Shale Oil Fiasco

[Gerry Maddoux + 3,627]

4 minutes ago, James Gautreau said:

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. 

Well heck, James, you made me feel so much better that I just ordered a new shotgun. Thanks, buddy. 

The only factor that you left out is that as oil marches toward a hundred (which I agree is where it's headed), and NG prices move up a touch, more shale will be drilled. Deloitte and Touche have already determined that whether it's tier 1, 2,or 3 makes not a whit in profitability of a well, it's the way the well is drilled and completed, so there's a lot of shale out there to be drilled. 

Dennis Coyne has these beautiful models about the future. In them, he too overlooks this fact. He readily says that the price of oil is headed up--maybe by a lot--but that shale drilling will be done at 400,000 wells. I think that's far too low, because to use his models you have to plug in a target oil price, and that's tougher than it sounds. Maybe there'll be a giant discovery somewhere. Perhaps the Iranians will wipe out the Saudi facilities. Geopolitics are too complex to artfully model.  

 

[remake it + 288]

3 hours 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. 

Exactly the point and while Mr Buckman's posts are often very enlightening there is a good chance he has confused the innovation which is constant in drilling with technology leading to his dogmatism.

[jjj + 26]

1 hour ago, James Gautreau said:

 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. 

What supports the $150 break even? 

 

My god I keep getting sucked back into the thread. 

 

Jay

[James Gautreau + 86]

2 hours ago, Gerry Maddoux said:

Well heck, James, you made me feel so much better that I just ordered a new shotgun. Thanks, buddy. 

The only factor that you left out is that as oil marches toward a hundred (which I agree is where it's headed), and NG prices move up a touch, more shale will be drilled. Deloitte and Touche have already determined that whether it's tier 1, 2,or 3 makes not a whit in profitability of a well, it's the way the well is drilled and completed, so there's a lot of shale out there to be drilled. 

Dennis Coyne has these beautiful models about the future. In them, he too overlooks this fact. He readily says that the price of oil is headed up--maybe by a lot--but that shale drilling will be done at 400,000 wells. I think that's far too low, because to use his models you have to plug in a target oil price, and that's tougher than it sounds. Maybe there'll be a giant discovery somewhere. Perhaps the Iranians will wipe out the Saudi facilities. Geopolitics are too complex to artfully model.  

 

I think that's the plan. I mean OPEC just agreed to another 500,000 barrel cut, and a week later they and Kuwait are going to kiss and make up and bring their border fields online. That's their spare capacity! They know come early next year they're won't be enough oil. You can rest assured another attack on Abiqaik and this time it's down for months. The first was a trial run. Sure there's a relation to price. But I've run the numbers. For sure the Tier 1 stuff is gone. Rig counts will go up when people reading the oil leaves think they've found some Tier 1 that everyone missed. 

Edited December 23, 2019 by James Gautreau

[James Gautreau + 86]

1 hour ago, jjj said:

What supports the $150 break even? 

 

My god I keep getting sucked back into the thread. 

 

Jay

Best I can tell the EUR on the best Permian wells is 300,000 barrels, down from 700,000. When you count the 4 or 5 wells you have to drill to find that well, you're looking at $50 million. The oil out of all of them is worth maybe $20 million. So you need a hike in price somewhere around 2 to 2.5 times. 

[James Gautreau + 86]

People all over the world pay the equivalent of $300 a barrel oil now, which is roughly $12 a gallon gas. People do it, and have been doing it the last 20 years. $300 oil is where it's headed, but it will take all of 2020 and into 2021 to get there. The only thing is will it collapse like it did in 2008? I'm not so sure. This time they're will be physical scarcity, the last time there was not. It was just bid up on speculation.

[Gerry Maddoux + 3,627]

You may well be right, James. 

I predict that Putin (and the Saudis?) will increase production to inflict maximum pain. 

So, this may be the chance for OPEC+ to show their stuff. If they can rise to the occasion, the price of oil may not go up much at all. But there will be wailing and gnashing of teeth from the LNG transporters. Right now they have it pretty sweet: low cost NG at the end of the pipe, $3 edge-water at many destinations. The dry gas fields can't produce enough. 

Additionally, if the price does rise, drillers (a new bunch of six-guns) will return to the shale field. At $100, quite a bit of shale is profitable. At $200, it is all profitable. At $300, it's wildly profitable. So higher oil prices begets drilling. More drilling reins in the prices. It's going to be a goat-ropin' for sure!

