Shale Oil Fiasco

[James Gautreau + 86]

3 minutes ago, BByrd said:

We were visiting last week and one of our older crowd commented it’s just drilling 30 or 40 vertical Sprayberry wells in the same wellbore for 8 mil

Matt Simmons said it very succinctly "Records are peaks." In 2018 we added more oil than any country has in a year in history. That's a peak. From now on growth will be less. How much less? That's the question, but it will be determined by decline rates, and eventually they swamp attempts to maintain production. It's happened countless times all over the world. The bulk of conventional oil, and I mean like 90%, come from fields that are all over 50 years old. If that starts declining and shale comes up short... well that's the perfect storm. 

[James Gautreau + 86]

Matt Simmons even went back to the year 1970 and dug up old news articles and they said to the effect, "Remember that old coot who said oil production would be declining by now. We've never produced more!" Oil peaked that very year. 

[James Gautreau + 86]

I stand corrected on cobalt. There are 6,000,000 tons of reserves currently worldwide. So it's between 240,000,000 - 400,000,000 cars if each EV uses 30 - 50 lbs apiece. 

[D Coyne + 305]

On 12/12/2019 at 12:26 PM, PE Scott said:

Can I chime in as "Guy C" - pro frac but also pro reality?

I agree with Doug in the sense that I haven't seen any technology that substantially and consistently improved the EUR in wells when normalized for length, etc. As technology goes, please correct me if I'm wrong @Douglas Buckland, I think he's trying to illustrate that it hasnt changed the physics or overall recoverable oil on an individual well. Look at a technology meant to do this, like MicroScout from Halliburton, and find something that's actually made a big difference. I cant name anything and I'm a completion engineer......maybe I'm just bad at my job. As far as microscout goes.....it was 300 mesh sand meant to prop micro fractures and increase EUR by some significant percentage as a result of greater propped frac length. Most recently, I found it works better as a diverter if dropped in high concentration.......if you understand what I'm talking about....you'll know why this is not intended. 

However, theres more to making these wells economically viable than EUR. The biggest focus now, in my opinion, isn't trying to recover a greater percentage of oil from each well but rather trying to cut the completion cost wherever they can. I have seen stage cost drop from $80k to around $20k. The stages are nearly the same length and with the same amount or more proppant, but the chemicals and fluid volumes have dropped dramatically. The chemicals being used, like HVFR, are a fraction of the cost of running guar based gels. Every single person and piece of equipment on the surface is being optimized for efficiency. Average time between wells on a zipper is less than 15 minutes when things are running smoothly. It's not uncommon to complete 12 or more stages in 24 hours these days. That's lightning fast for plug and perf operations. That's where the technology has benefited the shale field though. It's not about higher production, it's about lower completion cost and a higher completion frequency. 

Now, I'm not saying operators aren't still trying to optimize their production and get every last drop they can.....I just haven't seen any big changes in that arena in a long long time and it seems like the production data supports that opinion.

All that being said, I can't foresee the next "big thing". There might be something out there I've never heard of or considered that will turn this whole argument on its head with it's obvious advantages. Please someone let me know as I would like to make money off of it.

Mr Scott,

Has the average cost to complete a well decreased?  It seems a lot has been done to improve productivity. more proppant, higher numbers of frack stages per 100 feet of lateral, but has the overall cost (normalized for lateral length) decreased significantly?  Can you give a rough estimate for the average well cost (D+C) for a Permian well with a 9000 foot lateral?

My guess is roughly $9 million.  Based not on experience, but reports by Rystad and others.

[Jabbar + 465]

19 hours ago, Coffeeguyzz said:

Boat

Hope you are doing well.

As succinctly as I may be able to answer your question, the currently accepted rate of primary recovery in the shales is 8 to 12 per cent.

Different operators/formations/skill (luck?) plus a whole bunch of other factors loom large in these matters.

For context, the early Montana/North Dakota Bakken operators were getting ~3% OOIP and thought that it was great.

Not all fractures created equal

Technical Engineering Reservoir Modeling Article.

https://pubs.spe.org/en/jpt/jpt-main-page/

https://pubs.spe.org/en/jpt/jpt-article-detail/?art=6240

Shale going bust laughable.  Shale and actually whole energy industry going thru transition. That is not to say over half of today's shale producers will not be gone in a year or two.  They will.  

