Softpanorama

May the source be with you, but remember the KISS principle ;-)
Home Switchboard Unix Administration Red Hat TCP/IP Networks Neoliberalism Toxic Managers
(slightly skeptical) Educational society promoting "Back to basics" movement against IT overcomplexity and  bastardization of classic Unix

Softpanorama Energy Bulletin, 2016

Economics of Peak Energy 2016 2015 2014 2013 2012 2011 2010 2009 2008

Top Visited
Switchboard
Latest
Past week
Past month

NEWS CONTENTS

Old News ;-)

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

March

[Dec 27, 2016] Low oil prices and an increasingly costly war in Yemen have torn a yawning hole in the Saudi budget

Dec 27, 2016 | economistsview.typepad.com

December 27, 2016 at 04:40 AM

Low oil prices and an increasingly costly war in Yemen have torn a yawning hole in the Saudi budget and created a crisis that has led to cuts in public spending, reductions in take-home pay and benefits for government workers and a host of new fees and fines. Huge subsidies for fuel, water and electricity that encourage overconsumption are being curtailed. ...

[Dec 27, 2016] As of Dec. 14, 114 oil and gas producers had filed for bankruptcy in 2016 with $57 billion in total debt, more than double the number of filings in 2015,

Dec 27, 2016 | peakoilbarrel.com
sunnnv says: 12/26/2016 at 4:50 am
http://finance.yahoo.com/news/bonanza-creek-other-u-energy-162825818.html

"Bonanza Creek Energy Inc and two other energy firms announced on Friday plans to file for bankruptcy in coming weeks, joining a long list of U.S. energy companies that have succumbed to a drop in oil prices."

"As of Dec. 14, 114 oil and gas producers had filed for bankruptcy in 2016 with $57 billion in total debt, more than double the number of filings in 2015, "

"Among companies that provide well-site services to energy exploration firms, 110 had filed for Chapter 11 protection with $17 billion of debt as of Dec. 14, also more than double the 2015 number, according to Haynes & Boone."

224 total companies, $74 billion total debt – whoo whee, sounds like a lot of write downs

AlexS says: 12/26/2016 at 8:27 am
Dakota Plains Holdings Begins Voluntary Chapter 11 Proceeding

December 22, 2016
http://www.ogfj.com/articles/2016/12/dakota-plains-holdings-begins-voluntary-chapter-11-proceeding.html

Dakota Plains Holdings Inc. (NYSE MKT: DAKP) and six of its wholly owned subsidiaries filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the District of Minnesota on Tuesday, December 20, 2016, initiating a process intended to preserve value and accommodate an eventual going-concern sale of Dakota Plains' business operations.
.
Dakota Plains Holdings Inc. is an integrated midstream energy company operating the Pioneer Terminal transloading facility. The Pioneer Terminal is centrally located in Mountrail County, North Dakota, for Bakken and Three Forks related Energy & Production activity.

[Dec 27, 2016] Prediction for 2017 oil prices and increased probability of Seneca Cliff

Dec 27, 2016 | peakoilbarrel.com
Fernando Leanme says: 12/25/2016 at 9:13 am
My estimate continues to be $63 per barrel Brent.
likbez says: 12/27/2016 at 1:27 am
Essentially this is very close to BofA Merrill Lynch price prediction. Does not promise great profitability for shale ;-).

This price might increase the chance of Seneca Cliff.

And does not save KAS from its huge budget deficit (Platt thinks that they need at least $85 to balance the budget). Russia probably can balance budget at this price (anything about $55 average will suit)

See http://oilprice.com/Energy/Energy-General/The-Craziest-Oil-Price-Predictions-For-201712879.html

In February of this year, when WTI was just over US$31, Brandon Blossman at Tudor Pickering Holt & Co said he expected oil at US$70 by the end of the year, and at US$90 by the end of next year, commenting on the Colliers International Trends 2016 Commercial Real Estate Market Update, as quoted by Houston Agent Magazine.

Raymond James forecast WTI at US$75 in the first quarter next year and at US$80 in the fourth quarter of 2017.

U.S. Energy Information Administration (EIA) expects Brent Crude prices to average US$51.66 in 2017, with WTI Crude prices averaging US$50.66 next year.

BofA Merrill Lynch – one of the optimistic viewpoints among the investment banks – said in its 2017 Market Outlook that its forecast for WTI Crude is US$59 and Brent – at US$61. BofA Merrill Lynch also factors in a rebound of the U.S. shale patch in its price projections.

[Dec 27, 2016] How Americans Spent Their Money In The Last 75 Years (In 1 Simple Chart) Zero Hedge

Dec 27, 2016 | www.zerohedge.com
How Americans Spent Their Money In The Last 75 Years (In 1 Simple Chart) Tyler Durden Dec 25, 2016 11:55 PM 0 SHARES Consumer spending makes up 70% of the United States economy. We all have bills to pay and mouths to feed, but where do Americans spend their money? Here is a breakdown of how Americans spent their money in the last 75 years...

In the chart above, spending is broken into 12 categories: Reading, alcohol, tobacco, education, personal care, miscellaneous, recreation & entertainment, healthcare, clothing, food, transportation and housing. Each category is further broken down into spending by year, from 1941 to 2014, and each category is given a unique color. The data were collected from the Bureau of Labor Statistics . The data is adjusted for inflation and measures median spending of all Americans.

Unsurprisingly, housing expenses have almost always been the largest area of spending in America for over 70 years. The only exception is 1941, when spending on food averaged $8,311, whereas spending on housing came to $7,537. However, in 1941 the government included alcohol in the food spending category, which inflates the food spending data for that year. In the other years, alcohol was given its own category. In every other year measured, spending on housing outpaced every other category.

Another interesting trend is the downward slope of spending on clothing. Americans spent the most on clothing in 1961 for an average of $4,157. In every year measured since 1961, spending on clothing fell, even when accounting for inflation.

At the same time, Americans began spending more on education, transportation and healthcare. Spending on education has increased far more than any other category, jumping from $242 in 1941 to $1,236 in 2014. Education spending increased at a particularly fast rate between 1984 and 1994 and onward. While spending on healthcare increased between 1941 and 2014, overall spending dipped between 1973 and 1984, but then began rising rapidly thereafter.

Between 1941 and 2014 Americans spent money on most of the same things, with a few changes. Housing has persisted as a large area of spending for Americans, as has the food category. However, spending on food and clothing has fallen when adjusting for inflation while spending on education and healthcare has risen quickly.

[Dec 27, 2016] Oil Price Roulette: Investors Bet On $100 Oil

Notable quotes:
"... "was the most traded contract on Tuesday across the whole ICE Brent market." ..."
"... "That's a relatively cheap lottery ticket," ..."
"... "It's clearly not the consensus in the market that we're going to see a return to those prices any time soon, so it's more likely a hedge against unforeseen geopolitical events during that time." ..."
Dec 27, 2016 | finance.yahoo.com
Oil prices are rising and speculators are already staking out bullish positions on futures for the next few months, but some traders are rolling the dice on a much bigger price spike in the next two years.

Some contracts that pay off big time if oil prices hit $100 per barrel by December 2018 just saw a spike in interest, according to Bloomberg . The $100 December 2018 call option, Bloomberg says, "was the most traded contract on Tuesday across the whole ICE Brent market." That contract gives the owner the right to buy Dec. 2018 futures at $100 per barrel.

Few oil analysts expect oil prices to rise that high within the next two years. The oil market is still oversupplied, and even with the OPEC deal – which will take 1.8 million barrels per day off the market if fully fulfilled – the world is still flush with oil sitting in storage. It will take time to work through those inventories, providing a cushion to a tightening market. However, the sudden interest in such a remote possibility of a large price spike suggests that investors are growing more confident that the market is on the upswing.

"That's a relatively cheap lottery ticket," Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in an interview with Bloomberg. "It's clearly not the consensus in the market that we're going to see a return to those prices any time soon, so it's more likely a hedge against unforeseen geopolitical events during that time."

Related: The U.S. Oil Rig Count Hits Its Highest Level Since January

Purchasing these options may not be such a huge risk – Bloomberg says they could cost a bit more than $1 million while the payoff would be multiples of that if prices happened to go that high. It is similar to going to Vegas and playing roulette, putting some money on a single number or a few numbers, which have long odds but huge payouts. On the other hand, the spike in interest in the $100 options could also just be a small part of a broader hedging program from some companies, cropping up now since the contracts are two years out.

With oil back above $50 per barrel, money managers have become much more bullish on crude. In fact, collectively, hedge funds and other investors have sold off short bets and purchased long positions, building up the most bullish net-long position in more than two years. OPEC has not yet cut back by a single barrel, but its Nov. 30 deal in Vienna has succeeded in sparking a bull run for oil.

By Charles Kennedy of Oilprice.com

[Dec 26, 2016] Neoliberalims led to impoverishment of lower 80 pecent of the USA population with a large part of the US population living in a third world country

Notable quotes:
"... Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it. ..."
"... While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable. ..."
"... Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt. ..."
Dec 26, 2016 | economistsview.typepad.com

ilsm -> pgl... December 26, 2016 at 05:12 AM

"What is good for wall st. is good for America". The remains of the late 19th century anti trust/regulation momentum are democrat farmer labor wing in Minnesota, if it still exists. An example: how farmers organized to keep railroads in their place. Today populists are called deplorable, before they ever get going.

And US' "libruls" are corporatist war mongers.

Used to be the deplorable would be the libruls!

Division!

likbez -> pgl...

I browsed it and see more of less typical pro-neoliberal sentiments, despite some critique of neoliberalism at the end.

This guy does not understand history and does not want to understand. He propagates or invents historic myths. One thing that he really does not understand is how WWI and WWII propelled the USA at the expense of Europe. He also does not understand why New Deal was adopted and why the existence of the USSR was the key to "reasonable" (as in "not self-destructive" ) behaviour of the US elite till late 70th. And how promptly the US elite changed to self-destructive habits after 1991. In a way he is a preacher not a scientist. So is probably not second rate, but third rate thinker in this area.

While Trump_vs_deep_state (aka "bastard neoliberalism") might not be an answer to challenges the USA is facing, it is definitely a sign that "this time is different" and at least part of the US elite realized that it is too dangerous to kick the can down the road. That's why Bush and Clinton political clans were sidelined this time.

There are powerful factors that make the US economic position somewhat fragile and while Trump is a very questionable answer to the challenges the USA society faces, unlike Hillary he might be more reasonable in his foreign policy abandoning efforts to expand global neoliberal empire led by the USA.

Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it.

Add to this the decline of the US infrastructure due to overstretch of imperial building efforts (which reminds British empire troubles).

I see several factors that IMHO make the current situation dangerous and unsustainable, Trump or no Trump:

1. Rapid growth of population. The US population doubled in less them 70 years. Currently at 318 million, the USA is the third most populous country on earth. That spells troubles for democracy and ecology, to name just two. That might also catalyze separatists movements with two already present (Alaska and Texas).

2. Plato oil. While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable.

3. Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt.

4. Growth of automation endangers the remaining jobs, even jobs in service sector . Cashiers and waiters are now on the firing line. Wall Mart, Shop Rite, etc, are already using automatic cashiers machines in some stores. Wall-Mart also uses automatic machines in back office eliminating staff in "cash office".

Waiters might be more difficult task but orders and checkouts are computerized in many restaurants. So the function is reduced to bringing food. So much for the last refuge of recent college graduates.

The successes in speech recognition are such that Microsoft now provides on the fly translation in Skype. There are also instances of successful use of computer in medical diagnostics. https://en.wikipedia.org/wiki/Computer-aided_diagnosis

IT will continue to be outsourced as profits are way too big for anything to stop this trend.

[Dec 26, 2016] Radiation From Fukushima Disaster Reaches Oregon Coast

Dec 26, 2016 | science.slashdot.org
(nypost.com) 139 Posted by BeauHD on Friday December 09, 2016 @09:45PM from the hazmat-suit dept. An anonymous reader quotes a report from New York Post: Radiation from Japan's 2011 Fukushima nuclear disaster has apparently traveled across the Pacific . Researchers reported that radioactive matter -- in the form of an isotope known as cesium-134 -- was collected in seawater samples from Tillamook Bay and Gold Beach in Oregon. The levels were extremely low , however, and don't pose a threat to humans or the environment. In 2011, a 9.0-magnitude earthquake triggered a wave of tsunamis that caused colossal damage to Japan's Fukushima Daiichi nuclear power plant. The disaster released several radioactive isotopes -- including the dangerous fission products of cesium-137 and iodine-131 -- that contaminated the air and water. The ocean was later contaminated by the radiation. But cesium-134 is the fingerprint of Fukushima due to its short half-life of two years, meaning the level is cut in half every two years. Cesium-137 has a 30-year half-life. Particles from Chernobyl, nuclear weapons tests, and discharge from other nuclear power plants are still detectable -- in small, harmless amounts. While this is the first time cesium-134 has been detected on US shores, Higley said "really tiny quantities" have previously been found in albacore tuna. The Oregon samples were collected by the Woods Hole Oceanographic Institution in January and February. Each sample measured 0.3 becquerels, a unit of radioactivity, per cubic meter of cesium-134 -- significantly lower than the 50 million becquerels per cubic meter measured in Japan after the disaster.

[Dec 26, 2016] Japan Fukushima Nuclear Plant 'Clean-Up Costs Double,' Approaching $200 Billion

Dec 26, 2016 | news.slashdot.org
(bbc.com) 302 Posted by BeauHD on Monday November 28, 2016 @09:05PM from the unintended-consequences dept. An anonymous reader quotes a report from BBC: Japan's government estimates the cost of cleaning up radioactive contamination and compensating victims of the 2011 Fukushima nuclear disaster has more than doubled , reports say. The latest estimate from the trade ministry put the expected cost at some 20 trillion yen ($180 billion). The original estimate was for $50 billion, which was increased to $100 billion three years later. The majority of the money will go towards compensation, with decontamination taking the next biggest slice. Storing the contaminated soil and decommissioning are the two next greatest costs. The compensation pot has been increased by about 50% and decontamination estimates have been almost doubled. The BBC's Japan correspondent, Rupert Wingfield-Hayes, says it is still unclear who is going to pay for the clean up. Japan's government has long promised that Tokyo Electric Power, the company that owns the plant, will eventually pay the money back. But on Monday it admitted that electricity consumers would be forced to pay a portion of the clean up costs through higher electricity bills. Critics say this is effectively a tax on the public to pay the debt of a private electricity utility.

[Dec 26, 2016] Vehicle Sales Forecast: Sales Over 17 Million SAAR Again in December, On Track for Record Year in 2016

Dec 26, 2016 | www.calculatedriskblog.com
by Bill McBride on 12/26/2016 09:53:00 AM The automakers will report December vehicle sales on Wednesday, January 4th.

Note: There were 27 selling days in December 2016, down from 28 in December 2015.

From WardsAuto: December Light-Vehicle Sales to Push U.S. Market to New Record

December U.S. light-vehicle sales are forecast to finish strong enough for 2016 to top 2015's record 17.396 million units. However, actual volume largely will be determined by results in the final third of the month, because a major portion of December's deliveries typically occur after Christmas.

The forecast 17.7 million-unit seasonally adjusted annual rate is below November's 17.8 million, but above December 2015's 17.4 million.
...
Despite the drop in December's volume, total 2016 sales will end at 17.41 million units, barely edging out the all-time high set last year.
emphasis added

Here is a table (source: BEA) showing the 5 top years for light vehicle sales through November, and the top 5 full years. 2016 will probably finish in the top 3, and could be the best year ever - just beating last year.

Light Vehicle Sales, Top 5 Years and Through November
Through November Full Year
Year Sales (000s) Year Sales (000s)
1 2000 16,109 2015 17,396
2 2001 15,812 2000 17,350
3 2016 15,783 2001 17,122
4 2015 15,766 2005 16,948
5 1999 15,498 1999 16,894

[Dec 26, 2016] One estimate for 2017 average oil price is 63 dollars. This still means huge Saudi definit of budget

Dec 26, 2016 | peakoilbarrel.com
AlexS says: 12/24/2016 at 1:14 pm
Saudi 2017 budget projects 46% rise in oil revenues, no details on fuel price hikes

London (Platts)–22 Dec 2016
http://www.platts.com/latest-news/oil/london/saudi-2017-budget-projects-46-rise-in-oil-revenues-21425903

Saudi Arabia expects to earn 46% more from oil revenues in 2017 compared to this year, with expectations of rising global demand combining with the OPEC-led global production cut to push prices higher.
In its annual budget unveiled Thursday, the kingdom said its oil revenues were projected to hit Riyals 480 billion ($128 billion) next year, up from Riyals 328 billion ($88 billion).
The budget did not reveal any details about Saudi Arabia's oil production plans or targets, nor does it say what price it expects to receive for its oil, though it cited the International Monetary Fund's estimate of 2017 oil prices at $50.60/b. Oil prices in 2016 averaged $43/b, the budget document said.
Overall revenues for 2017, including non-oil revenues, are expected to rise 31% from 2016 levels to Riyals 692 billion.
With the budget laying out an expenditure plan for Riyals 890 billion ($237 billion), an 8% increase over this year, this means the kingdom will be facing a deficit of 198 billion riyals ($53 billion), down 33% from this year, as Saudi Arabia has had to tap into its reserves to withstand the low oil price environment of the last two years.
"The 2017 budget was prepared in light of developments in the local and global economy, including the estimated price of oil," the budget document states, attributing the increases in projected revenues and expenditures to energy pricing reforms.
"As the kingdom's economy is strongly connected to oil, the decrease in oil prices over the past two years has led to a significant deficit in the government's budget and has impacted the kingdom's credit rating."
Total national debt for 2016 was about Riyals 316.5 billion ($84 billion), or 12.3% of projected GDP.

Fernando Leanme says: 12/25/2016 at 9:13 am
My estimate continues to be $63 per barrel Brent.

[Dec 26, 2016] Paris, Madrid, Athens, Mexico City Will Ban Diesel Vehicles By 2025

Dec 26, 2016 | yro.slashdot.org
(bbc.com) 243 Posted by BeauHD on Friday December 02, 2016 @10:30PM from the cease-and-desist dept. The mayors of four major global cities -- Paris, Mexico City, Madrid and Athens -- announced plans to stop the use of all diesel-powered cars and trucks by 2025 . The leaders made their commitments in Mexico at a biennial meeting of city leaders . BBC reports: At the C40 meeting of urban leaders in Mexico, the four mayors declared that they would ban all diesel vehicles by 2025 and "commit to doing everything in their power to incentivize the use of electric, hydrogen and hybrid vehicles." "It is no secret that in Mexico City, we grapple with the twin problems of air pollution and traffic," said the city's mayor, Miguel Angel Mancera. "By expanding alternative transportation options like our Bus Rapid Transport and subway systems, while also investing in cycling infrastructure, we are working to ease congestion in our roadways and our lungs." Paris has already taken a series of steps to cut the impact of diesel cars and trucks. Vehicles registered before 1997 have already been banned from entering the city , with restrictions increasing each year until 2020. The use of diesel in transport has come under increasing scrutiny in recent years, as concerns about its impact on air quality have grown.

The World Health Organization (WHO) says that around three million deaths every year are linked to exposure to outdoor air pollution . Diesel engines contribute to the problem in two key ways -- through the production of particulate matter (PM) and nitrogen oxides (NOx). Very fine soot PM can penetrate the lungs and can contribute to cardiovascular illness and death. Nitrogen oxides can help form ground level ozone and this can exacerbate breathing difficulties, even for people without a history of respiratory problems. The diesel ban is hugely significant. Carmakers will look at this decision and know it's just a matter of time before other city mayors follow suit.

[Dec 26, 2016] Scientific American Column: 'It's Not Cold Fusion...But It's Something'

Dec 26, 2016 | hardware.slashdot.org
Posted by EditorDavid on Saturday December 17, 2016 @02:34PM from the low-energy-nuclear-reactions dept. An anonymous reader writes: Scientific American magazine has published a guest column on low-energy nuclear reactions (LENR) [putting] into context the history of what was mistakenly referred to as cold fusion and what happened. The bottom line is that there is compelling cumulative evidence for nuclear reactions taking place , including shifts in the abundance of isotopes, element transmutations, and localized melting of metals. Furthermore, those reactions do not have the characteristics of either nuclear fission or nuclear fusion. Despite sharp criticism from much of the scientific community after the 1989 announcement by Fleischmann and Pons, the Department of the Navy's Space and Naval Warfare Systems Center and other reputable organizations continued the research and published many papers. The article reports that "to the surprise of many people, a new field of nuclear research has emerged," adding that even in the early 20th century, atomic scientists were already reporting "inexplicable experimental evidence of elemental transmutations."

[Dec 26, 2016] Scientists Turn Nuclear Waste Into Diamond Batteries

Dec 26, 2016 | hardware.slashdot.org
(newatlas.com) 156 Posted by BeauHD on Monday November 28, 2016 @08:25PM from the one-man's-trash-is-another-man's-treasure dept. Scientists at the University of Bristol have found a way to convert thousands of tons of nuclear waste into man-made diamond batteries that can generate a small electric current for thousands of years. New Atlas reports: How to dispose of nuclear waste is one of the great technical challenges of the 21st century. The trouble is, it usually turns out not to be so much a question of disposal as long-term storage. Disposal, therefore is more often a matter of keeping waste safe, but being able to get at it later when needed. One unexpected example of this is the Bristol team's work on a major source of nuclear waste from Britain's aging Magnox reactors , which are now being decommissioned after over half a century of service. These first generation reactors used graphite blocks as moderators to slow down neutrons to keep the nuclear fission process running, but decades of exposure have left the UK with 104,720 tons of graphite blocks that are now classed as nuclear waste because the radiation in the reactors changes some of the inert carbon in the blocks into radioactive carbon-14. Carbon-14 is a low-yield beta particle emitter that can't penetrate even a few centimeters of air, but it's still too dangerous to allow into the environment. Instead of burying it, the Bristol team's solution is to remove most of the c-14 from the graphite blocks and turn it into electricity-generating diamonds. The nuclear diamond battery is based on the fact that when a man-made diamond is exposed to radiation, it produces a small electric current. According to the researchers, this makes it possible to build a battery that has no moving parts, gives off no emissions, and is maintenance-free. The Bristol researchers found that the carbon-14 wasn't uniformly distributed in the Magnox blocks, but is concentrated in the side closest to the uranium fuel rods. To produce the batteries, the blocks are heated to drive out the carbon-14 from the radioactive end, leaving the blocks much less radioactive than before. c-14 gas is then collected and using low pressures and high temperatures is turned into man-made diamonds. Once formed, the beta particles emitted by the c-14 interact with the diamond's crystal lattice, throwing off electrons and generating electricity. The diamonds themselves are radioactive, so they are given a second non-radioactive diamond coating to act as a radiation shield.

[Dec 26, 2016] EPA Increases Amount of Renewable Fuel To Be Blended Into Gasoline

Dec 26, 2016 | science.slashdot.org
(arstechnica.com) 351 Posted by BeauHD on Monday November 28, 2016 @05:00PM from the whole-is-greater-than-the-sum-of-its-parts dept. An anonymous reader quotes a report from Ars Technica: Last week the Environmental Protection Agency (EPA) announced its final renewable fuel standards for 2017 , requiring that fuel suppliers blend an additional 1.2 billion gallons of renewable fuel into U.S. gas and diesel from 2016 levels . The rule breaks down the requirements to include quotas for cellulosic biofuels, biomass-based diesel, advanced biofuel, and traditional renewable fuel. Reuters points out that the aggressive new biofuel standards will create a dilemma for an incoming Trump administration, given that his campaign courted both the gas and corn industries. While the EPA under the Obama administration has continually increased so-called renewable fuel standards (RFS), the standards were first adopted by a majority-Republican Congress in 2005 and then bolstered in 2007 with a requirement to incorporate 36 billion gallons of renewable fuel into the fuel supply by 2022, barring "a determination that implementation of the program is causing severe economic or environmental harm," as the EPA writes . Some biofuels are controversial not just for oil and gas suppliers but for some wildlife advocates as well. Collin O'Mara, CEO of the National Wildlife Federation, said in a statement that the corn ethanol industry that most stands to benefit from the EPA's expansion of the renewable fuel standards "is responsible for the destruction of millions of acres of wildlife habitat and degradation of water quality." Still, the EPA contends that biofuels made from corn and other regenerating plants offer reductions in overall fuel emissions, if the processes used to make and transport the fuels are included. "Advanced biofuels" will offer "50 percent lifecycle carbon emissions reductions," and their share of the new standards will grow by 700 million gallons in 2017 from 2016 requirements, the EPA says. Cellulosic biofuel will be increased by 81 million gallons and biomass-based diesel will be increased by 100 million gallons. "Non-advanced or 'conventional' renewable fuel" will be increased to 19.28 billion gallons from 18.11 billion gallons in 2016. Conventional renewable fuel "typically refers to ethanol derived from corn starch and must meet a 20 percent lifecycle GHG [greenhouse gas] reduction threshold," according to EPA guidelines. Other kinds of renewable fuels include sugarcane-based ethanol, cellulosic ethanol derived from the stalks, leaves, and cobs leftover from a corn harvest, and compressed natural gas gleaned from wastewater facilities.

[Dec 26, 2016] Saudi Arabia fiscal balance suggests that the kingdom has a strong incentive to cut production to achieve a normalization of inventories, even if it requires a larger unilateral cut

Notable quotes:
"... Every OPEC nation is now producing at absolute maximum capacity. With the exception of the two countries, Libya and Nigeria, that have political production problems, they are all overproducing their reservoirs. They are doing this so when they are "forced" by OPEC to cut production, they can just cut back to normal production. ..."
"... People who still talk about "OPEC spare capacity" haven't a clue as to what the hell they are talking about. ..."
"... "Ultimately, our work on Saudi Arabia's fiscal balance suggests that the kingdom has a strong incentive to cut production to achieve a normalization of inventories, even if it requires a larger unilateral cut, consistent with comments last weekend by the energy minister," Goldman said in a note. ..."
Dec 24, 2016 | peakoilbarrel.com
Ron Patterson says: 12/24/2016 at 12:04 pm
Reservoir Damages May Stop OPEC From Cheating

OPEC oil production comes primarily from conventional reservoirs. These reservoirs require reservoir pressure management. Some have suggested that Saudi Arabia's rationale for cutting production was to reverse the reservoir damage that overproduction has, or may have, caused. Preservation of reservoir integrity may ultimately limit "immediate" increases to inventories from OPEC.

Okay, will someone please tell me how Saudi Arabia could have any "spare capacity" at all if their reservoirs have been damaged from overproduction? If they are overproducing their reservoirs now, then to produce even more "spare capacity", they would have to over-overproduce those reservoirs. That would be an absurd proposal.

Every OPEC nation is now producing at absolute maximum capacity. With the exception of the two countries, Libya and Nigeria, that have political production problems, they are all overproducing their reservoirs. They are doing this so when they are "forced" by OPEC to cut production, they can just cut back to normal production.

People who still talk about "OPEC spare capacity" haven't a clue as to what the hell they are talking about.

AlexS says: 12/24/2016 at 1:03 pm
Aramco IPO May Not Reveal Oil Reserves

December 20, 2016

http://www.energyintel.com/pages/worldopinionarticle.aspx?DocID=946738

One of the biggest obstacles to Saudi Arabia's planned initial public offering (IPO) for state oil giant Saudi Aramco has been the sensitive requirement to subject Saudi oil reserves to public regulatory scrutiny. But in an unconventional move, Riyadh is considering an approach to exclude reserves from any formal accounting of Aramco's assets, according to Petroleum Intelligence Weekly. Instead, it wants to value the company based on financial returns from production over a period of years or decades. While this approach risks lowering the valuation of the company and limiting the foreign exchanges where it could have a listing, it has the advantage of preserving an important state secret. The argument for this approach is that the state owns the reserves, not Saudi Aramco, which is the monopoly producer.

.

The reserves issue was always going to be thorny, and the current thinking is to derive the value of the IPO from the value created from each barrel produced, based on a revised tax and royalty scheme that the company has been working on for months, according to Saudi industry sources. Investors will be presented with details about Aramco's 12 million barrel per day production capacity, which for the time being will not be expanded, its average yearly production and profit per barrel - or "economic rent." Aramco will only provide the unaudited 261 billion barrels of reserves that it publishes in its annual reports, and uses in a bond prospectus, as it did in October.

The justification for this unusual approach to the IPO is that Aramco does not own the reserves, the state does. And while Aramco has a monopoly to produce those barrels, it does not have the right to reveal what are the kingdom's most important assets and a closely guarded secret. Inevitably, a decision to avoid vetting reserves will reinforce suspicions by those that already think Saudi Arabia has something to hide.

Ron Patterson says: 12/24/2016 at 8:52 pm
Inevitably, a decision to avoid vetting reserves will reinforce suspicions by those that already think Saudi Arabia has something to hide.

Why don't they tell us something that we didn't already know.

AlexS says: 12/24/2016 at 1:11 pm
KSA has a clear economic incentive to cut output: Goldman Sachs raises 2017 oil price forecast on compliance rethink

London (Platts)–16 Dec 2016 842 am EST/1342 GMT
http://www.platts.com/latest-news/oil/london/goldman-sachs-raises-2017-oil-price-forecast-26622256

Goldman Sachs raised Friday its oil price forecasts for 2017 after reassessing the likelihood that key global oil producers, led by Saudi Arabia, will stick to output cut pledges under OPEC's efforts to clear the oil market glut.

After analyzing Saudi Arabia's fiscal revenue outlook for 2017, the bank said it sees the motivation for an average 84% compliance with the announced collective OPEC and non-OPEC production cuts which it estimates at a total 1.6 million b/d.

"Ultimately, our work on Saudi Arabia's fiscal balance suggests that the kingdom has a strong incentive to cut production to achieve a normalization of inventories, even if it requires a larger unilateral cut, consistent with comments last weekend by the energy minister," Goldman said in a note.

Saudi energy minister Khalid al-Falih on Saturday said his country was prepared to slash production below 10 million b/d, after having previously agreed to cut down to 10.058 million b/d.

AlexS says: 12/24/2016 at 1:14 pm
Saudi 2017 budget projects 46% rise in oil revenues, no details on fuel price hikes

London (Platts)–22 Dec 2016

http://www.platts.com/latest-news/oil/london/saudi-2017-budget-projects-46-rise-in-oil-revenues-21425903

Saudi Arabia expects to earn 46% more from oil revenues in 2017 compared to this year, with expectations of rising global demand combining with the OPEC-led global production cut to push prices higher.

In its annual budget unveiled Thursday, the kingdom said its oil revenues were projected to hit Riyals 480 billion ($128 billion) next year, up from Riyals 328 billion ($88 billion).

The budget did not reveal any details about Saudi Arabia's oil production plans or targets, nor does it say what price it expects to receive for its oil, though it cited the International Monetary Fund's estimate of 2017 oil prices at $50.60/b. Oil prices in 2016 averaged $43/b, the budget document said.

Overall revenues for 2017, including non-oil revenues, are expected to rise 31% from 2016 levels to Riyals 692 billion.

With the budget laying out an expenditure plan for Riyals 890 billion ($237 billion), an 8% increase over this year, this means the kingdom will be facing a deficit of 198 billion riyals ($53 billion), down 33% from this year, as Saudi Arabia has had to tap into its reserves to withstand the low oil price environment of the last two years.

"The 2017 budget was prepared in light of developments in the local and global economy, including the estimated price of oil," the budget document states, attributing the increases in projected revenues and expenditures to energy pricing reforms.

"As the kingdom's economy is strongly connected to oil, the decrease in oil prices over the past two years has led to a significant deficit in the government's budget and has impacted the kingdom's credit rating."

Total national debt for 2016 was about Riyals 316.5 billion ($84 billion), or 12.3% of projected GDP.

[Dec 23, 2016] 10 Energy Surprises In 2017

oilprice.com

[Dec 23, 2016] The Craziest Oil Price Predictions For 2017

Dec 23, 2016 | oilprice.com

In a Reuters poll of 29 analysts and economists carried out after the OPEC deal, Raymond James had the highest 2017 forecast for Brent price, at US$83 per barrel, while the poll saw Brent averaging US$57.01 next year.

...The market is likely to move into deficit in the first half next year by an estimated 600,000 bpd, said the International Energy Agency (IEA), as long as OPEC and non-OPEC producers manage to (and are willing to) stick to promised cuts.