 

[Chris Kanaan + 22]

On 12/16/2019 at 3:05 AM, Boat said:

I would love to see a report of DUCs that raise concern instead of saying bringing it online would hurt their image. So far bringing in DUCTs hasn’t hurt production as completions have remained steady and production has gone up.

 

 

If you review the first conference call after the EQT hostile takeover by the Rice Brothers, they essentially said the previous EQT management team was given incentives to "drill for the sake of drilling" which resulted in substandard wells.

There have been some intelligence groups which suggested similar.  Kayyros and Rystad Energy (before they were bought out by shale producers?) all predicted many DUCs would never get brought online.

Multiple shale companies (like Pioneer) are being sued in the US for giving misleading information on well potential.  They know if they bring on some of these DUCs it will be a risk to their image as they promised much more then what will be delivered and know there are serious issues that were not foreseen at the time (parent child, spacing.)  

[James Gautreau + 86]

12 hours ago, Gerry Maddoux said:

You may well be right, James. 

I predict that Putin (and the Saudis?) will increase production to inflict maximum pain. 

So, this may be the chance for OPEC+ to show their stuff. If they can rise to the occasion, the price of oil may not go up much at all. But there will be wailing and gnashing of teeth from the LNG transporters. Right now they have it pretty sweet: low cost NG at the end of the pipe, $3 edge-water at many destinations. The dry gas fields can't produce enough. 

Additionally, if the price does rise, drillers (a new bunch of six-guns) will return to the shale field. At $100, quite a bit of shale is profitable. At $200, it is all profitable. At $300, it's wildly profitable. So higher oil prices begets drilling. More drilling reins in the prices. It's going to be a goat-ropin' for sure!

 

I'm not so sure. You had oil at over $100 for 4 years straight from 2011-2014 and they never made a profit. There are reasons for that. Crews demand higher rates, oil service companies want higher rates for their equipment, hotels in the shale towns charge $850 a room, shared impossibly by 2 to 4 guys. Barack Obama is not given enough credit for managing to keep the country out of recession. I calculated $85 a barrel break even based on the debt overhang. When you take into account what I just said, I would $125 is break even. Costs are not static. That presumption is wrong.

[Gerry Maddoux + 3,627]

15 hours ago, James Gautreau said:

Best I can tell the EUR on the best Permian wells is 300,000 barrels, down from 700,000. When you count the 4 or 5 wells you have to drill to find that well, you're looking at $50 million. The oil out of all of them is worth maybe $20 million. So you need a hike in price somewhere around 2 to 2.5 times. 

Okay, James, here's a hypothetical: If you were Chevron and drilled a bunch of carefully-completed wells in the Permian but still had to do an eleven-billion-dollar write-down, and then when the media asked you why, you gave the zero price of NG as the reason (they actually paid to have a lot of gas taken away), what would you do? I mean, you're sitting there in the catbird seat, ostensibly, in control of your own destiny, and you basically admit that you're going broke if you keep on course, but you see Cheniere making serious change from taking that free NG, liquifying it, then taking it somewhere to sell it for $3-4.

The choices are either quit drilling or . . . . . . buy Cheniere, add another 200 tankers, and make your money on that end. 

I'm sure that Chevron is doing fine in the refinery and petchem business, which excels when oil prices are low but there's so much NG that you have to dispose of, the only way to handle it--if you're that big--is to go into the LNG business. If I'm sitting here in Santa Fe and come up with this, I'm pretty sure they're talking about it in their boardroom. Eleven billion write-down becomes eleven-billion-dollar profit, presto, just like that. Exxon follows suit. Oxy can't--they're overleveraged from paying waaay too much for Anadarko. The way it's going, the companies that develop or buy LNG transport will drill out the shale . . . and quickly, because their wells are all at once very profitable.  

This changes the calculus.

[James Gautreau + 86]

I see your point. I don't know the EUR of nat gas for a typical well. 

Oil production thousand barrels/day				Gas production million cubic feet/day
Region	December 2019	January 2020	change		December 2019	January 2020	change
Anadarko	568	553	(15)		7,655	7,523	(132)
Appalachia	169	171	2		33,506	33,432	(74)
Bakken	1,523	1,526	3		3,115	3,118	3
Eagle Ford	1,366	1,357	(9)		6,844	6,775	(69)
Haynesville	39	39	-		11,962	12,085	123
Niobrara	746	747	1		5,575	5,588	13
Permian	4,694	4,742	48		16,864	17,077	213
Total	9,105	9,135	30		85,521	85,598	77

 

By my calculations 9,105,000 X$60 is $546 million a day in oil revenue. Since 1 mbtu is basically 1 mcf (1.036 is the conversion) then I figure 85,600 X 2.17 is $185,000 a day in nat gas revenue. Am I missing something? Calculating it wrong. I do know worldwide the nat gas market is roughly half the size of the oil market. 

