World "Awash" in oil. Sec Perry says Goldman Sachs wrong.

[D Coyne + 305]

6 hours ago, Marcin said:

You are actually right, for 3 weeks in October US is net energy exporter.

(If I would really try to make my case I would say that imported Canadian crude has higher calorific value than exported light fractions, so per Peta Joule it is more like balanced, but by volume you are right)

EIA weekly is not that off of monthly reports lately. For July 2019 monthly net imports as cited by @D Coyne were -1466 k bbl/d, and per weekly EIA reports it was 1.6 m bbl/d in July, so very close.

Marcin,

Sometimes the weekly data matches the monthly data, more often it does not, just because it was close in July tells us very little about current weekly data, the weekly data is best ignored unless one is trying to play the futures market where it is no doubt very relevant.  And a 9% error is very close?   I guess it is in the ball park, but I don't think we would need instant replay. 

[Old-Ruffneck + 1,223]

5 hours ago, D Coyne said:

Eventually oil output will peak, my guess is 2025 if World URR is about 3120 Gb.  A higher URR assumption results in a later peak.

5 years?? Uhhhh, me thinks yer dead wrong!! You can draw all the graphs on theory but it's not fact. There is alot more oil to be discovered thoughout the world. I do think the demand curve will slow tho, needing less oil by 2050. My "guesstimate" will be range of 65mmd or thereabouts. 

[D Coyne + 305]

1 hour ago, Old-Ruffneck said:

5 years?? Uhhhh, me thinks yer dead wrong!! You can draw all the graphs on theory but it's not fact. There is alot more oil to be discovered thoughout the world. I do think the demand curve will slow tho, needing less oil by 2050. My "guesstimate" will be range of 65mmd or thereabouts. 

Old-Ruffneck,

Note that I presented two scenarios, a "medium scenario" with a plateau from 2023 to 2028 (C+C output between 85 and 86 MMbopd) and  and a "high URR scenario" with a plateau from 2028 to 2038 (C+C at 91 to 92 MMbopd), you might prefer the "high" scenario.

You could be right, we will find out in 5 to 10 years, my best guess scenario has been revised to 3200 Gb. Output of C+C is between 85 and 86 Mb/d from 2023 to 2028, so essentially a bumpy plateau for this narrow band of output.  No future scenario is a fact, facts are history, different from scenarios of the future.  Good thing that demand will slow as my best guess scenario has output at about 60 MMbpd in 2050.  We have not been discovering much oil lately see

https://www.ogj.com/exploration-development/reserves/article/14068305/rystad-oil-and-gas-resource-replacement-ratio-lowest-in-decades

liquids discoveries were 5.6 Gb in 2018 and so far in 2019 (Jan to Sept 2019) only 3.2 Gb of liquids have been discovered.  About 32 Gb of C+C was produced in 2018, there are about 1300 Gb of conventional and tight oil reserves (leaving out oil sands in Canada and Venezuela), lets say we discover 5 Gb of oil each year and production remains 32 Gb, so each year proved reserves fall by 27 Gb, in 48 years reserves would be zero (1300/27=48).  Obviously output starts to fall before we get to year 48.  My model assumes about 188 Gb of discoveries over the next 80 years.  Chart below  shows the discovery model I use for future C+C discovery of conventional oil, which excludes extra heavy oil (oil sands with API Gravity <10) and tight oil.

Notice how the model over predicts discoveries in 2018 (at 8.1 BBO) and possibly in 2019 as well (7.7 BBO).

[Marcin + 519]

10 hours ago, D Coyne said:

Jabbar,

Eventually oil output will peak, my guess is 2025 if World URR is about 3120 Gb.

 

Gazillion articles about peak oil waiting round the corner, but my opinion is it is still far, far away, like 2050 and at much higher output at least 20-30% higher than today ?

1. We are still living in golden age of dirt cheap energy resources. In developed countries oil bill is still less than 2-3% of GDP. People will still drive/transport stuff if it is double this amount (current experience of developing countries).