... ... ...

At oil above US$55 next year, energy consultancy Wood Mackenzie sees the oil and gas industry turning cash flow positive for the first time since the downturn, and expects 2017 will be a year of "stability and opportunity" for the sector.

...(EIA) expects Brent Crude prices to average US$51.66 in 2017, with WTI Crude prices averaging US$50.66 next year.

...BofA Merrill Lynch - one of the optimistic viewpoints among the investment banks – said in its 2017 Market Outlook that its forecast for WTI Crude is US$59 and

[Dec 22, 2016] Saudis Forecast $51 Oil In 2017 Rising To $65 By 2019; Will Spend 20% Of Total Budget On Military Zero Hedge

Dec 22, 2016 | www.zerohedge.com
And while the Saudis believe the country's budget deficit will fall modestly next year even with an increase in spending , it is still set to be a painful 8% of GDP suggesting the Saudi cash burn will continue even with some generous oil price assumptions .

The budget deficit for 2017 is expected decline 33% to 198 billion riyals ($237 billion), or 7.7% of GDP, from 297 billion riyals or 11.5% of GDP in 2016 year and 362 billion riyals in 2015, the Finance Ministry said in a statement on its website on Thursday. In 2016, the finance ministry said its spending of 825 billion riyals ($220 billion) was under the budgeted 840 billion, and the 2016 budget deficit came to 297 billion, below the 362 billion in 2015.

[Dec 22, 2016] Oil Consumption Is Immune To A Transport Transformation

Notable quotes:
"... ...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand. ..."
oilprice.com

...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand.

[Dec 22, 2016] Huge Decline In U.S. Proved Oil And Gas Reserves

Proved reserved are price dependent and low price leads to the decline of proved reserves estimates.
oilprice.com

Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline.

... ... ...

Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

[Dec 21, 2016] Goldman Sachs raised its outlook for crude oil prices for mid-2017, predicting WTI prices at $57.50 by the second quarter

Dec 21, 2016 | maritime-executive.com

http://maritime-executive.com/article/us-rig-count-up-on-land-flat-offshore

"U.S. Rig Count Up on Land, Flat Offshore
permian"

By MarEx...2016-12-16

"For the seventh week in a row, the benchmark Baker Hughes Rig Count trended upwards, bringing the combined count of active oil and gas rigs in the U.S. to 637. However, only 22 of these were offshore rigs, essentially unchanged from the same period last year.

The largest part of the onshore increase was in Texas, where activity in the Permian Basin and Eagle Ford fields has brought the state's count by 14 rigs in one week. Taken together, the Permian and Eagle Ford accound for nearly half of U.S. drilling activity, with 302 rigs between them. Compared with offshore projects, onshore shale drilling campaigns like those in the Eagle Ford are remarkably inexpensive and brief; a shale well's breakeven price point is typically in the range of $30-40, depending on the field, and it is often a matter of weeks between setting up a rig and pumping first oil.

West Texas Intermediate crude prices were at $52 per barrel on Friday, well above the price point that would induce shale producers to begin new drilling, analysts say. In addition, Goldman Sachs raised its outlook for crude oil prices for mid-2017, predicting WTI prices at $57.50 by the second quarter. Goldman cited the recent OPEC and non-OPEC agreements to cut production by 1.6 million barrels per day, and said that it expects compliance with the cut agreement in excess of 80 percent.

However, assuming that the OPEC agreement holds and that competitors do not raise output to offset it, a price of $57.50 is still below the level at which many offshore projects become competitive, says Wood Mackenzie. In July, the firm found that only 20 percent of deep- and ultra-deepwater projects at the pre-FID stage are commercially viable at $60 per barrel – suggesting that offshore activity may remain quiet until prices rise further."

[Dec 20, 2016] What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff

Notable quotes:
"... What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff. ..."
Dec 20, 2016 | peakoilbarrel.com

AlexS says: 12/19/2016 at 8:28 am

George,

The situation with global natural gas is different.

1) There is significant spare capacity in a number of countries. For example, Russia has reduced gas production in the past few years due to falling demand from Europe, but can easily increase it if demand returns.

2) There are significant developed and undeveloped proven reserves. Reserves/production ratio is much higher for natural gas (see the chart below).

3) Natural gas resources are generally explored less than oil. Potential for increase in proven reserves is much bigger for natural gas.

The countries and regions with significant resource potential and able to sharply increase production include: Iran, U.S., Russia, East Mediteranean, several countries in Asia (including China).
Several countries in Africa are not producing at full potential.

Global proven reserves / production ratio for oil and natural gas
source: BP Statistical Review of World Energy 2016

VK says: 12/19/2016 at 4:27 pm
What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff.
Synapsid says: 12/19/2016 at 5:46 pm
George Kaplan,

I got a bit of a shock when I read the caption in small print: Data excludes onshore Canada, US lower-48 onshore, and US shallow-water.

AlexS says: 12/19/2016 at 6:01 pm
The chart is named "Annual conventional oil and gas volumes discovered".

Onshore Canada production is dominated by oil sands; US lower-48 onshore – by tight oil.
Conventional output in both cases is from mature fields; and there were no major conventional discoveries for many years.

US shallow-water GoM is also a mature province. New discoveries were made in deepwater GoM.

[Dec 20, 2016] How accurate are U.S. DOE/EIA Projections?

Dec 20, 2016 | peakoilbarrel.com
Roger Blanchard says: 12/17/2016 at 3:18 pm
How accurate are U.S. DOE/EIA Projections?

Here are some projections I made in 1999 which are compared to what the EIA projected in 1999.

Author's Projections Peak Prod. Year Peak Prod. (mb/d) 2010 Projected Prod. (mb/d) % Error

Norway           2001     ..3.2            .1.6           +14.4
U.K.             1999     ..2.7            .1.5           -22.0
Sum                 ..      5.9            .3.1           .0.0
U.S. DOE/EIA's Projections
Norway          ..2005     .3.9            .3.7           +97.9
U.K.             ~2006      3.3            .3.0          ..+143.9
Sum                 ..      7.2            .6.7          ..+116.1
Actual Production Values
From U.S. DOE/EIA
Norway          ..2001     .3.226          1.87
U.K.          ..  1999     .2.684          1.23
Sum                 ..      5.91           3.1 

The 2010 values for the US DOE/EIA are based upon an interpolation between the peak projected values and the 2020 projected values

Actual Production data is based upon data from the US DOE/EIA

Mexican Oil Production

In 2003, the U.S. DOE/EIA was projecting that total liquid hydrocarbons production (crude oil + condensate + liquefied petroleum gas + biofuels + refinery gain) for Mexico would rise above 4.2 mb/d by 2010. Specifically, here is what they stated in their International Energy Outlook 2003:

"Mexico is expected to adopt energy policies that will encourage the efficient development of its resource base. Expected production volumes in Mexico exceed 4.2 million barrels per day by the end of the decade and remain near that level through 2025."

It was clear by 2003 that Cantarell complex oil production (crude oil + condensate) would start declining in approximately 2005. Since the Cantarell complex produced about 60% of Mexico's oil production in 2002, it appeared obvious that as Cantarell complex oil production started declining, it would bring down Mexico's oil production as well as its total liquid hydrocarbons production.

Mexico's oil production peaked in 2004 at 3.48 mb/d. By 2010, it was down to 2.62 mb/d, a decline of ~860,000 b/d. In 2010, Mexico's total liquid hydrocarbons production was down to 2.98 mb/d according to US DOE/EIA data. The U.S. DOE/EIA was high by at least 1.22 mb/d for their 2010 Mexican production forecast.

[Dec 16, 2016] The Oil Mystery Behind Saudi Arabia's Production Cut OilPrice.com

Dec 16, 2016 | oilprice.com
The Oil Mystery Behind Saudi Arabia's Production Cut By Nick Cunningham - Dec 15, 2016, 4:56 PM CST Oil rigs Saudi Arabia surprised the world by helping to engineer an unexpectedly strong agreement from OPEC members to cut production by 1.2 million barrels per day, followed by additional cuts from non-OPEC members. While the two agreements incorporate cuts from a wide range of oil producers, Saudi Arabia will do much of the heavy lifting, cutting nearly 500,000 barrels per day and even promising to go further than that should the markets warrant steeper reductions.

Depending on one's perspective, Saudi Arabia demonstrated its diplomatic prowess and made OPEC relevant again, succeeding in talking up oil prices without sacrificing much. After all, Saudi Arabia often lowers production in winter months. Other analysts look at it a different way – Riyadh was actually pretty desperate for higher oil prices, given the toll that the two-year bust has taken on the country's economy. That led Saudi Arabia to shoulder most of the burden of adjustment, achieving only small concessions from other OPEC members, most notably Iran. Riyadh was the big loser of the deal, the thinking goes, but ultimately had no choice as the government needed higher oil prices.

There are arguments to made for both sides, but then there is a third possibility: Saudi Arabia was motivated to pullback because it was actually leaning on its oilfields too hard this year when it pushed output up to 10.7 million barrels per day, an output level that might have strained the reservoirs of some of its largest fields. Producing too aggressively can ultimately damage the long-term recovery of oil reserves. Reuters reports in an exclusive report that Saudi Aramco could have been pushing its oil fields to the limit this year, and had little choice to but to climb down from record high output levels.

[Dec 16, 2016] Deplete America first as national policy. The US is wasting its precious oil deposits like there is no tomorrow

Dec 16, 2016 | peakoilbarrel.com
Instead of switch to hybrids and smaller cars as well as using nat gas for local city tranport they are trying to comsume as much as possible. Without high tax of SUVs and opther "oil waisting" personal tranporation veiches it is impossible to sustain the US economy. the only question is when it falls from the cliff.

Boomer II says:

12/15/2016 at 1:00 pm
I've never understood the urgency of using up US oil so quickly. Better to buy someone else's at a cheap price and save ours for a time when it is depleted elsewhere.
robert wilson says: 12/15/2016 at 1:50 pm
Burn America First
shallow sand says: 12/15/2016 at 3:44 pm
I was going to type deplete America first, LOL.
likbez says: 12/16/2016 at 10:54 am
Its' not only the USA. KAS, Iran and Russia are doing the same. There are a lot of short termism obsessed politicians besides Obama administration

Especially KAS in 2014-2016. Who were instrumental in the current oil price crash.

But behavior of the Iran and Russia was also deplorable. Iran decided to get back its former market share at all costs. But they like KAS are governed by religious fanatics, so what we can expect?

At the same time Russia, which theoretically should be a rational player and have enough space and steel to build huge national oil reserves, using it as alternative currency reserves, did nothing. Instead Russia also increased oil production selling its national treasure left and right, while prices were hovering below $50.

Another bunch of short termism obsessed suckers. So much about Putin as a great statesman. And what he got in return for his stupidity - only additional sanctions and allegations that he fixed elections for Trump. Such a huge payoff.

IMHO of big oil producing nations only China behaved rationally.

Oil is not renewable resource and burning it in large SUVs and small trucks carrying one person to commute to work is a suicide. That's what the USA is doing on the national scale. Add to this all those wars for the expansion of the US neoliberal empire, the USA is fighting, which also consume large amount of oil and it looks even worse. See
http://www.ucsusa.org/clean_vehicles/smart-transportation-solutions/us-military-oil-use.html

The U.S. military is the largest institutional consumer of oil in the world. Every year, our armed forces consume more than 100 million barrels of oil to power ships, vehicles, aircraft, and ground operations-enough for over 4 million trips around the Earth, assuming 25 mpg.

So out of the total US oil consumption (let's say 20 MB/day) around 0.3 MB/day is consumed by military. I think that the figure in reality might be twice larger that cited as it is not clear how consumption of planes operating in Iran, Syria, Libya, Yemen (and generally outside the USA) is counted. But even 0.3 Mb/day is approximately the same amount that Greece, or Sweden, or Philippines are consuming. The latter is a country with over 100 million people.

In twenty-forty years this period would probably be viewed as really crazy.

[Dec 16, 2016] Saudi Arabia said it is ready to go above and beyond its pledge for the OPEC deal and cut production to below 10 million barrel per day

Notable quotes:
"... Saudi Arabia could produce more but it would likely come at the expense of optimal reservoir practices. They could certainly bring on new fields but this is a lengthy process (years) and expensive as well ..."
"... So far the kingdom is not adding any significant new producing capacity based on project announcements and rig activity but rather replacing the aforementioned 4 to 6 percent annual decline rate. ..."
"... As the chart below shows, in the past 2 years Saudi Arabia increased oil production by about 1 mb/d. The country was the main contributor to the current oil glut over that period. Now the Saudis pledge to remove from the market about half of this incremental supply. ..."
Dec 15, 2016 | peakoilbarrel.com
AlexS , 12/15/2016 at 1:53 pm
Article in Reuters explaining Saudi Arabia's shift from output maximization / market share defending to price support policy.
There are also estimates of Saudi oil production capacity.

Cost of pump-at-will oil policy spurred Saudi OPEC U-turn

Thu Dec 15, 2016
http://www.reuters.com/article/us-saudi-oil-capacity-exclusive-idUSKBN14417X

Saudi Arabia has long said it could produce as much as 12 million barrels per day (bpd) of oil if needed, but that pump-at-will claim – which would require huge capital spending to access spare capacity – has never been tested.

Sources say the kingdom may have stretched its current limits by extracting a record of around 10.7 million bpd this year, which could be one reason why Riyadh pushed so hard for a global deal to cut production.
..
With tight resources, Saudi Arabia found itself weighing the prospect of investing billions of dollars to raise oil output further if it wanted to gain more market share under a strategy adopted in 2014. Instead, cutting production amid a global glut and low prices to take the pressure off its oilfields, secure better reservoir management and save itself unnecessary expenses, seemed the perfect deal.

"You invest in raising your production when prices are high, not when they are low," a Saudi-based industry source said.

"Choices are tougher now. The question is, would the Saudi government with its tight budget put huge investment in raising production or put it somewhere else where it's needed more?"

Under the deal, Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting Countries, will from January cut output to around 10 million bpd – well below the 12 million bpd that the state has affirmed it can produce.

Saudi-based industry sources and market insiders say the kingdom cannot sustain historically high output for long. State oil giant Saudi Aramco has never tested 12 million bpd and would find it hard to keep the needed investments flowing with current low oil prices, they said.

Aramco, responding to a Reuters request for comment, said only that the company does not comment on current production levels.

One source familiar with Aramco production management said the firm's capacity stood at 11.4 million bpd and it was still working to boost that figure to 12 million by 2018.

"Twelve million bpd has been planned since 2008-2010 and every annual budget worked towards that goal," the source told Reuters on condition of anonymity.

To achieve that goal, the company has annual operating expenses (opex) of $20 billion and capital expenditure (capex) at around $40 billion, the source said.

"When the 12 million bpd plan is achieved by 2018, the overall capex will fall to $20 billion," he added.

Aramco does not disclose its opex or capex figures.

SHIFT IN THINKING

In a note to clients in May, U.S. consultancy PIRA estimated Saudi Arabia's instantly available capacity at that time at 10.5 million bpd, after tracing expansion plans since 2008 and calculating an annual decline rate of 4 percent.

"Saudi Arabia could produce more but it would likely come at the expense of optimal reservoir practices. They could certainly bring on new fields but this is a lengthy process (years) and expensive as well," PIRA wrote.

"So far the kingdom is not adding any significant new producing capacity based on project announcements and rig activity but rather replacing the aforementioned 4 to 6 percent annual decline rate."

Saudi oil officials have said they can produce up to 12 million or even 12.5 million bpd if needed, particularly in the event of a sudden, global supply disruption.

Some say it is not a question of whether Saudi can do it, it is a matter of how soon. Former oil minister Ali al-Naimi had said that to reach 12 million, Saudi Aramco would need 90 days to move rigs from exploration work to drill new wells and raise production.

Saudi Arabia has been working for most of this year towards boosting prices, rather than leaving that job to market forces, a shift from the strategy it had championed since November 2014. The pain of cheap oil was enough to bring other producers to the negotiating table, but industry sources said the kingdom was also keen to seal a deal as it plans to offload a stake in Aramco by 2018.
-----------------
My comment:

According to OPEC agreement, the Saudis pledged to cut supply by 486 kb/d from a reference production level of 10,544 kb/d to 10,058 kb/d. According to Saudi official sources (shown as "direct communication' in OPEC's monthly report), the country's crude output reached record level of 10,720 kb/d in November. According to the IEA's estimate and Reuters survey, Saudi output was also higher in November vs. October. By contrast, estimates from "secondary sources" (also shown in OPEC's MOMR), indicate a slight decline to 10,512 kb/d.

In any case, important to note that in 2016, unlike the previous years, KSA's output has stayed at elevated levels in 4Q despite the usual seasonal decline in winter when domestic consumption of crude burning for power is less. Saudi crude exports have also been high in recent months. Earlier this month, KSA cut January oil price to Asia to four-month low to keep market share. It seems that the Saudis are trying to sell as much crude as they can before the planned cuts.

Meanwhile, Saudi Arabia has informed its clients in North America and Europe that their crude oil deliveries in January will be lower, to reflect the country's compliance with the production cut agreed by OPEC members.

https://www.bloomberg.com/news/articles/2016-12-09/saudi-aramco-makes-good-on-opec-promise-to-cut-january-supplies

Furthermore, Saudi Arabia said it is ready to go above and beyond its pledge for the OPEC deal and cut production to below 10 mb/d.

http://oilprice.com/Energy/Oil-Prices/Can-OPEC-Send-Oil-To-70.html

As the chart below shows, in the past 2 years Saudi Arabia increased oil production by about 1 mb/d. The country was the main contributor to the current oil glut over that period. Now the Saudis pledge to remove from the market about half of this incremental supply.

Saudi Arabia oil output and agreed production quota (mb/d)
source: OPEC Monthly Oil Market Report, December 2016

[Dec 15, 2016] 12/14/2016 at 7:41 pm

Dec 15, 2016 | peakoilbarrel.com
According to OPEC Monthly Oil Market Report for December, the group's crude oil production rose by 150 kb/d from 33.72 mb/d in October to 33.87 mb/d in November. These estimates are based on secondary sources.
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR%20December%202016.pdf

The IEA's estimate from its Oil Market Report shows an even bigger growth: by 300 kb/d to 34.20 mb/d, led by increases from Angola along with Libya and Saudi Arabia. The group's output stood 1.4 mb/d higher than a year ago.
https://www.iea.org/oilmarketreport/omrpublic/

According to a Reuters survey, in November, OPEC produced a record 34.19 million barrels per day (bpd) from 33.82 million bpd in October.
https://www.rt.com/business/369348-oil-russia-budget-opec/

OPEC countries are pumping oil at the highest rate for the past several years, ahead of the announced output cuts in January 2017.

OPEC crude oil production, 2014-16
Source: OPEC Monthly Oil Market Report, December 2016 (secondary sources)

AlexS says: 12/15/2016 at 5:40 am
China's crude oil production increased 3.6% in November from the previous month to about 3,915 kb/d, the highest since July.
Output was down 382 kb/d (8.9%) from the same month last year.
Crude production has fallen 294 kb/d (6.9%) in the first 11 months of 2016 to 3,984 kb/d.

Comment from Bloomberg:

"China's output has declined this year as state-owned firms shut wells at mature fields that are too expensive to operate at current prices. The country needs oil above $50 a barrel to stabilize production, according to analysts at Sanford C. Bernstein, as well asFu Chengyu, the former chairman of both Cnooc Ltd. and China Petroleum & Chemical Corp. Production is forecast to drop 335,000 barrels a day this year, followed by a further slide next year of 240,000 barrel a day, the International Energy Agency said Tuesday.
"November's output pickup is probably just a blip, which won't likely persist," said Gao Jian, an analyst with Shandong-based industry consultant SCI International. "For the next six months, unless oil prices stay above $50 a barrel, we we won't see solid recovery."
The rise in production last month was in anticipation of higher crude prices amid OPEC meetings, said Amy Sun, an analyst with Shanghai-based commodities researcher ICIS-China.

China's annual crude output is seen falling to 200 million tons this year (about 4 million barrels a day), down roughly 7 percent from nearly 215 million tons last year, according to estimates from SCI International and ICIS-China."

https://www.bloomberg.com/news/articles/2016-12-13/china-oil-output-rebounds-from-7-year-low-on-opec-led-price-gain

China's crude + condendate production (mb/d).
Source: China's National Bureau of Statistics

AlexS says: 12/15/2016 at 5:47 am
China's C+C production in 2002-2016 (mb/d)

Heinrich Leopold says: 12/15/2016 at 6:51 am
AlexS,

It could be also a clever strategy to buy cheap oil from the market and leave China's oil in the ground as a strategic oil reserve.

AlexS says: 12/15/2016 at 7:40 am
I agree. It was a rational decision to cut output from high-cost fields, which was loss-making at low oil prices, rather than maximizing production.

I think that, with oil prices at $50-60, China will be able to temporarily stabilize output

shallow sand says: 12/15/2016 at 11:35 am
Yes, the US clearly needs some kind of energy policy, and I think one thing that highlights how badly this is needed is the ability of anyone who can raise the money to be able to drill 96 horizontal wells in one section of land (two if the laterals are the two mile variety).

But, I guess any mention of conservation in the US industry these days is heresy.

I would not be too critical of Chinese production falling. Seems to me they are buying up all the cheap oil they can from overproducing nations, and storing it. Makes sense to me.

[Dec 13, 2016] A Real Opportunity For An Oil Price Recovery

Dec 13, 2016 | oilprice.com
by Dan Dicker

Dec 11, 2016 | OilPrice.com


The OPEC production agreement, which we called correctly, has already helped hoist the profitable oil stocks we held, but what about 2017? One way I've looked at oil and oil stocks is by looking at the crude curve – the differentials between monthly contract prices. And a recent big move in the curve makes 2017 look very positive indeed.

I've seen all kinds of futures curves in my 30+ years of trading oil, and many analysts believe that the crude curve is really predictive of the future –but more often than not, it is merely an outline of what traders and hedgers are thinking.

here's a look at Thursday's curve:

... ... ...

These numbers represent an enormous change from the numbers we saw even two weeks ago, before the big OPEC deal in Vienna. Since 2014, we had been seeing a deep contango market, where oil prices in the future were a lot higher than where they were trading in the front (present) months. But what does a contango market mean?

Many like to look at contango markets as a signal of crude storage, and that has merit – but I like to look at the curve through the eyes of its participants: when the oil market is collapsing, as it has been since 2014, players in the futures markets know that the costs of oil recovery fall well above the trading price, and will buy future oil contracts banking on a recovery. This drives buying interest away from the present and into the future and creates our contango. This kind of market is dominated by the speculators, who are willing to buy (bet) on higher prices later on.

In contrast, the hedging players are in retreat in busting markets, dropping capex and working wells and trying merely to survive to see the next boom. It's when prices begin to recover and they gain confidence in future prices that they try to hedge and plan for the coming up-cycle. This is when speculators, if they are buying, are likely to move closer to the front months if they're buying while producers (commercials) are looking to sell futures 12-24 months out. Suddenly, you have a curve that is being more dominated by commercial players, selling back months and creating the backwardation we're starting to see right now.

You may remember that I was able to nearly predict this year's bottom in oil prices by looking for that flattening move of the crude curve in February. This latest move from a discount to a premium curve has moved more than two dollars in the last week alone. This gives me added confidence in oil prices for 2017:

Let's look, as a practical matter, why a premium (backwardated) market is absolutely REQUIRED to see a long-term recovery in oil.

Imagine you're a shale producer and you've seen prices move from $45 to $52. You've been waiting for a move like this to restart some non-core acreage that you could have working by the middle of 2017. With a deep contango market, you might have gotten $55 or even more for a hedged barrel of crude in June of 2017.

But you're not alone in looking to come out of your bunker, hedge some forward production and restart some idle wells – every other producer is trying to do the same thing. If all of you could depend on a future premium, every producer would hedge out new production and ultimately add to the gluts that have been already slow to disappear.

Related: The OPEC Effect? U.S. Rig Count Spikes Most In 31 Months

If you think about it, a premium market works to DISCOURAGE fast restarts and quick restoration of gluts that a two-year rebalancing process has only slowly managed to fix – and this is a good thing. Producers have to be wary of adding wells so quickly, even in a market that is clearly ready to again rise in price. In a truly backwardated market, the futures work to keep the rebalancing process on track and production increases slow. That governor on production is the key to keeping a rallying market strong, and the frantic addition of wells at a minimum.

The proof of all this is in the type of curves we see depending on how the markets are trading.

Now, take another look at the December-December spread chart I put up and you'll see that a Contango market was a critical component to the bull markets we saw in oil prior to 2014. Unless something very strange is happening, a Contango curve is indicative of a strong market, while a backwardated one indicates a market under pressure. It's something I've watched closely for more than 30 years to help me find major trends.

And convinces me today that oil will have a constructive 2017.

By Dan Dicker for Oilprice.com

[Dec 13, 2016] It is amazing how many times we have caught the shale oil industry lying thru its teeth but EIA still believe everything they say

Notable quotes:
"... its amazing to me, given how many times we have caught the shale oil industry lying thru its teeth, how many people (EIA and the NDIC) still believe everything it says about itself: http://www.worldoil.com/news/2016/9/22/analyst-touts-industry-s-cost-reductions-in-us-shale-plays ..."
"... "Technically" recoverable reserves is a wild ass guess based on volumetric calculations of shale OOIP over a hypothetical homogeneous area in all the producing basins throughout the country that has absolutely nothing to do with reality. Reality is that only about 5-6% of that oil is recoverable thru primary means, not 74%. ..."
"... as we have seen in the past, poor economics did not deter sharp growth in LTO production. It seems that financial markets are ready to resume funding of the shale sector, although more cautiously than in 2011-14. And shale companies are already announcing their growth plans for next year. ..."
"... I expect growth in LTO production to resume next year and accelerate in 2018. This growth will be much slower than during the years of the shale boom, but the U.S. LTO production may reach a new peak in the beginning of the next decade. ..."
"... When the EIA states we can recover 70 plus percent of TRR shale oil in America that is a grave disservice to the public. As is "undiscovered TRR," whatever the hell that is. ..."
"... If you were to poll most Americans I believe the vast majority would say we no longer have a hydrocarbon problem in America, that we have 150 years of shale oil and more than that in natural gas and that we should, and can, isolate ourselves from the rest of the energy world and become energy independent. That is a mistake. ..."
"... The shale industry, and its "groupies," has deceived many people over the past 14 years and that pisses me off, big time. ..."
Dec 13, 2016 | peakoilbarrel.com
Mike 12/12/2016 at 5:43 pm

Alex, I might wish to disagree with you regarding the EIA's predictions; its amazing to me, given how many times we have caught the shale oil industry lying thru its teeth, how many people (EIA and the NDIC) still believe everything it says about itself: http://www.worldoil.com/news/2016/9/22/analyst-touts-industry-s-cost-reductions-in-us-shale-plays

David Hughes at PCI might disagree with you also. Predicting a 74% recovery of technically recoverable shale oil reserves in America by 2040 (EIA AEO2016) is an enormous stretch: http://www.postcarbon.org/publications/2016-tight-oil-reality-check/

Dennis Coyne says: 12/12/2016 at 7:24 pm
Hi Mike,

Alex S is mostly talking about the short term forecast. I agree that the long term forecast in the EIA's AEO for LTO is much too optimistic and that Hughes' estimates are quite good.

Note that one mistake Hughes makes is confusing the undiscovered TRR with TRR, he needs to account for 2P reserves and add those to UTRR for the Bakken/Three Forks. His estimates for Bakken/Three Forks are a bit low. Maybe a couple of Gb.

Mike says: 12/12/2016 at 8:06 pm
Dennis, what in the hell is the difference in undiscovered TRR and TRR? What shale oil resources are out there left to be discovered, do you reckon? "Technically" recoverable reserves is a wild ass guess based on volumetric calculations of shale OOIP over a hypothetical homogeneous area in all the producing basins throughout the country that has absolutely nothing to do with reality. Reality is that only about 5-6% of that oil is recoverable thru primary means, not 74%. Lordy.
AlexS says: 12/12/2016 at 9:54 pm
Mike,

As Dennis says, I was talking about the EIA's short-term forecasts, which are the initial topic of this thread. The fact is that the EIA was generally too conservative in its forecasts for U.S. C+C production, which my charts above show. I think their forecast for 2017 is still too low and will be revised upwards, especially as oil prices will likely be higher than the EIA was assuming in December STEO ($51 average).

Long-term forecasts in the Annual Energy Outlook are a different story.

Note, that I totally agree with your view on shale economics. But as we have seen in the past, poor economics did not deter sharp growth in LTO production. It seems that financial markets are ready to resume funding of the shale sector, although more cautiously than in 2011-14. And shale companies are already announcing their growth plans for next year.

I expect growth in LTO production to resume next year and accelerate in 2018. This growth will be much slower than during the years of the shale boom, but the U.S. LTO production may reach a new peak in the beginning of the next decade.

Mike says: 12/13/2016 at 8:30 am
Thank you, Alex; I am aware of the title of the post and the fact that it contains information on IEA export data for Iran, JODI data on the KSA, the Marcellus gas "miracle" a discussion of Russian politics, the usual sprinkling of ant-oil, EV stuff, Donald Trump and Obamacare. You will of course forgive me for not fully understanding this statement: " the EIA's projections tend to underestimate U.S. oil production in general, and LTO output, in particular."

My interest in LTO economics is multi-faceted and because shale oil extraction is extremely expensive, and woefully unprofitable, unlike yourself, perhaps, I do not believe it will have a significant role in our energy future until we sort out how to pay for it. Hoping for higher oil prices, and "predicting" higher oil prices is not a plan, therefore stating it will grow in the future, without stating how, is dangerous, in my opinion. I don't believe it can be funded as it has been; that WILL stop, eventually. At best, whether we believe people like David Hughes, or the EIA, we only have 6-8 years of shale oil to provide to the US's total annual crude oil needs. When the EIA states we can recover 70 plus percent of TRR shale oil in America that is a grave disservice to the public. As is "undiscovered TRR," whatever the hell that is.

If you were to poll most Americans I believe the vast majority would say we no longer have a hydrocarbon problem in America, that we have 150 years of shale oil and more than that in natural gas and that we should, and can, isolate ourselves from the rest of the energy world and become energy independent. That is a mistake.

The shale industry, and its "groupies," has deceived many people over the past 14 years and that pisses me off, big time. MY industry should tell the truth about the oil and gas future. It doesn't. We will likely have to explain to our children someday why we pissed off all of our remaining resources and did not leave them anything.

Merry Christmas, y'all.

[Dec 13, 2016] Both China and India experienced record crude oil demand in November

Dec 13, 2016 | peakoilbarrel.com
shallow sand, 12/13/2016 at 12:05 am
Read on CNBC that both China and India experienced record crude oil demand in November, 2016, with China up 3.4% yoy and India up 12.1% yoy.
Boomer II, 12/13/2016 at 12:28 am
"Read on CNBC that both China and India experienced record crude oil demand in November, 2016, with China up 3.4% yoy and India up 12.1% yoy."

I went looking for something about this and have found nothing on CNBC or anywhere else. Do you have a link?

Watcher, 12/13/2016 at 2:48 am
China's consumption growth was 5% last year. India 7%.

Of course it's growing, maybe even accelerating. Population does.

There really isn't much doubt how this ends, once ppl get past the pearl clutching.

likbez,, 12/13/2016 at 10:52 am
According to Yahoo ( http://finance.yahoo.com/news/iea-ups-oil-demand-forecast-095410829.html ):

IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate.

likbez, 12/13/2016 at 11:40 am

Realistically the only country that can substantially increase its oil production in 2017 in Libya. But that requires the end of the civil war in the country which is unlikely. Iran card was already played.

Iraq is producing without proper maintenance. At some point they might have substantial difficulties.

[Dec 13, 2016] IEA ups oil demand forecast for 2017, says next few weeks are 'crucial' for markets after OPEC deal

Notable quotes:
"... The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate. ..."
finance.yahoo.com

...OPEC ... crude output in November was 34.2 million barrels per day (mb/d) - a record high - and 300,000 barrels a day higher than in October.

The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate.