[James Gautreau + 86]

What are Ccf, Mcf, Btu, and therms? How do I convert natural gas prices in dollars per Ccf or Mcf to dollars per Btu or therm?

Btu—British thermal unit(s)
Ccf—the volume of 100 cubic feet (cf)
M—one thousand (1,000)
MM—one million (1,000,000)
Mcf—the volume of 1,000 cubic feet
MMBtu—1,000,000 British thermal units
Therm—One therm equals 100,000 Btu, or 0.10 MMBtu

In the United States, natural gas can be priced in units of dollars per therm, dollars per MMBtu, or dollars per cubic feet.¹ The heat content of natural gas per physical unit (such as Btu per cubic foot) is needed to convert these prices from one price basis to another. In 2018, the U.S. annual average heat content of natural gas for the residential, commercial, industrial, and transportation sectors was about 1,036 Btu per cubic foot. Therefore, 100 cubic feet (Ccf) of natural gas equals 103,600 Btu, or 1.036 therms. One thousand cubic feet (Mcf) of natural gas equals 1.036 MMBtu, or 10.36 therms.

You can convert natural gas prices from one price basis to another with these formulas (assuming a heat content of natural gas of 1,036 Btu per cubic foot):
$ per Ccf divided by 1.036 equals $ per therm
$ per therm multiplied by 1.036 equals $ per Ccf
$ per Mcf divided by 1.036 equals $ per MMBtu
$ per Mcf divided by 10.36 equals $ per therm
$ per MMBtu multiplied by 1.036 equals $ per Mcf
$ per therm multiplied by 10.36 equals $ per Mcf

The heat content of natural gas may vary by location and by type of natural gas consumer, and it may vary over time. Consumers and analysts should contact natural gas distribution companies or natural gas suppliers for information on the heat content of the natural gas they supply to their customers. Some natural gas distribution companies or utilities may provide this information on customers' bills.

¹ The U.S. Energy Information Administration reports natural gas in volumes of cubic feet through 1964 at a pressure base of 14.65 psia (pounds per square inch absolute) at 60° Fahrenheit. Beginning in 1965, the pressure base is 14.73 psia at 60° Fahrenheit.

[James Gautreau + 86]

INDEX	UNITS	PRICE	CHANGE	%CHANGE	CONTRACT	TIME (EST)
CL1:COM WTI Crude Oil (Nymex)	USD/bbl.	60.88	+0.36	+0.59%	Feb 2020	9:40 AM
CO1:COM Brent Crude (ICE)	USD/bbl.	66.98	+0.59	+0.89%	Feb 2020	9:39 AM
XB1:COM RBOB Gasoline (Nymex)	USd/gal.	172.47	+1.96	+1.15%	Jan 2020	9:39 AM
NG1:COM Natural Gas (Nymex)	USD/MMBtu	2.17	-0.04	-1.94%	Jan 2020	9:39 AM
HO1:COM Heating Oil (Nymex)	USd/gal.	203.39	+1.17	+0.58%	Jan 2020	9:39 AM

 

[Gerry Maddoux + 3,627]

7 minutes ago, James Gautreau said:

By my calculations 9,105,000 X$60 is $546 million a day in oil revenue. Since 1 mbtu is basically 1 mcf (1.036 is the conversion) then I figure 85,600 X 2.17 is $185,000 a day in nat gas revenue. Am I missing something? Calculating it wrong. I do know worldwide the nat gas market is roughly half the size of the oil market. 

You left off three zeros, which makes it $185M/D. 

[James Gautreau + 86]

Now it's my understanding there are 2 types of rigs, oil and gas. So a well drilled for oil probably produces a whole lot more oil than nat gas, and a well drilled for gas produces a whole lot more gas than oil, and the flaring occurs at oil wells because the infrastructure to remove the gas is not there. Are you saying that has changed and now all oil wells can capture nat gas,  since the pipelines are for both oil and gas, albeit separate, now exist and these oil wells now produce as much as 30% more revenue from the gas?  

