Shale Oil Fiasco

[Coffeeguyzz + 454]

Jab

December 6 article in Platts (Eric Yep author) describes Singapore rolling off contracts for piped Malaysian and Indonesian gas in favor of LNG coming in via FSRU.

Cyprus mulling over LNG (via FSRU) rather than building short 12 incher from Leviathon.

Fuel for marine transport comprises ~60/70% daily shipping costs.

Newbuild LNG tankers burn  Boil Off Gas which - essentially - brings this cost to near 'free'.

(Small, micro LNG operation in northeast Pennsylvania is liquefying and trucking product to Rhode Island - probably Long Island shortly, also - with LNG-fueled trucks. Again, practically  ' free' fuel).

Biggest advantage to US LNG is the fact that current suppliers need  hydrocarbon revenues (think Algeria, Qatar, Malaysia, et al) to support social/political goals and are priced off of oil indexes.

Just as lifting/shipping  from Ghawar is way cheaper than from Dunn county, the 'bigger picture' does not now favor the merely physical inputs.

 

 

 

[Rob Kramer + 696]

3 hours ago, Jabbar said:

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

Tough to compete when transportation costs greater than product itself.  Chevron just pulled out of JV LNG project from Kitmat bay, Canada that was supposed to ship LNG to China.  

Papa New Guinea is a lot closer than even NORTH America West coast.

Chevron has 20B in yearly capex I've read and there is oil at brent in that capex. Canadian NG from AECO averaged 1.50c .... that's like 1.10$ us with 8 day shipping to japan. I'd expect greater returns in oil with a spike that a few dollars for shipping. I did hear that they have a buyer lined up but source is questionable.  But with Very cheap NG and close shipping someone will step in . 

[Jabbar + 465]

7 hours ago, James Gautreau said:

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.  

Trade war working. "Trade War" is a "Proxy War" for battle against China hegemony.  Mfg leaving China , supply chain leaving China, that's big win for Trump. I invested in a speaker company Sonus.  On Sonus recent earnings call said all new manufacturing is being built-in Malaysia instead of China.  One example.  

Trump had to compromise.  He has to win reelection.  Note he cut some tariffs from 15 % to to 7.5 % .   .   .   .  and left the 25 % tariffs intact.  Plenty of TARIFF money to make U.S. farmers happy.

Manufacturers will continue to leave China.  

Draughts in Argentina so China needs the U.S. soy beans.

Swine virus  in China so China needs U.S. pork. 

China only buys from U.S. because they have to.  

Trump said resume Phase Il after election. China wants to continue now. Why ? Desperate ? As Kirkman correctly  stated U.S. has already won the trade war.  Don't foolishly judge Final Trade Agreement by this temp pause until after Trump wins reelection. Trump has upper hand.  He is in no hurry . . . China is. 

Just like many panned the USMCA agreement with Mex/CD.  They don't understand what section 32 means.  The Section 32 will be key in future U.S. trade deals with China, Asia and EU.  Who's the Boss ?

You think 18 months in a trade war with China is a long time.  If China doesn't want to deal . . . screw 'em. Make Tariffs permanent. 

Give Trump credit for having the balls but .   .   .   .  give Trade Rep Lighthizer credit for having the brains. 

You can never trust anything China says ( or anything Saudi Arabia says)

Edited December 14, 2019 by Jabbar

[Jabbar + 465]

6 hours ago, Rob Kramer said:

Chevron has 20B in yearly capex I've read and there is oil at brent in that capex. Canadian NG from AECO averaged 1.50c .... that's like 1.10$ us with 8 day shipping to japan. I'd expect greater returns in oil with a spike that a few dollars for shipping. I did hear that they have a buyer lined up but source is questionable.  But with Very cheap NG and close shipping someone will step in . 

Someone will step in.  Probably , a Japanese or other Asian gas company. 

Chevron dumping natural gas because not priority as ROI.  Much better long-term and short-term returns with Permian and new Offshore oil. 

Chevron dropped to 20b capex , down from 40b a few years ago.