DOUBLE YIELD 10% TO 20%

During Investor Day Conoco discussed how they used 5 technologies to double yield.  It is primarily based on (1) CORE SAMPLING, (2) ADVANCED SIESMIC TECHNIQUES /ANALYTICS, and (3) PRESSURE CONTROL.  

(4) They have also stated that they solved the  well stack/spacing (parent/child) deleima and are able to drill 12 to 16 wells per section. 

Conoco champions 5 TECHNOLOGIES to achieve greater productivity.  Conoco recent Investor Day Presentation stated they are doubling yield from 10% to  20% at their pilot test wells and .  .  .  .  . .  .  .    they said they can do even better (> 20%) !

ADDITIONALLY THEY ARE REFRACING ALL VINTAGE 1 AND Vintage 2 WELLS (2009 thru 2014) and doing so at COST BELOW $30 BARREL.

TRANSITION / CONSOLIDATION

All those producers that survive the Consolidation and Transition will be using these new 5 technologies 

This in effect is doubling reserves and cutting costs per barrel by as much as 30% to 40%. 

Shale slows 2020 . . . transition year as weak sisters culled , gets second wind 2021. Decades of profitable shale productivity. 

Edited December 13, 2019 by Jabbar

[Rob Kramer + 696]

1 hour ago, Jabbar said:

Shale going bust laughable.  Shale and actually whole energy industry going thru transition. That is not to say over half of today's shale producers will not be gone in a year or two.  They will.  

Shale slows 2020 . . . yrandition year as well sisters culled , gets second wind 2021. Decades of profitable shale productivity. 

I think most agree with this. Do you see declines or lower amounts than today's level going forward into culling? Or what levels of production through those decades of profitability? Any price spike from the transition? 

Edited December 13, 2019 by Rob Kramer
My definition of bust is ceased operations

[James Gautreau + 86]

57 minutes ago, Jabbar said:

Not all fractures created equal

Technical Engineering Reservoir Modeling Article.

https://pubs.spe.org/en/jpt/jpt-main-page/

https://pubs.spe.org/en/jpt/jpt-article-detail/?art=6240

Shale going bust laughable.  Shale and actually whole energy industry going thru transition. That is not to say over half of today's shale producers will not be gone in a year or two.  They will.  

DOUBLE YIELD 10% TO 20%

During Investor Day Conoco discussed how they used 5 technologies to double yield.  It is primarily based on (1) CORE SAMPLING, (2) ADVANCED SIESMIC TECHNIQUES /ANALYTICS, and (3) PRESSURE CONTROL.  

(4) They have also stated that they solved the  well stack/spacing (parent/child) deleima and are able to drill 12 to 16 wells per section. 

Conoco champions 5 TECHNOLOGIES to achieve greater productivity.  Conoco recent Investor Day Presentation stated they are doubling yield from 10% to  20% at their pilot test wells and .  .  .  .  . .  .  .    they said they can do even better (> 20%) !

ADDITIONALLY THEY ARE REFRACING ALL VINTAGE 1 AND Vintage 2 WELLS (2009 thru 2014) and doing so at COST BELOW $30 BARREL.

TRANSITION / CONSOLIDATION

All those producers that survive the Consolidation and Transition will be using these new 5 technologies 

This in effect is doubling reserves and cutting costs per barrel by as much as 30% to 40%. 

Shale slows 2020 . . . yrandition year as well sisters culled , gets second wind 2021. Decades of profitable shale productivity. 

I've heard this song before. Wall Street Journal:

In 2015, Pioneer Natural Resources filed a report with the federal Securities and Exchange Commission, in which the shale drilling and fracking company said that it was “drilling the most productive wells in the Eagle Ford Shale” in Texas.

That made the company a major player in what local trade papers were calling “arguably the largest single economic event in Texas history,” as drillers pumped more than a billion barrels of fossil fuels from the Eagle Ford.

Its Eagle Ford wells, Pioneer’s filing said, were massive finds, with each well able to deliver an average of roughly 1.3 million barrels of oil and other fossil fuels over their lifetimes.

Three years later, The Wall Street Journal checked the numbers, investigating how those massive wells are turning out for Pioneer.