2. At present about 40% of global population (3 billion people) is living something I would call more or less decent life, it means 100 million vehicles sold every year. Well, oil demand in developing countries where 2 out of 3 billion of these people live is not saturated yet.  (30 years ago 1 billion people lived decent life, 45 million vehicles sold every year).

3. Another 2 billion people mainly in developing Asia (with Middle East) will join this club in 20 years. And they will also drive and transport stuff by trucks. 100 or 150 oil - oil consumption would not decrease much as it is necessity, like food.

4. Intensive research in batteries technology brought nothing spectacular. You can drive fancy Tesla or other electric car for 300 kilometres but for real people with not much free time it is just gadget, expensive gadget.

Last but not least what is the definition of oil, Coal to Liquids, our future at 150 oil in today prices counts ?

 

[Boat + 1,323]

On 10/29/2019 at 11:40 AM, Jabbar said:

Keep it simple.

US exports 3.7 million day of crude

US exports Over 5.5 million day of petroleum products. 

TOO MUCH OIL

You have yet to give a coherent answer to the importance of US exports while the US is a net importer. Call the US a refining center for imports. That would be more factual. 
To much oil for a $100 a barrel price? Yes. To much oil for a $30 a barrel price? No

But yea I think your right that only cuts by OPEC are keeping oil prices up short/mid term. Only geopolitical events and voluntary cuts can keep prices around $60 for many years to come. However I do think you underestimate transpiration competition causing peak oil in a decade or so.

[J.R. Ewing + 19]

Per the EIA, US production up strongly to 12.365 million barrels in August from 11.766m in July.

Offshore accounted for just about all the increase after dropping in July because of hurricanes.

 

[PE Scott + 563]

15 hours ago, Marcin said:

Gazillion articles about peak oil waiting round the corner, but my opinion is it is still far, far away, like 2050 and at much higher output at least 20-30% higher than today ?

1. We are still living in golden age of dirt cheap energy resources. In developed countries oil bill is still less than 2-3% of GDP. People will still drive/transport stuff if it is double this amount (current experience of developing countries).

2. At present about 40% of global population (3 billion people) is living something I would call more or less decent life, it means 100 million vehicles sold every year. Well, oil demand in developing countries where 2 out of 3 billion of these people live is not saturated yet.  (30 years ago 1 billion people lived decent life, 45 million vehicles sold every year).

3. Another 2 billion people mainly in developing Asia (with Middle East) will join this club in 20 years. And they will also drive and transport stuff by trucks. 100 or 150 oil - oil consumption would not decrease much as it is necessity, like food.

4. Intensive research in batteries technology brought nothing spectacular. You can drive fancy Tesla or other electric car for 300 kilometres but for real people with not much free time it is just gadget, expensive gadget.

Last but not least what is the definition of oil, Coal to Liquids, our future at 150 oil in today prices counts ?

 

I had to scroll back to the top and check to make sure this was actually posted by @Marcin. It's the internet equivalent of the shock induced double-take. 

I pretty much completely agree with you. I never say never about emerging technologies, because I've been surprised before, but I think you're estimates are reasonably accurate here.

1 gold star.

[Kenosha Liquidators + 1]

Traders are holding price up for Arabs that are just plain fu-ked. They can't hold it up forever so Aramco can have an IPO. Some need $80 oil. The real value is less than $40. We have never in history had so many reserves and they aren't looking hard to find them. In the next few years, gasoline consumption is going to go down. Oil is a commodity and how many producers are there? Electricity is going to replace gas and fuel oil in a lot of other places, it's easier to work with as POWER. 

[Jabbar + 465]

12 hours ago, Boat said:

To much oil for a $100 a barrel price? Yes. To much oil for a $30 a barrel price? No

Obviously when one says too much oil it is for a given price . . . Keeping in mind the cost to produce

Brent and WTI fair price is 55 to 65 dollars in today's environment.  

The U.S. Shale producers are for the most part is divided into two type of producers.  Those that can produce shale oil between 20 to 30 dollars and those that can produce between 45 to 55 dollars.  

The second group will be forced out and sell to others.