Edited December 14, 2019 by Jabbar

[Jabbar + 465]

On 12/14/2019 at 9:45 AM, Coffeeguyzz said:

Jab

December 6 article in Platts (Eric Yep author) describes Singapore rolling off contracts for piped Malaysian and Indonesian gas in favor of LNG coming in via FSRU

Two suppliers better than one.  Play them off each other.

Quote

Cyprus mulling over LNG (via FSRU) rather than building short 12 incher from Leviathon.

Yea, cost/benefit anslysis. This is a new infrastructure decosion.  While the future is uncertsin have to look at future scenarios. What is best decision today vs future.

Quote

Fuel for marine transport comprises ~60/70% daily shipping costs.

Newbuild LNG tankers burn  Boil Off Gas which - essentially - brings this cost to near 'free'.

(Small, micro LNG operation in northeast Pennsylvania is liquefying and trucking product to Rhode Island - probably Long Island shortly, also - with LNG-fueled trucks. Again, practically  ' free' fuel).

Biggest advantage to US LNG is the fact that current suppliers need  hydrocarbon revenues (think Algeria, Qatar, Malaysia, et al) to support social/political goals and are priced off of oil indexes.

As current indexed based contracts expire they are dumped

Quote

Just as lifting/shipping  from Ghawar is way cheaper than from Dunn county, the 'bigger picture' does not now favor the merely physical inputs.

NATURAL GAS DIFFERENT ECONOMICS THAN OIL. 

Yes shipping oil from Ghawar is cheaper than shipping from Dunn county.  

GAS: BUT when Henry Hub gas is $2.40 mmbtu AND THEN IT COSTS  $2.70 to ship to Europe you are around $5.00 cost

  .  .   not much room to discount or for profit margin.

OIL: When Pioneer's Sheffield ships a barrel of oil to China at current Brent pricing of $65 , he can afford to eat an extra $2 or $3 of shipping cost and still make nice profit. 

Couple of months ago while on a campaign stop Joe Biden said , China's our friend we have nothing to be worried about.  I can't remember if he was in Ohio or Iowa . . . . . But neither could he and he was in the state.

Quote

 

 

 

 

Edited December 16, 2019 by Jabbar

[James Gautreau + 86]

Newer wells in the Permian see their oil and gas production declining much faster than older wells, and operators will need to drill a large number of wells just to keep current production levels, an IHS Markit analysis showed on Thursday.  

IHS Markit has analyzed what it calls the “base decline” rate, calculating the actual or expected production of all the operating wells at the start of the year and tracking their cumulative decline by the end of the year. Over the past decade, the base decline rate of the more than 150,000 producing oil and gas wells in the Permian has “increased dramatically,” according to the analysis.

“Because of the large increases of recent years, the base decline production rate for the Permian Basin has increased dramatically, and we expect those declines to continue to accelerate. As a result, it is going to be challenging, especially for some companies with cash constraints, just to keep production flat,” Raoul LeBlanc, vice president of Unconventional Oil and Gas at IHS Markit, said in a statement.

[James Gautreau + 86]

So the average well in the Permian produces 4,700,000/150,000= ......wait for it......drum roll......tick tock, tick tock.....31.33 barrels a day.

[Jabbar + 465]

4 hours ago, James Gautreau said:

Newer wells in the Permian see their oil and gas production declining much faster than older wells, and operators will need to drill a large number of wells just to keep current production levels, an IHS Markit analysis showed on Thursday.  

IHS Markit has analyzed what it calls the “base decline” rate, calculating the actual or expected production of all the operating wells at the start of the year and tracking their cumulative decline by the end of the year. Over the past decade, the base decline rate of the more than 150,000 producing oil and gas wells in the Permian has “increased dramatically,” according to the analysis.

“Because of the large increases of recent years, the base decline production rate for the Permian Basin has increased dramatically, and we expect those declines to continue to accelerate. As a result, it is going to be challenging, especially for some companies with cash constraints, just to keep production flat,” Raoul LeBlanc, vice president of Unconventional Oil and Gas at IHS Markit, said in a statement.

Wrong

[Jabbar + 465]

4 hours ago, James Gautreau said:

So the average well in the Permian produces 4,700,000/150,000= ......wait for it......drum roll......tick tock, tick tock.....31.33 barrels a day.