Turns out, not so well. And Pioneer is not alone.

Those 1.3 million-barrel wells, the Journal reported, “now appear to be on a pace to produce about 482,000 barrels” apiece — a little over a third of what Pioneer told investors they could deliver.

In Texas’ famed Permian Basin, now the nation’s most productive shale oil field, where Pioneer predicted 960,000 barrels from each of its shale wells in 2015, the Journal concluded that those “wells are now on track to produce about 720,000 barrels” each.

Not only are the wells already drying up at a much faster rate than the company predicted, according to the Journal’s investigative report, but Pioneer’s projections require oil to flow for at least 50 years after the well was drilled and fracked — a projection experts told the Journal would be “extremely optimistic.”

[Rob Kramer + 696]

Rigs up 4 . From what I read theres year end production goals and then new budget spending to start the year. Well see if this continues.  The Canadian rig count looks like it has very regular cycles.  

[James Gautreau + 86]

The other thing to keep in mind is that not all DUC's can be brought on line due to lack of infrastructure, roads and pipelines and such. So the number of DUC's may be drying up much faster than people are thinking. We'll know soon enough.

[James Gautreau + 86]

Shale Oil Pioneers Say the Boom is Ending

by  Bloomberg

|

Kevin Crowley and Michael Bellusci

|

Wednesday, November 06, 2019

Share

 

 

Two shale pioneers think the days of relentless production growth from US unconventional oil fields are ending.

 

(Bloomberg) -- The days of relentless production growth from U.S. shale oil fields are ending, potentially aiding OPEC’s years-long effort to drain a worldwide supply glut, according to industry pioneers Scott Sheffield and Mark Papa.

Investor calls for shale producers to shut down rigs and stop burning through cash are being heeded, Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield said on Tuesday. Across the American shale industry, output growth will slow next year, providing a boost for crude prices through the early 2020s, he said.

“I don’t think OPEC has to worry that much more about U.S. shale growth long term,” Sheffield said during a conference call with analysts. He’s “definitely becoming more optimistic that we’re probably at the bottom end of the cycle regarding oil prices.”

Talk of a shale slowdown reached a fever pitch this year as investors crushed drillers’ stocks and demanded spending discipline. As if on cue, Occidental Petroleum Corp., Apache Corp., Cimarex Energy Co. and Pioneer all are signaling plans to trim budgets.

Mark Papa, who built Enron Corp. castoff EOG Resources Inc. into one of the world’s biggest independent oil explorers and now runs Centennial Resource Development Inc., has been sounding the alarm on shale growth since at least February. In reiterating that warning on Tuesday, he said the slowdown will be more dramatic than he predicted as recently as nine weeks ago.

Beyond 2020

Papa downgraded his 2020 shale growth forecast to 400,000 barrels a day from the 700,000 estimate he discussed in early September.

“This is likely not just a 2020 event,” Papa said during Centennial’s third-quarter results call. “I believe U.S. shale production on a year-over-year growth basis will be considerably less powerful in 2021 and later years than most people currently expect.”

Sheffield sees about 700,000 barrels a day being added next year while the Energy Information Administration predicts that next year’s daily production will expand by 910,000 barrels. Even the EIA’s figure is half of 2018’s increase.

Crowded Wells

For Papa, there’s a more fundamental reason driving the downturn in shale than investor sentiment. Many producers have drilled their best locations and are now turning to lower-quality sites. Some also have been drilling wells too close together, resulting in a loss of overall performance.

The counterpoint to Sheffield and Papa’s gloomy outlook is the supermajors Exxon Mobil Corp. and Chevron Corp., which are ramping up Permian Basin drilling. Each plan to produce about one million barrels a day from the basin by the early 2020s. That may provide a silver lining for independent producers: an opportunity to get bought, Sheffield said.

The majors will have “to decide whether or not to bulk up their inventory over the next two to three years and decide whether or not to acquire any independents,” he said.

Edited December 13, 2019 by James Gautreau

[James Regan + 1,776]

On 12/11/2019 at 11:22 AM, James Gautreau said:

Do the simple math boys and girls. If the average well is 400,000 EUR that's $20,000,000 on a well that costs $10,000,000 to drill. How can these companies be $250 billion in the red? Actually I think the average price for a barrel of oil over the last 10 years is $75, so $30,000,000 in revenues on a $10,000,000 well. IT AIN'T SO.

