Shale Oil Fiasco

[ceo_energemsier + 1,818]

14 hours ago, Gerry Maddoux said:

Makes perfect sense: the stuff is whistling out our ears. Putin's too. I have to say, I can't help but believe this Nord Stream 2 deal to be a major screw-up on Angela Merkel's part. And I think it'll bite her in the end. Just sayin' . . . the US is the biggest buyer of German cars, and when Mr. Trump gets acquitted by the Senate he's going to go on full-attack. If he then gets reelected, and I think he will, then I sure wouldn't want to be the head of a country that crossed him in any way. If you're planning on buying a new Mercedes, I think I'd go ahead and do it now. I don't think the LNG sales to Germany will make or break this industry, but the Nord Stream II sends a strong message. Tom Kirkman is very smart about all this, too, and I asked him to provide a little color why he thinks it's a good deal.

Nordstream could just end up being a figment of Rootin Tootin Putin's and Merkels imagination. I came across a website and a twitter account by Russian oil gas companies/workers who are demanding that the sanctions be removed , how badly they are affected by the US sanctions on the Russian oil gas industry.

Russia gas export pipeline in jeopardy as Trump signs sanctions bill

 

By Timothy Gardner

WASHINGTON (Reuters) - Swiss-Dutch company Allseas said it had suspended work on building a major Russia-to-Germany natural gas pipeline in order to avoid U.S. sanctions contained in legislation signed by President Donald Trump on Friday.

The move throws into doubt the completion date of the $11 billion project that Moscow had said would be ready in months, jeopardizing plans to quickly expand Russian sales of natural gas to Europe via pipeline.

The participation of privately-held Allseas, a specialist in subsea construction and laying underwater pipeline, is integral to the completion of Nord Stream 2, led by Russia's state energy company Gazprom.

"In anticipation of the enactment of the National Defense Authorization Act (NDAA), Allseas has suspended its Nord Stream 2 pipelay activities," the company said in a statement dated Dec. 21, seen by Reuters shortly before Trump signed the bill.

"Allseas will proceed, consistent with the legislation's wind down provision and expect guidance comprising of the necessary regulatory, technical and environmental clarifications from the relevant US authority."

The annual national defense policy bill contains legislation, first sponsored by Republican Senator Ted Cruz and Democratic Senator Jeanne Shaheen, imposing sanctions on companies laying pipe for the project that will double the pipeline's capacity to Germany.

The bill calls on the administration to identify companies working on the project within 60 days to trigger the sanctions. That report will likely be completed faster than that, however, meaning the sanctions could be triggered earlier than expected, two U.S. senior officials told Reuters.

Nord Stream 2 would allow Russia to bypass Ukraine and Poland to deliver gas under the Baltic Sea to Germany.

Gazprom is taking on half of the project's planned costs and the rest is divided between five European energy companies: Austria's OMV, Germany's Uniper and Wintershall, Royal Dutch Shell and France's Engie.

The Trump administration, like the Obama administration before it, opposes the project on the grounds it would strengthen Russian President Vladimir Putin's economic and political grip over Europe. Russia has cut deliveries of the fuel to Ukraine and parts of Europe in winter during pricing disputes.

"We have a degree of consistency, over a decade of opposing this issue, across presidential administrations," one of the U.S. officials said.

The United States has become the world's top oil and gas producer in recent years and is aggressively trying to sell the products abroad. The Trump administration has touted U.S. liquefied natural gas as "freedom gas" that gives Europe an alternative to Russian supply.

Washington says that Nord Stream 2 would also likely deprive Ukraine of billions of dollars in gas transit fees.

Germany says it needs the gas as it weans itself off coal and nuclear power.

 

(Reporting by Timothy Gardner; Writing by Mohammad Zargham and Sonya Hepinstall; Editing by Sandra Maler and Leslie Adler)

[Gerry Maddoux + 3,627]

9 minutes ago, ceo_energemsier said:

Rig count is up so is demand for US crude and IMO 2020 is and will be playing a bit big part for the demand increase in light sweet crude bringing with it a price increase.

I believe you're right: the LTO from the shale fields is ideally suited for this. It is impossible to get an accurate figure for just how much fuel is burned annually by oceangoing freighters. It has to be enormous, because it costs upwards of a hundred-thousand a day to power the giant ones. Maybe I'm a Pollyanna but I actually think this IMO2020 mandate could be a game-changer in many ways. If published accounts are accurate, the largest 15 vessels were spewing out more NOX and SOX than all the vehicles on the planet. If there are 60,000 such freighters, then the other 59,985 equate to much more than we're doing with planes, petrochemicals, flaring, venting, heating and cooling, etc. In other words, it may well be that the primary contributor to greenhouse gases was right under our noses all this time, and by reducing emissions by this staggering degree, the problem may be mostly solved. 

It would cheer me to no end if all at once these climate changes began to ease, or even turn around. What a world!

[ceo_energemsier + 1,818]

2 minutes ago, Gerry Maddoux said:

I believe you're right: the LTO from the shale fields is ideally suited for this. It is impossible to get an accurate figure for just how much fuel is burned annually by oceangoing freighters. It has to be enormous, because it costs upwards of a hundred-thousand a day to power the giant ones. Maybe I'm a Pollyanna but I actually think this IMO2020 mandate could be a game-changer in many ways. If published accounts are accurate, the largest 15 vessels were spewing out more NOX and SOX than all the vehicles on the planet. If there are 60,000 such freighters, then the other 59,985 equate to much more than we're doing with planes, petrochemicals, flaring, venting, heating and cooling, etc. In other words, it may well be that the primary contributor to greenhouse gases was right under our noses all this time, and by reducing emissions by this staggering degree, the problem may be mostly solved. 

It would cheer me to no end if all at once these climate changes began to ease, or even turn around. What a world!

I have a IMO 2020 thread on the site with a lot of data.

Shale oil is also being used as feedstock in some countries for petchem.

[Gerry Maddoux + 3,627]

40 minutes ago, ceo_energemsier said:

Nord Stream 2 would allow Russia to bypass Ukraine and Poland to deliver gas under the Baltic Sea to Germany.

 

40 minutes ago, ceo_energemsier said:

Washington says that Nord Stream 2 would also likely deprive Ukraine of billions of dollars in gas transit fees.