Yea .   .   .   right

Not correct numbers

Edited December 14, 2019 by Jabbar

[James Gautreau + 86]

They sold you that the Permian had all this oil. 20 billion barrels of conventional and an estimated 46 billion of unconventional. Now why would you believe that? The oil that pooled in good permeability rock had to be more that what was locked in the shale? Right? So they took that fact and turned it on its ear. That's how you know it's a lie. Now they tell us there are 3 X what they recovered conventionally. I say they would be lucky to make it to 10 billion barrels unconventional. I told myself when world hit 100 mbpd we would be close. I knew as soon as shale stopped growing we would be close. Because like conventional wells, the good plays are all upfront because investors plow their money into the best spots to drill. They don't say save the best spots for last. Now the best spots are gone, and the next spots are even worse than they thought. 2017 oil loses 2 million barrels in 20 months. 2018 loses 2 million barrels in 8 months. 2019 will lose 2 million barrels in the first 3.2 months of 2020 if the well decline doesn't accelerate, sooner if it does, and it is accelerating. That means 2020 will have to replace 5 million barrels to depletion. 3 million from 2018 and 2 million from 2019 in the first few months of 2020, or a total of 5 million. Oil production growth has never been that high ever in history. Game over. 

Edited December 14, 2019 by James Gautreau

[James Gautreau + 86]

To put that in perspective, even if they completed every DUC they have, all 7500 of them, in the first 3 months of 2020, they would barely cover their nut with 5,250,000 bpd. But then they're out of DUC's. 

Edited December 14, 2019 by James Gautreau

[Boat + 1,325]

7 hours ago, Jabbar said:

Trade war working. "Trade War" is a "Proxy War" for battle against China hegemony.  Mfg leaving China , supply chain leaving China, that's big win for Trump. I invested in a speaker company Sonus.  On Sonus recent earnings call said all new manufacturing is being built-in Malaysia instead of China.  One example.  

Trump had to compromise.  He has to win reelection.  Note he cut some tariffs from 15 % to to 7.5 % .   .   .   .  and left the 25 % tariffs intact.  Plenty of TARIFF money to make U.S. farmers happy.

Manufacturers will continue to leave China.  

Draughts in Argentina so China needs the U.S. soy beans.

Swine virus  in China so China needs U.S. pork. 

China only buys from U.S. because they have to.  

Trump said resume Phase Il after election. China wants to continue now. Why ? Desperate ? As Kirkman correctly  stated U.S. has already won the trade war.  Don't foolishly judge Final Trade Agreement by this temp pause until after Trump wins reelection. Trump has upper hand.  He is in no hurry . . . China is. 

Just like many panned the USMCA agreement with Mex/CD.  They don't understand what section 32 means.  The Section 32 will be key in future U.S. trade deals with China, Asia and EU.  Who's the Boss ?

You think 18 months in a trade war with China is a long time.  If China doesn't want to deal . . . screw 'em. Make Tariffs permanent. 

Give Trump credit for having the balls but .   .   .   .  give Trade Rep Lighthizer credit for having the brains. 

You can never trust anything China says ( or anything Saudi Arabia says)

Jabbar , it seems to me you want to pump the Trump a little early when looking at actual trade imbalance. You seen to be a numbers guy but in this tariff case can you show me any kind of trade imbalance with China that has improved and by how much. I have posted twice a chart that shows no improvement. Seems to me hundreds of billions per of imbalance year have to be worked out to call this war a success.

[Boat + 1,325]

1 hour ago, James Gautreau said:

To put that in perspective, even if they completed every DUC they have, all 7500 of them, in the first 3 months of 2020, they would barely cover their nut with 5,250,000 bpd. But then they're out of DUC's. 

You say the best spots are gone yet completions in the Permian have remained steady for 5 months and production has not gone down. Can you explain please. If your correct about wells not being as productive wouldn’t completions have to dramatically improve or production dramatically drop?

Even other ideas of spacing being to close and losing production doesn’t explain the rise in production with completions remaining level. Why is the question you love this line reasoning while the simple numbers don’t support it. Are you Russian? Is the site Russian financed? 