THESE SHALE WELLS ARE BASICALLY GAS STATIONS WITH NO SUPPLIER.......DOOOOMED

[Jabbar + 465]

1 hour ago, James Gautreau said:

I've heard this song before. Wall Street Journal:

In 2015, Pioneer Natural Resources filed a report with the federal Securities and Exchange Commission, in which the shale drilling and fracking company said that it was “drilling the most productive wells in the Eagle Ford Shale” in Texas.

That made the company a major player in what local trade papers were calling “arguably the largest single economic event in Texas history,” as drillers pumped more than a billion barrels of fossil fuels from the Eagle Ford.

Its Eagle Ford wells, Pioneer’s filing said, were massive finds, with each well able to deliver an average of roughly 1.3 million barrels of oil and other fossil fuels over their lifetimes.

Three years later, The Wall Street Journal checked the numbers, investigating how those massive wells are turning out for Pioneer.

Turns out, not so well. And Pioneer is not alone.

Those 1.3 million-barrel wells, the Journal reported, “now appear to be on a pace to produce about 482,000 barrels” apiece — a little over a third of what Pioneer told investors they could deliver.

In Texas’ famed Permian Basin, now the nation’s most productive shale oil field, where Pioneer predicted 960,000 barrels from each of its shale wells in 2015, the Journal concluded that those “wells are now on track to produce about 720,000 barrels” each.

Not only are the wells already drying up at a much faster rate than the company predicted, according to the Journal’s investigative report, but Pioneer’s projections require oil to flow for at least 50 years after the well was drilled and fracked — a projection experts told the Journal would be “extremely optimistic.”

Don't know about that.

Pioneer stock doing quite well. 

 

[Jabbar + 465]

16 hours ago, James Gautreau said:

Shale Oil Pioneers Say the Boom is Ending

by  Bloomberg

|

Kevin Crowley and Michael Bellusci

|

Wednesday, November 06, 2019

Share

 

 

Two shale pioneers think the days of relentless production growth from US unconventional oil fields are ending.

 

(Bloomberg) -- The days of relentless production growth from U.S. shale oil fields are ending, potentially aiding OPEC’s years-long effort to drain a worldwide supply glut, according to industry pioneers Scott Sheffield and Mark Papa.

Investor calls for shale producers to shut down rigs and stop burning through cash are being heeded, Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield said on Tuesday. Across the American shale industry, output growth will slow next year, providing a boost for crude prices through the early 2020s, he said.

“I don’t think OPEC has to worry that much more about U.S. shale growth long term,” Sheffield said during a conference call with analysts. He’s “definitely becoming more optimistic that we’re probably at the bottom end of the cycle regarding oil prices.”

Talk of a shale slowdown reached a fever pitch this year as investors crushed drillers’ stocks and demanded spending discipline. As if on cue, Occidental Petroleum Corp., Apache Corp., Cimarex Energy Co. and Pioneer all are signaling plans to trim budgets.

Mark Papa, who built Enron Corp. castoff EOG Resources Inc. into one of the world’s biggest independent oil explorers and now runs Centennial Resource Development Inc., has been sounding the alarm on shale growth since at least February. In reiterating that warning on Tuesday, he said the slowdown will be more dramatic than he predicted as recently as nine weeks ago.

Beyond 2020

Papa downgraded his 2020 shale growth forecast to 400,000 barrels a day from the 700,000 estimate he discussed in early September.

“This is likely not just a 2020 event,” Papa said during Centennial’s third-quarter results call. “I believe U.S. shale production on a year-over-year growth basis will be considerably less powerful in 2021 and later years than most people currently expect.”

Sheffield sees about 700,000 barrels a day being added next year while the Energy Information Administration predicts that next year’s daily production will expand by 910,000 barrels. Even the EIA’s figure is half of 2018’s increase.

Crowded Wells

For Papa, there’s a more fundamental reason driving the downturn in shale than investor sentiment. Many producers have drilled their best locations and are now turning to lower-quality sites. Some also have been drilling wells too close together, resulting in a loss of overall performance.