[Gerry Maddoux + 3,627]

24 minutes ago, James Gautreau said:

16,864

By your chart, the Permian produces 16,864,000,000 btu/d. If Chevron--just to take an example b/c they're the one with the big write-down that got everyone thinking the shale was headed for the toilet (WSJ yesterday)--were to acquire enough tankers to transport their own NG production (about 5,000,000,000 btu/d) and double that by taking away an equivalent amount produced by all the independents (or just offering to take pipeline gas for say, 50 cents), and then make only one buck per on the spread, that's 10M/d, 30M/month, nearly a billion a quarter. And that's halving what the LNG transporters are making now.

Consider that WTI stays range-bound, they're going to do well at their petchem plants and refinery. Turning NG from a huge loss into a $4B/y net profit completely changes the concept. Not only that but it allows for massive organic growth, since LNG is on track to capture the dominant spot in global energy needs. The Marcellus is desperate--those wells are massive but they keep digging a deeper hole. Right now, Cheniere and Tullerium (sp) are laughing their heads off at this unexpected quirk in the energy market. Well, there's always someone bigger out there--and they're frequently nursing a nasty wound. Chevron and Exxon have made such massive stakes in the LTO field that they can't just walk away. Well, they could, but it would ding them for a very long time.

Chevron and Exxon are going to control this thing, the more I talk about it the more I'm sure. Control of the shale necessarily means control of the LNG market . . . there just isn't any other way. The only other option is to have the whole shale concept wither and die, which of course is what you and others have expounded. I don't think that's going to happen, mainly b/c of the LNG market growing exponentially--if the Marcellus all but shuts down (those wells decline like crazy), the Permian declines greatly, then the Haynesville can't carry the water. That makes the whole LNG market vulnerable, b/c the cost of pipeline NG will go up dramatically--somewhere around $3--and that makes LNG noncompetitive worldwide. 

[Gerry Maddoux + 3,627]

8 minutes ago, James Gautreau said:

Now it's my understanding there are 2 types of rigs, oil and gas. So a well drilled for oil probably produces a whole lot more oil than nat gas, and a well drilled for gas produces a whole lot more gas than oil, and the flaring occurs at oil wells because the infrastructure to remove the gas is not there. Are you saying that has changed and now all oil wells can capture nat gas,  since the pipelines are for both oil and gas, albeit separate, now exist and these oil wells now produce as much as 30% more revenue from the gas?  

1. The Permian wells are in trouble not only b/c of the parent-child squabble but b/c to bring up a bll of oil you also bring up a lot of water and scads of NG (which is almost pure methane, 80%, with the rest propane). This NG burden is halved in the Bakken, and it's 10% ethane.

2. The Texas Railroad Commission is sympathetic to the plight of the Texas drillers and operators, so they've allowed them to vent and flare even when a pipeline is coming soon (or even in place), as a lot of those guys are barely hanging on. The limit is supposed to be six months, max, but that has been stretched, I am told. The infrastructure is now pretty well in place, so venting and flaring allowances, under intense scrutiny by the national media, will now probably tow the line. BTW, North Dakota breaks its own rules too--that's how much trouble there is.

3. Yes, all oil wells can capture NG--that has been the case for years. Many rigs now use NG for fuel sources, as well as for e-fracking. The NG take-away is now mostly in place in the Permian and is coming along in ND. 

[James Gautreau + 86]

I do not expect the shale LTO revolution to end, or whither and die. I expect it to pause until the value of the oil ( and nat gas as you point out) justifies bringing it out of the ground. As Matt Simmons was so fond of saying $100 barrel oil is 10 cents a cup gasoline. You can't buy water for that, and that cup of gasoline can travel 3 miles in air conditioned comfort 5 adults. Oil will start to decline early next yer, oil prices will rise to the point drilling kicks in again, which will not stem just slow the decline. This drilling for oil will bring a lot of natural gas with it. Exxon is pairing up with Quatar at Sabine Pass. They'll start moving it overseas at a nice profit in 2021. 

[James Gautreau + 86]

8 minutes ago, Gerry Maddoux said:

1. The Permian wells are in trouble not only b/c of the parent-child squabble but b/c to bring up a bll of oil you also bring up a lot of water and scads of NG (which is almost pure methane, 80%, with the rest propane). This NG burden is halved in the Bakken, and it's 10% ethane.

2. The Texas Railroad Commission is sympathetic to the plight of the Texas drillers and operators, so they've allowed them to vent and flare even when a pipeline is coming soon (or even in place), as a lot of those guys are barely hanging on. The limit is supposed to be six months, max, but that has been stretched, I am told. The infrastructure is now pretty well in place, so venting and flaring allowances, under intense scrutiny by the national media, will now probably tow the line. BTW, North Dakota breaks its own rules too--that's how much trouble there is.