Edited December 15, 2019 by Boat

[James Gautreau + 86]

 

Man when Trump kicks ass, he really hits you in your calves or maybe the back of your thighs.

[Rob Kramer + 696]

In the third quarter of 2019, the Permian basin alone vented and flared 752 million cubic feet of natural gas per day, up sharply from 661 mcf/d in the first quarter, according to Rystad Energy. “This represents a new all-time high. Oil production in the Permian Basin is growing at an accelerated pace again, and we observe high, sustained levels of flaring and venting of associated gas in the basin,” Artem Abramov, head of shale research at Rystad, said in November.

 

that's in one of oil prices current articles.  752mcf/d is the energy content of 125,333 barrels of oil at 6000/boe. Is this gas counted in the eia reports or unaccounted for as it doesn't see its use as energy? 

according to EIA data it's about 4.65% of gas production.  

[Jabbar + 465]

13 hours ago, Boat said:

Jabbar , it seems to me you want to pump the Trump a little early when looking at actual trade imbalance. You seen to be a numbers guy but in this tariff case can you show me any kind of trade imbalance with China that has improved and by how much. I have posted twice a chart that shows no improvement. Seems to me hundreds of billions per of imbalance year have to be worked out to call this war a success.

No improvement until an agreement is signed, a total agreement. This phase I just temp arrangement until Trump gets reelected.

 How long did you think it would take to get China to sign an agreement.  Some say China will never sign a real agreement.  They may be right. If so make tariffs permanent.  China thought they could play US like they did Obama and Bush. Communist Secretary General Xi thought Trump would have to give in due to election. Xi is wrong. 

You have to understand what the end game is. Some say that the U.S. powers to be understand China will never honor agreements and play fair. Some believe the endgame is total disengagement.  Can't do that overnight.  

In the meantime tariffs are being paid. Yes I know by the importers pay the tariff  .  .  .   but China has devalued yuan, as well as, reduce prices.  U.S. consumer is not hurt.

Even if the December 15th tariffs were enacted on $160 Billion consumers would not be hurt.  

MORE IMPORTANT: Manufacturing is fleeing China for other countries.That's a big win ,  even if not moving to U.S.  

This is an economic  war for the next 50 years. Much more than just trade balance. Have you read Chinese Communist Party Master plan . . .  Dominate every industry , Belt and Roads, etc

Victory is not selling more soybeans to China.  As soon as Brazil finishes burning down half their rain forests China will dump U.S. farmers for Brazilian soy beans and continue to buy from Argentina. 

All trade is connected.  USMCA is first step.  Many "experts"  say it is marginally better than NAFTA.  It's better for autos and agriculture , especially dairy to Canada.  Nobody mentions the key provision which is section 32.  Put simply Section 32 states USMCA members can't negotiate with any other country independently. Like maybe China ? It's key to the end game.

Next up is EU.  The Democrats say work with EU against China.  The problem is EU doesn't want to.  The EU has been ripping the U.S. off for 40 years putting tariffs on U.S. imports and having U.S. pay for the majority of their national defense.  France with Airbus subsidies and new tax on U.S. big tech .   .   .    Germany with their tariffs on imported  vehicles.  

Trump is holding all the cards.  Germany's economy has bottomed and about to come back. What would happen to their economy if Trump just put a 10% tax on German cars and carparts.  Disaster. What would happen Trump put a 25% tax on French wine and cheese.  

You can be sure there will be a similar Section 32 in the EU deal. The "experts" are focused on what have the trade negotiations done for them today.  They don't even know of or have read section 32 nor understand it's  important to the true end game.

The U.S. was the force behind WTO in effort to get fair access to markets. It has been twisted and used against the U.S.  For example China benefits from its designation as a developing economy even though it's second largest economy in the world.  

Trump wants to wait for phase II until after the election.  China wants to negotiate NOW.

Trump is toying with them. 

Time is on Trump's side, unless he doesn't get reelected. That's why he signed a "phase I" which is really just a temporary placeholder. 

 

 

 

Edited December 15, 2019 by Jabbar

[Jabbar + 465]

12 hours ago, James Gautreau said:

 

Man when Trump kicks ass, he really hits you in your calves or maybe the back of your thighs.