Some oil consultants that post on these discussion boards think shale is going out of business and the good ol' days of the 70's, 80's, and 90's when a man was a man and roughnecks traveled the world drilling conventional on shore wells making a pocket load of money are coming back.

Not gonna happen

Offshore, deepwater, shale

Technology, automation, yield, 

 

Edited October 31, 2019 by Jabbar

[Jabbar + 465]

2 hours ago, J.R. Ewing said:

Per the EIA, US production up strongly to 12.365 million barrels in August from 11.766m in July.

Offshore accounted for just about all the increase after dropping in July because of hurricanes.

 

So 12.6 for October could be accurate 

All four weekly reports in October = 12.6

[Jabbar + 465]

On 10/29/2019 at 5:39 PM, D Coyne said:

For description of model see  https://www.amazon.com/Mathematical-Geoenergy-Discovery-Depletion-Geophysical/dp/1119434297

 

Or perhaps a University library

 

http://ursus.maine.edu/search/?searchtype=X&SORT=D&searcharg=mathematical+geoenergy&searchscope=1

A search on oil shock model may find some blog posts.

 

Good advertising for your books.  How are they selling.

DC as I mentioned before you can have the most sophisticated mathematics and algorithms.

IT ALL DEPENDS ON THE INPUTS

The majority of your mathamatical inputs are ASSUMPTIONS. 

Your assumptions are different than mine. ASSUMPTION are not imperical data. Everyone has their own bias. 

You make some excellent points.  I respectully disagree to some.

Edited November 1, 2019 by Jabbar

[D Coyne + 305]

19 hours ago, Marcin said:

Gazillion articles about peak oil waiting round the corner, but my opinion is it is still far, far away, like 2050 and at much higher output at least 20-30% higher than today ?

1. We are still living in golden age of dirt cheap energy resources. In developed countries oil bill is still less than 2-3% of GDP. People will still drive/transport stuff if it is double this amount (current experience of developing countries).

2. At present about 40% of global population (3 billion people) is living something I would call more or less decent life, it means 100 million vehicles sold every year. Well, oil demand in developing countries where 2 out of 3 billion of these people live is not saturated yet.  (30 years ago 1 billion people lived decent life, 45 million vehicles sold every year).

3. Another 2 billion people mainly in developing Asia (with Middle East) will join this club in 20 years. And they will also drive and transport stuff by trucks. 100 or 150 oil - oil consumption would not decrease much as it is necessity, like food.

4. Intensive research in batteries technology brought nothing spectacular. You can drive fancy Tesla or other electric car for 300 kilometres but for real people with not much free time it is just gadget, expensive gadget.

Last but not least what is the definition of oil, Coal to Liquids, our future at 150 oil in today prices counts ?

 

I define oil as crude plus condensate.  Perhaps coal to liquids or gas to liquids will see significant output in the future.

The amount of oil discovered over the past few years has been quite low, perhaps higher oil prices might lead to higher discovery rates.  We just do not know, most of the easy to recover oil has been discovered, future finds may be quite expensive to produce.  My model 3 goes about 300 miles (480 km) on a charge.  Much nicer car than my Camry XLE.  

Battery electric vehicles will fall in price as they ramp up in output and ICEVs will no longer be competitive as oil prices rise as oil becomes scarce.   In 30 years, the ICEV will be as common as horse and buggies are today.  Have you ridden a horse lately?  Personally I never have.

[D Coyne + 305]

2 hours ago, Jabbar said:

Good advertising for your books.  How are they selling.

DC as I mentioned before you can have the most sophisticated mathematics and algorithms.

IT ALL DEPENDS ON THE INPUTS

The majority of your mathamatical inputs are ASSUPTIONS

Your assumptions are different than mine. ASSUMPTION are not imperical data. Everyone has their own bias.

You make some excellent points.  I respectully disagree to some.

For LTO I use data.  I also use the fact that every oil play ever discovered has sweet spots, these get drilled up to the point where no further drilling is profitable, when oil producers move to tier two and tier 3 areas well productivity decreases.