[Dec 13, 2016] OPEC Monthly Oil Market Report

Notable quotes:
"... Peak oil is not just about cars. Oil is the reason why our civilization exists in its current form. Oil is why we have 7 billion people on this planet. Oil is about agriculture and food supply, it is about distribution of everything we buy and not least it is about the raw materials for many if not most of our goods. It is about almost every economic and social transaction that takes place. ..."
"... It is unbelievable what misinformation has been spread by the media. I attended a public forum of the Australian Energy Council and one participant thought that OPEC had increased oil production. My presentation on the need to replace oil by natural gas as transport fuel (instead of exporting it as LNG) was met with silence and did not spark a debate. Another participant was running away when he heard the word peak oil. ..."
"... Further re climate, most agree CO2 is a greenhouse gas but estimates of the temperature change caused by a doubling of its concentration have been coming down over the last 15 years. In other words, it may not warrant the type of policy response that is being promoted at present. ..."
"... Meanwhile the IPCC projections continue with climate sensitivity estimates of 3 to 6 degrees when the more recent estimates of ECS and TRC are consistently under 2 degrees. So contrary to what is alleged above, there is lots of doubt about the IPCC models. ..."
"... I agree with author. If you look at 2 previous OPEC meetings, the players claim disorder and inability to control output only to find resolution the day after the meeting. I believe OPEC is setting up for a freeze as we are only 1% oversupplied now. If the OPEC big wigs need to fatten the bank accounts, what better way than to set up your own long call on the cheap? ..."
"... Balance this with Iran and Iraq incapable of proper well maintenance and we will soon see inadequate supply not later than 2qtr 17′. ..."
Dec 13, 2016 | www.opec.org
is out with crude only production numbers for October 2016. All charts are in thousand barrels per day.

OPEC crude only production reached 33,643,000 barrels per day in October. This includes Gabon. Since May, OPEC production has increased 1.05 million barrels per day.

World oil supply is very near its November 2015 peak.


steve from virginia says: 08/10/2014 at 12:30 pm
All this oil tens of billions of barrels all of it non-renewable, never to be seen- or made use of again for a hundred million or more years, for all practical purpose, ever!

the greatest bulk of it put into cars where it is wasted, by people driving aimlessly in circles from gas station to gas station for entertainment purposes only By way of this idiocy we destroy ourselves and our futures. We aren't doomed, we are damned.

Mike, Sydney says: 10/10/2014 at 6:05 pm
The big mistake most energy illiterates make is to talk about their cars when the peak oil subject comes up. Most hope or assume that another form of fuel or energy will power their ride post oil.

Peak oil is not just about cars. Oil is the reason why our civilization exists in its current form. Oil is why we have 7 billion people on this planet. Oil is about agriculture and food supply, it is about distribution of everything we buy and not least it is about the raw materials for many if not most of our goods. It is about almost every economic and social transaction that takes place.

When oil becomes expensive our economies and societies will implode, jobs and goods imported from far away will disappear. This will apply worldwide. The citizens of Addis Ababa are just as dependent as the ones in Amsterdam or Atlanta.

We have exhausted most of our soils and lost the skill to eke out a living from Mother Nature without fertilizers and machines. Could it be that the least "developed" countries will lead post oil because our "developed" nations are the least able to cope without oil?

Ron Patterson says: 10/10/2014 at 6:45 pm
Mike, that's exactly what I have been trying to tell folks for years. Most just don't want to believe it. They see solar, wind and other such things as keeping BAU going for awhile.

Why don't you post over on the post section. We get a lot more traffic over there.

Peak Oil Barrel

Argh says: 04/06/2015 at 1:35 pm
Big mistake thinking that this crisis will not arrive with plenty of time to avoid it. Oil prices will rise slowly over time. However we create energy, we will find a way to pay for locomotion or create food.

Oil is down 50% This is because of new sources of supply combined with continuing energy efficiency improvement. Doomed or damned, don't hold your breath. I am sure you will find something else -- perhaps global warming, now climate change, to scare people with.

Don Wharton says: 06/10/2015 at 7:54 pm
Argh. Your comment suggests that you are a militantly ignorant troll. 97% of the competent climatologists fully support the IPCC global warming summary model. There is no reasonable doubt about this science.

In my opinion there has been a revolution in drilling technology over recent years. However, the measured rate of additional improvement is now very modest as measured by the US EIA.

Most of the recent improvement is explained by the discovery and exploitation of sweet spots which are being rapidly drained. For an objective look at prospects going forward for oil and gas you should read David Hughes' Drilling Deeper report.

This is an exhaustive analysis based on a data base of all existing US oil and gas wells. It impressively documents a future of peak oil and gas based on fully exploiting fracking technology. I don't see any magical technology that will get the projected fossil fuel resources required for business as usual. It is just not there.

Nick G says: 12/15/2015 at 2:43 pm
Oil is the reason why our civilization exists in its current form.

Not really. There's nothing magical about oil. 100 years ago civilization was pretty recognizable, and it didn't require oil.

Oil is about agriculture and food supply

For the moment. Batteries and synthetic fuel can move tractors. Electricity (from many sources) can create fertilizer.

it is about distribution of everything we buy

Rail works awfully well.

is about the raw materials for many if not most of our goods.

Meh. It produces some of our raw materials. But plastic can be produced from a lot of different hydrocarbons, and it's production doesn' necessarilly create CO2, so we could produce plastic from coal for centuries. That's plenty of time for a smooth transition.

jay says: 09/24/2016 at 7:36 am
"Not really. There's nothing magical about oil. 100 years ago civilization was pretty recognizable, and it didn't require oil." You missed his point entirely. The reason there is 7 billion people now is because of oil and what it has done for industrial, agriculture ect ect ect.

There was 1.7 billion people 100 years ago. How many people do you think would be here if not for oil and all it has done?

">For the moment. Batteries and synthetic fuel can move tractors. Electricity (from many sources) can create fertilizer<".

This is lack of a better word retarded for you to even consider that a battery will be used even in the distant future to power agricultural machinery on a mass scale. Maybe the little ride on mower you cut grass with, but that is it.

" Rail works awfully well."

Ya it does, but when it gets to a terminal, it will have to be unloaded and transported then. Which basically happens now, so what is your point? And your last comment I wont even pick apart because you obviously know little to very little about the uses of oil and the advantages it has brought humanity.

Johnny Honda says: 10/13/2015 at 2:44 am
@ Steve from Vaginia: Did you ever consider that some People have to drive to *work* and *produce* so that you can sit around and swing your testicles and so that your mommy can prepare your lunch and dinner?

So when you sit around the whole day you can think what happens in 300 years, when most of the oil and gas has been used up. We don't have time for that, but we are sure that People will find a solution.

Rubber Johnny says: 10/13/2015 at 5:59 am
One or the solution will be not driving to work and wasting time in gridlock so we can have more time to swing our balls be 'productive' on our own and our real community's terms. Real community that includes momma

Rubber Johnny

Argh says: 04/06/2015 at 1:30 pm
Oil will get more expensive, some day slowly. Right now the cost is down (50%!!!) because of new sources and efficiency improvements. I think that those who predict doom will be disappointed.
SRSrocco says: 10/12/2015 at 1:23 pm
Argh,

The falling EROI destroys your lousy assumption in spades. Your time might be better spent burning books or working on one of the dozen worthless Presidential campaigns.

Steve

RSAldeen says: 04/29/2015 at 1:50 pm
Oil is very precious raw material, our demand for oil increases day after day, year after year and century after another. The search and use other sources such as atomic, wind, tide, solar, geothermal and others will continue but the prospects / trend to keep on using oil as a main source of energy still quite high and will continue with time due to the following reasons:
Matt Mushalik says: 05/12/2015 at 7:25 pm
Thanks for the graphs. Saudi Arabia may be ramping up production ahead of the air-conditioning season. Around 600 kb/d are needed in the hottest month.

It is unbelievable what misinformation has been spread by the media. I attended a public forum of the Australian Energy Council and one participant thought that OPEC had increased oil production. My presentation on the need to replace oil by natural gas as transport fuel (instead of exporting it as LNG) was met with silence and did not spark a debate. Another participant was running away when he heard the word peak oil.

Greg Surgener says: 08/20/2015 at 3:57 am
Matt,

Im lost by ur comments. 1st of all the graphs clearly show that Opec has increased production by 2+m/d in the last year.

2ndly, Saudi's oil output charts above are for just Oil not NG. Ive never been there, are you suggesting they run generators from oil for electricity and subsequent air conditioning. Why wouldn't they run thier power plants on Natural Gas? Please educate me.

No doubt that investor sentiment and market makers are playing a significant role in price decline, as opposed to actual supply/demand issues. How do you find out how much the Opec nations have sold oil short in the various markets. Not a bad deal for them, if they can lay rigs down World wide and make the money in the commodity markets while doing so. But prices can only slide so far and for so long before that game is up. It seems like if short selling or hedging slows, buyers will outweigh sellers and the price should rise soon

Your thoughts?

Greg

Ron Patterson says: 08/20/2015 at 5:41 am
Greg, Saudi Arabia is very short of natural gas and have been for several years now. They would love to run all their power plants and desal plants on natural gas if they just had enough of it. They don't. They do burn a lot of natural gas but their supply is far short of what they need.
Nick G says: 12/15/2015 at 12:48 pm
Ron,

As best I can tell, KSA is short of NG because they've fixed the price at a very low level to subsidize domestic companies that use NG.

What have you seen about that?

Ron Patterson says: 08/20/2015 at 8:43 am
...Saudi is producing flat out right now just like every other OPEC country except Iran. Sanctions are holding Iran back. Political violence is holding Libya back, but they are still producing every barrel they can. It's just that violence keeps them from producing any more.
Keith says: 08/29/2015 at 4:55 am
A few comments:

Most polls show a split of about 60 40 in terms of views on climate science, rather than 97 3 despite what POTUS may have tweeted.

Further re climate, most agree CO2 is a greenhouse gas but estimates of the temperature change caused by a doubling of its concentration have been coming down over the last 15 years. In other words, it may not warrant the type of policy response that is being promoted at present.
http://climateaudit.org/2014/09/24/the-implications-for-climate-sensitivity-of-ar5-forcing-and-heat-uptake-estimates-2/

Meanwhile the IPCC projections continue with climate sensitivity estimates of 3 to 6 degrees when the more recent estimates of ECS and TRC are consistently under 2 degrees. So contrary to what is alleged above, there is lots of doubt about the IPCC models. The latter point comes from peer reviewed science, by, among others, Nic Lewis.

Keith says: 08/29/2015 at 6:44 am
Another point of interest is the relative steadiness of Venezuelan production. Allegedly various of the empresas mixtas (Joint Ventures between PDVSA and International Oil Co.'s) are not proportionally funded by PDVSA as they should be. As a result production is down or is not reaching targets. Apparently contractor companies will not accept new contracts from PDVSA unless they set up an escrow account or other arrangement that guarantees payment in foreign currency. It is surprising therefore that Venezuelan production shows a slight rise since December.
skykingww says: 10/22/2016 at 4:35 pm
Yes one day we will be without oil that is pumped from the earth. This is not going to happen for 100's of years. Our intellect will probably find chemical or biological solution to this problem long before we run out. If not humanity will survive. Global warming, yes its real and one day the Sun will double in size and engulf the earth. I am not worried about either. I hate winter anyway.

The problem humanity will face and not discussed near enough is the lack of clean drinking water. Everyday it becomes harder to deliver enough clean water to all areas in need. States fight over the rights to what little water pass through their terrain every year. Many times it has to be pumped from other states at a premium. The worlds population grows larger every second. crops demand more and more. Ethanol was forced on us without thought as usual by the oil fear mongers. You do not grow food to solve a commodity problem.

The land resources, water resources, and corrosive properties that Ethanol introduced far out weigh any benefit accomplished but still its forced down our throats destroying everything its poured into. So please build those oil pipelines all across the country and pump that oil at rates that keep our prices low so I can drive in circles any time I feel like it. I am not going to worry about it because about the time we run out of oil we will need those pipelines to pump clean water to all that need it.

Eric Sepp says: 11/01/2016 at 2:56 pm
I agree with author. If you look at 2 previous OPEC meetings, the players claim disorder and inability to control output only to find resolution the day after the meeting. I believe OPEC is setting up for a freeze as we are only 1% oversupplied now. If the OPEC big wigs need to fatten the bank accounts, what better way than to set up your own long call on the cheap?

OPEC will shut in wells before the Fed adjusts interest rates resulting in magnified downward pressure on oil.

Balance this with Iran and Iraq incapable of proper well maintenance and we will soon see inadequate supply not later than 2qtr 17′.

cmejunkie says: 11/14/2016 at 4:05 pm
Angola: October 2016 decline – chiefly due to Dalia maintenance (though might have peaked in this cycle as no major is rushing to invest in Angola's deepwater wells). http://www.brecorder.com/markets/energy/europe/314268-angolan-oct-crude-oil-exports-to-fall-as-dalia-enters-maintenance.html

[Dec 12, 2016] EIA's Short-Term Energy Outlook Peak Oil Barrel

Dec 12, 2016 | peakoilbarrel.com
shallow sand says: 12/11/2016 at 9:20 pm
With OPEC and non-OPEC production agreements signed, WTI futures are within less than $2 of the bottom of our preferred $55-65 range.

Where they go from here, of course, depends on compliance, demand and North American production.

1.75+ million BOPD is what has been agreed to be taken off the market. That is quite a bit more than anyone expected.

Ves says: 12/12/2016 at 12:56 pm
Shallow,
If we look just at numbers the biggest "cut" (non-volunteer) actually come from Shale in the last year and half. Without that non-volunteer "cut" price would not be where it is today. I suspect that the discussion within/between OPEC and non-OPEC was aimed just to keep price between $50-60 in the first half 2017. We really can't say at this point if they are going to do that by just "talking about it" or doing some actual "cuts". It seems at this point that it would be combination of both.
Boomer II says: 12/11/2016 at 11:55 pm
I wouldn't characterize an increase of 4% to be soaring.

Oil prices soar on global producer deal to cut crude output | Reuters : "Oil prices shot up by 4 percent to their highest level since 2015 early on Monday after OPEC and other producers over the weekend reached their first deal since 2001 to jointly reduce output in order to rein in oversupply and prop up the market."

Greenbub says: 12/12/2016 at 2:29 am
How about 5% ? That's what it is right now. What's the cutoff?
Boomer II says: 12/12/2016 at 11:51 am
My definition of soaring would be a 20% rise or more.

A 5% rise just doesn't strike me as a soar.

Boomer II says: 12/12/2016 at 12:27 am
Info like this makes me wonder what the pro-gas and oil Trump appointees plan to do. Why do we need more production?

OPEC Skeptics Flee as Production Cut Rockets Oil Past $50 – Bloomberg : "U.S. crude inventories at 485.8 million barrels are at the highest seasonal level in at least 30 years, EIA data show. Total fuel demand slipped 1.4 percent to an average 19.6 million barrels a day in the four weeks ended Dec. 2, the lowest since April.

'This tells me that a lot of U.S. output is going to be coming on line early next year because they've sold forward production,' Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by telephone. 'The market still faces big, strong headwinds. Inventories are still very high, demand is suspect.'"

shallow sand says: 12/12/2016 at 12:34 am
Hard to say how wild the shale promoters will go. Up to investors/banks.

Give 'em the money, they will spend it. They don't make money from earnings, they make it from promoting investors/bankers.

Enno says: 12/12/2016 at 10:34 am
I've a new post on the Marcellus and Utica, here .
AlexS says: 12/12/2016 at 11:47 am
Some OPEC countries increasing output ahead of the projected cut.

from Reuters:

Saudi Arabia pumped record-high amounts of oil in November, amid talks over a global deal to cut production, defying market expectations of lower output on slower domestic demand and refinery maintenance.
The world's top oil exporter told the Organization of the Petroleum Exporting Countries it pumped 10.72 million barrels per day last month, an OPEC source said, up from 10.625 million bpd in October.
In July, the kingdom's production was 10.67 million bpd, the previous high.
Iraq said its November output was 4.8 million bpd, up from 4.776 million bpd in October, another OPEC source said, as oil exports reached a record high of 4.051 million bpd.
Gulf OPEC member Kuwait reported output at 2.9 million bpd in November, lower than its 3 million bpd in October, while the United Arab Emirates kept its output virtually steady at 3.195 million bpd, according to official figures reported to OPEC.

http://www.reuters.com/article/us-opec-oil-output-idUSKBN1400J5

[Dec 12, 2016] What is the estimate of global depletion of operating oil wells for 2017? In other words what part of OPEC and non-OPEC oil production cut can be attributed to the wells decline

Notable quotes:
"... An evaluation of giant fields by date of peak shows that new technologies applied to those fields has kept their production higher for longer only to lead to more rapid declines later. ..."
"... Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent. ..."
Dec 12, 2016 | peakoilbarrel.com
AlexS says:

12/12/2016 at 11:47 am
Some OPEC countries increasing output ahead of the projected cut.

from Reuters:

Saudi Arabia pumped record-high amounts of oil in November, amid talks over a global deal to cut production, defying market expectations of lower output on slower domestic demand and refinery maintenance.

The world's top oil exporter told the Organization of the Petroleum Exporting Countries it pumped 10.72 million barrels per day last month, an OPEC source said, up from 10.625 million bpd in October.

In July, the kingdom's production was 10.67 million bpd, the previous high.

Iraq said its November output was 4.8 million bpd, up from 4.776 million bpd in October, another OPEC source said, as oil exports reached a record high of 4.051 million bpd.
Gulf OPEC member Kuwait reported output at 2.9 million bpd in November, lower than its 3 million bpd in October, while the United Arab Emirates kept its output virtually steady at 3.195 million bpd, according to official figures reported to OPEC.

http://www.reuters.com/article/us-opec-oil-output-idUSKBN1400J5

likbez says: 12/12/2016 at 2:11 pm
Alex,

What is the estimate of global depletion of operating oil wells for 2017? In other words what part of OPEC and non-OPEC oil production cut can be attributed to the natural decline due to well depletion and malinvestment during the last two years? And would happen anyway.

If you reread posts from this blog from early 2015 (which is a pretty educational and sobering read, I can tell) it is interesting how slow things change as for oil production decline in comparison with our expectations (of cause Iran played the role of a Trojan horse here, no question about it; it looks like lifting sanctions was, at least partially, designed to get this particular effect).

Like inertia of a huge tanker, the inertia of this giant global oil producing machine is simply tremendous, as most oil producing countries have state budgets linked to oil price and oil prices crush created for them classic "chess-style" Zugzwang situation in which cutting oil production was as bad option as continuing to sell oil at dumping prices dictated by KSA and the wolf packs of global "paper oil" speculators.

But, anyway, this sobering two year experience suggests that like in software development all forecasts of oil production decline should be always multiplied by the factor two, or even three 🙂

Still judging from hysterical reaction from US MSM on OPEC cut (and instant publishing of tons of stories about cheating as inevitable outcome, size of inventories alarms, revival of US shale fairy tales, etc ), 2017 might be the time when supposed (illusive) neoclassical "balance" of production and consumption is achieved.

Although I never managed to understand how realistic this simplistic concept of oil "overproduction" works, and how much it was trifecta of "Iran is back news" + "wolf packs of oil speculators" + "KSA dumping the oil (with the cheerful help from Iran ayatollahs)"

It is interesting how eagerly ayatollahs were ready to waist their national treasure selling it at really low prices after enduring years of sanctions which supposedly should teach them not to trust West (and undermining Russia in the process).

BTW one interesting side effect of this oil crush was a rapid raise of refining facilities on oil producing nations, which makes export of raw oil shrink in addition to well decline as refined products almost always have better margins then raw oil.

An interesting side question is what price level EIA meant, when it forecasted really rapid increase of shale production in the US in the second half of 2017. It is over $80? Or like Shallow Sand suggested shale oil will again rely on loans from "investors" (who are expected to be so greedy that they somehow managed to forget the lesson or 2014-2016) to get things rolling again.

AlexS says: 12/12/2016 at 3:33 pm
"What is the estimate of global depletion of operating oil wells for 2017?"

There is no specific estimate for 2017.
Most estimates are for production declines in the fields that are post peak.
Decline rates are very different for onshore and offshore fields, big and small fields,
conventional, LTO and oil sands operations, etc.
There are estimates for natural declines; for declines with applied secondary and tertiary recovery, etc.
Production in mature fields can be supported by drilling of new wells.

"In other words what part of OPEC and non-OPEC oil production cut can be attributed to the natural decline due to well depletion and malinvestment during the last two years? And would happen anyway."

Of course, some of the decline can be attributed to the natural decline due to well depletion and lower investment during the last two years. And would happen anyway.
But I cannot say exactly which portion of the projected declines is due to these factors.

This question should be analyzed country-by-country.

likbez says: 12/12/2016 at 9:24 pm
Alex,

> This question should be analyzed country-by-country.

You probably can limit yourself to giant fields, as in general only they matter.

Here are the data for 2009: which suggest around 6% annual decline, which is around 6 Mb/d a year.

I wonder, if three years of absence of new investments will get us closer to this figure. But even half of that (3%) is more then OPEC plans to cut. So IMHO they essentially do not need to do anything to achieve the cut - the natural decline will cover the bases and limited access to new investments might prevent "waive dead chicken" tactic used in shale oil.

http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields

1.The world's 507 giant oil fields comprise a little over one percent of all oil fields, but produce 60 percent of current world supply (2005). (A giant field is defined as having more than 500 million barrels of ultimately recoverable resources of conventional crude. Heavy oil deposits are not included in the study.)

2."[A] majority of the largest giant fields are over 50 years old, and fewer and fewer new giants have been discovered since the decade of the 1960s." The top 10 fields with their location and the year production began are: Ghawar (Saudi Arabia) 1951, Burgan (Kuwait) 1945, Safaniya (Saudi Arabia) 1957, Rumaila (Iraq) 1955, Bolivar Coastal (Venezuela) 1917, Samotlor (Russia) 1964, Kirkuk (Iraq) 1934, Berri (Saudi Arabia) 1964, Manifa (Saudi Arabia) 1964, and Shaybah (Saudi Arabia) 1998 (discovered 1968). (This list was taken from Fredrik Robelius's "Giant Oil Fields -The Highway to Oil.")

3.The 2009 study focused on 331 giant oil fields from a database previously created for the groundbreaking work of Robelius mentioned above. Of those, 261 or 79 percent are considered past their peak and in decline.

4.The average annual production decline for those 261 fields has been 6.5 percent. That means, of course, that the number of barrels coming from these fields on average is 6.5 percent less EACH YEAR.

5. Now, here's the key insight from the study. An evaluation of giant fields by date of peak shows that new technologies applied to those fields has kept their production higher for longer only to lead to more rapid declines later. As the world's giant fields continue to age and more start to decline, we can therefore expect the annual decline in their rate of production to worsen. Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent.

6.What this means is that it will become progressively more difficult for new discoveries to replace declining production from existing giants. And, though I may sound like a broken record, it is important to remind readers that the world remains on a bumpy production plateau for crude oil including lease condensate (which is counted as oil), a plateau which began in 2005.

The question to you - do any newer data for such fields exist, as new technologies to extend the life of the field were developed since 2010. Also infill drilling is now used extremely aggressively by all major players, as if there is no tomorrow

[Dec 12, 2016] Oil soars as non-OPEC producers agree on caps

Dec 12, 2016 | finance.yahoo.com

[Dec 11, 2016] XOM has long coveted the Siberian and sub-Arctic oil and Russia deeply needs our technology and capital to develop them

Dec 11, 2016 | www.nakedcapitalism.com
MikeRW , December 11, 2016 at 9:33 am

RE: Tillerman to State

XOM has long coveted the Siberian and sub-Arctic oil and Russia deeply needs our technology and capital to develop them. Remember, Russia is a petro state and their economy is highly dependent on hydrocarbons. Also, as one of the great kleptocracies the ruling class, driven by Putin, needs higher oil prices to continue to drive their personal wealth. A major reason Russia seized the Crimea is that there is a very large offshore natural gas reserve that the Ukraine was putting up for bid and it looked like Gazprom wouldn't get it. A new, major source of natural gas to W. Europe is a direct threat to Russia which uses natural gas for both economic gain and political leverage. As I recall when they were trying to exercise political power in Ukraine they shut down the pipe of gas to them. I do not believe it is an accident that the Glencore investment into Rosneft occurred once Trump won and the prospects for a change in US policy looked possible (probable?). Russia is heavily indebted and any increase in export revenues can only help them. There has been some appreciation in the Ruble since the election. [Though I would expect a cold winter in W. Europe to help them more in the short run than the time it will take to alter US policies.]

This probably means an end to the US participation in the multi-lateral agreement with Iran, which somewhat helps Russia as it keeps US dollars out and slows the development and export of Iran's oil. A modest potential bump up in oil prices. I would expect a loosening or end to the sanctions against Russia by Treasury pretty quickly.

One also has to wonder if the recent agreement by OPEC to cut production was influenced by Trump's win. It either is a signal by the Saudi's that they can influence oil prices in the short term, which in this case pushes them up. Though I suspect they will be cautious and keep them below say $80 per barrel for Brent to ensure that there isn't a resumption of fracking in the US. For all the bluster, fracking is expensive oil and the drop in drilling reflects economics and isn't a function of regulations.

Jim Haygood , December 11, 2016 at 12:14 pm

Best rationale I've seen for the Saudis' sudden willingness to cut and cut some more, is that $80 crude will bolster Aramco's valuation in the planned 2018 IPO.

Another factor in pulling off Aramco's epic IPO will be keeping the global economy out of recession and OECD stock prices bubbly.

Perhaps the Saudis could give us a hand with that last bit. Dow 22,942!

Brucie A. , December 11, 2016 at 11:38 am

The New Yorker: Rex Tillerson, from a Corporate Oil Sovereign to the State Department

The news that President-elect Donald Trump is expected to nominate Rex Tillerson, the chairman and chief executive of ExxonMobil, as his Secretary of State is astonishing on many levels. As an exercise of public diplomacy, it will certainly confirm the assumption of many people around the world that American power is best understood as a raw, neocolonial exercise in securing resources.

[Dec 11, 2016] The solution to limited Earth resources is to substitute redistribution for growth. A refinement is to redefine standard of living, so it isnt just standard of consumption but measures quality of life

Notable quotes:
"... I'd like to see a lot more about steady-state economics on here; that means I and you should dig up articles and sources and send them to "blogger" or to Lambert for the Watercooler. They don't take assignments and they're infernally busy, but they do appreciate suggestions. ..."
www.nakedcapitalism.com

Webstir December 10, 2016 at 12:40 pm

From the Automatic Earth link:

"Every species that finds a large amount of free energy reacts the same way: proliferation. The unconscious drive is to use up the energy as fast as possible. If only we could understand that. But understanding it would get in the way of the principle itself. The only thing we can do to stop the extinction is for all of us to use a lot less energy. But because energy consumption provides wealth and -more importantly- political power, we will not do that. We instead tell ourselves all we need to do is use different forms of energy."

In the wake of the election, I have heard many on here (including the curators) talking about how the election was all about jobs - read economic growth. As Herman Daly has pointed out, perpetual growth is an oxymoron when constrained by a finite number of energy resources. So please, can someone on here offer an explanation for the obvious cognitive dissonance? In general, I'm convinced most of the people that interact on this page would call themselves environmentalists.

So how, out of the other side of our mouth, can we talk about focusing on economic growth as a panacea to our political problems? This goes to the root of what I think my most important mission is moving forward. Namely, finding a way to bring labor and environmentalism together. Thoughts anyone?

MyLessThanPrimeBeef December 10, 2016 at 2:34 pm

To avoid death, for many people, it means having a job (or more).

When one is not facing death, one can elevate oneself to think about high ideals when one is exceptional, perhaps one can do that while looking at the Grim Reaper.

I believe we can happier with a smaller GDP. That's not growth. That's opposite of growth.

As it turns out, the destination is easy to understand. Perhaps because its too late to avoid arriving there, as more a few have commented, the game now is about taking control during the journey with many climate renaissance sweet spots to live comfortable around the globe. That game is tied to wealth and power inequality.

It's not about cutting down overall carbon emissions, but who should cut more. It's not that there will be droughts, but securing water sources huge underground aquifers, for example.

And so on and so forth.

To the extent the deplorables are visible now, it gives hope that the journey will not be one where they're simply jettisoned along the way.

Grebo December 10, 2016 at 2:35 pm

An important question.

Growth means an increase in wealth. Wealth and energy do not have a one-to-t-one relation, it seems to me. A low-energy appliance can be more valuable than a high-energy one, for example. So sustainable growth means doing more with less. Recycle old inefficient wealth into new, more efficient wealth.
Wealth can also mean services, and many services can be performed without much use of energy or resources.

Oregoncharles December 10, 2016 at 3:07 pm

You're not alone. In fact, there's NC slang for the concept: "groaf."

The contradiction is built into liberal economics, including MMT. The political motive is that reality turns economics into a zero-sum game: the "grim science." As far as I know, Daly and his movement are the only ones to really address the problem.

The solution is to substitute redistribution for growth. A refinement is to redefine "standard of living," so it isn't just "standard of consumption" but measures quality of life. Of course, redistribution is a big political challenge; furthermore, it tends to encourage growth – poor people spend all they get.

I'd like to see a lot more about steady-state economics on here; that means I and you should dig up articles and sources and send them to "blogger" or to Lambert for the Watercooler. They don't take assignments and they're infernally busy, but they do appreciate suggestions.

Here's the basic source: CASSE, http://steadystate.org/ .

craazyboy December 10, 2016 at 5:55 pm

Pretty easy really. I'll wing it and create a new offshoot of economics.

I'll call it Refrigerator Economics. Growth for the consumer would be if it could purchase the good old refrigerator that lasted 25 years and pay 10% more to include energy saving technology. More insulation and more efficient motor/compressor. Even if this doesn't sound very innovative.

Growth for the industry is when they crappify and sell 9 year refrigerators for the same money. Then the consumer has to buy a new one and have the old one hauled to a landfill. Industry is busy digging holes to obtain resources to make the new crappy refrigerator. In spite of industry being known for it's beady eyed efficiency, typically these are not even the same hole in the ground. Buying furniture works the same way.

Conventional economic theory tells us the second way is better. One more reason to hate economics.

Jeremy Grimm December 10, 2016 at 7:47 pm

I believe in the growth of knowledge as contributing to the GNP. We could invest in basic research. The H1-B problem could be eliminated with major research efforts employing the brightest and best from around the world. We used to do that kind of thing - the space race provides a pale example. There are problems to solve - major problems - and we are on the cusp of great discoveries in many fields. I am most bullish on chemistry and biochemistry.

If unused or under-utilized labor really is available to be employed through the machinations of fiat currency I can't think of a better application of excess capacity than putting the many researchers we've trained to work doing research.

Oregoncharles December 10, 2016 at 11:28 pm

Another approach: http://www.truth-out.org/news/item/38675-stop-fixating-on-economic-growth-let-s-talk-about-quality-of-life ;

Grebo December 10, 2016 at 7:34 pm

I skimmed it the other day. Found it too long and whiny I'm afraid, but then I'm technically minded and long familiar with the issues.

It seems unlikely to me that we can prevent the collapse of technological civilisation worldwide due to our exhaustion, pollution and destruction of the ecosphere. We would need to reduce our population quite quickly, keep (or put) most of it in poverty and only allow a small elite to live like Americans. This seems to be the current gameplan.

A more ethically acceptable, but less certain, approach would be to try to quickly bring everyone up to a level of prosperity and security where population falls naturally, whilst minimising resource use and pollution. The latter will require technological improvements and is a race against time and energy depletion. It will also require some kind of defeat of the current elite.

[Dec 11, 2016] The geopolitical aspect of oil and West attack on Russia

Notable quotes:
"... Libya and Venezuela peaked long ago. Russia is at her peak right now. Iran is very likely post peak. Iraq can increase production slightly but is very near her peak. Kazakhstan is at 1.75 million bpd and if they can manage to keep the toxic oil from Kashagan from corroding their pipes they may one day get to 2 million bpd. Big deal. ..."
"... The Ukraine crisis was provoked by NATO itself (see: EuroMaidan) and Russia reacted to it. NATO was long looking for an excuse as well as the right timing for imposing sanctions on Russia. ..."
Dec 11, 2016 | peakoilbarrel.com
Stavros H says: 12/10/2016 at 4:11 am
What Ron Patterson and the Peak Oil-ers in general fail to include in their calculations is the geopolitical aspect of oil, as well as Global Economics.