3. Yes, all oil wells can capture NG--that has been the case for years. Many rigs now use NG for fuel sources, as well as for e-fracking. The NG take-away is now mostly in place in the Permian and is coming along in ND. 

Yes I have read that. New fracking rigs use a nat gas fired gas turbine from an outfit like Solar and these power electric pumps and motors to frack wells  saving about $125,000 of diesel per well, not a lot but every little bit helps. 

[Gerry Maddoux + 3,627]

Right, the Sabine Pass is Exxon's LNG decision. What about Chevron? Maybe they have their own outlet, that I'm not aware of. If they do, someone on this board will know about it. My concept of buying Cheneire came to me last night in a fever dream (I have the flu). 

If this becomes a typical case of the tail wagging the dog: LNG becoming so large and profitable while LTO stays unprofitable, then Chevron and Exxon will emerge triumphant. And shale drilling will go on pretty much unscathed--why kill the goose that laid the golden egg, even if the goose didn't know it. 

Dennis Coyne has developed these beautiful models based on maximum entropy distribution. However, I don't believe he has factored in the concept of the tail wagging the dog: LNG driving the shale oil drilling program. Dennis?

[James Gautreau + 86]

My mistake, it's going to take 5 years to build. 

"It's going to enhance energy security not just for us but for our allies around the world," Perry said. "Imagine how Europe feels when  those winter winds crank up and the need for energy increases. And Russia seemingly has their hand of the supply valve."

Golden Pass is expected to take five years to build, requiring the hiring of more than 9,000 workers, Exxon said. Once completed the facility will require 200 staff for operations.

"This is going to be so huge for the Gulf Coast," said Rep. Randy Weber, R-Beaumont. "We have more LNG facilities in my district than anyone else."

So it comes online 2024.

Edited December 24, 2019 by James Gautreau

[D Coyne + 305]

17 hours ago, Gerry Maddoux said:

Well heck, James, you made me feel so much better that I just ordered a new shotgun. Thanks, buddy. 

The only factor that you left out is that as oil marches toward a hundred (which I agree is where it's headed), and NG prices move up a touch, more shale will be drilled. Deloitte and Touche have already determined that whether it's tier 1, 2,or 3 makes not a whit in profitability of a well, it's the way the well is drilled and completed, so there's a lot of shale out there to be drilled. 

Dennis Coyne has these beautiful models about the future. In them, he too overlooks this fact. He readily says that the price of oil is headed up--maybe by a lot--but that shale drilling will be done at 400,000 wells. I think that's far too low, because to use his models you have to plug in a target oil price, and that's tougher than it sounds. Maybe there'll be a giant discovery somewhere. Perhaps the Iranians will wipe out the Saudi facilities. Geopolitics are too complex to artfully model.  

 

Thanks Gerry,

Note that I pulled back on my oil price estimates based on hints by Mr Shellman (though he in no way endorses my estimates, I believe he thinks any model of the future is likely to be wrong, and I agree 100%).  Some at oil price have suggested a "Goldilocks" oil price of $65/bo for Brent, that price does not work for very long in the tight oil plays (the average well breaks even at $60/bo today at a 10% discount rate where NPV of future discounted net cash flow is equal to well cost.)  So I assume oil prices gradually rise from $60/bo in 2018$ today to about $90/bo in 2018$ in June 2027 and then remain at that level until 2050 and then decrease to $40/bo by 2070 and remain at that level until 2080 (end of my scenario).  The EIA's AEO 2019 reference oil price case has Brent increasing to $108/bo in 2018$ by 2050.  I doubt scenarios that have oil prices higher than about $140/b in 2018$ long term, this only occurs with a major war between all Persian Gulf Oil producers which takes 20 Mbopd of the World Market.  That kind of scenario would result in an oil price spike to $300/bo and much damage to the World economy.