This is precisely the way I understood it. It looks to me like Putin is trying to gain energy hegemony in Europe by locking Germany into a longterm contract, and that in the doing, he's also putting Ukraine in a box. It may also be that Ms. Merkel, who is no fan of Mr. Trump, has decided to make a vindictive point . . . which is always dangerous. For example, Coffeeguyzz (who seems to be exceptionally well informed, particularly in LNG moving at blinding speed), stated that he'd read about Ukraine and Bulgaria buying LNG as it was cheaper than Russia piped gas. If an LNG loads up on almost-free NG in the Gulf Coast, paying very little true cost for transportation fuel, it doesn't take a huge spread to make some money. I suspect Mr. Putin will do his best to make Russian NG price-competitive, but he may not have much say in the matter--this Nord Stream 2 is financed and run by a multinational group of oil companies. If LNG keeps growing exponentially, Ms. Merkel may rue the day she inked this deal. 

[D Coyne + 305]

On 12/20/2019 at 2:39 PM, Gerry Maddoux said:

Dennis, I have to yield to you, for you have written the book and built models about this. I will order your book. However, I must register a reservation: Most models work on the probability system, not the chaos system. Most models assume a certain degree of ergodicity. In my experience, the petroleum business is a) chaotic, b) full of surprises, and c) the future looks nothing like the past. For example, the late Mathew Simmons--as good a modeler as ever existed--would be absolutely astounded at the growth of LTO. And at the fact that the giant Saudi fields are still producing at the same rate. Or even that gasoline is $3 at the pump.

While there's been an awful lot of 3-D maritime seismography performed, I'd be willing to surmise that there are huge pools of as-yet-undiscovered oil trapped in oceanic coves by ancient anticlines. Additionally, I'm just about the smallest fish in the oil ocean, but I've been told by a seasoned petroleum engineer that I have 550 to 750 new sites if prices stay above $60. If I'm this small and the minerals have that much to yield, what is the total capacity in just the shale fields alone? A million new wells? Ten million? I honestly don't know.

Well, no one loves the modeling process more than I, and no one appreciates the mathematical process more, so I am forced by my nature to give in to your research. And I appreciate it. But $128 for that book? Every purchase in these days of intolerably low oil prices makes me cringe.

Modeling? Well, here's one for you. If we could turn back the clock and model today's oil and gas environment using the probability system, we would not be looking at cheaper oil than latte. And that windmill and solar panel graph? Well, I'm just thinking, on a drive through Texas, Arizona, or California deserts, you look out the window and see all these giant, spidery windmills turning, these solar panels. Yet I'm assured that wind and solar make up only 10% of energy. If you multiply the windmills and solar panels by 10, you get this horrid landscape which, I guarantee you, will pose unintended consequences. I don't know what they are, but they're there, and since unintended consequences always take more of a toll than one would expect, those things are going to raise the cost. What I'm saying is that renewables are not going to come without their own set of problems.

But I do like your graphs and the thought that went into all this. I wish I had conceived it. When I first met Bill Sharpe, the man who won the Nobel Prize for coming up with the Sharpe Ratio, I went home and looked at the equation on the computer. He later became one of my best friends and is a wonderful person. At one point, I said something like, I saw your ratio, to which he replied, Oh, you did, did you? And I said, I believe I could have come up with it. He didn't miss a beat, saying, you should have, it has been really good to me. I sincerely hope your research pans out in predictability, because--selfishly--that will be very good for me. 

Gerry,

If you gave a university nearby, they may have the book in their library.

thanks.  The probability distribution used is the maximum entropy probability distribution.

https://en.wikipedia.org/wiki/Principle_of_maximum_entropy

No doubt you are familiar with this, others might not be.

I certainly did not see the LTO resource being as large as I believe it is today.  My guess is about 300,000 to 400,000 tight oil wells might be completed.

[Gerry Maddoux + 3,627]

To your point, the exuberance of the LTO community has to do as much with ignorance as anything on the planet. Irrational exuberance created those high prices in the Permian--based on a single wildcat holding a certain acreage by production. Those parent wells were drilled everywhere across the isopach, with no thought to the concept that child wells--at least in family sizes needed to make the acreage pay off--might create a pressure and resource sink, not to mention destroying the integrity of the parent well. That was five years ago. Now that we're down the line, that data would be pertinent to stick into the maximum entropy probability distribution, yes? 

I get how the modeling improves over time. I'm flummoxed about all these kids--the new generation (my daughter amongst them)--thinking that fracking is evil, causes cancer, it going to wipe out the planet. That's the stuff you just can't plan for. 

But numbers of LTO sites? Without outside interference? Roughly a million: 700,000 in Texas and 300,000 in North Dakota and Powder River, Niobrara/Codel, Hogshooter. Easy.

Thanks for your help. I'm eager to read your book. 

[Douglas Buckland + 6,308]

So, who is hiring the ‘new’ rigs? Independents or the new big players? Would be interesting to know...

[ceo_energemsier + 1,818]

On 12/21/2019 at 11:03 AM, Gerry Maddoux said:

 

This is precisely the way I understood it. It looks to me like Putin is trying to gain energy hegemony in Europe by locking Germany into a longterm contract, and that in the doing, he's also putting Ukraine in a box. It may also be that Ms. Merkel, who is no fan of Mr. Trump, has decided to make a vindictive point . . . which is always dangerous. For example, Coffeeguyzz (who seems to be exceptionally well informed, particularly in LNG moving at blinding speed), stated that he'd read about Ukraine and Bulgaria buying LNG as it was cheaper than Russia piped gas. If an LNG loads up on almost-free NG in the Gulf Coast, paying very little true cost for transportation fuel, it doesn't take a huge spread to make some money. I suspect Mr. Putin will do his best to make Russian NG price-competitive, but he may not have much say in the matter--this Nord Stream 2 is financed and run by a multinational group of oil companies. If LNG keeps growing exponentially, Ms. Merkel may rue the day she inked this deal. 

More on US LNG: It is a long one but its from behind a pay wall , so just the link wont work:

US LNG Producers Shift Into High Gear Global Market

The U.S. will make up 67% of growth in global LNG exports between 2019 and 2024 while 33% of global imports are expected to go to China.

 

 

The International Energy Agency reported in its World Energy Outlook 2017, “A new gas order is emerging, with U.S. LNG helping to accelerate a shift toward a more flexible, liquid global market.”

U.S. LNG exporters are certainly turning world markets topsy-turvy. Since Cheniere began commercial operations at its Corpus Christi Train 1 in 2016, the U.S. has overtaken Malaysia as the third largest exporting country in terms of capacity. U.S. LNG producers expect to compete with Qatar and Australia to be the largest exporter.