In order for us to understand what the imperatives are in dictating oil production levels, prices etc we should be at first able to distinguish between the different types of oil producers. To provide the most obvious contrasting example, let's take Russia & the USA. These two major oil producers are quite dissimilar to each other, if not outright opposites. For Russia – a much poorer country – oil production is *the* core industry, as well as the core export item which is vital for the country's success or failure. The US – a much wealthier country – despite its high production levels, is still a massive importer. This distinction makes a world of difference. For the US, the aim of oil production is to be maximized, so that imports can be minimized and also that oil exporters (such as Russia) can enjoy far less strategic or economic leverage. Hence, the expensive and risky gambit on shale oil and tar sands in North America. For Russia on the other hand, the goal is never to maximize production, their aim is to balance production levels with price levels so that the Russian economy can get the best results and the country the most leverage possible in the long-run. My point here is that when we make forecasts over future production we should always make the distinction between countries that are producers, yet importers and countries that are producers-exporters and rely to a high (or absolute) degree on oil revenues for their well-being. So, the first distinction we can make, is between oil-producing-exporters and oil-producing-importers. The first category would include: Russia, KSA, Iraq, Iran, Kuwait, UAE, Libya, Venezuela etc, while the 2nd would include the US, China, UK, India etc But another, even more important distinction is crucially important here. Some of the oil exporters are part and parcel of the US-EU (NATO) economic-military structure while others are not. The first category would include: KSA, Kuwait, UAE, Norway, Canada etc while the second category would include: Russia, Iraq*, Iran, Libya*, Venezuela, Kazakhstan etc

From the above, another clear conclusion arises. The US-EU Axis (NATO) has calculated that the oil exporters it doesn't already control must be attacked until a high degree of control over them can be imposed. This has taken the form of a direct military attack as in the cases of Libya and Iraq, or the form of Hybrid Warfare methods of sabotage and subversion against all the others.

Now, how does all this relate to actual production levels? My point here is this, the dominant US-EU Axis is very much interested in suppressing the levels of oil production (or conversely, the level of prices) from places such as Russia, Iran, Iraq etc whenever this is possible (for example, when the North Sea and North Slope were being developed, or when shale/tar sands came online more recently) In fact they have been doing exactly that for decades now (pressure on Yeltsin's Russia, sanctions on Saddam's Iraq, sanctions on Iran and now sanctions on Russia) As you can see, the sanctions carousel shifts between these 3 oil giants that NATO does not control.

This is the point I have been periodically making on this blog but nobody seems to be picking up on it. Yes, countries such as the US, Norway, UK, Indonesia etc have peaked to various degrees and can only maintain or increase production temporarily via massive capital expenditure and technological breakthroughs. While countries that have been victims of US-EU (NATO) hostility are merely trying to navigate out of the siege laid against them until they hold enough leverage to produce closer to their real potential.

So, for the umpteenth time, Russia, Iran, Iraq, Kazakhstan and very possibly Libya and Venezuela are nowhere near the peaks and will be growing producers in the coming decades. The only question is whether this will be done under their own terms, or under NATO's terms.

Ron Patterson says: 12/10/2016 at 1:44 pm
For the US, the aim of oil production is to be maximized, so that imports can be minimized and also that oil exporters (such as Russia) can enjoy far less strategic or economic leverage.

Baloney! The US government does not have an aim of oil production. The US government does not produce a single barrel of oil. Oil, in the USA, is produced by private and publicly owned companies. Their aim is to make money, nothing else.

Hence, the expensive and risky gambit on shale oil and tar sands in North America.

Again, that risky gambit was not made by the US government, it was made by private and publicly owned companies. They took that risky gambit because they thought they could make a fortune. Do you really believe they had Russia in mind when they decided to drill and frack that oil bearing shale? Do you really believe they did it because they wanted Russia to enjoy less economic leverage? I doubt that any of them really gave a shit about Russia's welfare.

The US sanctions against Russia was because of their takeover of Crimea and their invasion into Ukraine. It had nothing to do with trying to suppress their oil production. Ditto for the Iranian sanctions. Obama wanted to halt their development of nuclear weapons. Good God man, do you really believe those sanctions was about suppressing their oil production instead?

So, for the umpteenth time, Russia, Iran, Iraq, Kazakhstan and very possibly Libya and Venezuela are nowhere near the peaks and will be growing producers in the coming decades.

Libya and Venezuela peaked long ago. Russia is at her peak right now. Iran is very likely post peak. Iraq can increase production slightly but is very near her peak. Kazakhstan is at 1.75 million bpd and if they can manage to keep the toxic oil from Kashagan from corroding their pipes they may one day get to 2 million bpd. Big deal.

Stavros H says: 12/10/2016 at 7:13 pm
So you really believe that the USG has no way of influencing what the various American corporations do? There is no such thing as "free-market" in the abstract, the state is involved heavily every step of the way. Legislation, regulation, taxation, subsidies (or lack thereof) directions to financial institutions, bail-outs etc etc etc. I am not of course saying that the USG commands US corporations as would be the case under say a Stalinist system, but you can bet it can *influence* it. Several laws were passed around more than a decade ago in order to precisely encourage shale operations (Cheney was behind them) Secondly, I find it shocking that you deny the most obvious statement I made, namely that major oil importers struggle any which way they can to minimize oil imports, maximize own oil production (if they have any oil reserves that is) and also control the countries that do export oil. Just read what the CIA said about the Persian Gulf right after WWII. Control of oil-rich regions has been an absolute imperative for US FP since then. Astonishing that anyone that can doubt that. As for your claims about anti-Russian sanctions, again your ignorance about geopolitics is astonishing.

The Ukraine crisis was provoked by NATO itself (see: EuroMaidan) and Russia reacted to it. NATO was long looking for an excuse as well as the right timing for imposing sanctions on Russia. The Ukraine crisis, as well as rising oil production in North America provided a perfect opportunity for those sanctions to be imposed at the time they did, otherwise they would have looked pretty pathetic.

And notice what the sanctions were all about: a) no selling of oil equipment to RUS firms, b) no lending to RUS oil firms, c) no US-EU oil corporation can invest in RUS oil or cooperate with RUS oil companies. This, coupled with a crushed price was hoped that would discourage/impede the Russian oil industry. It's so eye-popping it hurts. BTW, I am not moralizing here, I am just presenting the facts as I see them, from the prism of RealPolitik.

As for your persistent belief that every country in the world has peaked in terms of oil production. How long do you have to be proven wrong until you admit it? I am sure that you thought that Iraq under Saddam had "peaked" or that during the early years of US occupation it had also peaked. But what do we see?

A war ravaged country being able to rapidly expand production. Imagine what the Iraqi oil production levels would be if the country enjoyed some relative piece and the global market called for it? My point here is that these countries are constrained by market as well as geopolitical factors, which you seem to completely ignore.

So, I hope that your blog is still around in the coming years, when all of Russia, Iran, Iraq, Libya, Venezuela & Kazakhstan boost oil production. Some of them will boost their production massively, others significantly. You will see.

Hickory says: 12/11/2016 at 12:07 am
I'm sure the world looks like you depict it, from where you look Stravos. But it doesn't look like that from here.

Russia has sanctions imposed on it for acting aggressive on its borders. I'm sure it feels uncomfortable to be surrounded, and not have a good port to the south for its navy. I truly believe that USA and the rest of the modern world were hoping Russia would join in a constructive and cooperative role after the Soviet breakup, but they have failed miserably so far. Still hope though.

And Iran has sanctions imposed because they have been an extremely aggressive theocracy that no one wants to have nukes- the sanctions imposed included China and Russia as sponsors. Also, it was to Russia advantage economically, to not have Iranian oil on the market.

China, Europe and USA do prefer to have Iranian oil on the market, but not at the cost of a theocracy (bizarre) with nucs.
More to say- but thats enough to chew on.

AlexS says: 12/11/2016 at 5:58 am
"Russia has sanctions imposed on it for acting aggressive on its borders"

What about >90% of Crimea's population voting for re-unification with Russia?

"extremely aggressive theocracy"

What about Saudi Arabia sponsoring terrorists all around the world? Is it a perfect modern democracy?

Stavros H says: 12/11/2016 at 6:01 am
I talk Real-Politik but you have again collapsed into the cheap hypocritical nonsense of the MSM and pseudo-experts. The mere suggestion that Iran has been "aggressive" is insulting to my intelligence. Iran can't be aggressive regardless of their inner desires. Iran can only hope to defend itself from the US & its allies and even that would have been impossible without Russian and Chinese support from behind the scenes. I don't see why you think that Russia & China going along with the West on imposing sanctions on Iran somehow proves that the excuse for them was truthful. No, Russia & China both make deals with the West all the time, in the hope that they can serve their own interests as best possible. If it means screwing Iran in some cases, then so be it. Every state is in this for its very own interests (no permanent allies, only permanent interests)

As for Russia. There wouldn't be a more catastrophic scenario imaginable for the West (especially Europe) if Russia ever managed or was allowed to enter the global marketplace in anything remotely resembling "fair terms". The reason why NATO is so obsessed with Russia is because that country possesses *all* the necessary elements (massive hydrocarbon reserves, nukes, metals, strategic location, geographic size) for a superpower, except of course the economic part. But, as NATO strategists are keenly aware, that can change, and if it does, then the Global Balance of Power changes radically and at the expense of NATO. This is why Russia is NATO's number one target and not say China, or India or anybody else. Most people have been fooled by thinking that power in international relations is all about the size of your GDP. While this may be true for most countries, it's definitely not true when it comes to Russia. If I were NATO I would be doing the same and more in order to bring Russia down.

[Dec 11, 2016] 12/09/2016 at 4:48 am

Dec 11, 2016 | peakoilbarrel.com
Rosneft sells 10% stake to Qataris and Glencore. That's a pretty big surprise to me at least.

https://www.bloomberg.com/news/articles/2016-12-07/glencore-qatar-fund-buy-russia-s-rosneft-stake-for-11-billion

(An article in the FT is better but behind a paywall – try the Google route if interested).

Chevron to cut budget another 20% in 2017. Much bigger than expected, again by me anyway.

http://www.reuters.com/article/us-chevron-outlook-idUSKBN13X01S

International rig counts are out – up five overall, mostly a bounce back to around September numbers from an unusually big dip in October, especially in the North Sea.

http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsintl

Also I took a look at some of the Bakken daily reports for this week, new permitting and completions announcements seem to have come to a stop – maybe the extra cold weather, or maybe someone on vacation and not completing the paperwork, or a sign of things to come?

Is this the news of an industry with a rosy glow of optimism following the OPEC announcements? Too early to feel the impact yet I guess.

[Dec 11, 2016] I won't deny there is an uptick in drilling coming, it is just that I perceive they are trying to hold the leases not that they are jumping at $50 oil to plan to go all out for that reason.

Notable quotes:
"... Most shale oil companies are looking down the barrel of loans coming due beginning 2017 and continue to do stupid things with borrowed money because they have no choice. In spite of lower costs and higher EUR's brain washing campaign, they are all still losing money hand over fist. Even mighty EOG. ..."
Dec 11, 2016 | peakoilbarrel.com
Guy Minton says: 12/09/2016 at 3:05 am
I won't deny there is an uptick in drilling coming, it is just that I perceive a different rationale for it, than assuming they are jumping at $50 oil to plan to go all out for that reason. Some companies are completing wells that would only be profitable at $100 a barrel. No rationale for those, other than they are simply trying to hold on to the lease, and hope. I follow EOG fairly closely, and from my own lease, I know they are trying to hold on to fairly good leases, but only drill what they have to. I think that is the reason your seeing an uptick. They are planning on what will hold the leases for 2017. They are balancing those permits for "marginal" wells at $50, with permits in the sweet spots. From a planning perspective, it makes sense on getting that over with first. Then you can concentrate on what is going to keep you alive. It is interesting to note that the Austin Chalk (Sugarcane) has become their new sweet spot in Karnes County. They have 5 or 6 now producing, and 9 more planned so far for next year. All are doing very well, and two had first month production in excess of 100k barrels a month. Less decline than the Eagle Ford, so far. Other companies are now jumping on it, too.
Mike says: 12/09/2016 at 9:16 am
Mr. Minton do you have continuous drilling provisions in your lease and if so may I ask, what year did you lease to EOG?

I contend that at these oil prices the speculation about "drilling to hold leases" is vastly overblown, that most leases made in the Eagle Ford and Bakken before 2012-2013 had no continuous drilling provisions in them, and that most of the drilling still being done in those two plays, at these oil prices, are actually related to loan covenants regarding booking PDP reserves, SEC 5 year rules regarding PDNP reserves and to reduce taxable income thru IDC deductions. Most shale oil companies are looking down the barrel of loans coming due beginning 2017 and continue to do stupid things with borrowed money because they have no choice. In spite of lower costs and higher EUR's brain washing campaign, they are all still losing money hand over fist. Even mighty EOG.

HZ Austin Chalk wells cost considerably less that shale wells because they don't typically require frac'ing. Some of the initial IP's and IP90's in the Chalk have been spectacular, especially for EOG who is well know for gutting wells to create big EUR's; take it from me, an old Chalk hand, however, the decline on Chalk wells after 12-18 months will suck the hardhat over the top of your head and I am quite certain 95% of those wells will NOT payout either. They did not in 1981, 1991, 2001 nor will they this time around the block either.

Guy Minton says: 12/09/2016 at 5:06 pm
Yes it has continuous drilling clause.
Austin chalk wells by EOG are frac'ed. Who cares what happens to the decline in 12 to 18, if you recover over 300k the first year?
Mike says: 12/10/2016 at 3:01 pm
If EOG frac's those Chalk wells then they cost essentially what an EF well costs. If a Chalk well makes 300,000 BO in the first year, which they don't, then declines 80% annually after the first 12 months and every year thereafter, they'll never reach payout. If your only interest in any of that is from the standpoint of a royalty owner, then I am sure you don't care about profitability. I do.
Watcher says: 12/11/2016 at 5:45 am
Mike, pls elaborate on this theory.

We have sought the reason wells are being drilled at sure loss, and lease obligation was one suggestion. Can you flesh out this other

Mike says: 12/11/2016 at 9:25 am
I contend that most mineral leases made before 2013 did not contain "drill and earn provisions" in them (drilling commitments) and that one well could hold the entire lease. I can confirm that in S. Texas and I suspect less knowledgeable mineral owners in the Bakken that leased early in the play had no drilling commitment provisions in them either. Leases made later in both plays involved more sophisticated mineral owners who required drilling commitments. In W. Texas, for instance, all that now being drilled is subject to drilling commitments.

SEC rules are very clear regarding 'proven but not producing' reserves that were "booked" and made into assets they must be drilled within 5 years or lost. DUC wells are PDNP reserves and they too must be completed within 5 years.

I am familiar with two new loan covenants, particularly relative to recent credit swaps, etc. that if a company gets more money in the equity swap, they must develop PDNP reserves or suffer penalties.

None of this precludes the fact that 95% of the shale oil wells being drilled in America and these oil price levels will not payout unless prices rise dramatically. Those wells ARE drilled at a sure loss. The shale oil industry is penned up now like a heard of goats; they voluntarily drill unprofitable wells with borrowed money because they need cash flow and they need to book more assets to be able to borrow more money. They are also forced to drill and complete wells that are unprofitable for reasons I have explained. The ONLY way out for them, even the biggest of them, is if oil prices rise into the 80's and 90's and that is not going to happen for a long time, short of some big chicken fight somewhere in the world that would have an affect on supply.

Guy Minton says: 12/09/2016 at 8:27 am
Not really. There is not a lot of interest in drilling for $50 to $60 oil in the shale. Go back and look at what happened in 2009 when oil dropped to $60. Most places are profitable to drill at $80 to $100. Very few are profitable at $50. The press can hype all they want. It won't change reality.
Eulenspiegel says: 12/09/2016 at 9:24 am
I think the press helps – if enough people buy it, silly money will give free loans to these companies to continue drilling. You can loose as much money as you like, as long as you have creative bookkeeping and a neverending roll in of money.

We had this here in Germany in the wild 2000s – film making fonds have been the red hot burner, people lost millions but continues investing until alle these companies where history. Hollywood was laughing about Germany "silly money".

[Dec 11, 2016] The Fallacy Of Increasing U.S. Oil Production Post-OPEC Agreement

Dec 11, 2016 | peakoilbarrel.com
Ron Patterson says: 12/09/2016 at 10:03 am
The Fallacy Of Increasing U.S. Oil Production Post-OPEC Agreement

It's little surprise that Credit Suisse recently stated:

"With service prices, particularly pressure pumping expected to rise in 2017 on the back of increased activity, a Permian operator commented that it is already seeing greater than a 20% increase in completion costs. The biggest concern for Permian management teams has been a potential scramble for equipment and services that higher commodity pricing could introduce, and the OPEC move has the potential to drive faster service cost inflation than we would have otherwise seen, muting the impact of the oil spike on returns for US shale operators."

In other words, the cost of drilling is likely to go up just as fast as the price of oil goes up if there is a cut in production by OPEC.

Guy Minton says: 12/10/2016 at 8:26 am
Most of the new "drilling efficieny" is a result of depressed costs and drilling in primarily "sweet spots". Easy financing is a thing of the past. Can't see a big enough resurgence in shale drilling to overcome drops in production in the short term. A 20% increase is a killer, but that is only the beginning. The way I see it, because the new drills won't keep up wit the decline rates of the old wells; they have to recoup all their drilling costs the first year, to enable them to keep drilling. That leaves only a few areas to drill in. The only reasons it surged in the past, were easy money and oil at $100 a barrel. Both are no longer available, now.

[Dec 11, 2016] Iran's total crude oil and condensates sales likely reached around 2.8 million barrels per day in September

Dec 11, 2016 | peakoilbarrel.com
Watcher says: 12/08/2016 at 10:19 am
Iran exported condensate around the sanctions. This was called oil. Probably still do.
AlexS says: 12/08/2016 at 10:46 am
"Iran's total crude oil and condensates sales likely reached around 2.8 million barrels per day in September, two sources with knowledge of the matter said, nearly matching a 2011 peak in shipments before sanctions were imposed on the OPEC producer.

Iran sold 600,000 bpd of condensates for September, including about 100,000 bpd shipped from storage, to meet robust demand in Asia, the two sources said. September crude exports increased slightly from the previous month to about 2.2 million bpd, they said."

http://financialtribune.com/articles/energy/51005/condensates-drive-iran-oil-export-pre-sanctions-high

"Iran's condensate production has exceeded 610,000 b/d this year, with 561,000 b/d of this - or around 90% - coming from the 16 operating phases at the giant offshore South Pars gas field in the Persian Gulf, Akbary said.

The latest additions to the project were phases 17, 18 and 19, which came into operation this year, Akbary said.

In addition, eight new phases are currently being installed at the field. Phases 20 and 21 will become operational in 2017, Akbary said, while phases 13 and 22-24 are expected to begin in 2018. Iran hopes the entire development will be completed in 2021.

By then, South Pars condensate production will exceed 1 million b/d.

Smaller offshore fields under development could add another 50,000 b/d, with a further 55,000 b/d on top of this should additional projects be approved.
Onshore fields could add a further 115,000 b/d, taking total capacity to more than 1.2 million b/d.

Iran's domestic consumption currently stands at around 260,000 b/d, leaving a surplus of more than 350,000 b/d this year. But consumption is forecast to rise to more than 700,000 b/d by 2021 with the completion of new condensate splitters, such as the 360,000 b/d Persian Gulf Star.
as a result, Iran's condensate exports are expected to drop to around 250,000 b/d in 2021."
http://www.platts.com/latest-news/natural-gas/dubai/major-investment-needed-to-avoid-output-fall-26601277

[Dec 11, 2016] OPEC's Historic Deal Won't Be Enough to Drain Oil Stockpiles - Bloomberg

Dec 11, 2016 | www.bloomberg.com

Crude prices could rise to $60 to $70 a barrel if the Organization of Petroleum Exporting Countries succeeds in bring inventories back to a normal level, Venezuelan Oil Minister Eulogio del Pino said last week, echoing a widely held view within the group, from Saudi Arabia to Iran.

... ... ...

The International Energy Agency expects the re-balancing will happen early next year, while consultants at Rystad Energy expect a 1.26 million barrels-a-day deficit in the first quarter of next year if Russia is the only non-OPEC country to join the effort.

[Dec 11, 2016] 12/09/2016 at 2:33 pm

Dec 11, 2016 | peakoilbarrel.com
Been difficult for me to stay engaged recently but I did come across this piece. Might be of some interest here.

Peak Oil By Any Other Name Is Still Peak Oil
in Resource Crisis - by Diego Mantilla - December 1, 2016

https://www.countercurrents.org/2016/12/01/peak-oil-by-any-other-name-is-still-peak-oil/

Ezrydermike says: 12/09/2016 at 2:36 pm
Also, my google news feed is packed with articles touting peak demand not peak production. Is this some sort of distraction effort? I know the topic of peak demand has been discussed before, but I am having severe memory issues.
Ron Patterson says: 12/09/2016 at 6:40 pm
Ezrydermike, did you not read the article that you, yourself, posted? "Peak oil by any other name is still peak oil." Peak oil is peak oil is peak oil.

Peak demand and peak supply are the same thing. That is, when the production of crude oil peaks, regardless of the cause, that will be peak oil. I don't know how I could make it any simpler than that.

Watcher says: 12/09/2016 at 7:08 pm
Oh I can make it less simple.

When there is peak supply, including all hand waving about storage tapping and what's in pipelines and assorted gobbledygook, there will be demand for more than that supply, with lines at gas stations and requests for more than the ration allowed, but the gas station guy will say no and the customer's consumption will be limited to whatever rationing is available - if his license plate is an even number and it's an even day - if an odd numbered day, he gets to consume none, regardless of how much he demands of gas station dood.

Ezrydermike says: 12/10/2016 at 1:55 pm
yes Ron I get that. I was more remarking on how my Google news feed is presenting the articles as peak demand not peak oil. Many of these seem to be trying to replace the terminology and pointing that some oil can be left in situ for future production. For example, this article from the CSM.

"The threat of the world facing a declining supply of oil, so-called peak oil, has given way to a forecast that is calling forth its much more benign cousin: peak demand."

http://www.csmonitor.com/Commentary/the-monitors-view/2016/1202/Goodbye-peak-oil-hello-peak-demand

[Dec 11, 2016] Saudis Signal Deeper Cuts After Deal With Non-OPEC Countries - Bloomberg

Notable quotes:
"... The chain of announcements signal that Saudi Arabia is trying to push oil prices above $60 a barrel -- and perhaps closer to $70 a barrel -- as it attempts to fill a fiscal hole and prepares a partial flotation of its crown jewel, state-owned oil company Saudi Aramco, in 2018... ..."
Dec 11, 2016 | www.bloomberg.com
  • Russia among non-OPEC nations pledging to cut 558,000 barrels
  • Saudi minister says he'll go beyond commitment at OPEC meeting
Saudi Arabia signaled it's ready to cut oil production more than expected, a surprise announcement made minutes after Russia and several non-other OPEC countries pledged to curb output next year.

... ... ...

"This is shock and awe by Saudi Arabia," said Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London. "It shows the commitment of Riyadh to rebalance the market and should end concerns about OPEC delivering the deal."

.... ... ...

The chain of announcements signal that Saudi Arabia is trying to push oil prices above $60 a barrel -- and perhaps closer to $70 a barrel -- as it attempts to fill a fiscal hole and prepares a partial flotation of its crown jewel, state-owned oil company Saudi Aramco, in 2018...

[Dec 11, 2016] 2016 should see a new record for OPEC exports due to ramp-up in production and exports from Saudi Arabia, Iran and Iraq.

Dec 11, 2016 | peakoilbarrel.com
AlexS says: 12/08/2016 at 5:40 am
BP's numbers for oil exports (available from 1980) and production less consumption (available from 1965) are slightly different, which may reflect changes in inventories and other balancing items.

According to BP, Middle East oil exports in 2015 was 20.6 mb/d, the record for the period from 1980.
Production less consumption was 20.5 mb/d vs. all-time high of 20.8 mb/d in 1976-1977.
But 2016 should see a new record due to ramp-up in production and exports from Saudi Arabia, Iran and Iraq.

Middle East oil exports (mb/d)
Source: BP Statistical Review of World Energy

[Dec 11, 2016] These EIA projections are indeed to be taken with a grain of salt especially concerning the USA

Dec 11, 2016 | peakoilbarrel.com
Verwimp says: 12/08/2016 at 5:37 pm
These EIA projections are indeed to be taken with a grain of salt, I think. Especially concerning the USA. Why would the production suddenly stabilise? There has been a -10% decrease over the course of the last 1,5 year. (= a severe decline). And now, miraculously, things will stabilise?
I think, over the course of the next 365 days, the USA will lose another million barrels per day of oil production.
Guy Minton says: 12/08/2016 at 6:53 pm
Wasn't going to be the first one to go that far. Pretty sure we have another half million to go by end of 2017. Including the Gulf. Still, that would be about a million barrels less than EIA is projecting.
Javier says: 12/09/2016 at 6:54 am
Supposedly the increase in oil price should stabilize US production that has been severely affected by low prices. It remains to be seen if OPEC+Russia cuts (no article on this?) in 2017 realize and if US production can increase to compensate for the cuts. Obviously OPEC+Russia think not or they would not be cutting production, unless it is a fake cut in the first place.

[Dec 11, 2016] The EIA oil production forecast for the GOM is a complete fabrication

Dec 11, 2016 | peakoilbarrel.com
Coolreit says: 12/08/2016 at 1:10 am
The EIA oil production forecast for the GOM is a complete fabrication! Here is proof:

Nawar has a list of 2016 new projects that itemize the new GOM projects here:
http://www.investorvillage.com/groups.asp?mb=19176&mn=3794&pt=msg&mid=16582044

The new projects list is derived from the leading independent energy analysts, Energy Aspects!

They include three US projects: all GOM:

Heidelberg 80k b/d
Stones 50kb/d
Julia 34k b/d

Hedelberg forecast directly from the operator forecasts a production rise from ~12k b/d to ~32k b/d by end of 2016:

p6 of their latest presentation:

file:///C:/Users/kopel/Downloads/Anadarko+Jefferies+Presentation.pdf

Stones: From the press release of the startup: " September 6, 2016. Shell announces today that production has started from the Stones development in the Gulf of Mexico. Stones is expected to produce around 50,000 barrels of oil equivalent per day (boe/d) when fully ramped up at the end of 2017

That would suggest a gradual ramp all the way from Sept. 2016 through December 2017. At best a 20% initial flow in September or 10k b/d

Julia: The first well came on line in April and the 2nd one was to start a few weeks later:
ExxonMobil starts up Julia oil field in the deepwater Gulf of Mexico
04/19/2016

Offshore staff

IRVING, Texas – Exxon Mobil Corp. has started oil production at the Julia field in the deepwater Gulf of Mexico under budget and ahead of schedule. The first production well is now online and a second well will start production in the coming weeks.

The Julia development is located about 265 mi (426 km) southwest of New Orleans in water depths of more than 7,000 ft (2,134 m). The initial development phase uses subsea tiebacks to the Chevron-operated Jack/St. Malo production facility.

According to ExxonMobil, the development includes the use of subsea pumps that have one of the deepest applications and highest design pressures in the industry to date.

Neil W. Duffin, president of ExxonMobil Development Co., said: "Successful deepwater developments like Julia, located more than 30,000 ft [9,144 m] below the ocean's surface, benefit from ExxonMobil's disciplined project execution capabilities and commitment to developing quality resources using advanced technology.

"This initial production will provide ExxonMobil with insight into the potential future development of the reservoir."

The Maersk Viking drillship is currently drilling a third well, which is expected to come online in early 2017.

http://www.offshore-mag.com/articles/2016/04/exxonmobil-starts-up-julia-oil-field-in-the-deepwater-gulf-of-mexico.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+offshore-latest-news+(OS+-+Latest+News)

So when you consider the start dates and the companies own reports, then there is no evidence of any material GOM oil production growth from the GOM starting October 2016. Furthermore, there is not one 2017 GOM project. So, the EIA forecasting oil production growth of 500k b/d by the end of 2017 is pure fiction. To compound the error, the EIA excludes GOM depletion of what I recall is ~22% depletion in the GOM for 2017 of ~300k b/d (1.5 million b/d of production @20%).

The EIA oil production forecast for the GOM is a complete fabrication!

Guy Minton says: 12/08/2016 at 6:18 am
Thanks, Coolreit! With 15% decline rates, I can't imagine much of an increase, overall.
AlexS says: 12/08/2016 at 3:54 am
Here is the list of projected deepwater GoM field start-ups from February 18, 2016 issue of Today In Energy
http://www.eia.gov/todayinenergy/detail.php?id=25012

AlexS says: 12/08/2016 at 4:00 am
EIA C+C production projections for the Gulf of Mexico: STEO Dec 2016 vs. STEO January 2016

George Kaplan says: 12/08/2016 at 7:36 am
This shows production from the new leases reported to BOEM since 2015, except Hadrian South which is mainly a gas field, but including Julia which EIA missed. Also missing is Gunflint (nameplate 60 kbpd) which hasn't reported any production although supposed to have started in early 2016. Son of Bluto 2 started early and looks to be watering out quickly. Dantzler also cut a lot of water early and is in decline. Silvertip was tied in as part of Great White (Perdido spar). West Boreas and Deimos South are considered part of Mars B (tied into Olympus spar I think) but I can't tell if they are operating (there are two new leases that appear to have started in 2016). Stones only started operating in September. Heidelberg has a very slow ramp up. Julia has two wells on line but is only at half nameplate (I don't know if it is limited by capacity at the Jack hub. As others I don't see where 300 kbpd of new capacity is supposed to come from, especially given high declines in mature deep water fields.

George Kaplan says: 12/08/2016 at 7:46 am
I noticed I missed off Big Bend – that started up October last year hit an early plateau and looks to be in slight decline at 16 kbpd at the moment. (note the graph is stacked production, oil only – none of the leases reported condensate).
SouthLaGeo says: 12/08/2016 at 7:48 am
Thanks George,

Gunflint is probably identified by BOEM as Freedom/Gunflint – but I don't see any reported production for that either through September.
Julia production is not limited by Jack capacity. Jack capacity is around 170 kbopd, and is currently around 120 (with Jack, St. Malo and Julia).

SouthLaGeo says: 12/08/2016 at 8:14 am
George,
I think what you show as Horn Mountain Deep and Holstein Deep are actually just the base production from those fields. I don't think either Horn Mountain Deep or Holstein Deep are on production yet - I think.
George Kaplan says: 12/08/2016 at 9:29 am
Agreed probably – the numbers are given by lease number only. Sometimes there can be more than one well to a lease (they give the number of completions so sometimes you can see when something starts up then), but additional complications are that BOEM sometimes use different names from the E&P company, and there are often several leases per field. Tie backs, even if given a particular name, are listed against the main filed only. I think there is a way to apportion production to particular wells and from there to a particular tie-back, but it's beyond may attention span at the moment. I was more interested in the overall shape of the curve – which shows a clear flattening. Horn Mountain Depp added two completions in March/April, I need to check further on Holstein, I might have screwed up there as the curve looks suspiciously similar to Horn Mountain Deep. I think there probably is another 150 kbpd ramp up nameplate capacity between Gunflint, Stones, Heidelberg and Julia and maybe 50000 extra tiebacks if they are drilled – but that would only just about cover decline over the next 15 to 18 months.

It's also interesting that, though now in decline, Dantzler and Big Bend initially exceeded expected production capacity, and still do.

Another correction: Son of Bluto 2 didn't cut a lot of water, I looked at the wrong column, so I don't know why it declined so fast. I think it may have capacity for a second well there.

AlexS says: 12/08/2016 at 8:25 am
Interesting, that, in the Annual Energy Outlook 2016, the EIA projects further growth in the U.S. Federal offshore (ex Alaska) oil production to 1.93 mb/d in 2021.

Given high decline rates for deepwater fields, that implies new start-ups or ramp-ups.
One of these projects is BP's Mad Dog Phase 2 . Is there anything else?