The counterpoint to Sheffield and Papa’s gloomy outlook is the supermajors Exxon Mobil Corp. and Chevron Corp., which are ramping up Permian Basin drilling. Each plan to produce about one million barrels a day from the basin by the early 2020s. That may provide a silver lining for independent producers: an opportunity to get bought, Sheffield said.

The majors will have “to decide whether or not to bulk up their inventory over the next two to three years and decide whether or not to acquire any independents,” he said.

Within last year Sheffield said "U.S. would be producing 14 to 15 million barrels a day if not for the lack of pipelines.  Their export agents blasted them (most of Sheffield's oil exported) . His bragging about Permian Shale destroyed the price of oil.  He is now converted , at least publicly, to downplay shale.  

He's not a " Never Shalers" but he stopped promoting shale. 

I think his son runs Diamondback.  A group went to the OPEC sponsored CERAWEEK dinner Q1. Someone (Diamondback ?) said OPEC rep (UAE) basically threatened to put shale out of business if they don't cut back. That don't work no more. 

Lot of talk going on.  Always will.  

OPEC/SAUDIS have to worry about much more than the U.S. shale .  

U.S. shale contributed a great deal to supply, but now it is the scapegoat. 

Offshore is not standing still. They are not living in a vacuum.  Chevron just made go ahead decision on $5.7 Billion phase 1 Gulf of Mexico project.  Chevron said new developments bring cost per barrel below $30.  They gave Schlumberger an order for first 20,000 psi subsea gear.

Ask James how things are going in Brazil.

OPEC needs to worry about U.S. GOM, West Africa, South America, Norway, in addition to shale.  

Oh, what happens when Venezuela, Libya, and Iran start to ramp. 

Too much oil 

Edited December 14, 2019 by Jabbar

[Jabbar + 465]

21 hours ago, Rob Kramer said:

I think most I agree with this. Do you see declines or lower amounts than today's level going forward into culling? Or what levels of production through those decades of profitability? Any price spike from the transition? 

You think most agree ? Not at this website.  A lot of Never Shalers. 

I look at long term trends, but trade on short term sentiment.  Oil does not trade on fundamentals anymore.  OPEC is less than truthful and has no transparency.Too many suppliers. Oil trades on emotion and events.  Mideast unstable.  etc etc

KEEP IN MIND: Many are focused on U.S. shale.  Offshore can now produce under $30 . Going to see offshore more and more.  I think oil continues to trade in range $55 to $65.  Until excess supply reaches a few million barrels a day.  

PS A new oil purchasing trading method starting to be used by China called "trigger pricing" could be a game changer.  Could put large volume buyers in control. Not sellers , not OPEC.

It has the capability of giving control to buyer.  Take control away from contracts based on out month contract. 

Edited December 14, 2019 by Jabbar

[James Benjamin Oppenheim + 1]

On 12/11/2019 at 6:36 PM, Jabbar said:

What does Platts analyst say will happen if commodity prices DON'T fully recover ? 

Does it get to a point of panic selling ? 

 

Look, we all can sit and make all kind of comments as to what is going on (Globally) right now, but do any of us actually know what is going on? 

[James Gautreau + 86]

There are other things to look at. MBS bringing Aramco public. Why would he do that if he wasn't expecting much higher oil prices. Why now? Why coincide with IMO 2020 which is expected to up demand of medium distillate 5 mbpd. That's 5% of world consumption. The terrorist attack  at Abkaiq was a dry run for something much bigger. It is well know that 9/11 happened while they were doing a drill for a 9/11. Prior to that they conducted other war games. The next time 5.7 mbpd will be out for 6 months to a year and Trump will be powerless to stop it because he has shown he has no appetite for a Middle East War. There are so many things that point to 2020 as the year of a huge oil price spike caused by a confluence of events. Shale oil peaking. Conventional oil peaking. Iraq in near revolution. Venezuela in near revolution. Iran in near revolution. It's all coming together in 2020. 

[jjj + 26]

2 hours ago, James Gautreau said:

I've heard this song before. Wall Street Journal:

In 2015, Pioneer Natural Resources filed a report with the federal Securities and Exchange Commission, in which the shale drilling and fracking company said that it was “drilling the most productive wells in the Eagle Ford Shale” in Texas.