“The U.S. has truly been a game changer for the industry. We think that U.S. LNG competition has resulted in a more dynamic, more competitive and more resilient trade system, which is good for everyone,” said Andrew Walker, vice president of LNG strategy and communications for Cheniere Energy, at the 2019 Gastech Conference in September in Houston. “It is making LNG more abundant, more affordable and more secure for buyers.”

Cheniere now has 20 long-term customers. He noted that when looking at these customers, there are different types, including national oil companies, international oil companies (IOCs), trading houses and utilities as well as different geographies. “We’ve produced more than 800 cargoes from our facilities as of Sept. 19,” he said.

Most companies are generally in agreement on LNG trade. In Shell’s LNG Outlook 2019, which was released in February 2019, the company said LNG trading reached 313 MMmt in 2018. The company expects LNG demand to reach 384 MMmt in 2020.

China became the world’s largest gas importer with LNG imports doubling in two years. LNG exports grew by 27 MMmt with half of the growth coming from Australia. About 21 MMmt of new final investment decisions (FIDs) were sanctioned in 2018, according to the outlook.

“Encouragingly for the long-term health of the global LNG market, the average length of contracts doubled from around six years in 2017 to about 13 years in 2018. There were more than 1,400 spot cargoes in 2018,” according to Shell. 

In 2019 about 35 MMmt of new LNG supply are expected. “A rebound in new long-term contracting in 2018 could revive investment in liquefaction projects. There is a potential for a supply shortage in the mid-2020s unless more LNG production project commitments are made soon,” according to the company.

In three short years, the industry has gone through a major transformation when it comes to contracts, indexation, pricing, gas supply, markets and players. More change is on its way.

LNG and gas markets
“Global gas demand will peak in 2033, then slowly decline to 2050 with some variation in supply sources. Conventional onshore gas production will peak in 2033 with offshore gas production peaking in 2040,” according to DNV GL’s Energy Transition Outlook 2019.

“Unconventional onshore gas is forecast to continue rising slowly to [2050],” said Hans Kristian Danielsen, DNV GL marketing and sales director, oil and gas, during a Sept. 17, 2019, presentation. “We see gas continuing to grow. It will actually surpass oil as the world’s primary energy source in 2026 and continue to grow into 2033.”

Demand for LNG will follow a similar trend. The company’s model shows that 298 MMmt of LNG were traded in 2018. For 2019 it predicts total trading of 320 MMmt. In 2050 the model predicts a little less than 1,200 MMmt. 

The predictions point to a rosy future for U.S. LNG. There are now 42 LNG importing markets. A record for new sanctioned capacity is expected for the 2019-2020 period. “That’s over 100 million metric tons of new capacity looking at FID in 2019 alone and quite a few of those have already reached final investment decision,” said Elizabeth “Betsy” Spomer, board adviser for Gas Strategies.

But there are some potential difficulties as with all complex negotiations. The new capacity “is going to have huge implications going forward as this market probably stays unbalanced to the buyers’ benefit,” she said.

“One of the things that has allowed this to happen is a breakdown in the development of supply through the emergence of portfolio players—the big IOCs that take equity positions in these projects and then use their balance sheets to support sales and purchase agreements with or without designated markets. It will be interesting to see how this imbalance plays through the next several years,” Spomer continued.

“Gas Strategies projects the market is going to stay on into the late 2020s based on what’s been achieved to date. You have a 250 million metric ton variance between supply and demand in 2035. That’s massive,” she said.

When Spomer went to Gastech, she questioned, “Where are the deals? Why haven’t we seen a whole slew of deals announced? Where are all pending FIDs? I think uncertainty and current low prices have been a drag on all these things.”

 

 

Second LNG wave faces tougher market
At Gastech, Blackstone Energy Partners CEO David Foley said the developers of the next wave of U.S. LNG projects will face “tougher” market conditions for bringing new plants online.

“In terms of liquefaction capacity that gets FID from the U.S., the hit rate will be a lot higher on projects either sponsored by major oil companies or expansions of existing facilities. I think the hit rate will be pretty low if you don’t have a customer that is willing to do a long-term offtake and its investment grade,” he said.

Permits might get tougher after the election in November 2020, and pipeline construction might get a little tougher. “The hit rate will be a lot higher on projects that are either sponsored by major oil companies because they can contract themselves or are expansions at existing facilities. You might have one or two new startups that might make it,” he said.

Blackstone committed $2 billion in equity to Cheniere seven years ago for liquefaction at Sabine Pass. “Cheniere has done a fantastic job in terms of bringing those facilities on time and on budget—actually a little bit ahead of schedule—and delivering reliable service to the customers. The whole idea of the Henry Hub based prices has really taken off globally,” he said.

Getting sensible contracts with shippers was a challenge then as now. “Getting long-term contracts from investment-grade companies that could stand behind the contract and provide a good sensible basis for project financing wasn’t easy then, but it seems to be even harder in the current market. LNG is in something of a glut right now, which makes it harder to sign up a long-term contract,” Foley said.

LNG market is changing
One of the major changes in the LNG industry has to do with increased competitiveness, according to DNV GL’s Danielsen. “On the demand side, people are really looking for more flexible contracts. Many potential buyers don’t have the consumption or outlook to agree to 20-year, 1 million metric tons per year contracts,” he said. 

In 2019 there is a changing landscape in the LNG portfolio.

“We’re moving away from the old model with one operator controlling the full value chain—export, transport and import, like Shell, Petronas, etc.,” Danielsen continued. “New players like Gunvor, Trafigura, Vitol and Glencore are now buying up LNG and breaking it up, or they gather portfolios of LNG. Of course, as traders, they will try to buy LNG when the price is low, providing more floor in the LNG price and hopefully more predictability for large exporters. In fact, these companies traded up to 7 million metric tons of LNG. That is not insignificant.”

Internationally on the supply side, there is a lot of activity in Australia. “Our forecast suggests that Australia’s competitiveness will lead to more LNG trains,” he said.

“Qatar is also starting to build more trains, which should bring capacity to 110 million metric tons. Russia is also high on the radar with Arctic LNG 2 and Yamal coming onstream,” he added.

Where is the gas going? China increased its imports by 38% from 2017 to 2018 to 56 MMmt.