Guy M says: 12/08/2016 at 9:58 am
Mad Dog Phase 2 is expected to start drilling in 2021. There is no explanation for why EIA is reporting increased production, as they are.
SouthLaGeo says: 12/08/2016 at 1:10 pm
The additional ones I can think of are Stampede and Big Foot, both in 2018, and Shell's Appomattox, but I don't know when that is slated to come online.
In addition, there will be a fair number of 1-3 well tiebacks to existing facilities. (Maybe 3-4 a year??)
AlexS says: 12/08/2016 at 1:44 pm
Guy M, SouthLaGeo,

Thanks

George Kaplan says: 12/08/2016 at 2:26 pm
There are Thunder Horse South tie backs next year (BP, nameplate maybe 42,000 bpd), Heidelberg Phase II might add another 30,000 in 2021, small tie backs to Delta House (Odd Job next year at 5000, maybe others), Vita (c/w Power Nap) has gone out for FEED but I don't think it could get done before 2022 now, possibly Caesar/Tonga additions next year (20,000 ??), and I think Typhoon (or might be called Tornado now) might have started up recently at 13,000 tie back to Helix producer.
George Kaplan says: 12/08/2016 at 3:07 pm
So I corrected Holstein Deep (I don't think there have been any new tie ins and it is in gradual decline), added Big Bend, Gunflint (though it is zero flow) and Pheonix (no change in the dates shown but Tornado has started up at 20 kbpd this month and will be choked to 13 to 16 kbpd at plateau (this used to be Typhoon I think, but all these names are quite confusing) there are other tie-back options for Phoenix, which is serviced by the Helix producer, in the future, including a second Tornado well and Motormouth.

The plateau through 2016 is maintained but I think there will be a jump in October and then a steady rise at least for a few months. I don't know the issue with Gunflint but if it has a lot of predrilled wells and is just waiting on getting the production facilities operating there could be another big increase then.

Also I had a thought on Julia and Horn Mountain Deep: it's possible that the completions listed by BOEM include producer and injector pairs so at the moment Julia has only one producer, but two wells, and therefore with another producer to come to give full capacity (at up to 35 kbpd).

AlexS says: 12/08/2016 at 5:43 pm
Thanks George,

Do you still think that the EIA's projections for the GoM are unrealistic?

If so, is that because of depleted resource base, or likely project delays, high costs, etc.?

George Kaplan says: 12/08/2016 at 7:26 pm
Alex – I don't think there will be as high a peak as they say – I don't see where the projects ramping up or in late development stages are that could achieve that (I still go for around 1.85 mmbpd sometime in mid 2017 as peak). But equally the decline might be less steep than they show and the tail fatter. Two other projects not yet approved are Shenandoah and Kaskida. I think they would both be about 150 kbpd nameplate, but they are high temperature / high pressure and Kaskida has sand issues I think (maybe they both do), and both might need relatively many wells – so very expensive. There's also Tiber / Gila / Gibson / Guadelupe (I don't know much about that but over 100 kbpd), Anchor (also about 100 kbpd), some fields around Tahiti for tie backs and Constellation (ex-Hopkins) which used to be considered a big find with BP but know looks like a smaller tie back (30 kbpd maybe) for Anadarko. After those only bits and pieces are left, and with not much frontier exploration going on so little prospect of big finds either. Anadarko and BP have a lot of the prospects which would tend to mean they'll get spread out a bit. I've also been surprised at how long the schedules are for Appomatox and Mad Dog II (and also Trion on the Mexican side) they all are around 7 years from FID to plateau rates.

[Dec 11, 2016] Glencore stuns the oil-trading business with a deal to take a big stake in Rosneft

Dec 11, 2016 | discussion.theguardian.com
mrpukpuk, 9 Dec 2016 22:24
In the meanwhile: Glencore stuns the oil-trading business with a deal to take a big stake in Rosneft

http://www.economist.com/news/business/21711503-sanctions-are-not-impediment-they-were-expected-be-glencore-stuns-oil-trading

[Dec 09, 2016] It looks like shale oil is a USA phenomenon with no appreciable production anywhere else in the world but the shale oil phenomenon has given the entire world the illution the peak oil does not exist, an idea that had no valid support in the real world

Notable quotes:
"... The real danger is that the media, as well as the general public, has been sold the idea that peak oil has now been discredited because of shale oil. It has not. And that only increases the dramatic shock effect it will have when it finally becomes obvious that peak oil has arrived. ..."
"... Of course some will agree but say that "No big deal, renewables will make peak oil a non event!" And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway. ..."
"... To me, that is like a farmer saying I estimate next year and beyond that the cost of seed, chemicals, fertilizer, fuel, labor, real estate taxes, etc, will fall by 60%. I am not familiar with any commodity based business where that is reality. Yet almost ALL US LTO did the same thing, 30-60% reduction. ..."
"... The point is, had they not done that, they would have basically lost ALL of their proved reserves at 2015 prices. My point is, how can a company that is losing large amounts, pre-reserve write downs, have any economic reserves? If the costs cannot all be recovered for the well at SEC prices, there are no reserves for that well. ..."
"... 2016 SEC prices are about $10 lower. We shall see what they come up with. ..."
"... I also agree peak oil will be obvious before long, I think eventually (by 2020 at least unless a big recession intervenes) oil prices will rise, maybe to $100/b. Most will expect a big surge in output, but any surge will be small (1 Mb/d at most) and likely short lived (if it happens at all). ..."
Dec 09, 2016 | peakoilbarrel.com
Survivalist says: 12/07/2016 at 5:06 pm
Hi Ron. Thanks for your awesome website. The word blog doesn't do it justice.. It is truly the best, and attracts a great group of commenters. May I ask how you might see 'serious depletion' playing out, roughly speaking? Do you have any predictions or wild ass guesses on the slope of the production decline or perhaps where world crude plus condensate production might be by 2020 and/or 2025? Given your wisdom and insight into human nature what are your feelings about the human response to these future conditions?
Ron Patterson says: 12/07/2016 at 6:57 pm
Do you have any predictions or wild ass guesses on the slope of the production decline or perhaps where world crude plus condensate production might be by 2020 and/or 2025?

Not really. We all had a pretty good idea where things were heading until shale oil raised its ugly head. No one that I know of predicted that. But now it looks like shale oil is a USA phenomenon with no appreciable production anywhere else in the world.

My strong feeling right now is that the shale oil phenomenon has given the entire world the idea that peak oil is, or was, an illusion or an idea that had no valid support in the real world.

But peak oil is as real as it ever was. The amount of recoverable oil in the ground is finite. We may have had the numbers wrong in our personifications because of shale oil. But that does not change the big picture. The peak oil phenomenon is as real as it ever was.

The real danger is that the media, as well as the general public, has been sold the idea that peak oil has now been discredited because of shale oil. It has not. And that only increases the dramatic shock effect it will have when it finally becomes obvious that peak oil has arrived.

Of course some will agree but say that "No big deal, renewables will make peak oil a non event!" And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway.

shallow sand says: 12/07/2016 at 7:27 pm
Ron.

Like the "US phenomenon" comment.

2016 10K will be out in late February-early March for US LTO producers.

It will be interesting to compare 2014, 2015 and 2016. In particular I am waiting to see the estimates of future cash flows to see how much more the engineering firms let them slash future estimated production costs and estimated future development costs.

In my opinion, there was a lot of hocus pocus in those particular numbers, which, of course provide the basis for proved reserves and PV10.

The amounts slashed from 2014 to 2015 were incredible, for example Mr. Hamm's CLR dropped its estimate of future production costs by 60%.

To me, that is like a farmer saying I estimate next year and beyond that the cost of seed, chemicals, fertilizer, fuel, labor, real estate taxes, etc, will fall by 60%. I am not familiar with any commodity based business where that is reality. Yet almost ALL US LTO did the same thing, 30-60% reduction.

The point is, had they not done that, they would have basically lost ALL of their proved reserves at 2015 prices. My point is, how can a company that is losing large amounts, pre-reserve write downs, have any economic reserves? If the costs cannot all be recovered for the well at SEC prices, there are no reserves for that well.

2016 SEC prices are about $10 lower. We shall see what they come up with.

Oldfarmermac says: 12/08/2016 at 3:15 pm
"And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway."

I think the odds are pretty good that Ron is right. We can hope that Dennis C and the others who think production will stay on a plateau for a while and then gradually decline rather slowly are right.

If they are, and the electric car industry does as well as hoped, then the economy national and world wide can probably adapt fast enough to avoid catastrophic economic depression brought on specifically by scarce and expensive oil.

If for some reason, any reason, oil production declines sharply and suddenly, for a long period or permanently, we are going to be in a world of hurt.

People need not starve, at least in richer and economically advanced countries, but millions of people could lose their jobs and a lot of businesses dependent on cheap travel would fail. The effects of these lost jobs would expand outward thru the economy doing Sky Daddy alone knows how much damage.

In poor countries, starvation is a real possibility.

The time frame I have in mind in making this comment is out to twenty or thirty years. After that, it's anybody's guess what the population will be, and what the economy will be like.Hell, it's anybody's guess as far as next week is concerned, so far as that goes.

Dennis Coyne says: 12/07/2016 at 6:30 pm
Hi Ron

I agree.

Plateau until 2019 or 2020 then some decline slow at first and gradually accelerating. Unless a recession hits in that case acceleration is more rapid.

Ron Patterson says: 12/07/2016 at 7:00 pm
Thanks Dennis, on the rare occasion where we agree. :-)
Dennis Coyne says: 12/07/2016 at 8:00 pm
Hi Ron,

I also agree peak oil will be obvious before long, I think eventually (by 2020 at least unless a big recession intervenes) oil prices will rise, maybe to $100/b. Most will expect a big surge in output, but any surge will be small (1 Mb/d at most) and likely short lived (if it happens at all).

Whether oil prices spike and this leads to either Great Depression(GD) 2 or a lot of EV and plugin sales is unknown, it might be the latter at first with GD2 following between 2025 and 2030. It will depend on how quickly oil output falls, I think it might be 1% or less until 2030 if oil prices are high with faster decline rates once the depression hits.

As usual big WAGs by me. Of course nobody knows, but your insights on how things might play out would be interesting.

Guy Minton says: 12/07/2016 at 8:00 pm
You are a smart man, Dennis 😊
Dennis Coyne says: 12/07/2016 at 8:01 pm
Hi Guy,

When I agree with Ron of course. LOL.

BloomingDave says: 12/07/2016 at 9:07 pm
Hi Dennis,
If I am not mistaken, you have moved up your estimate of global petroleum peak, and perhaps the pace of the decline.
Just months ago, your opinion was that it would not occur until 2025. Are you moved by any specifics that you would like to share?
Thank you, and as a follower of your good work, I appreciate your insight.
Javier says: 12/09/2016 at 6:48 am
Yes, that is a change of position. It used to be 2025. Another advance and we are in.

[Dec 09, 2016] EIAs Short-Term Energy Outlook Peak Oil Barrel

Dec 09, 2016 | peakoilbarrel.com
VK says: 12/07/2016 at 1:17 pm
Steve at SRS Rocco report has a new, very informative post up showing that Middle East oil exports are lower today than 40 years ago!

"According to the 2016 BP Statistical Review, the Middle East produced 30.10 mbd of oil in 2015 compared to 22.35 mbd in 1976. This was a growth of 7.75 mbd. However, Middle East domestic oil consumption increased from 1.51 mbd in 1976 to 9.57 mbd in 2015. Thus, the Middle Eastern economies devoured an additional 8.06 mbd of oil during that 40 year time-period."

Would be great to see an update on the global export land model that Jeff Brown (westexas) used to update us on. How much C+C is available on the global markets as of today after domestic consumption?

Jeff says: 12/07/2016 at 2:04 pm
I΄m not Jeff B. but if I remember last version of BP stats. correctly, the net export market has been on a bumpy plateau between 2005-2015. It has varied between 41-44 Mb/day (approx.). 2015 set a record which was just slightly higher than 2005. It΄s possible that 2016 will be slightly higher.
Survivalist says: 12/07/2016 at 3:31 pm
I like this link.

http://mazamascience.com/OilExport/

World exports have been bumpy flat for 10 years or so.

Ecuador might be an importer soon'ish.

I like this site as I take an interest in observing the changes as exporters become importers. The country charts provide some rough idea of those timings.

Jeff says: 12/08/2016 at 3:39 am
2015 was indeed a net export record. The increase came mainly from Canada, Iraq and Russia. Iran may boost net exports in 2016, Kazakhstan will also add some. At least to me it seems unlikely that net-exports will grow substantially above the 2015/16-level. Increase from the mentioned countries will be needed to compensate decline in Mexico, Colombia, etc (+problems in Venezuela). Seems more likely it will continue on the plateau or decline. Nigeria and Libya are wildcards.

mazamascience also use BP-data but seems to give a much higher number, ~48Mb/day. Don't know why.

AlexS says: 12/08/2016 at 6:01 am
How do you calculate world total net export numbers if total global exports = total global imports?

Meanwhile, BP statistics for world oil exports (not net exports) show a rising trend.
I expect further increase in 2016, due to rising exports from Saudi Arabia, Iran, Iraq and Russia.

AlexS says: 12/08/2016 at 6:50 am
The IEA Oil Market Report, November 2016 on Iran's oil production and exports:

"With gains of 810 kb/d so far this year, Iran has emerged as the world's fastest source of supply growth. Crude oil output rose by 40 kb/d in October to reach a pre-sanctions rate of 3.72 mb/d and shipments of crude oil climbed well above 2.4 mb/d, a rate not seen in at least seven years.
For six straight months, the National Iranian Oil Co (NIOC) has been exporting more than 2 mb/d of crude – double the volume seen under sanctions."

AlexS says: 12/08/2016 at 6:54 am
Iraqi oil production and exports in 2016 were also above 2015 levels

source: IEA OMR, November 2016

AlexS says: 12/08/2016 at 6:59 am
According to JODI, Saudi Arabia's crude and refined product exports in January-September 2016 was about 460 kb/d higher than 2015 average.

Watcher says: 12/08/2016 at 10:16 am
So that says KSA domestic consumption is 2ish mbpd?

Are we comfortable with that?

AlexS says: 12/08/2016 at 10:36 am
3.3 mb/d in 2015

http://peakoilbarrel.com/texas-update-november-2016/#comment-587974

Watcher says: 12/08/2016 at 4:32 pm
But that's not what your chart says, in controvention to BP's data.

Your chart says KSA exports at 9. Production is known or thought to be 10.5. And since consumption is all liquids, that chart's products level is the correct number.

9 subtracted from 10.5. Leaves 1.5 consumption.

This looks bogus.

Did email BP. Waiting.

AlexS says: 12/08/2016 at 5:13 pm
10.5 is crude only.
Total liquids (including condensate and NGLs) was 12.0 mb/d in 2015 (BP number)
Jeff says: 12/08/2016 at 7:00 am
BP data. Only include countires if production > consumtion. Net export = sum(production – consumption).

Compared with your figure, US, for example, is thus not included, Canada has a lower value (import light), etc.

[Dec 05, 2016] Neoliberalism has only exacerbated falling living standards

Notable quotes:
"... the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder. ..."
"... the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources. ..."
Aug 07, 2016 | www.nakedcapitalism.com
Sally Snyder , August 5, 2016 at 11:57 am

Here is an article that explains the key reason why economic growth will be slow for the foreseeable future:

http://viableopposition.blogspot.ca/2016/08/the-baby-bust-and-its-impact-on.html

No matter what central banks do, their actions will not be able to create the same level of economic growth that we have become used to over the past seven decades.

JEHR , August 5, 2016 at 12:57 pm

Economic growth does not come from the central banks; if government sought to provide the basics for all its citizens, including health care, education, a home, and proper food and all the infrastructure needed to give people the basics, then you could have something akin to "growth" while at the same time making life more pleasant for the less fortunate. There seems to be no definition of economic growth that includes everyone.

David , August 5, 2016 at 1:25 pm

This seems a very elaborate way of stating a simple problem, that can be summarised in three points.

And that's about it.

jgordon , August 5, 2016 at 8:10 pm

Neoliberalism has only exacerbated falling living standards. Living standards would be falling even without it, albeit more gradually.

Neoliberalism itself may even be nothing more than a standard type response of species that have expanded beyond the capacity of their environment to support them. What we see as an evil ideology is only the expression of a mechanism that apportions declining resources to the elites, like shutting shutting down the periphery so the core can survive as in hypothermia.

I Lost at Jeopardy , August 5, 2016 at 6:57 pm

I really don't have problem with this. Let the financial sector run the world into the ground and get it over with.

In defference to a great many knowledgable commentors here that work in the FIRE sector, I don't want to create a damning screed on the cost of servicing money, but at some point even the most considered opinions have to acknowledge that that finance is flooded with *talent* which creates a number of problems; one being a waste of intellect and education in a field that doesn't offer much of a return when viewed in an egalitarian sense, secondly; as the field grows due to, the technical advances, the rise in globilization, and the security a financial occuptaion offers in an advanced first world country nowadays, it requires substantially more income to be devoted to it's function.

This income has to be derived somewhere, and the required sacrifices on every facet of a global economy to bolster positions and maintain asset prices has precipitated this decline in the well being of peoples not plugged-in to the consumer capitalist regime and dogma.

Something has to give here, and I honestly couldn't care about your 401k or home resale value, you did this to yourself as much as those day-traders who got clobbered in the dot-com crash.

nothing but the truth , August 6, 2016 at 11:46 am

the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder.

the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources.

[Dec 04, 2016] Oil is facing 3 different scenarios RBC

Blast from the past...
Notable quotes:
"... RBC Capital Markets' Global Head of Commodity Strategy Helima Croft outlined three potential scenarios for WTI crude on CNBC's "Fast Money" for the new year. The most bullish situation would be seeing more than a million barrels of oil pulled off the market and prices averaging in the $60 dollar range. ..."
"... "If you are thinking about sort of about a mid-$30s average for WTI, low-$40s, I think that's a bearish scenario," said Croft, who's also a CNBC contributor. ..."
"... "Our base case is this sort of middle range... $52 is our WTI call for next year," she said, implying that U.S. crude would be nearly one-third higher than its current trading levels. The fourth quarter "is really where you want to be looking for WTI to sort of take-off," she added. ..."
Dec 30, 2015 | www.cnbc.com

RBC Capital Markets' Global Head of Commodity Strategy Helima Croft outlined three potential scenarios for WTI crude on CNBC's "Fast Money" for the new year. The most bullish situation would be seeing more than a million barrels of oil pulled off the market and prices averaging in the $60 dollar range.

The worst case scenario involves a tsunami of new production from OPEC, Saudi Arabia, Iran and Libya hitting the market -- all but certain to drive prices even lower. On Thursday, the final day of trading before the Christmas holiday, Brent and U.S. crude closed up by more than a percent, but still well under $40 per barrel.

"If you are thinking about sort of about a mid-$30s average for WTI, low-$40s, I think that's a bearish scenario," said Croft, who's also a CNBC contributor.

... ... ....

"Our base case is this sort of middle range... $52 is our WTI call for next year," she said, implying that U.S. crude would be nearly one-third higher than its current trading levels. The fourth quarter "is really where you want to be looking for WTI to sort of take-off," she added.

[Nov 30, 2016] ZeroHedge as despicable propaganda site for oil shorts

Notable quotes:
"... mazamascience.com/oilexport and the BP bible says 2015 oil consumption growth in China was +5%. There is no continue to decline. And they have 21 million more cars this year burning oil. How can there be much decline, at all? ..."
"... Just checked EIA. No evidence of any significant fall in US consumption. It will probably rise. Indian consumption was +7% last year. No real evidence of a global drop in consumption. Population grows. So why is this surprising? ..."
peakoilbarrel.com
Watcher 11/30/2016 at 7:30 pm
Here is the sort of stuff going on. Some stuff profoundly right. Some stuff completely, factually wrong. Final paras from a ZH article:

In sum, OPEC has so far managed to fool the market, and send the price of oil surging off all time lows hit in early 2016 even as OPEC output has reached record highs, and the just concluded deal may end up eliminating just a small fraction of this excess supply.

All true.

There is also risk that demand – most notably out of China – will continue to decline, delaying the so-called market equilibrium even assuming full OPEC and non-OPEC compliance.

mazamascience.com/oilexport and the BP bible says 2015 oil consumption growth in China was +5%. There is no continue to decline. And they have 21 million more cars this year burning oil. How can there be much decline, at all?

And, courtesy of Modi's ridiculous "demonetization" attempt, India's economic outlook is suddenly in jeopardy: should Indian oil import demand decline as a result, OPEC will have to double its daily production cuts just to catch up to the drop in global demand.

Just checked EIA. No evidence of any significant fall in US consumption. It will probably rise. Indian consumption was +7% last year. No real evidence of a global drop in consumption. Population grows. So why is this surprising?

Perhaps the best forecast at this point is that the price of oil will remain rangebound between $45 and $55. Below that and more jawboning will emerge; above it and concerns about shale output will dominate.

That's not best. They are all equally worthless.

Finally, it is safe to say that this is OPEC's final attempt to prove it is still relevant in a shale-driven world after the "2014 Thanksgiving massacre" when Saudi Arabia essentially unilaterally crushed the organization, and the price of oil. Should OPEC blow this, it will likely be game over for any future attempts to artificially prop up the oil price by the world's oil exporters.

... ... ...

ZH can do better than this. They have.

[Nov 30, 2016] Iraq's prime minister says his country will agree to cut its own oil production as part of a plan by OPEC to push crude prices higher.

Nov 30, 2016 | finance.yahoo.com

Prime Minister Haider al-Abadi told The Associated Press that current prices are not sustainable for oil-producing countries.

Al-Abadi's comments could be critical because Iraq - along with Iran - has been reluctant to go along with cuts, creating an obstacle for an OPEC deal, according to published reports.

Al-Abadi said he understands that OPEC members will agree to reduce production by between 900,000 and 1.2 million barrels per day - that would be a cut of between 2.7 percent and 3.6 percent from October levels. He said it would be enough to push prices up.

"Yes, we will take our share and we agreed to this," he told the AP.

Kenneth Medlock, director of an energy-studies center at Rice University, said if Iraq pledges to cut its own production it could influence other reluctant countries and help push OPEC to an agreement. The size of the cuts suggested by al-Abadi would be big enough to push up prices, he said.

A successful production-cut might re-establish the cartel as oil's swing producer - able to balance global supply with demand and influence prices - "because they will then have the most flexible capability of dealing with near-term price instability, Medlock said, particularly if global inventories tighten quickly."

Benchmark international oil rose $1, or 2 percent, on Monday to close at $48.24 a barrel. Al-Abadi said for every dollar oil prices rise, Iraq gains about $1 billion.

In late 2014, as crude prices tumbled from more than $100 a barrel, OPEC countries decided not to intervene - they expected falling prices to drive high-cost producers in the U.S. out of business.

But a worldwide glut of oil has persisted and OPEC has been pumping at record levels. Now the cartel is trying to regain some of its historical ability to affect prices.

[Nov 28, 2016] I think oil prices are a long way away from being high enough to save the shale oil industry.

Notable quotes:
"... I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed. ..."
"... Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. ..."
"... I think oil prices are a long way away from being high enough to save the shale oil industry. ..."
"... We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline. ..."
Nov 28, 2016 | peakoilbarrel.com
Mike says:

11/27/2016 at 12:12 pm
I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed.

Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. I would say this particular shale play might work, except that from the data I see the UR's on those wells are going to be pitiful at best, far less than the Bakken. Unless it is by the shear number of wells those operators are not going to have a lot of reserves that will appreciate with rising prices. It will therefore fail too, just like the others, perhaps for different reasons, I don't know. I think oil prices are a long way away from being high enough to save the shale oil industry.

We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline.

John S says: 11/27/2016 at 1:46 pm
http://fuelfix.com/blog/2016/11/22/pioneer-denied-request-to-reclassify-oil-wells/

Happy Thanksgiving Mike! This article is for you! The RRC just refused to allow Pioneer to reclassify oil wells in the Eagle Ford to .. wait for it .GAS WELLS.

I believe Pioneer just admitted the you, Shallow, Alex, and the others have been right all along about the GOR going up, up and up.

It seems that Pioneer is trying to take advantage of the "high cost gas tax credit" designed to encourage gas production in HIGH COST low permeable tight gas reservoirs.

Interestingly, this move by Pioneer has initiated a discussion about whether there should be a new category for classifying wells. Hmmm sounds like the industry is about to hit the new Texas Legislative session up for some new tax relief to encourage horizontal drilling in its new favorite geological province the Permian Basin. But it will apply to the Barnett, Haynesville, Eagle Ford, and all those other disasters.

Mike says: 11/27/2016 at 7:22 pm
Happy Thanksgiving to you too, John -- I had actually seen this before. Scoundrels they are, one and all; Pioneer too, a Texas Company start to finish. The TRRC will roll over in another year or so, watch.
Dennis Coyne says: 11/27/2016 at 8:01 pm
Hi Mike,

Despite the CEOs not worrying about profits, I would think at some point the people buying the bonds or stock of these companies would realize that the Emperor is naked.

Eventually when enough investors get burned, the money will stop flowing. Maybe not in 2016, and perhaps not in 2017, but if oil prices remain low for the long term as experts in the field seem to suggest is a likely event (though nobody really knows future oil prices), the money will dry up. In that case these companies are done.

Dennis Coyne says: 11/27/2016 at 8:04 pm
Hi Alex,

Eventually the piper must be paid, low oil prices (for another 2 years) will be the LTO focused companies undoing in my opinion.

[Nov 28, 2016] IEA expects oil investment to fall for third year in 2017

Notable quotes:
"... "Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo. ..."
"... Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want. ..."
"... BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014. ..."
"... The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad ..."
Nov 28, 2016 | peakoilbarrel.com
AlexS says: 11/26/2016 at 5:50 am
IEA expects oil investment to fall for third year in 2017

Thu Nov 24, 2016
http://www.reuters.com/article/us-iea-oil-investment-idUSKBN13J08H

Investment in new oil production is likely to fall for a third year in 2017 as a global supply glut persists, stoking volatility in crude markets, the head of the International Energy Agency (IEA) said on Thursday.

"Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo.

"This is the first time in the history of oil that investments are declining three years in a row," he said, adding that this would cause "difficulties" in global oil markets in a few years.

Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want.

The Organization of the Petroleum Exporting Countries meets next week to try to finalize to output curbs.

"Our analysis shows that when prices go to $60, we'll make a big chunk of U.S. shale oil economical and within the nine months to 12 months of time, we may see a response coming from the shale oil and other high-cost areas," Birol told Reuters, speaking in an interview on the sidelines of the conference.
"And this may again put downward pressure on the prices."

Birol said that level would be enough for many U.S. shale companies to restart stalled production, although it would take around nine months for the new supply to reach the market.

The IEA director general said it is still early to speculate what Donald Trump's presidency in the United States will have on energy policies.

"Having said that, both U.S. shale oil and U.S. shale gas have a very strong economic momentum behind them," Birol said.

"Shale gas has significant economic competitiveness today, and we think it will be so in the next years to come."

AlexS says: 11/26/2016 at 7:50 am
Оpposite view on 2017 global upstream capex from BMI Research:

Oil Firm Spending Seen Up in 2017 for First Time Since 2014

September 23, 2016
https://www.bloomberg.com/news/articles/2016-09-23/oil-firms-seen-spending-more-next-year-for-first-time-since-2014

• Capital spending seen growing 2.5% in 2017 and 7%-14% in 2018
• U.S. independents, Asian giants seen spurring spending growth

The oil industry may be ready to open its wallet after two years of slashing investments.

Companies will spend 2.5 percent more on capital expenditure next year than they did this year, the first yearly growth in such spending since 2014, BMI Research said in a Sept. 22 report. Spending will increase by another 7 percent to 14 percent in 2018. It will remain well below the $724 billion spent in 2014, before the worst oil crash in a generation caused firms to cut back on drilling and exploration to conserve cash, the researcher said.

North American independent producers, Asian state-run oil companies and Russian firms are prepared to boost investments next year, outweighing continued cuts from global oil majors such as Exxon Mobil Corp. and Total SA, BMI said, based on company guidance and its own estimates. Spending will increase to a total of $455 billion next year from $444 billion this year, BMI said.

"North America is where we're really expecting things to turn around," Christopher Haines, BMI's head of oil and gas research, said by telephone. "We've seen a push to really reduce costs, reduce spending and take out any waste and inefficiency. These companies have gotten to the point where they're all set up to react."

BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014.

shallow sand says: 11/26/2016 at 1:18 pm
From what I am reading, Permian hz wells will be drilled in greater numbers in 2017, regardless of price.

These wells are generally less prolific than those in the Bakken and EFS. However, the money has been raised and therefore it will spent.

To me, a good question is how much money is being diverted away from longer term projects that will ultimately produce more oil, to drill these Permian wells?

The Permain wells have no staying power. Under 50 bopd after 24 months is the rule, not the exception. Under 200,000 cumulative in 60 months is the rule, not the exception.

We shall see.

AlexS says: 11/26/2016 at 4:00 pm
"To me, a good question is how much money is being diverted away from longer term projects that will ultimately produce more oil, to drill these Permian wells?"

shallow sand

The companies that are postponing longer term projects are not the same companies that are planning to increase drilling in LTO plays.

Boomer II says: 11/26/2016 at 4:12 pm
"The companies that are postponing longer term projects are not the same companies that are planning to increase drilling in LTO plays."

I assumed he meant investment money. If investors want to be in gas and oil, are they picking the companies with best chance of long-term success (if there is such a thing anymore)?

AlexS says: 11/26/2016 at 4:53 pm
"I assumed he meant investment money. "

Yes, but international oil majors and U.S. shale companies generally have different investor base.

Oil majors are viewed as defensive stocks, slowly growing, but with strong balance sheets, paying high dividends and buying back shares.

On the contrary, shale companies are viewed as high risk – high reward stocks, with aggressive growth strategies, highly leveraged.

shallow sand says: 11/26/2016 at 6:46 pm
I meant both.

ExxonMobil, Chevron, ConnocoPhillips, Hess, Marathon and Oxy all have significant LTO production and all are, or were considered international upstream producers.

I agree the supermajors are defensive stocks. But there were many "growth" stock US companies which explored and produced offshore/internationally or both, prior to the LTO boom.

I may be wrong, we shall see.

AlexS says: 11/26/2016 at 7:39 pm
Most of large US E&Ps and mid-sized integrateds have divested their overseas assets during the years of shale boom.

I'm not sure that Exxon and Chevron are planning to increase their shale exposure in the near term. For Exxon, US upstream operations were hugely loss-making in 2015-16. And it has recently made two relatively large discoveries outside US.

shallow sand says: 11/26/2016 at 11:10 pm
AlexS. Are those XOM international discoveries primarily oil or gas?

Also, for the international assets you refer to which US companies divested, do you know whether the buyers are aggressively developing them? Just a guess, but I suspect maybe not.

11/30 is a big day, hoping for a cut, hard to say if it occurs whether it will be adhered to, other than by maybe the Gulf States.

AlexS says: 11/27/2016 at 6:33 am
shallow sand,

Both are oil discoveries:

1) Liza discovery offshore Guyana, with potential recoverable resource of 800 million to 1.4 billion oil-equivalent barrels

http://news.exxonmobil.com/press-release/exxonmobil-says-second-well-offshore-guyana-confirms-significant-oil-discovery

2) Owowo field offshore Nigeria with a potential recoverable resource of between 500 million and 1 billion barrels.

http://news.exxonmobil.com/press-release/exxonmobil-announces-significant-oil-discovery-offshore-nigeria

shallow sand says: 11/27/2016 at 9:27 am
AlexS. Thank you for the information.

Interesting to note Nexen is a partner in both ventures, while Hess and Chevron are in one each.

I agree XOM has sustained significant losses in North America, but they continue to spend money on new wells. Had they not spent the money they have in North America (both shale and tar sands) would the money have been spent elsewhere. A tough one to know the answer to.

I recall XOM was going to partner in Russia on projects and those were halted for political reasons? Did those projects go ahead without them?

AlexS says: 11/27/2016 at 6:39 pm
shallow sand,

I'm not saying that Exxon stopped investing in U.S. upstream. My point is that oil supermajors, like Exxon, Chevron, BP, Shell and Total are not diverting investments from deep offshore, LNG and other long-term projects to U.S. shale. They cut upstream capex both in U.S. and in overseas projects.