You can assume this will not happen in tight oil plays, but this would be an example of garbage in.

Check link below, little change in well productivity in Permian basin since 2016 when wells are normalized for lateral length.

https://shaleprofile.com/2019/10/28/permian-update-through-july-2019/

Chart below shows Permian model vs EIA tight oil output data for Permian basin from Jan 2010 to Sept 2019, R squared for model vs data is 0.9994, fairly close.

For chart below not many assumptions, for future output I assume average well profile is unchanged through Dec 2025 and assume increased completion rate, as wells become less productive as sweet spots become fully developed, I assume completion rate gradually decreases.

I agree that assumptions must be made about the future in order to create any scenario.

Edited October 31, 2019 by D Coyne

[Rob Kramer + 696]

If EV sales ramp up and that displaces oil / gasoline use that lowers prices for gas making it more cost competitive. Also when majority of cars are EV (51%) they will flip the tax on electricity or car ownership to have road tax in it also slowing the rate of adoption. Then you have aircraft, ships, boats, rec vehicles ect. So in my view I see a gradual 15 - 20yr switch starting 2025 ish. And that's for gas cars and niche busses / transport truck. Boats and rec toys are closer to 30yr switch starting 2030 ish.

Just my opinion tho who knows if massive banning of ice vehicles will get massive adoption or recession lol. 

[D Coyne + 305]

US LTO model that is optimistic (from my perspective), uses EIA AEO 2018 reference oil price scenario and assumes USGS mean TRR estimates for Permian basin, Bakken and Eagle Ford are correct,  discounted cash flow analysis based on average basin costs and assumed oil prices and gradually decreasing EUR (after 2025 for Permian and after 2020 for other basins).

URR is 96 Gb with peak output of 12.5 Mb/d im 2026, TRR is assumed at about 120 Gb (Permian 75 Gb, Bakken 12 Gb, Eagle Ford 13 Gb, other basins combined 20 Gb).  About 80% of TRR produced at reference oil price scenario.

If this scenario should prove correct, where does the World find the resources to replace the 4.5 Mb/d of output that is needed for the drop from 2026 to 2036.  Over the past 9 years US tight oil has been responsible for all of the increase in World output.  A more realistic (in my view) scenario peaks at about 10 Mb/d in 2025.  The resource optimists eventually will be incorrect, likely between 2025 and 2030.

Edited October 31, 2019 by D Coyne

[D Coyne + 305]

39 minutes ago, Rob Kramer said:

If EV sales ramp up and that displaces oil / gasoline use that lowers prices for gas making it more cost competitive. Also when majority of cars are EV (51%) they will flip the tax on electricity or car ownership to have road tax in it also slowing the rate of adoption. Then you have aircraft, ships, boats, rec vehicles ect. So in my view I see a gradual 15 - 20yr switch starting 2025 ish. And that's for gas cars and niche busses / transport truck. Boats and rec toys are closer to 30yr switch starting 2030 ish.

Just my opinion tho who knows if massive banning of ice vehicles will get massive adoption or recession lol. 

Rob,

Sounds reasonable, I also expect the transition to be gradual, once EVs catch on and get to the point that demand for oil falls below supply we may see oil field development slow down so that supply will fall to match demand at a price that allows enough to be produced to meet demand, difficult to predict price, but some predict oil prices at $30/b would be needed to make ICEVs competitive with BEVs (in 10 to 15 years after costs fall further).  I expect road taxes will be collected at car registration based on miles travelled and vehicle weight in the future.

[D Coyne + 305]

3 hours ago, Jabbar said:

So 12.6 for October could be accurate 

All four weekly reports in October = 12.6

Jabbar,

You may be right, the 4 week average for August matched the monthly August estimate quite well.  Whether this continues through October we will know on December 31, 2019.

[Jabbar + 465]

1 hour ago, D Coyne said:

 

For chart below not many assumptions, for future output I assume average well profile is unchanged through Dec 2025 and assume increased completion rate, as wells become less productive as sweet spots become fully developed, I assume completion rate gradually decreases.

I agree that assumptions must be made about the future in order to create any scenario.