“At the end of June 2019, China had imported 28 million metric tons, which would lead to a 17% increase from 2018,” Danielsen said. “What’s different about our forecast this year compared to previous years is that we see a massive increase in demand from India.”

The market is definitely moving more toward flexible contracts. “Our forecast shows that North American LNG has become even more competitive,” Danielsen said.

Jan Hagen Anderson, DNV GL business development manager of Maritime Americas, talked about the LNG shipping fleet. “Today the fleet of LNG carriers is about 545 to 550 vessels. We expect that to double by 2030 and more than triple by 2050,” he said.

The International Maritime Organization (IMO) has some very ambitious goals to reduce greenhouse-gas emissions by 50% and transportation CO₂ by 70% by 2050. LNG would be a large part of this push.

For LNG as a marine fuel, Anderson said between 40% and 80% of all shipping will be fueled by LNG by 2050.

Cheniere embraces competition
Competition is helping the LNG marketplace. Buyers have more options to supply and manage their markets and more ability to choose the supply that suits them best, noted Cheniere’s Walker.

“We embrace competition. We think that U.S. LNG competition has resulted in a more dynamic, more competitive and more resilient trade system, which is good for everyone. It is making LNG more abundant, more affordable and more secure for buyers,” he said.

The background to the whole U.S. story is U.S. resources.

“We have tripled the resource base over the past decade. The Potential Gas Committee released their assessment for 2018 for future gas supply at 38 Tcf,” he said. “That also has been developed at reduced prices. Average gas price was over $8.50 per million British thermal units [MMBtu] in 2005. Today year-to-date the price is $2.66/MMBtu.”

Most markets and trades tend to evolve toward increasing competition. “LNG is doing that. We are in a very different business in the U.S. with that latent supply than we would be without it,” he said.

“Price diversification is something we offer in the U.S. that allows people to move away from the secondary indexation against oil. Destination flexibility has really changed the industry and is creating liquidity and a sustainable low-cost supply over the long run,” Walker continued. “If you can’t end up with a project that is equal to or lower than U.S. Henry Hub plus shipping, you probably don’t have a project because people know there is a large availability of resource that may be monetized.” 

The U.S. has increased industry diversification because the U.S. does not export as a national player. “It allows project-on-project competition unlike many exporters. We’re really seeing increased competition inter-project, increased commercial competition, increased technology and cost innovation. It is going to drive liquidity,” he said.

 

Spot and short-term trade in 2018 was about 32% of the market.

“The U.S. is driving competition in the marketplace but more importantly driving liquidity. You can appreciate the impact this is having in the marketplace,” he added. “In 2013 buyers tendered for nine cargoes. That has grown hugely since 2013. Trading house activity has grown hugely over the last five years. For Japan/Korea Marker [JKM] swaps, you can see almost nothing in 2016. That is growing quite rapidly today. We counted to date [that] about 25% of the total market share were JKM swaps. There were 161 cargoes equivalent in July 2019.”

Cheniere signed 15-year gas supply deals with EOG Resources, in which some of the gas is tied to Asian spot LNG prices. The deals indicate that upstream U.S. gas producers have an increased willingness to take on LNG price risk.

Unique business model
Petronet LNG Ltd. INDIA signed a memorandum of understanding (MOU) with Tellurian Inc. wherein Petronet and its affiliates intend to negotiate the purchase of up to 5 MMmt/year of LNG from Driftwood LNG, as stated in a Sept. 21 press release. The two companies are expected to finalize the transaction agreements by March 31, 2020. The total investment in Driftwood would be $2.5 billion.

That is part of the basically 8 MMmt/year that Tellurian has sold out of the 12 MMmt/year of LNG the company would like to sell before beginning construction of Phase 1 of the 26.6-MMmt/year project total. Tellurian has 2 MMmt/year for its own account, and Total has 1 MMmt/year, said Joi Lecznar, senior vice president of public affairs and communication at Tellurian.

“We’re looking to sell to anybody that wants to buy low-cost LNG. What we’re finding is that the potential edgewater partners that we’re talking to are quite frankly all over the world. It is really remarkable,” she said. “Another thing that differentiates us is that we have a lot of optionality in our gas supply. We can really get it from everywhere. We are just looking at the lowest cost we can procure in the market in either the Permian or the Haynesville or anywhere. We do have some upstream operations so we can produce it ourselves.”

These agreements are part of Tellurian’s business model, explained Renee Pirrong, director of research at Tellurian. “I would really consider them to be partners. As a partner in Driftwood LNG for $500 million, you purchase an equity stake of about 1 million metric tons per year of LNG in the LNG plant, upstream resource and the pipeline network that we are building. Altogether that is about $30 billion worth of infrastructure,” she said. 

Using that approach, Driftwood “will be the largest privately funded project in the U.S. once we go forward. What that enables you to do as a partner is lift your LNG at cost. You’re able to take advantage of lower cost throughout the entire value chain,” she said.

Tellurian also has a marketing team based out of London.

“As a partner in the facility, Tellurian will have our portfolio from Driftwood through our own equity stake. Our marketing team will sell those volumes on a variety of different terms and contracts,” Pirrong said. “Keep in mind that the market always underestimates demand. This year demand will be growing at about 13.3% year on year. There is a huge amount of latency of demand around the world that will be triggered by the low, LNG-price environment that we’re seeing today. We expect that demand to grow faster than most would anticipate.”

She explained, “I would characterize our entire business model as special. It really eliminates the need for long-term contracts, which we think is pretty creative and pretty important. As the market continues to commoditize, you need to incentivize new LNG projects to go forward, even as customers are more reluctant to commit to long-term contracts at prices that might not reflect the underlying supply and demand fundamentals of the LNG market.”

 

Targeting 45 MMmt/year
The goal of Sempra LNG is to be the premiere North American LNG company.

“The measure of ‘premiere’ for us is reaching 45 million metric tons per year,” said Justin Bird, president at Sempra LNG. “Our focus is really on building the infrastructure in North America so that we can export clean-burning U.S. natural gas to other countries around the world as they make a clean-energy transition.”

The company’s plan to reach that goal includes the first three trains at Cameron LNG, Phase 1 at Energía Costa Azul (ECA) in Mexico, the first two trains at Port Arthur LNG, Phase 2 at Cameron LNG and Phase 2 at ECA.

The first step in the plan began with commercial operations with Train 1 at Cameron LNG in August 2019. The second train is scheduled to start production in the first quarter of 2020 with the third train coming online in the second quarter of 2020. That will be the first 12 MMmt/year, Bird explained.