That made the company a major player in what local trade papers were calling “arguably the largest single economic event in Texas history,” as drillers pumped more than a billion barrels of fossil fuels from the Eagle Ford.

Its Eagle Ford wells, Pioneer’s filing said, were massive finds, with each well able to deliver an average of roughly 1.3 million barrels of oil and other fossil fuels over their lifetimes.

Three years later, The Wall Street Journal checked the numbers, investigating how those massive wells are turning out for Pioneer.

Turns out, not so well. And Pioneer is not alone.

Those 1.3 million-barrel wells, the Journal reported, “now appear to be on a pace to produce about 482,000 barrels” apiece — a little over a third of what Pioneer told investors they could deliver.

In Texas’ famed Permian Basin, now the nation’s most productive shale oil field, where Pioneer predicted 960,000 barrels from each of its shale wells in 2015, the Journal concluded that those “wells are now on track to produce about 720,000 barrels” each.

Not only are the wells already drying up at a much faster rate than the company predicted, according to the Journal’s investigative report, but Pioneer’s projections require oil to flow for at least 50 years after the well was drilled and fracked — a projection experts told the Journal would be “extremely optimistic.”

James,

I think this is the reason for the current financial state of shale drillers. Back then they thought the EUR's were much higher and they believed the price would never go below $60 . So they chose to drill because they thought they had the ROI. When it was proven they were wrong many companies were so far in debt they couldn't recover. Since then the better companies have figured out how to make money sub $60 and some even sub $40. The good news for people like me who have a few more years in the industry is that as the wells deplete the price of oil will go up which will start drilling up again. 

 

Jay

[Rob Kramer + 696]

1 hour ago, Jabbar said:

You think most agree ? Not at this website.  A lot of Never Shalers. 

KEEP IN MIND: Many are focused on U.S. shale.  Offshore can now produce under $30 . Going to see offshore more and more.  I think oil continues to trade in range $55 to $65.  Until excess supply reaches a few million barrels a day.  

So far middle of the road I've seen ME, PE and JJJ. We've seen a few pro shale closer to your view and a few anti shale (ish) to me there not 100% against shale just against overdrilling/unprofitable drilling from what I've read. Is that not balance? It's not everyone all out against shale. 

Thanks for the numbers. I like to see where I stand against other views. As jjj said I'd agree if theres a spike shale will return. And more efficient/knowledgable of true break even. 

Even tho your saying there prepared for 30$ I dont think prices will get there. I dont want to over simplify how prices work but when opec+ controls 33% of the production their word means alot . Also world production decline is never advertised only the new fields starting. It's a entire view that shapes prices too long to fit but if I had to bet it would be above global profitability as that's where the supply is from . Too low oil comes offline too high too much . I dont think global production costs are below 50$ wti. 

[J.R. Ewing + 19]

1 hour ago, James Gautreau said:

There are other things to look at. MBS bringing Aramco public. Why would he do that if he wasn't expecting much higher oil prices. Why now? Why coincide with IMO 2020 which is expected to up demand of medium distillate 5 mbpd. That's 5% of world consumption. The terrorist attack  at Abkaiq was a dry run for something much bigger. It is well know that 9/11 happened while they were doing a drill for a 9/11. Prior to that they conducted other war games. The next time 5.7 mbpd will be out for 6 months to a year and Trump will be powerless to stop it because he has shown he has no appetite for a Middle East War. There are so many things that point to 2020 as the year of a huge oil price spike caused by a confluence of events. Shale oil peaking. Conventional oil peaking. Iraq in near revolution. Venezuela in near revolution. Iran in near revolution. It's all coming together in 2020. 

 

[Coffeeguyzz + 454]

Jabbar

Excellent links.

Outstanding data.

Thanks for posting.

Few points of related interest, perhaps ...

The ~4 1/2 million bbld that the marine industry uses - out of ~100 million bbld global consumption -  is a significant portion of overall demand.

As IMO 2020 is about to kick in, various scenarios have been thrown around as to the impacts.

Well, turns out that Very Low Sulphur Fuel Oil (VLSFO ... <.5% sulphur) might offer the best option for ship owners as a high quality, uniform blend is now being produced by several Asian refineries.