 

 

DC

If you have the time :

Per Conoco yield at their Eagleford sites have increased from 9 or 10% up to 20%.

For a given horizontal or given acreage that will virtually double yield , close to double productivity and substantial reduce operating/lifting costs.

If you can put my assumption in your model (using 20% EUR).  

Let me know.

 

 

 

Edited October 31, 2019 by Jabbar

[Gerry Maddoux + 3,627]

On 10/29/2019 at 5:47 AM, Douglas Buckland said:

Furthermore, with exploration at an all time low (well, 70 year low) and replacement barrels not keeping up with production, the oil may be physically in the ground but access to it and then getting it to a refinery are years away, During those years, thing’s may get interesting!

Precisely! People use this term, "the world is awash in oil" like oil is something lying about. It's not. While it's a known fact that there are a lot of reserves, many of these have traditionally been, and will probably always be, either onshore or offshore some banana republic where it's dicey to try to develop a field and some semblance of infrastructure. It is great testimony to Exxon's money machine that they were able to weather Exxon Valdez, then Parachute, the Iraq project, and others, and still come away with their dividend intact. The world is awash in "reserves," and that's a very different thing than saying the world is awash in oil--like it's in tanks at the hub. I'm a stubborn man regarding cost of lifting. I heard at a party the other night in Texas that it was costing Occidental $14/barrel to lift a barrel of oil in the Delaware. I thought that was horse pucky. Turns out, when you "drill down" as they say on CNN or Fox, they were talking about the Comstock Lode, a well so massive and over-pressurized that they didn't quite know how to manage it at first. That's.not.your.average.well. Extrapolating a blind-assed lucky moonshot to the real world is dangerous in the extreme. In this country (the USA) and in the world at large, we have experienced stealth inflation. No longer can you hire a good eighteen-wheeler truck driver for $100,000/year in the oil field. Wisconsin white is expensive. Four people a month die on the "Highway of Death" between Carlsbad and Pecos--try out the insurance on those big rigs. A huge discovery offshore some country that doesn't cotton to the US isn't going to do much for us--it'll be years before that oil is marketed. I get incensed when I read this trite phrase, "the world is awash in oil." It isn't! It is awash in reserves. And that's the reason shale is going to be around awhile: it's on friendly soil, with pipelines, and yes it's a crazy idea and hard on the environment but it sure as hell beats being held hostage by the Saudis. Speak of the devil, the KSA has squandered most of its wealth. They're desperate. When you round up your cousins, lock them in the Ritz-Carlton and tell them to crack open their piggy banks, you're desperate. Then they got hit at Abqaiq. None of the banks thought their Aramco IPO was a $3T deal. They're desperate. They're in decline. Their oil is getting a) sourer, b) saltier, c) more dependent on salt-water-flooding--all hallmarks of decline. There's a pot-load of oil in the Permian, Eagle Ford, SCOOP/STACK, the Bakken, but it's going to take some doing to get to it. Guyana? Risky stuff, out of the way, gonna take some real money to get that to the market. Speaking of markets, they're being redefined as we speak: Russia running an LNG pipeline down the spine of Pakistan, KSA supplying China, Nord Stream 2 coming in, insurance and other costs of VLCC transport doubling in a few weeks time. The USA needs markets. The world would dry up in about two months without ready oil reserves coming on line. Right now, those "on line" efficiencies are GOM and shale. In time, GOM will dwarf shale. But right now, the world is nowhere near awash in oil: it's awash in reserves that are increasingly expensive and dangerous to go after. And believe it or not, the breakeven for doing that--if you take out the moonshots--is about 50 bucks.    

[Otis11 + 551]

On 10/30/2019 at 7:41 AM, Jan van Eck said:

And this is an interesting wrinkle.  Marcin correctly references the complicated relationship that the USA has with Canada. In oil, as in lumber, lobsters, paper, even automobiles, the USA-Canada import/export trade is intertwined and complicated.  For bizarre political reasons that nobody can possibly grasp, Canada has not built, and will not build, a pipeline to run Canadian crude from Alberta and Saskatchewan to refineries in the East.  So the product flow has WCS going South into the USA, a good portion traveling to refineries in the Northern US Great Lakes area, there refined, and the refined product is then piped or railed up to the big Toronto and Montreal markets. And yes, some Canadian crude trans-ships across Minnesota and Michigan to the refineries in Sarnia, Ontario, for processing there. 