Sempra has much of its capacity under contract, MOU or heads of agreement (HOA). “Cameron Phase 1 is fully contracted to Mitsui, Mitsubishi and Total. Total has signed an MOU to take up to 9 million metric tons per year of capacity of both Cameron Phase 2 and ECA LNG, which would be an expansion. It is likely the customers would be the same as Phase 1,” he said.

“Moving west to Port Arthur, we have publicly announced that there is a 2 million metric ton per year SPA [sales and purchase agreement] with the Polish Oil & Gas Co. and a 5 million metric tons per year HOA with Saudi Services, a subsidiary of Saudi Aramco. For the remaining volumes, we’re in active discussions with many parties,” Bird continued. “For ECA Phase 1, the customers are Mitsui, Total and Tokyo Gas. Total also signed an MOU for up to one-third of the capacity of Phase 2.”

Sempra has learned quite a few lessons between the development of Cameron LNG as a regasification facility and its redevelopment into a liquefaction plant. “We got regas so wrong, as did many others, but it became pretty attractive for liquefaction. I would say being able to take underperforming assets and turning them into wonderful projects is a great experience. That really worked well,” he said.

On the development front, he said, “Generally, we continue to see the strong value of partnerships where interests are aligned. We’ve seen a lot of value in being able to forge strong relationships early through development, construction and operation.”

He added, “Selecting the right partners and customers is also important. We like to build strategic relationships.”

Bird pointed out that Sempra was a little different from some of the other smaller LNG developers. “We’re a holding company with the largest U.S. customer base. We serve about 10% of the U.S. population in terms of power or energy needs,” he said.

Sempra has taken advantage of both Cameron LNG and ECA being brownfield projects. “Cameron Phase 1 was a regas asset that was being underutilized. What it allowed us to do is take a lot of that infrastructure and use it to see significant savings versus a newbuild. Some of the common facilities are in place. Right now the parties are figuring out what is the optimal design for the Phase 2 expansion to make it very cost competitive,” Bird said.

Port Arthur is a greenfield project. “What’s really different there is that you have a site that is expandable up to eight trains. We have some parties that want a significant equity holding. Port Arthur is a project where they can have equity,” he added.

“Saudi Services is interested in Port Arthur for three reasons: Sempra can build it economically, there is a large site capable of significant expansion, and they can have a significant equity holding,” he continued.

Although Cameron LNG is a tolling facility, both Port Arthur and ECA will be based on sales and purchase agreement models. That means Sempra will be responsible for gas supply to the plants. “At ECA, we will basically use existing U.S. infrastructure probably with adding a compressor or other minor upgrade. The pipelines in Mexico are operated by our affiliate IEnova,” Bird said.

For ECA Phase 2, Sempra would build a new pipeline from the Permian Basin to ECA, which would be located in either Mexico or the U.S.

“For Port Arthur, we see the Gulf Coast as a draw. We’re comfortable that the Permian revolution is what is underpinning a lot of the U.S. LNG. There are vast amounts of natural gas looking for foreign markets because it is associated gas. The options are to flare or stop oil production. Through our infrastructure, we can help that gas find a home around the world,” he said.

Midscale, small-scale trains next energy wave
With record numbers of FIDs in 2019 and a bullish forecast for 2020, the prognosis is generally good for midscale liquefaction.

“The preferred model, certainly for North American liquefaction and export, is midscale where total plant capacity is achieved through multiple modules rather than a single large train. Midscale developers are specifying lower costs per metric ton of LNG produced and shorter project timescales versus traditional baseload,” said Paul Shields, director of marketing for Chart Industries.

 

 

At the opposite end of the LNG chain, small-scale import terminals, like the Klaipeda floating storage and regasification unit in Lithuania, are proving the economic and technological viability of small-scale LNG storage and distribution.

Standardization and modularization are crucial in reducing cost and timescale, and small-scale terminals also provide operational flexibility. This creates an attractive business model for terminal operators and owners to quickly address the growing demand for LNG as a fuel for transportation and energy and take advantage of new supply, particularly North American shale.

Principle end-uses for LNG are power generation and vehicle fueling. The LNG Virtual Pipeline is already a well-established model for bringing natural gas power to regions off the grid, including remote locations and islands to displace diesel, propane, butane and oil.

“Using cryogenic ISO containers to transport LNG means it can be delivered from source to site efficiently and safely via different modes, for instance road and sea. A full-for-empty swap system provides greater cost efficiencies,” Shields said.

Integrated systems, comprising storage, vaporization and delivery, bring natural gas power to off-grid locations through the LNG virtual pipeline. Chart has experience with both large projects, such as powering generator sets at mines, through to enabling small/medium enterprises to switch to natural gas from other liquid fuels.

Satellite integrated systems also are used for distributed energy with small-scale, gas-fired power stations. Based on Chart’s experience, a nameplate capacity of about 50 MW typically requires an LNG satellite plant with 100,000 gal of LNG storage that feeds multiple reciprocating engine generator sets. Such systems are also in place as backup power for peakshaving and curtailment.

In the marine sector, IMO 2020 regulations mean that sulphur content in marine fuels has to be reduced from 3.5% to 0.5% and to 0.1% in emission controlled areas. LNG achieves this. Consequently, there has been a large increase in the number of LNG-fueled vessels on the water, under construction and ones classed as marine ready.

It also means that greater investment is needed in the bunkering infrastructure, and there are a number of new facilities in operation or being built, both land-based (e.g., Eagle LNG in Jacksonville, Fla.) and bunkering vessels.

In Europe there are a number of companies investing in developing the refueling infrastructure for LNG trucks. Main drivers promoting LNG over diesel are environmental and, in particular, the elimination of particulates.

Florida East Coast Railway has been operating natural-gas-fueled locomotives for some time. In another positive move for LNG, the U.S. administration is allowing it to be transported by rail.

 

 

[Gerry Maddoux + 3,627]

Thanks for the great article. Good business model: buy NG for fifty-cents, liquify it, transport it and sell it for $3.50. Soon to be $2.50, then maybe lower. Nobody gives Aubrey McClendon enough credit for this! Souki got the money from Blackstone to set up importation terminals when NG in America was scarce. About the time he got them built, Aubrey and Tom Ward began fracking like crazy in the Haynesville. Aubrey called up Souki and asked why not turn around the terminals, make them exportation units. Souki painfully explained that doing so was about a $1B, two-year project, to which Aubrey asked, "So?" That was Aubrey. He was talking his own book but he also genuinely wanted to see this sort of thing get going--a revolutionary of the first water. So, Souki went back to Cheneire and got this moving, then they threw him out, and I suppose he's still at Tellurian. 