Biggest component enabling this to happen?

None other than light, sweet US LTO.

Various bunkering outfits are cleaning their tanks/barges and loading up on this .5% product for an anticipated surge in demand in the coming months.

One thing I'd point out to you, Jab, when you mentioned US LNG is more expensive than piped gas.

It is not.

Article from today's Reuters (12/13 by Ekaterina Kravtsola) describes Turkey's national energy company - Botas - buying 30 shipments of LNG as the $5.65/mmbtu price is 3 bucks per cheaper than Russian piped.

As startling as it may seem, the US LNG pricing - indexed to Henry Hub rather than various oil indices - is WAY cheaper than many piped gas deliveries.

Absolutely profound, widespread implications to that.

[Jabbar + 465]

12 hours ago, Rob Kramer said:

So far middle of the road I've seen ME, PE and JJJ. We've seen a few pro shale closer to your view and a few anti shale (ish) to me there not 100% against shale just against overdrilling/unprofitable drilling from what I've read. Is that not balance? It's not everyone all out against shale. 

Thanks for the numbers. I like to see where I stand against other views. As jjj said I'd agree if theres a spike shale will return. 

Even tho your saying there prepared for 30$ I dont think prices will get there.

 . Too low oil comes offline too high too much . I dont think global production costs are below 50$ wti. 

No, some HATE shale.

Growth hadn't stopped yet. Just slowed  . .   because in my opinion going thru industry life cycle transition.  Always going to get spikes up or down, but not like you used to.  Markets desensitized to much that used to jolt the oil market.

Read again, I did not say price going to 30$.  I said production costs going below $30.

As I said many times .   .   .   there are two types of producers, generally speaking.  Those that can produce sub $30 and those that can produce at $50.

Which ones will still be around in 2 years. 

Edited December 14, 2019 by Jabbar

[Jabbar + 465]

12 hours ago, James Gautreau said:

There are other things to look at. MBS bringing Aramco public. Why would he do that if he wasn't expecting much higher oil prices. Why now? Why coincide with IMO 2020 which is expected to up demand of medium distillate 5 mbpd. That's 5% of world consumption. The terrorist attack  at Abkaiq was a dry run for something much bigger. It is well know that 9/11 happened while they were doing a drill for a 9/11. Prior to that they conducted other war games. The next time 5.7 mbpd will be out for 6 months to a year and Trump will be powerless to stop it because he has shown he has no appetite for a Middle East War. There are so many things that point to 2020 as the year of a huge oil price spike caused by a confluence of events. Shale oil peaking. Conventional oil peaking. Iraq in near revolution. Venezuela in near revolution. Iran in near revolution. It's all coming together in 2020. 

"There are other things to look at. MBS bringing Aramco public. Why would he do that if he wasn't expecting much higher oil prices. "

Saudis are short "Cash" even though Finance minister denied it. They lost about 50% of their reserves when failed to kill shale in 2014. Stupid. 

Saudis know the era of oil is ending at some point.  They are paying 22,000 Saudi princes stipend.  MBS cut back stipend end of 2017. His Cousins attempted a coup in April 2018.  MBS took a bullet.  The king was not at palace.  

IMO 2020 is overblown. Next generation of tankers/ships will run on natural gas. Half have installed scrubbers and will continue with bunker. 

Trump has no appetite for Middle East War .  .  .  THATS A GOOD THING. The U.S. has plenty of oil.  If EU and China won't contribute to protect Mideast shipping lanes it's their problem. 

Only reason Trump supporting Saudi Arabia is its the only chance (albeit slim) to get a Mideast peace plan. Did you see what Trump said on Thanksgiving weekend , "If Jared can't get a piece deal in Mideast, nobody can" . 

Of course if there is a war in Mideast oil spikes, including WTI.  Not U.S. problem.  U.S. does not have to worry about having plentiful oil . Europe or Asia would be another story.

 

Edited December 14, 2019 by Jabbar

[Jabbar + 465]

16 hours ago, Coffeeguyzz said:

Jabbar

Excellent links.

Outstanding data.

Thanks for posting.

Few points of related interest, perhaps ...

The ~4 1/2 million bbld that the marine industry uses - out of ~100 million bbld global consumption -  is a significant portion of overall demand.

