, to service your debt.

Another issue is where are you going to drill next? Logically you have already drilled the most attractive targets.

But heck, you seem to know more than I do so I’ll just keep quiet...

LOL

The topic of this discussion is simply oil majors increase yield , which stated in another way (1) DOUBLING LTO RESERVES (2) CUTTING COSTS IN HALF. 

Everyone known LTO wells short-lived. Tell us something new.

All those stupid engineers at Exxon, Chevron, BP, OXY, Conoco and kinda Shell (Shell is perplexed. Want to buy Endeavor but don't want to pay too much) pouring Billions into LTO.

LTO currently provides greatest Return on Capital for major producers.

Subsea will see growth and cost reduction greater than LTO.

 As we say where I live, "stop beating a dead goat" What did Shale ever do to you to deserve your attacks.

Impressive curriculum vitae.  Who do you work for ?

You say, " In case of LTO, it is not only 'drill pump, drill pump"

Yes, it is. That's exactly what LTO/Shale oil is only about really.

You say, ' you have already drilled the attractive targets"

Says who ? You ? Did you read the article. Minimum double yield from 9% to 20%

You say, " But heck you seem to know more than I do so I'll just keep quiet.... "

Thankyou

Edited by Jabbar

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I work as a drilling consultant, have done so since 1995. Prior to that I worked for a drilling contractor in Brasil, the US and the North Sea.

I did take time off to earn an advanced degree in another field.

But anyone can claim anything on a forum such as this.

First, you misquoted me. I said it is not ONLY drill, pump, drill again. That single word makes a big difference. Perhaps you should actually read the responses instead of congratulating yourself on how smart you are.

Unless the operator is an idiot, he will drill the ‘sweet spots’ first to maximize his chances of finding what he is after and to make as much money as he can, as quickly as he can. Common sense.

As for your last comment...do you understand sarcasm?

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26 minutes ago, Douglas Buckland said:

As for your last comment...do you understand sarcasm?

No, don't really grasp sarcasm.  It's a cultural thing. 

 

Should have known too good to be true. Stupid me.

 

Edited by Jabbar

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7 hours ago, Douglas Buckland said:

The ONLY way you can possibly maintain production is to constantly drill and frac.

Or re-frack. 

Your points are right as rain, though!

Tight oil, as you know, was an unexpected side effect of tight gas. I'm recall when President Reagan took the advice of his staff and put out the mandate to find nat gas--the US was in serious danger of running out of it. The big gas wells in the Anadarko Basin, specifically the Granite Wash, were just monsters, but very expensive to drill so Reagan put a floor under the price. In 1983 or so, we were selling NG from 29,000 foot deep wells for $13/TCF. And then, in 1987, this was suddenly reversed--no floor. 

Fracking actually began in earnest close to where I grew up: the old Hugoton Field in southwestern Kansas. Water was pumped from a creek and jelled gasoline (napalm) was added. It was sent down the well and some of those were pretty good wells, back in the forties. The Russians got onto it. The concept languished until the late nineties. 

Whether it is a good thing or a bad thing is still up for grabs. At a time when deepwater was doing so-so, mainly because of regulations (correct me if I'm wrong, Douglas), tight oil fracking became the thing that rescued us from dramatically high oil prices. But man, it's a treadmill: Doug's right, the only way to keep production going up is to drill and run to another site. Pretty soon we'll have the sweet spots drilled out and that's where the rubber meets the road. Like anything--as I was trying to say in my earlier post here--technology has allowed recovery to improve dramatically and has softened the decline curves. However, by no means is this equivalent to big deepwater wells, or even good conventional wells drilled into a literal pool of mature oil. 

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15 hours ago, Gerry Maddoux said:

the world is not going to let them release tons of methane gas into the environment of the Permian forever, even if Mr. Trump will

Gerry, I respect you, but this is patently absurd. No one is releasing methane on purpose anywhere near a producing well. They ARE flaring, which might have been your point, but a flare produces CO2 and H2O, not "tons of methane". If it isn't flared and simply released, you've got a bomb waiting to explode, and no one wants that. 