This article is bittersweet for me, as I sell natural gas. It sounds like this business model is built totally around buying dirt-cheap gas. Well, hmmmm, this is just one more bad side effect of the LTO market. It would all be okay if LTO had been allowed to assume its "normal" value. Maybe it will now that IMO2020 is here, lots of rigs are laid down, etc. We'll see.

 

[James Gautreau + 86]

On 12/19/2019 at 7:07 PM, DayTrader said:

@Gerry Maddoux , you know the reply to that article is ''I don't believe those stats'' yes?

20 pages of this ...

''Shale is great, it's the future''

''Nah it won't last, the writing is on the wall''

''Yeah it will, look at my stats''

''Those are false, look at these stats''

''But there are new technologies, so there may be better stats''

''What technologies?''

''These ones''

''Those aren't new!''

''Errr, well what about these stats instead?''

''I don't like those stats''

''Shale is great, it's the future''

 

20 f**king pages mate. 

What do you want us to do, sit around a flare gas pipe and sing Kumbaya?

[Gerry Maddoux + 3,627]

Welcome back, James. I've missed you for several days now--you have an interesting and worth-noting take on affairs. 

There are a lot of really good, divergent opinions on this post site. Yes, it dives and bobs from time to time, but still . . .

To catch you up, the LNG business is booming: mainly because NG can be bought at the end of the pipe for next to nothing, liquified, transported on a ship run by nat gas, and then sold in the UK, Japan, Korea, China for about three bucks and falling. It seems that Ms. Merkel may have doo-doo/ed on her hat by signing a pipeline deal with Mr. Putin--a deal that, btw, Mr. Trump certainly wants to blow up. The projections are that LNG will continue to be the cornerstone fuel in global energy until at least 2050 due to low cost, negligible NOX, etc. While the Marcellus produced prodigious quantities of NG, it's not nearly enough, even when coupled with the Haynesville--the two most prolific dry gas fields. That mean that . . . god I know you're gonna love this . . . the shale basins producing LTO are going to have to keep punching rabbit-warren holes into the ground, because that keeps the price down for the edgewater boys to keep riding the spread. 

Geopolitical dominion, they're calling it. 

[ceo_energemsier + 1,818]

4 hours ago, Gerry Maddoux said:

Thanks for the great article. Good business model: buy NG for fifty-cents, liquify it, transport it and sell it for $3.50. Soon to be $2.50, then maybe lower. Nobody gives Aubrey McClendon enough credit for this! Souki got the money from Blackstone to set up importation terminals when NG in America was scarce. About the time he got them built, Aubrey and Tom Ward began fracking like crazy in the Haynesville. Aubrey called up Souki and asked why not turn around the terminals, make them exportation units. Souki painfully explained that doing so was about a $1B, two-year project, to which Aubrey asked, "So?" That was Aubrey. He was talking his own book but he also genuinely wanted to see this sort of thing get going--a revolutionary of the first water. So, Souki went back to Cheneire and got this moving, then they threw him out, and I suppose he's still at Tellurian. 

This article is bittersweet for me, as I sell natural gas. It sounds like this business model is built totally around buying dirt-cheap gas. Well, hmmmm, this is just one more bad side effect of the LTO market. It would all be okay if LTO had been allowed to assume its "normal" value. Maybe it will now that IMO2020 is here, lots of rigs are laid down, etc. We'll see.

 

There is enough demand and enough supply to make it work, if management is good, technologies are used properly and always be on the lookout for new processes, procedures and technologies that are new or can be stacked and used in a synergistic system to improve finding good quality rock and all the geotech that goes with it to drilling, completion production and beyond all that, buying assets at a low and reasonable rate and having great outlet via great or above excellent marketing set up. We are directly tied into end buyer markets globally via various structures of participation both for oil and gas as fuel and feedstock for tertiary value added products. I have been able to bring extremely large $ value investments into the US for these oil and gas projects including refineries, LNG plants (large scale and compact as well as regional LNG/GTL and basin specific plants). We can convert gas to liquids for use as fuel and or feedstock for petchem , so we have lot of end marketing options and ease of transport in light of transport and getting to market issues. We are also value adding crude oil being produced and marketing those not just fuel feedstock but petchem feedstocks. Millions of barrels of new crude oil demand per day is going to be created for use in new tech-new gen hybrid petchem-fuel plants, actually it is an ongoing demand increase.

I highly doubt tens of billions of $$$ would have been invested by these major players if the supply was going to be issue because hydrofracking could not achieve the results.

For all the naysayers, companies have made and are making billions of $$$, not all companies have extreme costs from acquisition to breakeven, some may even say and have said breakevens are BS.

And for for the hell of saying it and putting it out there, all the shale naysayers, have they done and or contributed anything to improve the situation? I doubt it.

 

Merry Christmas and Happy New Year!!

[Mike Shellman + 548]

On 12/22/2019 at 7:10 PM, ceo_energemsier said:

And for for the hell of saying it and putting it out there, all the shale naysayers, have they done and or contributed anything to improve the situation? I doubt it.

 

Edited January 1, 2020 by Mike Shellman

[remake it + 288]

18 years ago and 5 years ago it was hard to find folk outside of the helmets on rigs forecasting where oil supply is today because they failed to jump out of their boxes and think about what advances were probable and how existing technologies could be transferred to its search and production.

[Douglas Buckland + 6,308]

12 hours ago, James Gautreau said:

What do you want us to do, sit around a flare gas pipe and sing Kumbaya?

Why not? Now that the international oilfield, onshore and off, has been on life support since 2015, us oilfield hands don’t have much else to do.

Try singing Kumbaya to the tune of AC/DC’s Back in Black....it is an amusing way to spend the time while waiting on job alerts...

[Douglas Buckland + 6,308]

3 hours ago, remake it said:

18 years ago and 5 years ago it was hard to find folk outside of the helmets on rigs forecasting where oil supply is today because they failed to jump out of their boxes and think about what advances were probable and how existing technologies could be transferred to its search and production.

Really? The guys on the rig floors were worried about forecasting? Is it their job to  ‘think out of the box’ regarding advances (?) and furthering EXISTING technology.