A lot of my focus has been on the Permian basin.  The USGS has a mean TRR (technically recoverable resource) estimate for the Permian basin at about 75 Gb. My Permian scenario has about a 60 Gb URR for the oil price scenario I suggested above.  A higher oil price scenario that goes to $171/bo in 2018$ for Brent in 2051 could lead to as high as a 74 Gb URR, with higher maximum completion rate for the high price scenario (910 vs 730 wells completed per month at highest rates).  A lower oil price scenario (max price $70/b in 2018$) leads to lower URR of 34 Gb.  I assume there is no change in completion rate for the low price scenario compared to medium price scenario up to 2027, then economics dictates that completion rate falls rapidly because it is no longer profitable to complete wells at the higher rate due to lower oil prices.  I do not think the low price scenario is realistic and expect oil prices will fall between the medium and high price scenario, this actual Permian output might fall between the medium and high price scenarios.

[James Gautreau + 86]

Corpus Christi LNG

Corpus Christi Liquefaction, LLC (Corpus Christi Liquefaction), a subsidiary of Cheniere Energy, is developing and constructing a liquefied natural gas (LNG) export terminal at one of Cheniere's existing sites that was previously permitted for a regasification terminal. The liquefaction project is being designed for three trains with expected aggregate nominal production capacity of up to 13.5 million tonnes per annum (mtpa) of LNG. Up to seven midscale liquefaction trains adjacent to the CCL Project (“Corpus Christi Stage 3”) are also being developed. The  seven midscale trains total aggregate expected nominal production capacity will be approximately 10 million tonnes per annum (“mtpa”) of LNG.

The Corpus Christi site is located on the La Quinta Channel on the northeast side of Corpus Christi Bay in San Patricio County, Texas, on over 1,000 acres owned or controlled by Cheniere and is approximately 15 nautical miles from the coast.

Train 1 is in operation and Train 2 became operational in August, 2019. Train 3 is under construction with an expected completion date in 1H 2021.

Over 10 million tonnes per annum of LNG production capacity from Corpus Christi Trains 1-3 has been contracted to long-term third-party customers. Customers of CCL include Pertamina, Endesa, Iberdrola, Naturgy, Woodside, EDF, EDP, Trafigura, and PetroChina. Any excess capacity not sol

Chevron buying Cheniere would make the Occidental/Anadarko purchase look idiotic, and make Warren Buffet a stooge quite possibly for the first time. They're the only game in town until 2024. If there' s room, maybe add another train. 

[Gerry Maddoux + 3,627]

4 minutes ago, James Gautreau said:

Yes I have read that. New fracking rigs use a nat gas fired gas turbine from an outfit like Solar and these power electric pumps and motors to frack wells  saving about $125,000 of diesel per well, not a lot but every little bit helps. 

It's more impressive than that. I'm sure you've been around a fracking fleet during a big project. The sound pollution is awful, those are huge diesel engines and they produce a lot of sulfur. With e-fracking, they use NG straight from the well--it's that pure. The pollution from NG is a fraction of that from diesel, and the cost savings can be $300-400,000 per well . . . if you don't consider the cost for the e-fracking fleet, which is $60 million, so that is passed on. This is really a pretty big deal. It's quite, and it produces electricity for the whole project. When you're doing six or eight frack jobs from a single pad, this becomes a pleasure. The "old-fashion" fracking fleets have equipment running everywhere; e-fracking calms down the site. It's a "green" approach to an otherwise dirty business. 

[D Coyne + 305]

9 minutes ago, Gerry Maddoux said:

Right, the Sabine Pass is Exxon's LNG decision. What about Chevron? Maybe they have their own outlet, that I'm not aware of. If they do, someone on this board will know about it. My concept of buying Cheneire came to me last night in a fever dream (I have the flu). 

If this becomes a typical case of the tail wagging the dog: LNG becoming so large and profitable while LTO stays unprofitable, then Chevron and Exxon will emerge triumphant. And shale drilling will go on pretty much unscathed--why kill the goose that laid the golden egg, even if the goose didn't know it. 

Dennis Coyne has developed these beautiful models based on maximum entropy distribution. However, I don't believe he has factored in the concept of the tail wagging the dog: LNG driving the shale oil drilling program. Dennis?

Gerry,

You are correct, most of the revenue for tight oil wells comes from tight oil sales, I figure the natural gas sales offsets some of the LOE, but without the oil at adequate output levels the economics does not work.  I assume natural gas prices in the US remain low ($2.50/MCF at Henry Hub in 2018$).  My focus is on the oil as that is the resource that is likely to peak, natural gas currently is plentiful, I don't see a peak for Natural gas until 2035 at the World level and the resource is less well studied so the estimate is far less certain, my guess is 2030 to 2040 with 2035 as my best WAG for World Natural Gas peak.

An older post on this at link below (it is over 4 years old).

http://peakoilbarrel.com/world-natural-gas-shock-model/