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(edited)

55 minutes ago, Gerry Maddoux said:

Doug's right, the only way to keep production going up is to drill and run to another site. Pretty soon we'll have the sweet spots drilled out and that's where the rubber meets the road. Like anything--as I was trying to say in my earlier post here--technology has allowed recovery to improve dramatically and has softened the decline curves. However, by no means is this equivalent to big deepwater wells, or even good conventional wells drilled into a literal pool of mature oil. 

Doug and Gerry,

Yes, 'drill and run to another site.  BEST RETURN ON CAPITAL IN THE E&P INDUSTRY.  Whether Tight oil or Conventional oil all the same.  Don't understand your intense animus toward LTO. Is it just because it is not within your area of expertise ? Are you a shill for OPEC or Aramco ?

Rystad Energy in their June 2019 report indicates Texas and New Mexico themselves have over 100 BILLION LTO recoverable reserves.. Thats using the old standard of 9% to 10%. 

Could double 100 BILLION billion but I won't.

So take just the 100 Billion barrels divide by present 8.6 million barrels U.S. shale production today and you get over 30 years of LTO production.

OK, I'll NOW cut that in half so 15 years of production.

Come back in 15 years and we can have an honest discussion.

NOTE: It is not just shale that is reducing costs and increasing production.  Subsea costs are dropping quickly.  GOM, Brazil, Guyana, Columbia, are just a few countries in North and South America driving sibsea cost down below $30 and production up by millions of barrels a day.  

See you back here in 15 years, 2034.

Edited by Jabbar

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18 hours ago, Jabbar said:

l vans like Amazon ? Electric State, Community and Federal  Electric Vehicles ? USPS, FEDEX, UPS Electric Vehicles ?

Won't outlaw combustion engines BUT COULD see green governments double, triple or quadruple gasoline taxes.  Same result.

 

NO, they will just double, triple, quadruple license fees, GWT fees.  Many states in USA and around the world have already done so. 

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The U.S. could see its crude oil exports nearly double by 2022, according to energy research firm Rystad Energy.

Rystad forecasts that U.S. crude exports could increase from current levels of 2.9 million barrels per day (bpd) to nearly six million bpd by 2022. This is based off the nation’s expected production increase of 1.2 million bpd year-over-year in 2020 and domestic refineries at capacity to absorb shale growth.

“Crude exports will grow on the back of new infrastructure coming online in Corpus Christi, Texas, and as international crude buyers ramp up efforts to diversify their import sources after the attacks on oil facilities in Saudi Arabia and overall rising tensions in the Middle East,” said Paola Rodriguez-Masiu, a senior analyst on Rystad’s oil market team.

Rystad also noted the recent slowdown of U.S. crude exports in third quarter of 2019, due in part to the narrowing of the Brent-WTI price spread and effects from the five percent tariff imposed on U.S. crude by China.

Despite that slowdown, Rystad expects an export rebound to 3.7 million bpd in fourth quarter 2019 before climbing to even higher levels.

“This surge in crude shipments from the U.S. will be made possible by a flurry of new pipeline and export terminal infrastructure coming online in the coming years,” Rodriguez-Masiu said.

 

 

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28 minutes ago, Ward Smith said:

No one is releasing methane on purpose anywhere near a producing well. They ARE flaring, which might have been your point, but a flare produces CO2 and H2O, not "tons of methane". If it isn't flared and simply released, you've got a bomb waiting to explode, and no one wants that. 