These guys are worried about utilizing the technology sent to them on the rig and utilizing it correctly - they do not specify what is used to drill the well.

If you have no idea how the drilling business works, perhaps you should refrain from discussing it.

Just a thought...

[remake it + 288]

22 minutes ago, Douglas Buckland said:

Really? The guys on the rig floors were worried about forecasting? Is it their job to  ‘think out of the box’ regarding advances (?) and furthering EXISTING technology.

These guys are worried about utilizing the technology sent to them on the rig and utilizing it correctly - they do not specify what is used to drill the well.

If you have no idea how the drilling business works, perhaps you should refrain from discussing it.

Just a thought...

You got the sense completely back to front Mr Buckman so maybe complex sentences are not for you (seek translations from the Day Trader) .

[Guest]

16 hours ago, James Gautreau said:

What do you want us to do, sit around a flare gas pipe and sing Kumbaya?

Agree to disagree and get on with your lives?

Just an idea. You obviously all enjoy pointless conversation though, so crack on.

[Gerry Maddoux + 3,627]

4 hours ago, Douglas Buckland said:

Really? The guys on the rig floors were worried about forecasting? Is it their job to  ‘think out of the box’ regarding advances (?) and furthering EXISTING technology.

These guys are worried about utilizing the technology sent to them on the rig and utilizing it correctly - they do not specify what is used to drill the well.

If you have no idea how the drilling business works, perhaps you should refrain from discussing it.

Just a thought...

Agree. It has always been the guys who put on hardhats while wearing suits that made the forecasts--that's part of the problem. Any forecasts made by the people who actually did the work were pretty much kept to themselves. 

Look guys, we're going to get through this. I want to see Douglas Buckland back to work, doing what makes him happy and has made America great. The infiltration of foreign outfits by American companies--providing the real know-how--worked for us a very long time. The issue, as you all know, is that much of shale was bought at such high prices, thinking that infill wells would pull their load, that it's collapsing in many places.

But on the flip side, LNG is really taking over the world. And why not? The liquifaction process removes sulfur and other oxide-polluting contaminants, the LNG guys (380 vessels) can buy NG for 30 cents, use the "boil-off" gas to fuel the ship, then offload, edge-water, for $3 per. This stuff is going to get cheaper, and it's already purer, than Putin's piped gas. 

In their board rooms, the oil giants realize that they have themselves in a bind. They're looking to enlarge Guyana and other offshore sites and quietly exit the shale fields when it's cherry-picked. They're taking huge hits from paying to get their by-product NG taken away (thus Chevron's $11B write-down). They can't continue giving away NG, selling oil for $60, and make this thing work--I don't care what anyone says, the numbers just don't pan out.

The Marcellus is going to collapse . . . only to be brought back to life when the burgeoning LNG companies need more cheap product (I predict Cheneire will start buying out those bankrupted Marcellus companies for pennies on the dollar).  

These giant companies are going to run through the shale like maize through a duck, and then there'll be some refracking (probably by the fringe companies). For the pioneers that started this shale deal, the end was written in today's Wall Street Journal. 

Lots of rancor on this topic. I think we can all agree that this shale concept is a mess. I am fascinated by the fact that the big winner has turned out to be . . . LNG. I would never have thought this possible. LNG is truly the tail wagging the dog. I believe it will become the dominant fuel for the world.

[James Gautreau + 86]

1 hour ago, Gerry Maddoux said:

Agree. It has always been the guys who put on hardhats while wearing suits that made the forecasts--that's part of the problem. Any forecasts made by the people who actually did the work were pretty much kept to themselves. 

Look guys, we're going to get through this. I want to see Douglas Buckland back to work, doing what makes him happy and has made America great. The infiltration of foreign outfits by American companies--providing the real know-how--worked for us a very long time. The issue, as you all know, is that much of shale was bought at such high prices, thinking that infill wells would pull their load, that it's collapsing in many places.

But on the flip side, LNG is really taking over the world. And why not? The liquifaction process removes sulfur and other oxide-polluting contaminants, the LNG guys (380 vessels) can buy NG for 30 cents, use the "boil-off" gas to fuel the ship, then offload, edge-water, for $3 per. This stuff is going to get cheaper, and it's already purer, than Putin's piped gas. 

In their board rooms, the oil giants realize that they have themselves in a bind. They're looking to enlarge Guyana and other offshore sites and quietly exit the shale fields when it's cherry-picked. They're taking huge hits from paying to get their by-product NG taken away (thus Chevron's $11B write-down). They can't continue giving away NG, selling oil for $60, and make this thing work--I don't care what anyone says, the numbers just don't pan out.

The Marcellus is going to collapse . . . only to be brought back to life when the burgeoning LNG companies need more cheap product (I predict Cheneire will start buying out those bankrupted Marcellus companies for pennies on the dollar).  

These giant companies are going to run through the shale like maize through a duck, and then there'll be some refracking (probably by the fringe companies). For the pioneers that started this shale deal, the end was written in today's Wall Street Journal. 

Lots of rancor on this topic. I think we can all agree that this shale concept is a mess. I am fascinated by the fact that the big winner has turned out to be . . . LNG. I would never have thought this possible. LNG is truly the tail wagging the dog. I believe it will become the dominant fuel for the world.

I worked at GE Power Systems around the turn of the century and everyone saw nat gas coming. Right then I should have shorted every major coal company because they all went to zero. GE was selling 300 turbines a year for nearly 2 decades. It crashed a couple of years ago and now they're lucky to sell a 12 a year. I saw a compressed nat gas station driving down to New Orleans last weekend. First time ever. 

[D Coyne + 305]

On 12/21/2019 at 9:03 PM, Gerry Maddoux said:

To your point, the exuberance of the LTO community has to do as much with ignorance as anything on the planet. Irrational exuberance created those high prices in the Permian--based on a single wildcat holding a certain acreage by production. Those parent wells were drilled everywhere across the isopach, with no thought to the concept that child wells--at least in family sizes needed to make the acreage pay off--might create a pressure and resource sink, not to mention destroying the integrity of the parent well. That was five years ago. Now that we're down the line, that data would be pertinent to stick into the maximum entropy probability distribution, yes? 

I get how the modeling improves over time. I'm flummoxed about all these kids--the new generation (my daughter amongst them)--thinking that fracking is evil, causes cancer, it going to wipe out the planet. That's the stuff you just can't plan for. 