The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad

[Nov 28, 2016] Oil companies shoulder pain of downturn with lower output

Notable quotes:
"... In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley. ..."
"... Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop. ..."
"... "Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond." ..."
"... We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that. ..."
"... Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them. ..."
"... I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative). ..."
"... Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production. ..."
"... But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation ..."
Nov 28, 2016 | peakoilbarrel.com
AlexS says: 11/26/2016 at 5:25 am
Oil companies shoulder pain of downturn with lower output

Nov 24, 2016
http://www.reuters.com/article/us-oil-production-idUSKBN13J0I0

The world's listed oil companies have slashed oil output by 2.4 percent so far this year.

The aggregated production of 109 listed companies that produce more than a third of the world's oil fell in the third quarter of 2016 by 838,000 barrels per day from a year earlier to 33.88 million bpd, data provided by Morgan Stanley showed.

In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley.

The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil and Royal Dutch Shell, as well as U.S. shale oil producers like EOG Resources and Occidental Petroleum.

The drop in oil companies' output is particularly compelling given the increase in 2015, when third-quarter production rose by some 1.9 million bpd.

"Clearly, we have seen a large swing in the year-on-year trend in production, from strong growth as recent as a year ago, now to steep decline. This is the outcome of the strong cutbacks in investment," Morgan Stanley equity analyst Martijn Rats said.

Capital expenditure for the companies combined more than halved from $136 billion in the third quarter of 2014 to $58 billion in the same period this year, according to Rats.

Oil executives and the International Energy Agency have warned that a sharp drop in global investment in oil and gas would result in a supply shortage by the end of the decade.

Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop.

Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production.

"These declines should temporarily soften in 2017 as new fields are coming on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil probably stabilizes," Rats said.

"Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond."

George Kaplan says: 11/26/2016 at 6:03 am
We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that.

When is someone in Reuters or Bloomberg going to figure out that 2017 + 3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the end) = 2021 (or 2023) so there is no way to cover drops "at the end of the decade" now. Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them.

And how about this paragraph

"Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production."

He/she has suddenly started to talk about company finances rather than production, but without actually telling the reading public.

Cost reductions caused the drop for heavens sake. "Increased efficiencies" and "technological advancements" – do you think the author has the faintest idea what that actually means and how it is related to anything else he says.

I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative).

AlexS says: 11/26/2016 at 8:29 am
"When is someone in Reuters or Bloomberg going to figure out that 2017 + 3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the end) = 2021 (or 2023) so there is no way to cover drops "at the end of the decade" now."

It should be actually 2015 + 3 (or 5), as pre-FID projects have been posponed since end-2014 – early 2015.

Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production.

But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation

[Nov 21, 2016] Bigger fracs which cost more money result in higher IPs and higher ensuing 90 day production results. That generates more cash flow and allows for higher EURs that translate into bigger booked reserve assets. More assets means the shale oil industry can borrow more money against those assets. Its a game, and a very obvious one at that.

Notable quotes:
"... This suggests the sweetspot theory is also bogus, unless there are 9 years of them, meaning it's ALL been sweetspots so far. 9 yrs of sweetspots might as well be called just normal rather than sweet. ..."
"... It is pretty much all bogus, yes, Watcher. With any rudimentary understanding of volumetric calculations of OOIP in a dense shale like the Bakken, there is only X BO along the horizontal lateral that might be "obtained" from stimulation. More sand along a longer lateral does not necessarily translate into greater frac growth (an increase in the radius around the horizontal lateral). Novices in frac technology believe in halo effects, or that more sand equates to higher UR of OOIP per acre foot of exposed reservoir. That is not the case; longer laterals simply expose more acre feet of shale that can be recovered. Recovery factors in shale per acre foot will never exceed 5-6%, IMO, short of any breakthroughs in EOR technology. That will take much higher oil prices. ..."
"... Its very simple, actually bigger fracs (that cost lots more money!!) over longer laterals result in higher IP's and higher ensuing 90 day production results. That generates more cash flow (imperative at the moment) and allows for higher EUR's that translate into bigger booked reserve assets. More assets means the shale oil industry can borrow more money against those assets. Its a game, and a very obvious one at that. ..."
peakoilbarrel.com
Hi,

Here are my updates as usual. GOR declined or stayed flat for all years except 2010 in September. Is it the beginning of a new trend?

FreddyW says: 11/16/2016 at 3:50 pm
Here is the production graph. Not that much has happened. There was a big drop for 2011. 2009 on the other hand saw an increase. Up to the left, which is very hard to see, 2015 continues to follow 2014 which follows 2013 which follows 2012. Will we see 2013 reach 2007 the next few months?

Watcher says: 11/16/2016 at 10:34 pm
Freddy, these latest years, the IP months are chopped at the top. Any chance of showing those?

The motivation would be to get a look at the alleged spectacular technology advances in the past, oh, 2 yrs.

FreddyW says: 11/17/2016 at 2:10 pm
Its on purpose both because I wanted to zoom in and because the data for first 18 months or so for the method I used above is not very usable. Bellow is the production profile which is better for seeing differences the first 18 months. Above graph is roughly 6 months ahead of the production profile graph.

Watcher says: 11/17/2016 at 2:40 pm
Excellent.

And I guess we can all see no technological breakthru. 2014's green line looks superior to first 3 mos 2015.

2016 looks like it declines to the same level about 2.5 mos later, but is clearly a steeper decline at that point and is likely going to intersect 2014's line probably within the year.

There is zero evidence on that compilation of any technological breakthrough surging output per well in the past 2-3 yrs.

In fact, they damn near all overlay within 2 yrs. No way in hell there is any spectacular EUR improvement.

And . . . in the context of the moment, nope, no evidence of techno breakthrough. But also no evidence of sweetspots first.

I suppose you could contort conclusions and say . . . Yes, the sweetspots were first - with inferior technology, and then as they became less sweet the technological breakthroughs brought output up to look the same.

Too
Much
Coincidence.

It's all bogus.

Watcher says: 11/17/2016 at 8:12 pm
clarifying, the techno breakthrus are bogus. They would show in that data if they were real.

And it would be far too much coincidence for techno breakthrus to just happen to increase flow the exact amount lost from exhausting sweet spots.

This suggests the sweetspot theory is also bogus, unless there are 9 years of them, meaning it's ALL been sweetspots so far. 9 yrs of sweetspots might as well be called just normal rather than sweet.

Mike says: 11/17/2016 at 8:59 pm
It is pretty much all bogus, yes, Watcher. With any rudimentary understanding of volumetric calculations of OOIP in a dense shale like the Bakken, there is only X BO along the horizontal lateral that might be "obtained" from stimulation. More sand along a longer lateral does not necessarily translate into greater frac growth (an increase in the radius around the horizontal lateral). Novices in frac technology believe in halo effects, or that more sand equates to higher UR of OOIP per acre foot of exposed reservoir. That is not the case; longer laterals simply expose more acre feet of shale that can be recovered. Recovery factors in shale per acre foot will never exceed 5-6%, IMO, short of any breakthroughs in EOR technology. That will take much higher oil prices.

Its very simple, actually bigger fracs (that cost lots more money!!) over longer laterals result in higher IP's and higher ensuing 90 day production results. That generates more cash flow (imperative at the moment) and allows for higher EUR's that translate into bigger booked reserve assets. More assets means the shale oil industry can borrow more money against those assets. Its a game, and a very obvious one at that.

Nobody is breaking new ground or making big strides in greater UR. That's internet dribble. Freddy is right; everyone in the shale biz is pounding their sweet spots, high grading as they call it, and higher GOR's are a sure sign of depletion. Moving off those sweet spots into flank areas will be even less economical (if that is possible) and will result in significantly less UR per well. That is what is ridiculous about modeling the future based on X wells per month and trying to determine how much unconventional shale oil can be produced in the US thru 2035. The term, "past performance is not indicative of future results?" We invented that phrase 120 years ago in the oil business.

Watcher says: 11/18/2016 at 12:03 am
That, sir, is pretty much the point. I see what looks like about 20% IP increase for the extra stages post 2008/9/10. How could there not be going from 15 stages to 30+?

I see NO magic post peak. They all descend exactly the same way and by 18-20 months every drill year is lined up. That's actually astounding - given 15 vs 30 stages. There should be more volume draining on day 1 and year 2, but the flow is the same at month 20+ for all drill years. This should kill the profitability on those later wells because 30 stages must cost more.

But profit is not required when you MUST have oil.

Watcher says: 11/18/2016 at 12:14 am
You know, that is absolutely insane.

Freddy, is there something going on in the data? How can 30 stage long laterals flow the same at production month 24 as the earlier dated wells at their production month 24 –whose lengths of well were MUCH shorter?

FreddyW says: 11/18/2016 at 2:55 pm
I can only speculate why the curves look like they do. It could be that the newer wells would have produced more than the older wells, but closer well spacing is causing the UR to go down.
FreddyW says: 11/16/2016 at 3:57 pm
Here is the updated yearly decline rate graph. 2010 has seen increased decline rates as I suspected. The curves are currently gathering in the 15%-20% range.

Dennis Coyne says: 11/16/2016 at 5:33 pm
Hi FreddyW,

What is the annual decline rate of the 2007 wells from month 98 to month 117 and how many wells in that sample (it may be too low to tell us much)?

FreddyW says: 11/16/2016 at 6:02 pm
2007 only has 161 wells. So it makes the production curve a bit noisy as you can see above. Current yearly decline rate for 2007 is 7,2% and the average from month 98 to 117 would translate to a 10,3% yearly decline rate. The 2007 curve look quite different from the other curves, so thats why I did not include it.
Dennis Coyne says: 11/16/2016 at 9:27 pm
Hi Freddy W,

Thanks. The 2008 wells were probably refracked so that curve is messed up. If we ignore 2008, 2007 looks fairly similar to the other curves (if we consider the smoothed slope.) I guess one way to do it would be to look at the natural log of monthly output vs month for each year and see where the curve starts to become straight indicating exponential decline. The decline rates of many of the curves look similar through about month 80 (2007, 2009, 2010, 2011) after 2011 (2012, 2013, 2014) decline rates look steeper, maybe poor well quality or super fracking (more frack stages and more proppant) has changed the shape of the decline curve. The shape is definitely different, I am speculating about the possible cause.

FreddyW says: 11/17/2016 at 3:37 pm
2007 had much lower initial production and the long late plateau gives it a low decline rate also. But yes, initial decline rates look similar to the other curves. If you look at the individual 2007 wells then you can see that some of them have similar increases to production as the 2008 wells had during 2014. I have not investigated this in detail, but it could be that those increases are fewer and distributed over a longer time span than 2008 and it is what has caused the plateau. If that is the case, then 2007 may not be different from the others at and we will see increased decline rates in the future.

Regarding natural log plots. Yes it could be good if you want to find a constant exponential decline. But we are not there yet as you can see in above graph.

One good reason why decline rates are increasing is because of the GOR increase. When they pump up the oil so fast that GOR is increasing, then it's expected that there are some production increases first but higher decline rates later. Perhaps completion techniques have something to do with it also. Well spacing is getting closer and closer also and is definitely close enough in some areas to cause reductions in UR. But I would expect lower inital production rather than higher decline rates from that. But maybe I΄m wrong.

Dennis Coyne says: 11/17/2016 at 8:42 am
Hi FreddyW,

Do you have an estimate of the number of wells completed in North Dakota in September? Does the 71 wells completed estimate by Helms seem correct?

Dennis Coyne says: 11/17/2016 at 12:40 pm
Hi FreddyW,

Ok Enno's data from NDIC shows 73 well completions in North Dakota in Sept 2016, 33 were confidential wells, if we assume 98% of those were Bakken/TF wells that would be 72 ND Bakken/TF wells completed in Sept 2016.

FreddyW says: 11/17/2016 at 2:19 pm
I have 75 in my data, so about the same. They have increased the number of new wells quite alot the last two months. It looks like the addtional ones mainly comes from the DUC backlog as it increased withouth the rig count going up. But I see that the rig count has gone up now too.
Pete Mason says: 11/16/2016 at 3:49 pm
Ron you say " Bakken production continues to decline though I expect it to level off soon."
A few words of wisdom as to the main reasons why it would level off? Price rise?
Dennis Coyne says: 11/16/2016 at 5:28 pm
Hi Pete,

Even though you asked Ron. He might think that the decline in the number of new wells per month may have stabilized at around 71 new wells per month. If that rate of new completions per month stays the same there will still be decline but the rate of decline will be slower. Scenario below shows what would happen with 71 new wells per month from Sept 2016 to June 2017 and then a 1 well per month increase from July 2017 to Dec 2018 (89 new wells per month in Dec 2018).

Guy Minton says: 11/16/2016 at 8:41 pm
I am not so convinced that either Texas or the Bakken is finished declining at the current level of completions. There was consistent completions of over 1000 wells in Texas until about October of 2015. Then it dropped to less than half of that. The number of producing wells in Texas peaked in June of this year. Since then, through October, it has decreased by roughly 1000 wells a month. The Texas RRC reports are indicating that they are still plugging more than they are completing.
I remember reading one projection recently for what wells will be doing over time in the Eagle Ford. They ran those projections for a well for over 22 years. Not sure which planet we are talking about, but in Texas an Eagle Ford does well to survive 6 years. They keep referring to an Eagle Ford producing half of what they will in the first two years. In most areas, I would say that it is half in the first year.
The EIA, IEA, Opec, and most pundits have the US shale drilling turning on a dime when the oil price reaches a certain level. If it was at a hundred now, it would still take about two years to significantly increase production, if it ever happens. I am not a big believer that US shale is the new spigot for supply.
Dennis Coyne says: 11/16/2016 at 10:03 pm
Hi Guy,

The wells being shut in are not nearly as important as the number of wells completed because the output volume is so different. So the average well in the Eagle Ford in its second month of production produces about 370 b/d, but the average well at 68 months was producing 10 b/d. So about 37 average wells need to be shut in to offset one average new well completion.

Point is that total well counts are not so important, it is well completions that drive output higher.

Output is falling because fewer wells are being completed. When oil prices rise and profits increase, completions per month will increase and slow the decline rate and eventually raise output if completions are high enough. For the Bakken at an output level of 863 kb/d in Dec 2017 about 79 new wells per month is enough to cause a slight increase in output. My model slightly underestimates Bakken output, for Sept 2016 my model has output at 890 kb/d, about 30 kb/d lower than actual output (3% too low), my well profile may be slightly too low, but I expect eventually new well EUR will start to decrease and my model will start to match actual output better by mid 2017 as sweet spots run out of room for new wells.

Guy Minton says: 11/17/2016 at 7:14 am
Guess I will remember that for the future. The number of producing wells is not important. Kinda like I got pooh poohed when I said the production would drop to over 1 million barrels back in early 2015.
Dennis Coyne says: 11/17/2016 at 10:39 am
Hi Guy,

Do you agree that the shut in wells tend to be low output wells? So if I shut down 37 of those but complete one well the net change in output is zero.

Likewise if I complete 1000 wells in a year, I could shut down 20,000 stripper wells and the net change in output would be zero, but there would be 19,000 fewer producing wells, if we assume the average output of the 1000 new wells completed was 200 b/d for the year and the stripper wells produced 10 b/d on average.

How much do you expect output to fall in the US by Dec 2017?

Hindsight is 20/20 and lots of people can make lucky guesses. Output did indeed fall by about 1 million barrels per day from April 2015 to July 2016, can you point me to your comment where you predicted this?

Tell us what it will be in August 2017.

I expected the fall in supply would lead to higher prices, I did not expect World output to be as resilient as it has been and I also did not realize how oversupplied the market was in April 2015. In Jan 2015 I expected output would decrease and it increased by 250 kb/d from Jan to April, so I was too pessimistic, from Jan 2015 (which is early 2015) to August 2016 US output has decreased by 635 kb/d.

If you were suggesting World output would fall from Jan 2015 levels by 1 Mb/d, you would also have been incorrect as World C+C output has increased from Feb 2015 to July 2016 by 400 kb/d. If we consider 12 month average output of World C+C, the decline has been 340 kb/d from the 12 month average peak in August 2015 (centered 12 month average).

Guy Minton says: 11/18/2016 at 4:50 am
The dropping numbers are not as much from the wells that produce less than 10 barrels a day, but from those producing greater than 10, but less than 100. The ones producing greater than 100 are remaining at a consistent level over 9000 to 9500. The prediction on one million was as to the US shale only. It is your site, you can search it better than I can,
Guy Minton says: 11/18/2016 at 6:20 am
But then don't take my word for it. You can find the same information under the Texas RRC site under oil and gas/research and statistics/well distribution tables. Current production for Sep can be found at online research queries/statewide. It is still dropping, and will long term at the current activity level. Production drop for oil, only, is a little over 40k per day barrels, and condensate is lower for September. Proofs in the pudding.
My guess is that you would see a lot more plugging reports, if it were not so expensive to plug a well. At net income levels where they are, I expect they would put that off as long as they could.
AlexS says: 11/16/2016 at 8:51 pm
Statistics for North Dakota and the Bakken oil production are perfect, but not for well completions.

From the Director's Cut:

"The number of well completions rose from 63(final) in August to 71(preliminary) in September"
(North Dakota total)

From the EIA DPR:

The number of well completions declined from 71 in August to 52 in September and rose to 58 in October
(Bakken North Dakota and Montana).

Wells drilled, completed, and DUCs in the Bakken.
Source: EIA DPR, November 2016

Dennis Coyne says: 11/16/2016 at 9:36 pm
Hi Alex S,

I trust the NDIC numbers much more than the EIA numbers which are based on a model. Enno Peters data has 66 completions in August 2016, he has not put up his post for the Sept data yet so I am using the Director's estimate for now. I agree his estimate is usually off a bit, Enno tends to be spot on for the Bakken data, for Texas he relies on RRC data which is not very good.

shallow sand says: 11/17/2016 at 8:36 am
Dennis. Someone pointed out Whiting's Twin Valley field wells being shut in for August.

It appears this was because another 13 wells in the field were recently completed.

It appears that when all 29 wells are returned to full production, this field will be very prolific initially. Therefore, on this one field alone, we could see some impact for the entire state.

Does anyone know if these wells are part of Whiting's JV? Telling if they had to do that on these strong wells. Bakken just not close to economic.

I also note that average production days per well in for EOG in Parshall was 24. I haven't looked at some of the other "older" large fields yet, but assume the numbers are similar.

shallow sand says: 11/17/2016 at 8:58 am
Also, over 3000 Hz wells in ND produced less than 1000 BO in 9/16.

This is just for wells with first production 1/1/07 or later.

Dennis Coyne says: 11/17/2016 at 10:57 am
Hi Shallow sand,

I agree higher prices will be needed in the Bakken, probably $75/b or more. To be honest I don't know why they continue to complete wells, but maybe it is a matter of ignoring the sunk costs in wells drilled but not completed and running the numbers based on whether they can pay back the completion costs. Everyone may be hoping the other guys fail and are just trying to pay the bills as best they can, not sure if just stopping altogether is the best strategy.

There is the old adage that when your in a hole, more digging doesn't help much. 🙂

So my model just assumes continued completions at the August rate for about 12 months with gradually rising prices as the market starts to balance, then a gradual increase in completions as prices continue to rise from July 2017($78/b) to Dec 2018 (from 72 completions to about 90 completions per month 18 months later). At that point oil prices have risen to $97/b and LTO companies are making money. Prices continue to rise to $130/b by Oct 2020 and then remain at that level for 40 years (not likely, but the model is simplistic).

I could easily do a model with no wells completed, but I doubt that will be correct. Suggestions?

shallow sand says: 11/18/2016 at 8:20 am
Dennis. As we have discussed before, tough to model when there is no way to be accurate regarding the oil price.

I continue to contend that there will be no quick price recovery without an OPEC cut. Further, the US dollar is very important too, as are interest rates.

Dennis Coyne says: 11/18/2016 at 10:03 am
Hi Shallow sand,

At some point OPEC may not be able to increase output much more and overall World supply will increase less than demand. My guess is that this will occur by mid 2017 and oil prices will rise. OPEC output from Libya an Nigeria has recovered, but this can only go so far, maybe another 1 Mb/d at most. I don't expect any big increases from other OPEC nations in the near term.

A big guess as to oil prices has to be made to do a model.

I believe my guess is conservative, but maybe oil prices will remain where they are now beyond mid 2017.

I expected World supply to have fallen much more quickly than has been the case at oil prices of $50/b.

George Kaplan says: 11/17/2016 at 3:31 am
Probably to do with how confidential wells are included.
AlexS says: 11/17/2016 at 4:42 am
RBN explains EIA methodology:

"EIA does this by using a relatively new dataset-FracFocus.org's national fracking chemical registry-to identify the completion phase, marked by the first fracking. If a well shows up on the registry, it's considered completed "

Sydney Mike says: 11/17/2016 at 2:19 am
There is an unlikely peak oil related editorial writer hiding in the most unlikely place: a weekly English business paper called Capital Ethiopia. The latest editorial is again putting an excellent perspective on world events. http://capitalethiopia.com/2016/11/15/system-failure/#.WC1ZCvl9600

For the record, I have no interest or connection to this publication other than that of a paying reader.

Wouldn't it be nice if mainstream publications would sound a bit more like this.

Watcher says: 11/17/2016 at 11:34 am
the word oil does not appear anywhere on that.
Pete Mason says: 11/17/2016 at 4:56 am
Thanks all. I thought that the red queen concept meant that there had to be an increase in the rate of completions. So that 71 year-on-year in north Dakota would only stabilise temporarily. Perhaps the loss of sweet spots are being counteracted by the improvements in technology? I'm assuming that even with difficulties of financing there will be a swift increase in completions should the oil price take off, but not sure how sustainable this would be
Oldfarmermac says: 11/17/2016 at 6:03 am
Hi Pete,

Sometimes I think that once the price of oil is up enough that sellers can hedge the their selling price for two or three years at a profitable level, it will hardly matter what the banks have to say about financing new wells.

At five to ten million apiece, there will probably be plenty of money coming out of various deep pockets to get the well drilling ball rolling again, if the profits look good.

Sometimes the folks who think the industry will not be able to raise money forget that it's not a scratch job anymore. The land surveys, roads, a good bit of pipeline, housing, leases, etc are already in place, meaning all it takes to get the oil started now is a drill and frack rig.

I don't know what the price will have to be, but considering that a lot of lease and other money is a sunk cost that can't be recovered, and will have to be written off, along with the mountain of debts accumulated so far, the price might be lower than a lot of people estimate.

Bankruptcy of old owners results in lowering the price at which an old business makes money for its new owners.

Dennis Coyne says: 11/17/2016 at 8:32 am
Hi Pete,

The Red Queen effect is that more and more wells need to be completed to increase output. As output decreases fewer wells are needed to maintain output. So at 1000 kb/d output it might require 120 wells to be completed to maintain output (if new well EUR did not eventually decrease), but at 850 kb/d it might require about 78 new wells per month to maintain output.

Heinrich Leopold says: 11/17/2016 at 8:11 am
The FED oil production number for October came out yesterday. In below chart the production decline (blue line) is the same as in the previous month, yet the trend is still a massive decline year over year. In my view year over year comparison can show the dynamic of a trend. And it shows clearly that in the current cycle the oil price recovery is – in contrast to the cycle in 2008/9 – very slow and tentative.

The year over year oil price (green line in below chart) actually decreased again year over year and the risk of a double dip in the oil price is growing by the day. Drilling follows very cautiously the oil price in a parallel line (red line in below chart). If there would be really a technological advantage for shale, the red and the green line would not be paralell, but the red line for drilling would rise much stronger. This is actually the case for Middle East drilling, which barely fell during this cycle. This indicates that most Middle East producers still have high margins at the current oil price. Middle East producers – and also Russia – can quite easily cope with an oil price of 40 +/- 10 USD per barrel. This is why I think that the oil price will bounce at the bottom of the barrel within above range for a few years.

There is also something interesting going on with the world economy. The shippers rose exponentionally over the last few days (DRYS up over 1000%). Also the baltic Dry index is up 600% since the beginning of this year. House prices here in London fell – mostly at the high end. Rents for expensives homes are down by up to 36%. Donald Trump has clearly changed something already as it becomes increasingly clear that the dollar hoarders are paying for the infrastructure spending. I am not sure if he understands that he is doing a lot of harm to his own business empire as well.

Wake says: 11/17/2016 at 3:30 pm
I expect if that depressing old banker were here he would note that instability is dangerous, and that all the moves in treasuries currency and possibly trade flow create changes of which the results are difficult or impossible to predict
Oldfarmermac says: 11/18/2016 at 7:55 am
Hi Heinrich,

I can easily understand your assertion that Middle Eastern and Russian oil is profitable at forty bucks.

But if the price is to stay around forty, then it follows that you think that between them, the producers in the Middle East and Russia will be able to supply all the oil the world wants for the next few years.

Am I correct in saying this?

Do you think western producers will continue to pump enough at a loss ( most of them are apparently losing money at forty bucks ) to make up the difference?

If you are willing to venture a guess, when do you think the price will get back into the sixty dollar and up range?

If you think it won't for a lot of years, is that because you believe the economy is will be that anemic, or because electric cars will substantially reduce demand, or both ? Or maybe you have other reasons ?

Heinrich Leopold says: 11/18/2016 at 9:49 am
oldfarmermac,

The US has thrown the gauntlet to OPEC by claiming to becoming an oil net exporter. This has brought OPEC in a very difficult situation. If they cut – and oil gets to 70 USD per barrel – shale will pick up the slack and produce the amount OPEC has cut within a short period of time. So, OPEC is forced to cut again, until it has lost a lot of market share – and thus also a lot of revenue.

In my view OPEC has no other choice than to produce come hell and water – until something breaks. This could be that many shale companies give up or that for instance Iran is not allowed to export as much as they do, or there is a major conflict in the Middle East, or Saudi Arabia is running out of cash ..

He who has the market share now, will cash in when the oil price rises. And it will rise, yet not until something breaks. This is how business works. This is how Microsoft crushed Apple in the nineties in the PC market – and Apple then crushed Nokia in the smart phone market .

I do not think that Saudi Arabia has the freedom to compromise here – even if they want. If they blink they will be crushed by shale producers. So, the stand-off will go on for a while, at a loose-loose situation for both parties. However this is great luck for consumers as they can enjoy low energy prices for 2 to 3 years.

Enno Peters says: 11/17/2016 at 11:48 am
I've also a new post on ND, here .
George Kaplan says: 11/18/2016 at 8:28 am
Do you know why you show a significantly higher number of DUCs than Bloomberg do – as reported here?

http://www.oilandgas360.com/ducs-havent-flown-fast-since-april/

I think your numbers reflect numbers reported from ND DMR but Bloomberg might be closer to reality for wells that will actually ever be completed (just a guess by me though). How do Bloomberg get their numbers (e.g. removing Tight Holes, or removing old wells, not counting non-completed waivers etc.)?

Enno says: 11/18/2016 at 10:56 am
George,

Yes indeed. The difficulty with DUCs is always, which wells do you count. I don't filter old wells for example, and already include those that were spud last month (even though maybe casing has not been set). I don't do a lot of filtering, so the actual # wells that really can be completed is likely quite a bit lower. I see my DUC numbers as the upper bound. I don't know Bloombergs method exactly, so I can't comment on that.

Oldfarmermac says: 11/18/2016 at 7:57 am
Discussion of Venezuelan politics should be in the open thread, but politics are going to determine how much oil is produced there for the next few years, and the situation looks iffy indeed.

https://www.theguardian.com/commentisfree/2016/nov/17/venezuela-nicolas-maduro-dictatorship-elections-jeremy-corbyn

Watcher says: 11/18/2016 at 2:09 pm
Concerning Freddy's chart of production profile of wells drilled in various years.

They all line up by about month 18 of production. This should not be possible. The later wells have many more stages of frack. They are longer, draining more volume of rock. But the chart says what it says. At month about 18 the 2014 wells are flowing the same rate as 2008 wells. We know stage count has risen over those 6 yrs. 2014 wells should flow a higher rate. The shape of the curve can be the same, but it should be offset higher.

Explanation?

How about above ground issues . . . older wells get pipelines and can flow more oil . . . nah, that's absurd.

There needs to be a physical explanation for this.

AlexS says: 11/18/2016 at 4:36 pm
These new wells have higher IPs, but also higher decline rates.
Closer spacing (see Freddy's comment above) and depletion of the sweet spots may also impact production curves and EURs.
Watcher says: 11/18/2016 at 6:02 pm
That doesn't make sense. They are longer. By a factor of 2ish. How can a 6000 foot lateral flow exactly the same amount 2 yrs into production as a 3000 foot lateral flows 2 yrs into production?

Look at the lines. At 18 months AND BEYOND, these longer laterals flow the same oil rate as the shorter laterals did at the same month number of production. Higher IP and higher decline rate will affect the shape, but There Is Twice The Length..

Dennis Coyne says: 11/18/2016 at 8:15 pm
Hi Watcher,

I don't think we have information on the length of the wells, since 2008 the length of the lateral has not changed, just the number of frack stages and amount of proppant. This seems to primarily affect the output in the first 12 to 18 months, and well spacing and room in the sweet spots no doubt has some effect (offsetting the greater number of frack stages etc.).

Listen to Mike, he knows this stuff.

Watcher says: 11/18/2016 at 8:31 pm
From http://www.dtcenergygroup.com/bakken-5-year-drilling-completion-trends/

STATISTICS

The combination of longer lateral lengths and advancements in completion technology has allowed operators to increase the number of frac stages during completions and space them closer together. The result has been a higher completion cost per well but with increased production and more emphasis on profitability.

In the past five years, DTC Energy Group completion supervisors in the Bakken have helped oversee a dramatic increase from an average of 10 stages in 2008 to 32 stages in 2013. Even 40-stage fracs have been achieved.

One of the main reasons for this is the longer lateral lengths – operators now have twice as much space to work with (10,000 versus 5,000 feet along the lateral). Frac stages are also being spaced closer together, roughly 300 feet apart as compared to spacing up to 800 feet in 2008, as experienced by DTC supervisors.

By placing more fracture stages closer together, over a longer lateral length, operators have successfully been able to improve initial production (IP) rates, as well as increase EURs over the life of the well.

blah blah, but they make clear the years have increased length. Freddy was talking about well spacing, this text is about stage spacing, but that is achieved because of lateral length.

Freddy can you revisit your graph code? It's just bizarre that different length wells have the same flow rate 2 yrs out, and later.

FreddyW says: 11/19/2016 at 7:22 am
Take a look at Enno΄s graphs at https://shaleprofile.com/ . They look the same as my graphs and we have collected and processed the data independently from each other.
George Kaplan says: 11/19/2016 at 1:39 am
If the wells have the same wellbore riser design irrespective of lateral length (i.e. same depth, which is a given, same bore, same downhole pump) then that section might become the main bottleneck later in life and not the reservoir rock. With a long fat tail that seems more likely somehow compared to the faster falling Eagle Ford wells say (but that is just a guess really). But there may be lots of other nuances, we just don't have enough data in enough detail especially on the late life performance for all different well designs – it looks like the early ones are just reaching shut off stage in numbers now. I doubt if the E&Ps concentrated on later life when the wells were planned – they wanted early production, and still do, to pay their creditors and company officers bonuses (not necessarily in that order).
Watcher says: 11/19/2016 at 3:31 am
Hmmm. I know it is speculation, but can you flesh that out?

If some bottleneck physically exists that defines a flow rate for all wells from all years then that does indeed explain the graphs, but what such thing could exist that has a new number each year past year 2?

We certainly have discussed chokes for reservoir/EUR management, but the same setting to define flow regardless of length?

Hmmm.

George Kaplan says: 11/19/2016 at 4:01 am
The flow depends on the available pressure drop, which is made up of friction through the rock and up the well bore (plus maybe some through the choke but not much), plus the head of the well, plus a negative number if there is a pump. The frictional and pump numbers depend on the flow and all the numbers depend on gas-oil ratio. Initially there is a big pressure drop in the rock because of the high flow, then not so much. Once the flow drops the pressure at base of the well bore just falls as a result of depletion over time, the effect of the completion design is a lot less and lost in the noise, so all the wells behave similarly. That's just a guess – I have never seen a shale well and never run a well with 10 bpd production, conventional or anything else.