Yet that Canadian heavy crude is ironically well suited for the refineries down in Texas and Louisiana, to be first blended with the LTO from the Texas shale fields, basically as a direct substitute for the stuff that was previously sourced, in large quantities, from Venezuela. So, yet once again, the politics of oil gets in the way of its rational distribution and use.  And you also have crude from the Bakken heading by rail to the port of Albany, NY, there to be loaded onto tankers in the 60,000-ton class, for routing to the Irving refinery in New Brunswick, basically in competition with crude otherwise sold there from Saudi Arabia. 

None of the trans-border intertwining really makes any sense, yet persists because of the political barriers to the rationalized flows of crudes to market. IS the USA a "net exporter"?  The definition is a bit artificial, as it places this 1700's sword across the map, making a "border" where none exists, except in politics. 

Another Wrinkle for you Jan - the Jones Act (or Merchant Marine Act of 1920) places additional requirements on transportation from US port to US port... so often we'll ship crude from US to Canada, and then ship different - but comparable - crude from Canada to the US, rather than go from US port to US port.

(Full disclosure - this is not an area of strong knowledge for me... just work with some people who deal with that)

[D Coyne + 305]

1 hour ago, Jabbar said:

 

DC

If you have the time :

Per Conoco yield at their Eagleford sites have increased from 9 or 10% up to 20%.

For a given horizontal or given acreage that will virtually double yield , close to double productivity and substantial reduce operating/lifting costs.

If you can put my assumption in your model (using 20% EUR).  

Let me know.

Jabbar,

Don't do investor hype.  When the average new well EUR of Eagle Ford wells increases by a factor of 2, I will believe it.

Do you believe all the investor hype out there?

I have some great property in central Florida that I would like to sell, and a bridge in NYC. 

Conoco has some nice wells, in 2017 their 98 wells were about double the other producers on average (1800 wells in total), this is probably simply a matter of high grading.  In 2017 Conoco completed about 5 % of the wells in the Eagle Ford

From 

https://shaleprofile.com/2019/09/30/eagle-ford-update-through-june-2019/

Here are average profiles for Conocophilips.

Quote

 

 

 

Edited October 31, 2019 by D Coyne

[Jabbar + 465]

3 hours ago, Gerry Maddoux said:

.

 

2 hours ago, D Coyne said:

Jabbar,

Don't do investor hype.  When the average new well EUR of Eagle Ford wells increases by a factor of 2, I will believe it.

Do you believe all the investor hype out there?

CD 

I'M NOT ASKING YOU TO BELIEVE POSIBLE YIELDS IN THE HIGH TEENS OR EVEN 20% CAN BE ACHIEVED.  

ITS JUST AN ASSUMPTION JUST LIKE THE ONES YOU USE IN YOUR MODELS AND GRAPHS.

Your models are on a computer.  How long to input the assumptions I have given you into your computer ?  Ten minutes at most ? 

Let me know.

PS : do you teach at University ?

Edited November 1, 2019 by Jabbar

[Jabbar + 465]

3 hours ago, Gerry Maddoux said:

Precisely! People use this term, "the world is awash in oil" like oil is something lying about. It's not. While it's a known fact that there are a lot of reserves, many of these have traditionally been, and will probably always be, either onshore or offshore some banana republic where it's dicey to try to develop a field and some semblance  . . . 

 

Gerry 

Great post. Agree with 95%. . . . 

. . . .  and a gifted writer to boot

 

Edited November 1, 2019 by Jabbar

[Guest]

Agreed, but I stil want more detail rather than his quippy answers

[Jabbar + 465]

37 minutes ago, DayTrader said:

 

Edited November 1, 2019 by Jabbar