But numbers of LTO sites? Without outside interference? Roughly a million: 700,000 in Texas and 300,000 in North Dakota and Powder River, Niobrara/Codel, Hogshooter. Easy.

Thanks for your help. I'm eager to read your book. 

Gerry,

If you do the math and consider both the geophysics and the economics under reasonable oil price scenarios, there will be about 400,000 tight oil wells completed from June 2006 to April 2053.  URR=86 Gb.

A lot of the tight oil won't be profitable to produce at a Brent oil price $90/bo or less (2018 US$).  

There may be that many well sites, but only areas with higher productivity (the sweet spots) will be economic.  The forecast of the EIA in it's AEO 2019 for tight oil, is ridiculous, they forecast tight oil output that is more than the TRR for the F5 cases by the USGS, if that forecast is the basis for your estimate, you may find you have overestimated.

Scenario for US tight oil, my current best guess, in chart below, with about 400,000 tight oil well completions and 86 Gb URR, well profiles are based on data from shaleprofile.com. The average well profile data is fit to a simple Arp's hyperbolic and exponential terminal decline of about 10% is assumed after the hyperbolic reaches that level of annual decline rate.

Edited December 23, 2019 by D Coyne

[D Coyne + 305]

1 hour ago, Gerry Maddoux said:

Agree. It has always been the guys who put on hardhats while wearing suits that made the forecasts--that's part of the problem. Any forecasts made by the people who actually did the work were pretty much kept to themselves. 

Look guys, we're going to get through this. I want to see Douglas Buckland back to work, doing what makes him happy and has made America great. The infiltration of foreign outfits by American companies--providing the real know-how--worked for us a very long time. The issue, as you all know, is that much of shale was bought at such high prices, thinking that infill wells would pull their load, that it's collapsing in many places.

But on the flip side, LNG is really taking over the world. And why not? The liquifaction process removes sulfur and other oxide-polluting contaminants, the LNG guys (380 vessels) can buy NG for 30 cents, use the "boil-off" gas to fuel the ship, then offload, edge-water, for $3 per. This stuff is going to get cheaper, and it's already purer, than Putin's piped gas. 

In their board rooms, the oil giants realize that they have themselves in a bind. They're looking to enlarge Guyana and other offshore sites and quietly exit the shale fields when it's cherry-picked. They're taking huge hits from paying to get their by-product NG taken away (thus Chevron's $11B write-down). They can't continue giving away NG, selling oil for $60, and make this thing work--I don't care what anyone says, the numbers just don't pan out.

The Marcellus is going to collapse . . . only to be brought back to life when the burgeoning LNG companies need more cheap product (I predict Cheneire will start buying out those bankrupted Marcellus companies for pennies on the dollar).  

These giant companies are going to run through the shale like maize through a duck, and then there'll be some refracking (probably by the fringe companies). For the pioneers that started this shale deal, the end was written in today's Wall Street Journal. 

Lots of rancor on this topic. I think we can all agree that this shale concept is a mess. I am fascinated by the fact that the big winner has turned out to be . . . LNG. I would never have thought this possible. LNG is truly the tail wagging the dog. I believe it will become the dominant fuel for the world.

Gerry,

It occurs to me you are talking about a million sites for both shale gas and tight oil, I am focused more on tight oil as there is likely to be plenty of natural gas (that is why in the US the price is in the toilet), it is doubtful anybody makes much money at $2/MCF or less at the well head for shale gas wells.  Perhaps 1% of the wells drilled make money at that price (as in the net present value of the discounted net cash flow at a 10% annual discount rate over the life of the well is equal to the all in l well cost of the well, which includes land, D+C, facilities and plugging at end of life.)

Perhaps your million wells includes tight oil and shale gas, not sure about 600,000 shale gas wells, probably more like 300,000, though I have not modelled it, so far only about 33% of the total tight oil and shale gas wells completed have been shale gas wells, so perhaps about 200,000 shale gas wells (once gas price increase) and 400,000 tight oil wells for a total of 600,000 total "shale" wells drilled.

[jjj + 26]

1 hour ago, James Gautreau said:

. I saw a compressed nat gas station driving down to New Orleans last weekend. First time ever. 

They are all over in Oklahoma.  We have a few here in Houston. I thought about converting my car but a compressor to home fill was too expensive. When gasoline goes back up I might do it.

https://afdc.energy.gov/fuels/natural_gas_locations.html#/find/nearest?fuel=CNG

[Gerry Maddoux + 3,627]

About a million, total, is what I've imagined in my head. Let's face it, something's gotta give. 

1) We have oil prices stuck at such low levels that the LTO drillers are going broke. 2) Shale LTO has thrown onto the market gargantuan quantities of nearly-pure natural gas. 3) LNG has taken off like a rocket because of an exceptionally low cost of this NG; so much in fact that it is projected to become the dominant and lowest-cost fuel source for the next twenty years at least.

The problem is that if LTO becomes drilled out at the exact time that LNG has reached its zenith, the price of LNG will necessarily go up, because the abundance dries up from the oil wells. Now maybe the dry gas fields can take up the slack, but they're struggling too, just to stay in business. I truly think the Marcellus may wither on the vine--it's not close enough to the large export terminals. 

Truth is, we've drilled ourselves into pricing oblivion. Chevron didn't get to where they are by being dumb. Their big write-down was primarily due to the NG situation. With laying down of 300 rigs, movement out of the eastern Permian, drilling out of the sweet spots in most shale fields, we are . . . about finished. I suppose this was what Douglas Buckland said when he first started this stream: it is a fiasco. (To Doug: sorry it took me so long to see, and that I argued so hard against it.) This is bad for me, very bad, but I'm an old guy. 

Thanks for the notes.

[James Gautreau + 86]

It is done. There is only so much oil down there, and you can only get so much out, and the more you do it the better you get at it, and the better you get at it the faster it depletes. What people are not expecting is a steep decline. I know how fast shale declines. What I don't know, and for that matter what no one knows, is how fast the conventional fields are going to decline. By my bet they will decline about 6% a year. Exxon said 7%. I think most experts think 4%. Either way oil will get scarcer and more expensive. Guyana, Norway, Brazil, and now the Saudi/Kuwait border oil will help, but it will never keep up with shale decline. The Permian is dying. There are articles everywhere. Home prices have dipped, sales have stalled, hotel rates are nearly back to normal. It's over and it's not coming back until oil prices pop over $150. That's the new break even in the Permian. Nat gas will pop too, just like last time.