Well, I didn't believe it either, because you're dead right, it's combustible. I haven't actually been to the Permian for a while, but was at a birthday party in Texas and was told by a reliable source that a good amount of venting of methane was taking place. You're right: I misspoke. It's not flaring, if NG is actually being released directly into the environment in an exhaust. Here's the copy of something I found, but you're entirely correct, I shouldn't have said something I hadn't seen with my own eyes, because it doesn't make much sense. However, if this article--and my source--are correct, venting is venting. I've always relied on Rystad as a reliable source, but they are stationed in Norway, which doesn't have the best interests of shale in mind. Thinking about it in more depth--I'm old, forgive me--I suspect that you're 100% correct because venting natural gas (and it's 80% methane in the Permian, 20% propane) wouldn't be the most sensible thing to do. Thanks for catching my slip. I'll be more careful in the future. I'm in the tight oil business, as an investor, and I'm just irritated at them for not pausing a bit, letting the pipelines catch up--what's going on down there is giving the oil and gas business a bad reputation at a time when we should all be working on salvaging it. I am a strong believer that carbon-neutrality is just around the corner, that we can run the world's gear with fossil fuels much more cheaply and reasonably than producing a massive junk heap of EV batteries, but when everyone is taking a shot, belching carbon dioxide into the atmosphere, picked up by satellite maps that make the Delaware Sub-Basin look like London, is not the way to promulgate an image. When it's a well I have an interest in, I want to see production as quickly as possible, and I understand that the NG has to be flared . . . but not for a year! And that's what's happening at more of those drilling pads than I even want to think about. My remarks came in haste, at a moment of exasperation, and I'm sorry if I erroneously stated it. I'm just angry about the slam-bam way it's being done! I worked on early wells when I was a kid and man, we wouldn't have done this. We would have dug a big ole sludge pit that covered about an acre and left it, but not this. 

Data: Venting and flaring at 'all-time high' in Permian basin as oil and gas booms

 
Adrian Hedden, Carlsbad Current-ArgusPublished 1:00 p.m. MT June 7, 2019

Venting and flaring natural gas became a controversial topic amid a boom in production of oil and gas in the Permian Basin of southeast New Mexico and West Texas.

The processes involve the release of gas either through combustion in flaring or by venting it out from facilities as exhaust.

Environmentalists questioned the practice as a waste of a valuable natural resource and danger to the environment, while industry experts claimed it an essential act to ensure safety at oil and gas facilities throughout the country.

Flaring and venting reached an “all-time high” in the Permian during the first quarter of 2019, per recent data from Rystad Energy, an independent energy research company headquartered in Norway.

MORE: Study: Methane emissions flat nationwide, slight increase from oil and gas

The study estimated up to 661 million cubic feet per day (MMcfd) was lost through venting and flaring in the region, blaming a lack of infrastructure and take-away capacity.

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(edited)

19 minutes ago, ceo_energemsier said:

 

Edited by Jabbar

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Just now, Jabbar said:
17 minutes ago, ceo_energemsier said:

The U.S. could see its crude oil exports nearly double by 2022, according to energy research firm Rystad Energy.

 

ceo

Yes the U.S. will increase exports substantially. Point taken but off topic.

Discussion topic increased LTO yield

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2 minutes ago, Jabbar said:

ceo

Yes the U.S. will increase exports substantially. Point taken but off topic.

Discussion topic increased LTO yield

You statement, " discussion topic increased LTO yield"

FYI, most of the exports are LTO

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7 minutes ago, Gerry Maddoux said:

Well, I didn't believe it either, because you're dead right, it's combustible. I haven't 

Methane and flaring are concerns. But off topic.

This discussion topic is Bloomberg article on increasing LTO yield.

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(edited)

2 hours ago, ceo_energemsier said:

You statement, " discussion topic increased LTO yield"

FYI, most of the exports are LTO

No, most of U.S. EXPORTS are petroleum products ie diesel, gasoline, gasoil, propane, natural gas liquids. 

Virtually all 3 million barrels a day crude IS 100% LTO.  And per your OFF TOPIC article will double by 2022.

BUT THE TOPIC IS NOT ABOUT EXPORTS.  FOCUS.

Edited by Jabbar

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I give up. 

See ya

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