As IMO 2020 is about to kick in, various scenarios have been thrown around as to the impacts.

Well, turns out that Very Low Sulphur Fuel Oil (VLSFO ... <.5% sulphur) might offer the best option for ship owners as a high quality, uniform blend is now being produced by several Asian refineries.

Biggest component enabling this to happen?

None other than light, sweet US LTO.

Various bunkering outfits are cleaning their tanks/barges and loading up on this .5% product for an anticipated surge in demand in the coming months.

One thing I'd point out to you, Jab, when you mentioned US LNG is more expensive than piped gas.

It is not.

Article from today's Reuters (12/13 by Ekaterina Kravtsola) describes Turkey's national energy company - Botas - buying 30 shipments of LNG as the $5.65/mmbtu price is 3 bucks per cheaper than Russian piped.

As startling as it may seem, the US LNG pricing - indexed to Henry Hub rather than various oil indices - is WAY cheaper than many piped gas deliveries.

Absolutely profound, widespread implications to that.

Coffee

It costs more to ship mmbtu LNG from U.S. to Europe  than it does to buy a mmbtu at Henry Hub. Then put a profit on top of that.

Turkey is not buying and shipping LNG from U.S. .  Probably Egypt.  Plus Iran and Qatar will soon start construction of pipeline to Turkey, Mediterranean and maybe Europe. 

Russia has new pipeline start up soon to China. 

Russian new Pipeline to Europe under construction.  

Demand for natural gas will double over next 20 years , but so will supply.

Tough to compete when unit transportation costs greater than unit product itself.  

Chevron just pulled out of JV LNG project from Kitmat bay, Canada that was supposed to ship LNG to China.  

Papua New Guinea is a lot closer than even NORTH America West Coast.

Edited December 14, 2019 by Jabbar

[Jabbar + 465]

Small Independent makes use of technology.  Some will survive.  It helps when you have prime virgin acreage in the Delaware. Even at that they are drilling single and some multi-well pads.

Best multi-well pads at 5 wells.  Imagine when Conoco's 12 to 16 wells becomes the standard.

https://www.worldoil.com/magazine/2019/november-2019/features/automation-results-in-significant-completion-efficiency-gains-in-delaware

[James Gautreau + 86]

2 hours ago, Jabbar said:

"There are other things to look at. MBS bringing Aramco public. Why would he do that if he wasn't expecting much higher oil prices. "

Saudis are short "Cash" even though Finance minister denied it. They lost about 50% of their reserves when failed to kill shale in 2014. Stupid. 

Saudis know the era of oil is ending at some point.  They are paying 22,000 Saudi princes stipend.  MBS cut back stipend end of 2017. His Cousins attempted a coup in April 2018.  MBS took a bullet.  The king was not at palace.  

IMO 2020 is overblown. Next generation of tankers/ships will run on natural gas. Half have installed scrubbers and will continue with bunker. 

Trump has no appetite for Middle East War .  .  .  THATS A GOOD THING. The U.S. has plenty of oil.  If EU and China won't contribute to protect Mideast shipping lanes it's their problem. 

Only reason Trump supporting Saudi Arabia is its the only chance (albeit slim) to get a Mideast peace plan. Did you see what Trump said on Thanksgiving weekend , "If Jared can't get a piece deal in Mideast, nobody can" . 

Of course if there is a war in Mideast oil spikes, including WTI.  Not U.S. problem.  U.S. does not have to worry about having plentiful oil . Europe or Asia would be another story.

 

That's a good thing when the oil is flowing. Everybody, including Trump, said Iraq War was bad idea. Now Iraq is the only supplier of conventional crude that is growing production. If Hussein was still there that oil would have stayed in the ground. They're set to pass 5 mbpd. You can't have it both ways. If Saudi Arabia is attacked or false flagged you'll be singing a different tune. Once shale starts declining those barrels have to come from somewhere else, and that somewhere has a zip code "Middle East." Trump also said trade wars are good and easy to win. That was 2 years ago. They finally signed Phase 1 and according to most experts we got nothing for all that trouble except a slowing world economy. The trade deficit with China is $80 billion higher than when the trade war started. I'd say that's going in the wrong direction.