A question might be if the flow is the same why doesn't the longer well with the bigger volume deplete more slowly, and I don't know the answer. It may be too small to notice and lost in the noise, or to do with gas breakout dominating the pressure balance, or just the way the the physics plays out as the fluids permeate through the rock, or we don't have long enough history to see the differences yet.

clueless says: 11/18/2016 at 2:30 pm
Permian rig count now greater than same time last year.
Watcher says: 11/18/2016 at 3:27 pm
http://www.fool.ca/2016/11/16/buffett-sells-suncor-energy-inc-what-does-this-mean-for-the-canadian-oil-patch/
AlexS says: 11/18/2016 at 4:55 pm
Suncor's forecast for production [in 2017] is 680,000-720,000 boe/d. A midpoint would represent a 13% increase over 2016.

http://www.ogj.com/articles/2016/11/suncor-provides-capital-spending-production-outlook-for-2017.html

Solid growth

R Walter says: 11/18/2016 at 5:47 pm
The only oil investment that has any feck is turmoil.

Or, Term Oil Corporation.

Also known as Peak Oil.

http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/

The number of rail cars hauling petroleum is a constant in the range of 7,200 to 7,400 petroleum cars hauled each week for a good six months now.

Seems as though petroleum by rail is more of a necessity than a choice.

The volume is down a good thirty percent since about 2013 when over 10,000 cars were hauled per week.

Demand decreases, contracts expire, better modes of transport emerge and cost less. not as much call for Bakken oil. Plenty of the stuff somewhere else in this world.

The trend is down, not up for petroleum hauled by rail.

If there were orders for Bakken oil for one million bpd, the production would be one million bpd.

Bakken oil lost marketshare due to price drop.

Buyers can buy oil from anywhere.

GoneFishing says: 11/18/2016 at 6:34 pm
More Bakken petroleum is being moved by pipeline.

Over the whole rail system, petroleum and petroleum product rail car loadings were down to 10.5 thousand in September. That compares to a high point of 16.3 thousand railcars in Sept of 2014.

Coal car loadings are on the rise, from a low of 61,000 in April to 86,000 in Sept. Coal was running a near steady 105,00 to 110,000 railcars every month in 2013 and 2014.

AlexS says: 11/18/2016 at 6:57 pm
The chart below from RBN shows that Bakken pipeline capacity did not increase since early 2015. But production dropped, and this primarily affected volumes of Bakken oil transported by rail.

Given the higher percentage of oil transported by pipelines, the average transporation cost for Bakken crude should have decreased. Interesting, however, that the price differential between the well-head Bakken sweet crude and WTI has remained within the $10-12/bbl range.

Bakken Crude Production and Takeaway Capacity
Source: RBN

AlexS says: 11/18/2016 at 7:06 pm
This article from Platts explains better than me:

Analysis: Bakken discounts deepen as competition heats up

Houston (Platts)–16 Nov 2016
http://www.platts.com/latest-news/oil/houston/analysis-bakken-discounts-deepen-as-competition-27711340

Bakken Blend differentials at terminals close to North Dakota wellheads held their lowest assessment since December Tuesday, closing at the calendar-month average of the NYMEX light sweet crude oil contract (WTI CMA) minus $6.25/b.
While one factor dragging on Bakken differentials has clearly been a tight Brent/WTI spread - trading around 42 cents/b Tuesday, well in from the steady $2/b seen this summer - the return of Louisiana Light Sweet to the Midwest market may also be having an impact, according to traders.
One trader said there was an increase in volumes heading up the Capline pipeline, however, differentials suggest LLS is still too expensive, at least compared to Bakken. Platts assessed LLS at WTI plus $1.15/b Tuesday.
Considered by some to be the "champagne of crudes," it is unclear what appeal LLS still has for a Midwest refiner as margins for LLS actually - and unusually - lag those for Bakken.
S&P Global Platts data shows LLS cracking margins in the Midwest closed at $3.30/b Monday, compared to Bakken cracking margins of $6.37/b. In fact, the advantage of cracking Bakken has grown steadily since August.
Platts margin data reflects the difference between a crude's netback and its spot price.
Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
What is clear however, is that the steeper discounts available for Bakken provide the biggest incentive for a Midwest refiner.
The cost of getting Bakken to this market is around $3.48/b, according to Platts netback calculations, compared to just $1.02/b for LLS.
These costs make up a significant portion of the Bakken discount.
Further, LLS moving up the Capline after many years of relative inactivity does not necessarily suggest a new trend is in the making. However, recent pipeline reversals between Texas and Louisiana mean more Permian crudes are capable of reaching Louisiana refineries, and thus, if priced accordingly, could displace incremental volumes of LLS from its home market.
With current pipeline capacity out of North Dakota typically full, the marginal Bakken barrel often gets to market via rail, and this cost has traditionally sets the floor to Bakken's discount to WTI. And part of the recent downturn in Bakken could be chalked up to an increase in railed volumes to the US Atlantic Coast, as Bakken cracking margins there are again in the black.
In fact, Association of American Railroad's latest monthly and weekly data shows crude and refined product rail movements appear to have bottomed, having grown in September from August.
Weekly data bears this out as well, showing increases in three of the last four weeks.
It remains to be seen how long this will last, however, should Energy Transfer Partners Dakota Access Pipeline go ahead as planned.
Linefill for the pipeline could boost Bakken differentials, potentially making the grade too expensive to rail east. However, the devil is in the details.
Traders and analysts have pegged Dakota Access pipeline tariffs between $4.50-$5.50/b for uncommitted shippers between North Dakota and Patoka, Illinois. A further $6.50/b would be needed to bring the crude south from Patoka to Nederland, Texas, sources have said.
If this $11-$12/b combined pipeline estimated cost were to pan out, it would be more expensive than the $10.20/b Platts assumes in its Bakken USAC rail-based netback calculation.

AlexS says: 11/18/2016 at 8:59 pm
U.S.oil rig count was up 19 units last week, the largest weekly gain in 16 months.
Gas rig count is up 1 unit.

Permian basin: + 11 oil rigs
Bakken: -1
Eagle Ford: -1
Niobrara: +2
Cana Woodford: unchanged
Other shale plays: +2
Conventional basins: +6

Oil rig count in the Permian is up 73.5% from this year's low – the biggest increase among all US basins.
It is still only 41% of October 2014 peak, but this is much better than the Bakken and especially the Eagle Ford where drilling activity remains depressed.

AlexS says: 11/18/2016 at 9:30 pm
The number of horizontal rigs drilling for oil in the Permian is now 54% of the 2014 peak.

Oil rig count in the Permian basin
source: Baker Hughes

AlexS says: 11/18/2016 at 9:42 pm
Weak drilling activity in the Bakken and the Eagle Ford helps to explain continued declines in their oil production

Oil rig count in 4 other tight oil plays

Roger Blanchard says: 11/19/2016 at 8:17 am
Alex,

As of September 2016, 4 counties produced 90.1% of all the Bakken/Three Forks oil production in North Dakota: McKenzie, Mountrail, Williams and Dunn. Relative to December 2014, North Dakota Bakken/Three Forks oil production is off 243,098 b/d relative to December 2014 while the number of producing wells is up 1861 based upon data from the state.

Based upon state data, the number of producing wells/square mile is 1.29 in Mountrail County, 1.22 in McKenzie County, 1.02 in Willams County, and 0.86 in Dunn County. How high can the number of producing wells/square mile go?

Is there something more than reduced drilling to explain the drop in production?

George Kaplan says: 11/19/2016 at 8:35 am
This shows well density and production from last September. The distance is concentric from a "production centre of gravity" – i.e. weighted average by production for all wells. The core area ("sweet spot") is a circle of about 50 to 60 kms only (it's squashed out a bit to the west and missing a bite in the SW). Maximum well density (and with the best wells is 120 to 160 acres, and falls off quickly outside the core. The core is getting saturated.

AlexS says: 11/18/2016 at 9:53 pm
From a recent EIA report:

"U.S. drilling activity is increasingly concentrated in the Permian Basin . The Permian now holds nearly as many active oil rigs as the rest of the United States combined, including both onshore and offshore rigs, and it is the only region in EIA's Drilling Productivity Report where crude oil production is expected to increase for the third consecutive month."

AlexS says: 11/18/2016 at 9:58 pm
The EIA DPR production volume estimates for the Permian include both LTO and conventional C+C

AlexS says: 11/18/2016 at 10:06 pm
Permian Basin also dominates M&A activity in the US E&P sector.

From the same EIA report:

"Several of the larger M&A deals involved Permian Basin assets, where drilling and production is beginning to increase.
Based on data through November 10, the second half of 2016 already has more M&A spending than the first half of 2016, but on fewer deals. The 93 M&A announcements in the third quarter of 2016 totaled $16.6 billion, for an average of $179 million per deal, the largest per deal average since the third quarter of 2014. Although only 11 of the 49 deals so far in the fourth quarter of 2016 are in the Permian Basin, they accounted for more than half of total deal value."

http://www.eia.gov/todayinenergy/detail.php?id=28772

Heinrich Leopold says: 11/19/2016 at 6:09 am
RRC Texas for September came out recently. As others will probably elaborate more on the data, I just want to show if year over year changes in production could be use as a predictive tool for future production (see below chart).

It is obvious that year over year changes (green line) beautifully predicted oil production (red line) at a time lag of about 15 month. Even when production was still growing, the steep decline of growth rate indicated already the current steep decline.

The interesting thing is that the year over year change is a summary indicator. It does not tell why production declines or rises. It can be the oil price, interest rates or just depletion – even seasonal factors are eliminated. It just shows the strength of a trend.

I am curious myself how this works out. The yoy% indicator predicts that Texas will have lost another million bbl per day by end next year. That sounds quite like a big plunge. One explanation could be the fact that we have now low oil prices and high interest rates. In all other cycles it has been the other way around: low oil prices came hand in hand with low interest rates. This could be now a major obstacle for companies to grow production.

This concept of following year over year changes works of course just for big trends, yet for investment timing it seems exactly the right tool. Another huge wave is coming in electric vehicles which are growing in China by 120% year over year. Here we have the same situation as for shale 7 years ago: Although current EV sales are barely 1 million per year worldwide, the growth rate reveals already an huge wave coming. So as an investor it is always necessary to stay ahead of the trend and I think this can be done by observing the year over year% change.

[Nov 19, 2016] 11/16/2016 at 3:49 pm

Notable quotes:
"... I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They periodically review basins to assess how much petroleum is there, we have been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins. ..."
"... I think when seismic, land, surface and down hole equipment is included, the number is much higher. With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing, $1-5 million per well? ..."
"... In reading company reports, it seems they state a cost to drill and case the hole, another to complete the well, then add the two for well cost. This does not include costs incurred prior to the well being drilled, which are not insignificant. Nor does it include costs of down hole and surface equipment, which also are not insignificant. ..."
"... Land costs are all over the map, and I think Bakken land costs overall are the lowest, because much of the leasing occurred prior to US shale production boom. I think a lot of acreage early on cost in the hundreds per acre. Of course, there was quite a bit of trading around since, so we have to look project by project, unfortunately. For purposes of a model, I think $8 million is probably in the ballpark. ..."
"... I would not include equipment for the well, initially, as OPEX (LOE is what I prefer to stick with, being US based). The companies do not do that, those costs are included in depreciation, depletion and amortization expense. ..."
"... Once the well is in production, and failures occur, I include the cost of repairs, including replacement equipment, in LOE. I am not sure that the companies do that, however. ..."
"... I think the Permian is going to be much tougher to estimate, as there are different producing formations at different depths, whereas the Bakken primarily has two, and the Eagle Ford has 1 or 2. ..."
"... What most interests me are suggestions that there is so much available oil in Wolfcamp and what that will do to oil prices and national policy. Seems like any announcement of more oil will likely keep prices low. And if they stay low, there's little reason to open up more areas for oil drilling. ..."
"... The key question is what part of these estimated technically recoverable resources are economically viable at $50; $60; $70; $80; $90, $100, etc. ..."
"... In November 2015, the EIA estimated proven reserves of tight oil in Wolfcamp and Bone Spring formations as of end 2014 at just 722 million barrels. ..."
"... AlexS. Another key question, which is price dependent, is how many years will it take to fully develop the reserves? ..."
"... If oil prices go back to $100/b in 2018 as the IEA seems to be concerned about, it could ramp up at the speed of the Eagle Ford ..."
"... It's impossible for IEA to make statements like: "the end of low cost oil will negatively affect economic growth", "geology is about to beat human ingenuity" etc. ..."
Nov 19, 2016 | peakoilbarrel.com
JG 11/16/2016 at 3:49 pm
I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They periodically review basins to assess how much petroleum is there, we have been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins.
Mike says: 11/17/2016 at 8:28 am
Thank you, JG -- Straight from the horses mouth, respectfully. The USGS lost all credibility with me as to estimating TRR in the Monterrey Shale in California. It baffles me, after five years of publically discussing unconventional shale oil resources, that modelers, internet analysts and predictors completely ignore economics, debt and finances. Extracting oil is a business; it must make money to succeed. If it does not succeed, all bets are off regarding predictions.
Dennis Coyne says: 11/17/2016 at 8:49 am
Hi Mike,

The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant do the analysis and it was mostly based on investor presentations, very little geological analysis.

It would be better if the USGS did an economic analysis as they do with coal for the Powder River Basin. They could develop a supply curve based on current costs, but they don't.

Do you have any idea of the capital cost of the wells (ballpark guess) for a horizontal multifracked well in the Wolfcamp? Would $7 million be about right (a WAG by me)?

On ignoring economics, I show my oil price assumptions. Other financial assumptions for the Bakken are $8 million for capital cost of the well (2016$). OPEX=$9/b, other costs=$5/b, royalty and taxes=29% of gross revenue, $10/b transport cost, and a real discount rate of 7% (10% nominal discount rate assuming 3% inflation).

I do a DCF based on my assumed real oil price curve. Brent oil price rises to $77/b (2016$) by June 2017 and continue to rise at 17% per year until Oct 2020 when the oil price reaches $130/b, it is assumed that average oil prices remain at that level until Dec 2060. The last well is drilled in Dec 2035 and stops producing 25 years later in Dec 2060.

EUR of wells today is assumed to be 321 kb and EUR falls to 160 kb by 2035. The last well drilled only makes $243,000 over the 7% real rate of return, so the 9 Gb scenario is probably too optimistic, it is assumed that any gas sales are used to offset OPEX and other costs, though no natural gas price assumptions have been made to simplify the analysis.

This analysis is based on the analyses that Rune Likvern has done in the past, though his analyses are far superior to my own.

shallow sand says: 11/17/2016 at 9:00 am
I think when seismic, land, surface and down hole equipment is included, the number is much higher. With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing, $1-5 million per well?
Dennis Coyne says: 11/17/2016 at 10:07 am
Hi Shallow sand,

I am doing the analysis for the Bakken. A lot of the leases are already held and I don't know that those were the prices paid. Give me a number for total capital cost that makes sense, are you suggesting $10.5 million per well, rather than $8 million? Not hard to do, but all the different assumptions you would like to change would be good so I don't redo it 5 times.

Mostly I would like to clear up "the number".

I threw out more than one number, OPEX, other costs, transport costs, royalties and taxes, real discount rate (adjusted for inflation), well cost.

I think you a re talking about well cost as "the number". I include down hole costs as part of OPEX (think of it as OPEX plus maintenance maybe).

shallow sand says: 11/17/2016 at 11:19 am
Dennis. The very high acreage numbers are for recent sales in the Permian Basin.

In reading company reports, it seems they state a cost to drill and case the hole, another to complete the well, then add the two for well cost. This does not include costs incurred prior to the well being drilled, which are not insignificant. Nor does it include costs of down hole and surface equipment, which also are not insignificant.

Land costs are all over the map, and I think Bakken land costs overall are the lowest, because much of the leasing occurred prior to US shale production boom. I think a lot of acreage early on cost in the hundreds per acre. Of course, there was quite a bit of trading around since, so we have to look project by project, unfortunately. For purposes of a model, I think $8 million is probably in the ballpark.

I would not include equipment for the well, initially, as OPEX (LOE is what I prefer to stick with, being US based). The companies do not do that, those costs are included in depreciation, depletion and amortization expense.

Once the well is in production, and failures occur, I include the cost of repairs, including replacement equipment, in LOE. I am not sure that the companies do that, however.

I think the Permian is going to be much tougher to estimate, as there are different producing formations at different depths, whereas the Bakken primarily has two, and the Eagle Ford has 1 or 2.

An example:

QEP paid roughly $60,000 per acre for land in Martin Co., TX. If we assume one drilling unit is 1280 acres (two sections), how many two mile laterals will be drilled in the unit?

1280 acres x $60,000 = $76,800,000.

Assume 440′ spacing, 12 wells per unit.

$76,800,000/12 = $6,400,000 per well.

However, there are claims of up to 8 producing zones in the Permian.

So, 12 x 8 = 96 wells.

$76,800,000 / 96 = $800,000 per well.

Even assuming 96 wells, the cost per well is still significant.

If we assume 96 wells x $7 million to drill, complete and equip, total cost to develop is $.75 BILLION. That is a lot of money for one 1280 acre unit, need to recover a lot of oil and gas to get that to payout.

Dennis Coyne says: 11/17/2016 at 1:22 pm
Hi Shallow sands,

I am neither an oil man nor an accountant, so regardless of what we call it I am assuming natural gas sales (maybe about $3/barrel on average) are used to offset the ongoing costs to operate the well (LOE, OPEX, financial costs, etc), we could add another million to the cost of the well for surface and downhole equipment and land costs. Does an average operating cost over the life of a well of about $17/b ($14/b plus natural gas sales of $3/b of oil produced)seem reasonable?

That would be about $5.4 million spent on LOE etc. over the life of the well (assuming 320 kbo produced). Also does the 10% nominal rate of return sound high enough, what number would you use as a cutoff? You use a different method than a DCF and want the well to pay out in 60 months. This would correspond to about a 14% nominal rate of return and an 11% real rate of return (assuming a 3% annual inflation rate.)

AlexS says: 11/17/2016 at 9:05 am
"The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant do the analysis and it was mostly based on investor presentations, very little geological analysis."

Exactly. USGS' estimate as of October 2015 is very conservative:

"The Monterey Formation in the deepest parts of California's San Joaquin Basin contains an estimated mean volumes of 21 million barrels of oil, 27 billion cubic feet of gas, and 1 million barrels of natural gas liquids, according to the first USGS assessment of continuous (unconventional), technically recoverable resources in the Monterey Formation."

"The volume estimated in the new study is small, compared to previous USGS estimates of conventionally trapped recoverable oil in the Monterey Formation in the San Joaquin Basin. Those earlier estimates were for oil that could come either from producing more Monterey oil from existing fields, or from discovering new conventional resources in the Monterey Formation."

Previous USGS estimates were for conventional oil:

"In 2003, USGS conducted an assessment of conventional oil and gas in the San Joaquin Basin, estimating a mean of 121 million barrels of oil recoverable from the Monterey. In addition, in 2012, USGS assessed the potential volume of oil that could be added to reserves in the San Joaquin Basin from increasing recovery in existing fields. The results of that study suggested that a mean of about 3 billion barrels of oil might eventually be added to reserves from Monterey reservoirs in conventional traps, mostly from a type of rock in the Monterey called diatomite, which has recently been producing over 20 million barrels of oil per year."

https://www.usgs.gov/news/usgs-estimates-21-million-barrels-oil-and-27-billion-cubic-feet-gas-monterey-formation-san

Mike says: 11/17/2016 at 1:24 pm
I am corrected, RE; USGS and Monterrey. I still don't believe there is 20G BO in the Wolfcamp. Most increases in PB DUC's are not wells awaiting frac's but lower Wolfcamp wells that are TA and awaiting re-drills; that should tell you something. With acreage, infrastructure and water costs in W. Texas, wells cost $8.5-9.0M each. The shale industry won't admit that, but that's what I think. What happens to EUR's and oil prices after April of 2017 is a guess and a waste of time, sorry.
Dennis Coyne says: 11/17/2016 at 8:54 am
Hi JG,

What is the average cost of drilling and completion (including fracking) for a horizontal Wolfcamp well?

Does the F95 estimate of 11 Gb seem reasonable if oil prices go up to over $80/b (2016 $) and remain above that level on average from 2018 to 2025?

Boomer II says: 11/17/2016 at 3:25 pm
What most interests me are suggestions that there is so much available oil in Wolfcamp and what that will do to oil prices and national policy. Seems like any announcement of more oil will likely keep prices low. And if they stay low, there's little reason to open up more areas for oil drilling.
AlexS says: 11/16/2016 at 3:53 pm
"Their assessment method for Bakken was pretty simple – pick a well EUR, pick a well spacing, pick total acreage, pick a factor for dry holes – multiply a by c by d and divide by b."

The EIA and others use the same methodology

AlexS says: 11/16/2016 at 4:09 pm
USGS estimates for average well EUR in Wolfcamp shale look reasonable: 167,ooo barrels in the core areas and much lower in other parts of the formation.

I do not know if the estimated potential production area is too big, or assumed well spacing is too tight.

The key question is what part of these estimated technically recoverable resources are economically viable at $50; $60; $70; $80; $90, $100, etc.

Significant part of resources may never be developed, even if they are technically recoverable.

Dennis Coyne says: 11/16/2016 at 5:17 pm
Keep in mind these USGS estimates are for undiscovered TRR, one needs to add proved reserves times 1.5 to get 2 P reserves and that should be added to UTRR to get TRR. There are roughly 3 Gb of 2P reserves that have been added to Permian reserves since 2011, if we assume most of these are from the Wolfcamp shale (not known) then the TRR would be about 23 Gb. Note that total proved plus probable reserves at the end of 2014 in the Permian was 10.5 Gb (7 Gb proved plus 3.5 GB probable with the assumption that probable=proved/2). I have assumed about 30% of total Permian 2P reserves is in the Wolfcamp shale. That is a WAG.

Note the median estimate is a UTRR of 19 Gb with F95=11.4 Gb and F5=31.4 Gb. So a conservative guess would be a TRR of 13.4 Gb= proved reserves plus F95 estimate. If prices go to $85/b and remain at that level the F95 estimate may become ERR, at $100/b maybe the median is potentially ERR. It will depend how long prices can remain at $100/b before an economic crash, prices are Brent Crude price in 2016$ with various crude spreads assumed to be about where they are now.

AlexS says: 11/16/2016 at 7:01 pm
Dennis,
where your number for proven reserves in the Permian comes from?

In November 2015, the EIA estimated proven reserves of tight oil in Wolfcamp and Bone Spring formations as of end 2014 at just 722 million barrels.

http://www.eia.gov/naturalgas/crudeoilreserves/

AlexS says: 11/16/2016 at 7:16 pm
US proved reserves of LTO

Dennis Coyne says: 11/16/2016 at 9:11 pm
Hi Alex S,

I just looked at Permian Basin crude reserves (Districts 7C, 8 and 8A) and assumed the change in reserves from 2011 to 2014 was from the Wolfcamp. I didn't know about that page for reserves. It is surprising it is that low.

In any case the difference is small relative to the UTRR, it will be interesting to see what the reserves are for year end 2015.

Based on this I would revise my estimate to 20 Gb for URR with a conservative estimate of 12 Gb until we have the data for year end 2015 to be released later this month.

My guess is that the USGS probably already has the 2015 year end reserve data.

AlexS says: 11/16/2016 at 9:26 pm
Dennis,

The EIA proved reserves estimate for 2015 will be issued this month. I think we will see a significant increase in the number for the Permian basin LTO.

Also note that USGS TRR estimate is only for Wolfcamp.
I can only guess what could be their estimate for the whole Permian tight oil reserves.
But the share of Wolfcamp in the Permian LTO output is only 24% (according to the EIA/DrillingInfo report).

Dennis Coyne says: 11/16/2016 at 10:09 pm
Hi Alex S,

http://www.beg.utexas.edu/resprog/permianbasin/index.htm

At link above they say Permian basin has 30 Gb of oil, so if both estimates are correct the Wolfcamp has 2/3 of remaining resources.

AlexS says: 11/17/2016 at 4:32 am
Dennis,

Wolfcamp is a newer play than Bone Spring and Spraberry. That's why its share in the Permian LTO production is less than in TRR.

Dennis Coyne says: 11/17/2016 at 8:21 am
Hi AlexS,

That makes sense. I also imagine the USGS focused on the formation with the bulk of the remaining resources. It is conceivable that the 30 Gb estimate is closer to the remaining oil in place and that more like 90% of the TRR is in the Wolfcamp, considering that the F5 estimate is about 30 Gb. That older study from 2005 may be an under estimate of TRR for the Permian, likewise the USGS might have overestimated the UTRR.

shallow sand says: 11/16/2016 at 5:18 pm
AlexS. Another key question, which is price dependent, is how many years will it take to fully develop the reserves?
Dennis Coyne says: 11/16/2016 at 5:38 pm
Hi Shallow sand,

If oil prices go back to $100/b in 2018 as the IEA seems to be concerned about, it could ramp up at the speed of the Eagle Ford (say 2 to 3 years). It will be oil price dependent and perhaps they won't over do it like in 2011-2014, but who knows, some people don't learn from past mistakes. If you or Mike were running things it would be done right, but the LTO guys, I don't know.

AlexS says: 11/16/2016 at 7:08 pm
shallow sand,

Yes, you are correct. And there are multiple potential production scenarios, depending on the oil prices.

Boomer II says: 11/16/2016 at 3:39 pm
From the USGS press release.

USGS Estimates 20 Billion Barrels of Oil in Texas' Wolfcamp Shale Formation

"This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically recoverable resources.

Undiscovered resources are those that are estimated to exist based on geologic knowledge and theory, while technically recoverable resources are those that can be produced using currently available technology and industry practices. Whether or not it is profitable to produce these resources has not been evaluated."

Watcher says: 11/16/2016 at 4:11 pm
This is an important way to assess.

If it requires slave labor at gunpoint to get the oil out, then that's what will happen because you MUST have oil, and a day will soon come when that sort of thing is reqd.

George Kaplan says: 11/16/2016 at 3:16 pm
This follows on from reserve post above (two a couple of comments). In terms of changes over the last three years – there really weren't anything much dramatic. We'll see what 2016 brings, especially for ExxonMobil, but it looks like they already knocked a big chunk off of their Bitumen numbers already in 2015.

Note I went through a lot of 20-F and 10-K reports watching the rain fall this morning and copied out the numbers, I'm not guaranteeing I got everything 100%, but I think the general trends are shown.

Note the figures are totals for all nine companies I looked at.

Jeff says: 11/16/2016 at 3:20 pm
IEA WEO is out: http://www.iea.org/newsroom/news/2016/november/world-energy-outlook-2016.html presentation slides, fact sheet and summary are available online (report can be purchased). IEA seems to be _very_ concerned about underinvestment in upstream oil production. Several pages of the report is devoted to this, the title of that section is "mind the gap". More or less all of the content has been discussed on this website, including the issue with high levels of debt and that this can affect suppliers' capacity to rebound, and how much demand can be reduced as a result of a stringent carbon cap.

From the fact sheet (available free of charge):
"Another year of low upstream oil investment in 2017 would risk a shortfall in oil production in a few years' time. The conventional crude oil resources (e.g. excluding tight oil and oil sands) approved for development in 2015 sank to the lowest level since the 1950s, with no sign of a rebound in 2016. If there is no pick-up in 2017, then it becomes increasingly unlikely that demand (as projected in our main scenario) and supply can be matched in the early 2020s without the start of a new boom/bust cycle for the industry"

Presentation 1:09 – Dr. Birol gives his view: "depletion never sleeps"

George Kaplan says: 11/17/2016 at 3:42 am
I wonder who that paragraph is aimed at. As I indicated above the companies that would be investing in long term conventional projects don't have a very large inventory of undeveloped reserves (17 Gb as of end of 2015, some of this has gone already this year and more is in development and will come on stream in 2017 and 2018 (and a small amount in later years for approved projects). I'd guess there might only be less than 10 Gb (and this the most expensive to develop) that is currently under appraisal among the major western IOCs and larger independents; allowing for their partnerships with NOCs in a lot of the available projects that could represent 20 to 30 Gb total. That really isn't very much new supply available, and a large proportion is in complex deep water projects that wouldn't be ramped up fully until 6 to 7 years after FID (i.e. already too late for 2020). Really the main players need to find new fields with easy developments, but they obviously aren't, probably never will, and actually aren't looking very hard at the moment.
Jeff says: 11/17/2016 at 7:24 am
My interpretation is that this is IEAs way of saying that it does not look good. Those who can read between the lines get the message. Also, a few years from they will be able to say "see we told you so".

It's impossible for IEA to make statements like: "the end of low cost oil will negatively affect economic growth", "geology is about to beat human ingenuity" etc.

WEO have become more and more bizarre over the years. On the one hand they contain quantitative projections which tell the story politicians wants to hear. On the other hand, the text describes all sorts of reason of why the assumptions are unlikely to hold. Normally, if you don't believe in your own assumptions you would change them.

[Nov 19, 2016] Why Economic Recovery Requires Rethinking Capitalism

Notable quotes:
"... If we are to rethink capitalism, let's make sure to include as one key element the banishment of the phrase "human capital". ..."
"... "On both sides of the Atlantic, public companies are sitting on record piles of cash-around $2 trillion in the U.S. and a similar amount in Europe" ..."
"... The first function of unemployment (which has always existed in open or disguised forms) is that it maintains the authority of master over man. The master has normally been in a position to say: "If you don't want the job, there are plenty of others who do." When the man can say: "If you don't want to employ me, there are plenty of others who will," the situation is radically altered. ..."
"... Illiberal libertarians: Why libertarianism is not a liberal view ..."
"... "Sustained exponential growth is mathematically impossible." ..."
"... creative destruction ..."
Nov 19, 2016 | www.nakedcapitalism.com
Wen November 19, 2016 at 6:58 am

To me it feels like Mazzucatto is promoting keynisanism. That's not really new and, if Philip Mirowski is to be believed, the neoliberal thought collective already has a strategy to shoot it down. May I suggest a more genuine example of rethinking(from Mirowski himself) – https://www.youtube.com/watch?v=xfbVPDNl7V4&list=PLQWdiYL5PMXHtFu6RpVfKyHftAmYlkxW7&index=10 and his accompanying paper – 'Markets Come to Bits: Evolution, Computation and Markomata in Economic Science' https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwj5yNvb4bTQAhVBNY8KHWNLBnIQFggcMAA&url=http%3A%2F%2Fwww.uq.edu.au%2Feconomics%2FPDF%2Fint%2FMirowski.pdf&usg=AFQjCNGWnjLqCE3459qPKnbW161SC7c6VA

linda a November 19, 2016 at 7:31 am

Where is the sustainable part? It is not in goals of growth. The goal should be sustainable evolution.

Government enshrines process and practices. It doesn't evolve well. Government also has a devastating track record on picking investments to incentivize - oil over ethyl alcohol back in the 1920's. Promoting land development and farming practices in the western plains that created the dust bowl. Government does do an amazing job of steam rolling contrary information, ideas, etc.

Sound of the Suburbs November 19, 2016 at 8:06 am

The rigorous and scientific economics profession just needs to decide

"Which way is up?"

40 years ago, most economists and almost everyone else believed the economy was demand driven and the system naturally trickled up. Now most economists and almost everyone else believes the economy is supply driven and the system naturally trickles down. Economics has been turned upside down in the last 40 years.

For a supply side, trickle down world you need Neo-Keynesian stimulus, where money is fed into the top of the economic pyramid, the banks, to be lent out, invested and trickle down.

For a demand driven, trickle up world you need traditional Keynesian stimulus, where money is fed into the bottom of the economic pyramid through infrastructure spending, to create jobs and wages which will be spent into the economy and trickle up.

The West has been doing Neo-Keynesian stimulus for the last eight years and asset prices have been maintained but little has trickled down to the real economy.

Oh dear, today's economics is upside down, let's try some good old Keynesian fiscal stimulus.

Brexit and Trump are the result of not working out "which way is up?" a little sooner.

Sound of the Suburbs November 19, 2016 at 8:06 am

China did fiscal stimulus after 2008, how did that go? China was the engine of global growth after 2008, its insatiable demand for raw materials made lots of other emerging economies boom too. Keynes is the man; he's the right way up.

Sound of the Suburbs November 19, 2016 at 8:12 am

Let's form a global economy guided by ideas of economic liberalism where we put the economy first over the interests of people.

1980s – boom
Early 1990s – bust
Late 1990s – boom
Early 2000s – bust
Mid 2000s – boom
Late 2000s – bust
2008 on – stagnation

Unfortunately, no one really understood how the economy worked.

2008 – "How did that happen?"
What more evidence do we need?