What is the U.S. Chinese strategy.  What is the U.S.  end game ? 

China has had an amazing 30 years. Because U.S. leadership let them.  They brought 300 million into the middle class.  There are still over 700 million peasant living in poverty.

This isn't about selling more soy beans to China.  Much deeper than that.

You have to get past thinking in simplistic terms or short term starts.

More white lies and statistics

 

Edited December 15, 2019 by Jabbar

[Jan van Eck + 7,558]

6 hours ago, James Gautreau said:

 

Man when Trump kicks ass, he really hits you in your calves or maybe the back of your thighs.

Here is the thing about your chart: it comes from China Stats which has a desire to make China look successful.  The question then is:  do these numbers include the tariffs?  Because if you now take that $323 Billion subtract out 25% for tariffs, to get a net revenue number, then the stats start to look quite a bit different.   

Edited December 15, 2019 by Jan van Eck

[Jabbar + 465]

12 hours ago, James Gautreau said:

 

Man when Trump kicks ass, he really hits you in your calves or maybe the back of your thighs.

China exports down 16 %

 

[wrs + 893]

20 hours ago, James Gautreau said:

Newer wells in the Permian see their oil and gas production declining much faster than older wells, and operators will need to drill a large number of wells just to keep current production levels, an IHS Markit analysis showed on Thursday.  

IHS Markit has analyzed what it calls the “base decline” rate, calculating the actual or expected production of all the operating wells at the start of the year and tracking their cumulative decline by the end of the year. Over the past decade, the base decline rate of the more than 150,000 producing oil and gas wells in the Permian has “increased dramatically,” according to the analysis.

“Because of the large increases of recent years, the base decline production rate for the Permian Basin has increased dramatically, and we expect those declines to continue to accelerate. As a result, it is going to be challenging, especially for some companies with cash constraints, just to keep production flat,” Raoul LeBlanc, vice president of Unconventional Oil and Gas at IHS Markit, said in a statement.

Without numbers all you have is hyperbole.

[Jabbar + 465]

On 12/5/2019 at 6:13 AM, Douglas Buckland said:

Anybody else seeing the shale oil ‘house of cards’ collapsing as we speak?

NEW NORTH DAKOTA BAKKEN PRODUCTION RECORD  :

1.52 MILLION BARRELS/DAY

The house of cards not collapsing. Slows during transition year.  

[James Gautreau + 86]

10 hours ago, Jabbar said:

What is the U.S. Chinese strategy.  What is the U.S.  end game ? 

China has had an amazing 30 years. Because U.S. leadership let them.  They brought 300 million into the middle class.  There are still over 700 million peasant living in poverty.

This isn't about selling more soy beans to China.  Much deeper than that.

You have to get past thinking in simplistic terms or short term starts.

More white lies and statistics

 

Much deeper than that. You talk in braille. Something either works or it doesn't. Trump declared this trade war " good and easy to win." It is neither. Trump declared the trade deficit with China as proof they were ripping us off. It's gotten bigger, $80 billion bigger, in spite of the tariffs. Everything he says is wrong, everything he does is wrong. They brought 300 million Chinese into the middle class by making and selling things to us, things we wanted to buy at prices we wanted to pay. All that is in jeopardy now and why? Our farmers will never recover the markets they have lost. Never. Trump is failing at everything. And all of you are still behind him. Why? You're waiting for him to shoot somebody on 5th Avenue I guess. The problem with dancing with the devil is eventually you have to f**k him. Every Republican senator will be smoking a cigarette sometime soon. 

[James Gautreau + 86]

39 minutes ago, Jabbar said:

NEW NORTH DAKOTA BAKKEN PRODUCTION RECORD  :

1.52 MILLION BARRELS/DAY

The house of cards not collapsing. Slows during transition year.  

Yeah they're producing flat out too. 30 barrels a day per well. Hoo! Hoo!

[Jan van Eck + 7,558]

15 minutes ago, James Gautreau said:

The problem with dancing with the devil is eventually you have to f**k him. Every Republican senator will be smoking a cigarette sometime soon. 

Well now.  That was certainly pithy enough. 

[James Gautreau + 86]

My bad. The Bakken is spitting out 101 barrels a day per well.