What is wrong with economics when science can successfully send space craft to the outer edges of the solar system?

Science has been allowed to develop successfully as it cannot be modified to suit certain vested interests to make them richer.

Economics is not like this.

There is something wrong with economics that was first spotted at the end of the 19th century and pretending it is a real science today is little more than wishful thinking.

Thorstein Veblen wrote an essay in 1898 "Why is economics not an evolutionary science?". Real sciences are evolutionary and old theory is replaced as new theory comes along and proves the old ideas wrong. Economics jumps about like a cat on a hot tin roof and is not evolutionary, in the late 1970s Keynesian ideas were ditched for the ideas of Milton Freidman. We threw out the old Keynesian economics and bought in something new and untested just as we are about to embark on globalisation, it was asking for trouble. Milton Freidman hadn't realised real science is evolutionary.

Looking back we can see other problems.

Malthus came up with an economics that worked for the vested interests of the land owning class.
Ricardo came up with an economics that worked for the vested interests of the financial class.
Marx came up with an economics that worked for the ideology he was trying to put forward.

It's complex, quite fuzzy and can be easily biased to suit vested interests.

Early on it became very apparent to the wealthy and powerful that economics needed to be biased in the right direction for their interests.

As Classical Economics reached its zenith in the 19th Century it had come to some unfortunate conclusions powerful, vested interests didn't like so they backed a new, neoclassical economics that missed out the undesirable conclusions from Classical Economics like the differentiation of "earned" and "unearned" income.

Most of the UK now dreams of giving up work and living off the "unearned" income from a BTL portfolio, extracting the "earned" income of generation rent.

The UK dream is to be like the idle rich, rentier, living off "unearned" income and doing nothing productive.

This distinction between "earned" and "unearned" income has been buried ever since, but was hidden is later revealed by who this economics favours.

Neoclassical economics led to the Wall Street Crash of 1929 and the Great Depression, where its ideas just made things worse.

Keynes came up with some new ideas that were incorporated into the "New Deal" and the recovery began in the US.

Keynes ideas had some unpleasant conclusions as well and so economists moulded some of Keynes ideas into neoclassical economics ready to use after the Second World War. Keynes had said that capitalism was inherently unstable and recognised the dangers from financial asset investing, not the sort of ideas that were desirable.

The Golden Age of the 1950s and 1960s followed.

The new hybrid Keynesian ideas went wrong in the 1970s and its ideas did not lead to recovery.

The powerful vested interests sought an opportunity to bring back their really biased pure neoclassical economics and use it as the basis for a global economy.

It was improved, but still had all the old problems:

Left to their own devices, powerful vested interests will develop an economics that is so biased the economic system will collapse due to the polarisation of wealth at the personal and national level (like now).

Lots of other inconvenient stuff is missing too, which has lead to many of the recent mistakes, including 2008 and its aftermath:

1) The true nature of money and how it is created and destroyed on bank balance sheets.

2) The work of Irving Fischer, Hyman Minsky and Steve Keen on debt inflated asset bubbles. Their inflation, bursting and the debt deflation that follows.

3) Richard Koo on balance sheet recessions.

You can bias economics to suit vested interests but you can't make that biased economics work.

Economics needs to be rebuilt form the bottom up in an evolutionary, scientific, manner not missing out the bits that are inconvenient for wealthy and powerful vested interests.

You can't put the economy first without good economics.

Let's get busy.

doug November 19, 2016 at 8:18 am

If we are to rethink capitalism, let's make sure to include as one key element the banishment of the phrase "human capital".

Sound of the Suburbs November 19, 2016 at 8:21 am

"On both sides of the Atlantic, public companies are sitting on record piles of cash-around $2 trillion in the U.S. and a similar amount in Europe"

Keynes called it the "liquidity trap". 1929 and 2008 were both debt inflated asset bubbles, where securitising loans increased leverage. Keynes studied the Great Depression and noted monetary stimulus lead to a "liquidity trap". Businesses and investors will not invest without the demand there to ensure their investment will be worthwhile. The money gets horded by investors and on company balance sheets as they won't invest. Cutting wages to increase profit just makes the demand side of the equation worse and leads you into debt deflation. Central Banks today talk about the "savings glut" not realising this is Keynes's "liquidity trap".

US firms engage in share buybacks as they don't want to invest in expansion.

Investors pour into negative yielding bonds and gold for safety.

Keynes realised wage income was just as important as profit as wage income looks after the demand side of the equation.

This is why you need fiscal stimulus to create jobs and wage income to spur demand.

Say may have said "supply creates its own demand" but he was wrong.

As we can see businesses and investors don't believe Say either and this why they are hoarding.

a different chris November 19, 2016 at 8:35 am

>Stagnation is not caused by the deterministic forces of an ageing population, high savings, and exhausted tech opportunities. Rather, it is a result of falling private and public investment that has prevented the emergence of new investment opportunities.

So I expected an explanation of why "falling investment" isn't directly correlated to "exhausted tech opportunities" and the like. Didn't get it.

The usual techno-libertarian babble with the libertarian part jammed into the closet so as to appeal to the political classes.

tegnost November 19, 2016 at 11:37 am

I think the problem with your problem is that it's not clear where the next phase of growth will come from, and as tech has reached a pinnacle, maybe the new thing will turn out to be surprisingly luddite and the searching for it may be better done by collective action which then is picked up by the private sector with the public part moving on to lead the thing that replaces that because this old world keeps spinning around in spite of the fact that people are always haunted with the notion that it might stop .think y2k, jan 1 2000 was going to and did happen regardless of the perceived capacity for our systems to bear it. Like in the election where the private sector thought it could lead us where they wanted us to go but it turns out they were wrong and they're actually following

a different chris November 19, 2016 at 12:22 pm

(not that I don't believe in the general idea, that's what made me sad..)

Sound of the Suburbs November 19, 2016 at 9:07 am

The secret is in how money works, which is why hardly any economists understand either the problem or the solution.

Money and debt are opposite sides of the same coin. If there is no debt there is no money. Money is created by loans and destroyed by repayments of those loans.

From the BoE:

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

After the system has been flooded with lots of debt by encouraging bankers to maximise profit with their debt products, you get to a point where everyone is paying down debt and few people are taking on new loans. This makes the money supply contract, making it harder to pay down the debt.

When the repayments are larger than the new debt being taken on, the money supply starts contracting. The Government needs to step in as the borrower of last resort to keep the money supply stable, otherwise you head into a deflationary spiral.

Central Banks are the lender of last resort and Governments are the borrowers of last resort.

Central Banks print money for banks (QE) and, as no one is borrowing, it stays in the financial system blowing bubbles and doesn't get to the real economy as seen from the low inflation round the world.

Central Banks printing money for the Government to engage in fiscal stimulus gets the money directly into the economy.

What they have been trying to do all along, the intermediary has just changed.

Banks never got the money into the real economy.

Keynes studied a similar situation in the Great Depression where debt deflation had taken hold.

He realised businesses and investors won't invest in the real economy when there is no demand. Today we see all the global businesses hoarding cash and engaging in share buybacks, they won't invest because there is no demand to make this worthwhile.

Keynes realised wage income was just as important as profit, wage income creates demand.

Keynes understood money.

Today's businesses think they should maximise profit by cutting wages, reducing wage income and demand and making the whole thing worse.

Today's economics is basically the same as that of the 1920s, its neoclassical economics and its core remains unchanged.

Neoclassical economics believes supply creates its own demand "Say's Law". It didn't then and it doesn't now.

Neoclassical economics believes capitalism naturally reaches stable equilibriums. It led to a Wall Street Crash and Great Depression then and it led to a Wall Street Crash and global recession now.

The FED engaged in QE then, it has engaged in QE now, it didn't really work either time.

It was the "New Deal" that bought the US out of the Great Depression, it's what the world needs now.

Saturating an economy in debt will always lead to debt deflation and the only way out is fiscal stimulus.

Richard Koo studied this in the Japanese debt deflation from 1989 to today:
https://www.youtube.com/watch?v=8YTyJzmiHGk

He explains the mistake Christina Romer made analysing data from the Great Depression leading Central Banks to think they could get us over 2008 with monetary policy.

In the first 12 mins.

Austerity is the worst thing you can do as it accelerates the contraction of the money supply. When the US was panicking about the fiscal cliff it was because Ben Bernanke had read Richard Koo's book and knew cutting Government spending would drive the US economy into recession.

Richard Koo understands money, he has worked in a Central Bank (New York Federal Reserve).

The secrets of money are not included in the neoclassical economics studied by economists outside the Central Banks. The consequences of the secrets of money are understood by very few who work in the Central Banks, they often favour austerity when it is the worst thing you can do.

Kent November 19, 2016 at 9:07 am

While I don't disagree with the this essay in the whole, I think it misses an important piece. There must be something that drives government investment. In the 1950s the government's investment in the highway system crowded in investment in the auto industry as well as investments in suburban housing. Those were things that could drive generations of wealth creation.

Green energy investments might do some of that today, but nowhere near on that scale. Besides that, what else is there?

Anon November 19, 2016 at 4:11 pm

What else?

Maybe a conversion to "single-payer" medicine expanded to include a geater range of services; child-services, elder care, and the like. These are people intensive services that can be performed by a wide range of skilled and semi-skilled people. It puts people to work at a job that is becoming essential as boomers age.

financial matters November 19, 2016 at 9:09 am

I think Mazzucato's work is very timely.

I think that her idea of private public partnerships may be the opposite of that of Trump.

There is worry that Trump's idea of this is privatization of assets to benefit a few in line with crony capitalism.

Mazzucato on the other hand wants the public to share profits and not just losses.

I think Trump does understand that fiscal stimulus is important and can outweigh the austerity oriented goal of balancing a budget.

Government has the deep pockets that can get huge projects like energy alternatives and public transportation off the ground. Mazzucato wants to do it in a way that benefits the public rather than what we have been seeing with the profits of these projects funneled to the 1%.

a different chris November 19, 2016 at 12:25 pm

>I think that her idea of private public partnerships may be the opposite of that of Trump.

Oh the Judean People's Front not those right b*stards in the People's Front of Judea. Got it.

>Government has the deep pockets that can get huge projects like energy alternatives and public transportation off the ground.

Well then just do it. What does the private financial sector have to do with it? I'm pretty sure Solyandra didn't cost anybody a single vote they would have gotten otherwise so why did they even involve the private financial – again note the important word, here – sector?

financial matters November 19, 2016 at 12:54 pm

I'm not opposed to a more socialistic type response and actually see this as a move in that direction.

She wants though to work within a capitalist system. Recognizing that the government has a lot of control even in so called 'free markets' this often leads to monopoly type activities. The government gives away important work such as in drug research or technology to the private sector and lets them run with it with little control.

She would like to see more control over this work. It can be given to pharmaceutical and tech companies to improve and market but not without controls in the public interest such as limiting excessive drug prices and not having all the tech gains of a product go to a few execs but be distributed to the overall public which helped fund the research in the first place.

In infrastructure it would emphasize the overall good to the economy of good infrastructure and not let a few companies benefit by control over tolls for example.

ali November 19, 2016 at 9:27 am

trying to better capitalism is the wrong path. the lack of investments is caused by the growing impossibility to get profit out of it – which is the effect of capitalism itself (tendency of falling profit rate).

Yves Smith Post author November 19, 2016 at 2:40 pm

Kalecki disagrees with you and later empirical work backs him up.

Capitalists choose to run the economy at less than full employment because they don't like workers having the power they'd have (more say over work conditions, less of a pay gap with capitalists) if they could quit their jobs and find another one readily. They seek a higher profit level than is necessary and chronically underinvest as a result.

ChrisAtRU November 19, 2016 at 4:47 pm

+1 YES! See also Joan Robinson (re: unemployment):

The first function of unemployment (which has always existed in open or disguised forms) is that it maintains the authority of master over man. The master has normally been in a position to say: "If you don't want the job, there are plenty of others who do." When the man can say: "If you don't want to employ me, there are plenty of others who will," the situation is radically altered.

January 23rd 1943 – Alternative Solutions To A Dilemma

washunate November 19, 2016 at 9:31 am

Uh, one small problem. Capitalism isn't the problem. Unless we're simply using the word capitalism to describe any fascist combination of imperialism abroad and corporate subsidies at home.

For example:

The failure by policy-makers to fully understand the dynamics of the capitalist system

This is the state of economic discourse on the left? Policy-makers understand the dynamics quite well. That's why they have done everything possible to undermine the rule of law and individual rights at the heart of market-based economics.

Concentration of wealth and power isn't a failure of public policy. It's the point.

JTMcPhee November 19, 2016 at 9:39 am

Yas, No True Libertarian would allow erosion of the ruleoflaw and individualrights if only those could be preserved, everythiing would fall into its preordained place Market-based economics

http://www.nakedcapitalism.com/2011/11/journey-into-a-libertarian-future-part-i-%e2%80%93the-vision.html , in six parts for those who want to imagine the Libertarian Paradise

Code Name D November 19, 2016 at 12:27 pm

Accept Libertarians don't belive in rights, but rather in a batch of comodities they call "rights" that exist for the soul purpous of being bartered away to the ownership class.

Science Officer Smirnoff November 19, 2016 at 4:37 pm

We are lucky to have this freely available-

Illiberal libertarians: Why libertarianism is not a liberal view
by Samuel Freeman in Philosophy and Public Affairs
http://sites.sas.upenn.edu/sfreeman/files/illiberal_libertarians_ppa_2001.pdf

Two highlights
p.147

. . . What is striking about libertarians' conception of political power is
its resemblance to feudalism . By "feudalism" I mean a particular conception of political power, not the manorial system or the economic system that relies on the institution of serfdom (as in European medieval feudalism).

p.149

. . . Liberalism evolved in great part by rejecting the idea of privately
exercised political power, whether it stemmed from a network of private
contracts under feudalism or whether it was conceived as owned
and exercised by divine right under royal absolutism. Libertarianism
resembles feudalism in that it establishes political power in a web of
bilateral individual contracts. Consequently, it has no conception of
legitimate public political authority nor any place for political society,
a "body politic" that political authority represents in a fiduciary capacity.
Having no conception of public political authority, libertarians
have no place for the impartial administration of justice. People's
rights are selectively protected only to the extent they can afford protection
and depending on which services they pay for. Having no conception of a political society, libertarians have no conception of the common good , those basic interests of each individual that according to liberals are to be maintained for the sake of justice by the impartial exercise of public political power.

paulmeli November 19, 2016 at 11:31 am

"Concentration of wealth and power isn't a failure of public policy. It's the point."

This gets to the root of the problem.

Norb November 19, 2016 at 9:54 am

Rethinking capitalism and rolling back the corporate coup d'etat will be difficult as most citizens have no idea what has taken place. Trumps election is good in one sense, it will be no longer possible to obfuscate corporate interests as somehow also in the best interests of the citizenry. The are in fact opposites.

Rethinking capitalism leads to rethinking the legitimacy of power centers. The cyclical political theatre between a sham duopoly hopefully is over, or will be over when Trump fails to deliver in any meaningful way for the working class. The time is now for rediscovering the true power in government lies with the people, not with some enthroned elite. It is somewhat ironic that it took the Queen of England to point that out in her indirect way.

lyman alpha blob November 19, 2016 at 10:27 am

The author seems to have a hard time shaking certain conventional assumptions.

If future growth is to take a different path

If that path is negative then maybe they have a point but we can't have perpetual growth in a closed system which is what this planet is.

And then this part:

As early as 1821, David Ricardo worried about the effect of mechanization on labor displacement. What was important then, and should inform our thinking now, was that profits (from mechanization) be reinvested into production, meaning that, in Ricardo's time, while some jobs fell away, others were created.

This also seems a little shortsighted and somewhat vague. How much exactly do we need to produce? Based on the amount of garbage floating around in the ocean and the rising global temperatures it would seem we've probably already overdone it.

This is another author who seems to think that money really does grow on trees, ie it's a naturally occurring phenomenon like the weather that we are subject to and can't change much rather than a tool made by human beings that can be used any way we see fit.

Rather than factories running 24/7 producing mounds of cheap crap that breaks down and needs to be replaced on a regular basis just to keep enough people marginally employed and constantly buying stuff, would it really be so bad to have automation that produces enough of what we need and then stops for a while until there's a new need, coupled with a job guarantee and BIG?

cnchal November 19, 2016 at 5:16 pm

It boils down to, do you want a rip roaring economy for all or a habitable planet?

Perhaps we can escape this with a combination of jawb guarantee and BIG. You're hired and your jawb is to do nothing. The problem is when you are off the jawb, spending the money earned by doing nothing

Jef November 19, 2016 at 11:24 am

What caused the economic collapse was hitting the obvious limits of economical resource extraction and environmental limits to absorbing our industrial waste stream.

The global economy is 100% dependent on resource extraction, production, and disposal.

We have tried to deny this reality by jiggering around with economic, monetary, and financial theories as if they, along with technolology can over come it. All that has done is increase inequality and empower what I call the cannibalistic phase of capitalism.

What is needed is just about the opposite of capitalism. We need to figure out how to pay people to do less way less, have less, consume less, procreate less .

Yves Smith Post author November 19, 2016 at 2:31 pm

We are facing a longer-term economic collapse if we don't restructure the economy to be vastly less wasteful. But the crisis in 2008 was not the result of resource extraction. This was a financial crisis and I (and many others) described at great length how it came about. My argument was that it was the result of bad economic ideology, applied over a period of 50 years.

Thor's Hammer November 19, 2016 at 11:30 am

Sigh- another blind Economist wandering through the zoo, stumbling upon an elephant's trunk, and conjuring up ideas to make it GROW longer.

Sustained exponential growth is mathematically impossible. At any rate of growth, the end result is that humans and their things end up occupying every square inch of territory, using every joule of energy, and consuming every natural resource until collapse intervenes.

Natural capital - the physical characteristics of the biosphere- is the foundation of all life including that of homo sapiens. Any economic theory that fails to build from this fundamental fact is mere econobabble.

Humans are a tribal species who have devoted much of their "human capital" to warfare since the current genetic strain succeeded in exterminating the Neanderthals. Any discussion of contemporary capitalism in the USA that fails to examine the pivotal role of the military-industrial state is fatally flawed.

The goal of economic policy should be the maximization of quality of life for a population level that can live in harmony with the billions of other inhalants of the biosphere- a goal diametrically opposed to homo sapiens goal of growth in ability to dominate it.

paulmeli November 19, 2016 at 11:39 am

"Sustained exponential growth is mathematically impossible."

Two things. Growth is more like an annuity of 1 at compound interest. if we are growing at r% per year the growth curve would be (1+r)^n.

Growth can be based on human resources, rather than real resources, i.e. services as opposed to consumption.

Code Name D November 19, 2016 at 12:37 pm

You are wrong on both counts. If "growth" is just "compound intrest," than you have a pointless economey, one that is not based in the real world,

Second, "human resourcs" is a "real resource" and thus havefundemental limits.

This is the origial point. You can not have an economey that violates the 2nd law of thermal dynamics. Economist need to stop pretending physics dosn't apply.

susan the other November 19, 2016 at 1:45 pm

the entropy that exists in our economies is a failure to organize at a much more complex and complete level – they say that nuclear energy is an incomplete technology and we all know how disastrous it can be – so is economics and it is because capitalism is a simplistic theory. Steve Keen is so good on this subject. He almost makes me see in graphic form how we should reverse our thinking from outward fractals of "productivity and profits" to something that goes deep instead. We need to change the concept of vertical integration to deep integration – make productivity be coherent all the way down the economic food chain from the profits to the bacteria in the ground. Repair the environment at all levels of production and account for the costs of using even the smallest thing – this would indeed put a cramp in capitalism.

OpenThePodBayDoorsHAL November 19, 2016 at 2:07 pm

"Economists need to stop pretending."
There, fixed it for you, the idea that an infinitely-complex system that is massively swayed by human emotion is somehow "model-able" is silly. The queen called everybody's bluff, recall what the august "economists" finally said after she asked what happened and why: "We don't know".

Second-order silly is the idea that a centrally-planned, command-and-control approach can work on such a system. Keynes and the others that came up with this hoo-haw were admirers of Stalinist Russia, at the time the Bloomsbury and other pink crowd were gushing "I have seen the future and it works!". The idea is "let's raise X number cows because we project we will need leather for Y number of shoes". After you're done falling off your chair laughing take a moment to realize that's exactly what they try to do today with the price of money and the level of demand in the economy.

There are too many unintended consequences, look at ZIRP for example, they thought free money would make people borrow more but (being rational) people saw they would get no current income so boosted their savings instead.

So:
Let bad debts clear, otherwise you're just suppressing brush fires on the forest floor and eventually the whole thing burns to the ground. Mario Draghi buying CCC-rated junk is precisely what you should not do.

And to Watt4 Bob below, the only "creative destruction" we have today is for people and households. Zombie banks, oil companies, insurers, big pharma, military companies, the surveillance-industrial complex are completely isolated from creative destruction by the big fat thumb of the gumment on the scales.

Thor's Hammer November 19, 2016 at 4:17 pm

Paul, Please step back and analyze the logical fallacy in your statement. Exponential growth based upon human resources ("rather than real resources" means that at some point in the growth cycle humans have to eat human resources rather than food.

Anyone who makes the (common) claim that you do simply does not understand the meaning of exponential growth. Model growth at any rate and you eventually reach the point where the next increment of growth fills the entirety of any finite universe. If production grows exponentially at the 3% target often bandied about as desirable the entire world would be covered by the human capital you hope will provide an escape from mathematical certainty. It only takes about 400 years of 3% exponential growth starting with only one Einstein or one bite of information to reach the finite limit of our planet. And it matters not a whit whether the human capital walks around in a physical body or is condensed into bits & bites and stored on a flash drive, the mathematics are the same.

Because we live in a real world with real physical limits, sustained long term growth will always be impossible and collapse of growth inevitable. Any theory of economics worth more than toilet paper should recognize that fundamental fact.

For those confused about real world limits to exponential growth, watch this short lecture:
https://www.youtube.com/watch?v=bRc-YfcXVYo

Thor's Hammer November 19, 2016 at 4:42 pm

Perhaps a more straightforward introduction to exponential growth:
https://www.youtube.com/watch?v=W2rTQpdyCFQ

paulmeli November 19, 2016 at 6:17 pm

Thor, with all due respect you've misunderstood what I wrote. Your response killed a bunch of straw men.

The point about human resources was that the growth in consumption is some 20 times greater than population growth. Take that for what it's worth, I think that is a big part of the problem.

The first point was purely arithmetic. An annuity of 1 at rate r for n periods fits the curve of GDP growth (a proxy for growth) like a glove. Compound interest is calculated using the same formula. Beyond that I don't know what you're arguing against.

You can do the same for growth in federal spending, growth in Investment, etc. They all fit the annuity curve. Your "3% exponential growth" is an annuity of 1 at 3% compounded for n periods.

Which IS an exponential relationship, but it puts growth in perspective when you look at it as analogous to compounding interest. For me at least.

Watt4Bob November 19, 2016 at 11:33 am

Rethinking capitalism and rolling back the corporate coup d'etat will be difficult as most citizens have no idea what has taken place.

It's worse than that.

Hysteresis, one of my favorite new vocabulary words, is the reason there's no easy fix for the system that is currently circling the drain.

That being the damage done by neo-liberal, creative destruction was actually destructive destruction.

It is impossible to simply turn-back the hands of time, the damage is done, the manufacturing base that supported a healthy working-class has been destroyed, and there is no actual path for revival of that reality.

This is the reason we are faced with the necessity of creating a new economy, TPTB have destroyed any path to what we might call a 'normal' economy from our current condition.

Hysteresis, means "Nope, you can't get there from here."

That used to be a Yankee farmer joke, now it's a perfectly good explanation for our situation.

Gaylord November 19, 2016 at 11:51 am

Assuming infinite growth on a finite planet is the fatal hubris of capitalism, which assumes that economics exist apart from the laws of nature. We are experiencing inevitable contraction because we have exceeded the limits of earth's ability to sustain our species' rapacious demands and destructive lifestyles. We are already experiencing catastrophic effects from our destruction of the planet's climate moderating system, which ultimately will destroy our habitat. We have seen this coming for a long time, yet leaders, heads of state, and academicians (including this author) continue to think in outmoded ways, particularly about our disregard of the ecosystem which will result in near-term mass extinction. Human exceptionalism is the fatal flaw that will wipe out most if not all life on this planet.

Disturbed Voter November 19, 2016 at 11:55 am

In the past, disaster was local, because hubris met its match locally. With a global civilization, we dream of going to Mars to trash another planet from scratch. But when disaster is truly global, the result will be truly apocalyptic. Humanity has had a good run; eat, drink and love while you still can.

Disturbed Voter November 19, 2016 at 11:52 am

There is an ancient battle between Heraclitus and Parmenides. Either dynamics is reality, or statics is reality. The reality is, both are real. Change is liberal, stasis is conservative. Unfortunately neither is a panacea, because there is no panacea, it all depends on context. When change is required, conservative-ism brings us the French Revolution as an unintended consequence. When stasis is required, liberal-ism brings us the French Revolution as an intended consequence. Sometimes change happens, sometimes things stay the same and either can be good or bad for you individually. Generalizing beyond this is over-generalization.

Katharine November 19, 2016 at 12:04 pm

While I acknowledge that this was written for an audience of economists, I do not think economists should expect to have much influence on the development of new systems until they learn to express themselves in language intelligible to an educated general audience. I can parse the clause, "Skills have always been an endogenous function of investment." I know the meaning of every word in it. I have no idea what it is supposed to communicate. It is not my problem, but the author's, that she fails to state what she considers a key point in language that conveys meaning. In fact, the sentence which follows the jargon appears to say what needed to be said; it is not at all clear what purpose the jargon was intended to serve, other than to signal membership in a professional club. Its primary effect is to break the flow of thought and annoy the non-specialist reader.

susan the other November 19, 2016 at 2:04 pm

i got that feeling as well – too many economists fail to make a satisfying point when it is pretty obvious by now what's wrong

Synoia November 19, 2016 at 12:25 pm

The point about companies hording profits is, I believe a key point. The money belongs to the shareholders, and the individual shareholder have to place investments and not indulge in share buybacks.

A second point not mentioned, after the great recession the chose solution was to preserve as much debt and debt service as possible, ignoring the asserting "debt which cannot be repaid, will not be repaid."

Code Name D November 19, 2016 at 12:46 pm

Why does money BELONG to the shareholder? The author did note that there was $3 trillion in buybacks but investment still remains mis-directed.

susan the other November 19, 2016 at 2:08 pm

" shareholders have to place investments " in order for capitalism to progress. But oops, we have come to the end of an era and altho there are trillions of dollars on the sidelines, there is no place to invest. Like the guy in MASH said re Christianity: You guys haven't come up with a new idea for 2000 years.

Altandmain November 19, 2016 at 6:40 pm

The fatal flaw of the current system is that it is not designed to benefit the majority of people. It is a system of rent extraction, made to benefit a few people on top at the expense of the general public.

It needs more than just a rethinking. It needs a ground up design. The problem is that the rent seekers have control of business and government. Both institutions will not be used for public benefit, but rather for the benefit of the extractive elite at the expense of the rest of society.

As for what has been learned – the elite do not "want" to learn the lessons that need to be learned. That is the problem that we face.

[Nov 19, 2016] We should not use the term capital when referring to credit/lending that is not related to economically real outputs

Notable quotes:
"... "And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. " ..."
"... I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. ..."
"... hy shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90% ..."
"... This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich . ..."
"... I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"? ..."
"... Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street? ..."
Nov 19, 2016 | www.nakedcapitalism.com
Sound of the Suburbs November 19, 2016 at 8:27 am

You can only pillage the world once, though I think they are going for second helpings in Brazil right now.

tegnost November 19, 2016 at 11:13 am

m'kay so kind of like robbing peter (emerging markets with growth potential) to pay paul (goldman et.al.) until peter goes broke (asset bubble collapse) so paul can't be paid until he "natural" growth potential of emerging markets recovers (peters growth potential recovers from the asset bubble/debt overhang with best performance to those with more flexible currency) so that paying paul (new grifts, oops financial innovations) can be foisted on them again leading to, in hindsight only of course, and notably after paul has been paid, another collapse? rinse and repeat .is there any sense to this postulation?

JF November 19, 2016 at 11:47 am

Why do you use the term 'capital' when referring to credit/lending that is not related to economically real outputs. The rest of the article tells this story but the lead groups it all as 'capital' flows.

This is an editorial suggestion really one that does not conflate or mislead when treating credit creation used for financial asset trading as if it were the same general thing as FDI, that is, direct investment.

We have seen the financial system react to the crisis by recognizing their own unhinged behavior, and doing much less of it for good reasons. They know their credit creating behavior was nit coverting Savings into Investment, they know it was not 'capital' – so editors, let us help our writers to bring more clarity.

Grebo November 19, 2016 at 1:19 pm

I agree. We need a separate word for 'financial capital'. I am thinking 'ante' or 'stake' or some similar word from the world of gambling and confidence tricks.

fresno dan November 19, 2016 at 11:56 am

"And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. "

================================================================

This is probably something that not one in 10,000 people understand (I don't really either) – but I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. And why shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90%

This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich .

Dave November 19, 2016 at 12:31 pm

I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"?

Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street?

Three numbers hopefully to provide 'balance':

[Nov 19, 2016] The bakken core is getting saturated and average production per well drops. Often dramatically as you go out of 50 km sweet spot zone.

Notable quotes:
"... As of September 2016, 4 counties produced 90.1% of all the Bakken/Three Forks oil production in North Dakota: McKenzie, Mountrail, Williams and Dunn. Relative to December 2014, North Dakota Bakken/Three Forks oil production is off 243,098 b/d relative to December 2014 while the number of producing wells is up 1861 based upon data from the state. ..."
"... This shows well density and production from last September. The distance is concentric from a "production centre of gravity" – i.e. weighted average by production for all wells. The core area ("sweet spot") is a circle of about 50 to 60 kms only (it's squashed out a bit to the west and missing a bite in the SW). Maximum well density (and with the best wells is 120 to 160 acres, and falls off quickly outside the core. The core is getting saturated. ..."
"... "U.S. drilling activity is increasingly concentrated in the Permian Basin . The Permian now holds nearly as many active oil rigs as the rest of the United States combined, including both onshore and offshore rigs, and it is the only region in EIA's Drilling Productivity Report where crude oil production is expected to increase for the third consecutive month." ..."
"... "Several of the larger M&A deals involved Permian Basin assets, where drilling and production is beginning to increase. Based on data through November 10, the second half of 2016 already has more M&A spending than the first half of 2016, but on fewer deals. The 93 M&A announcements in the third quarter of 2016 totaled $16.6 billion, for an average of $179 million per deal, the largest per deal average since the third quarter of 2014. Although only 11 of the 49 deals so far in the fourth quarter of 2016 are in the Permian Basin, they accounted for more than half of total deal value." ..."
Nov 19, 2016 | peakoilbarrel.com

R Walter says: 11/18/2016 at 5:47 pm

The only oil investment that has any feck is turmoil.

Or, Term Oil Corporation.

Also known as Peak Oil.

http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/

The number of rail cars hauling petroleum is a constant in the range of 7,200 to 7,400 petroleum cars hauled each week for a good six months now.

Seems as though petroleum by rail is more of a necessity than a choice.

The volume is down a good thirty percent since about 2013 when over 10,000 cars were hauled per week.

Demand decreases, contracts expire, better modes of transport emerge and cost less. not as much call for Bakken oil. Plenty of the stuff somewhere else in this world.

The trend is down, not up for petroleum hauled by rail.

If there were orders for Bakken oil for one million bpd, the production would be one million bpd. Bakken oil lost marketshare due to price drop. Buyers can buy oil from anywhere.

GoneFishing says: 11/18/2016 at 6:34 pm
More Bakken petroleum is being moved by pipeline. Over the whole rail system, petroleum and petroleum product rail car loadings were down to 10.5 thousand in September. That compares to a high point of 16.3 thousand railcars in Sept of 2014.

Coal car loadings are on the rise, from a low of 61,000 in April to 86,000 in Sept. Coal was running a near steady 105,00 to 110,000 railcars every month in 2013 and 2014.

AlexS says: 11/18/2016 at 6:57 pm
The chart below from RBN shows that Bakken pipeline capacity did not increase since early 2015. But production dropped, and this primarily affected volumes of Bakken oil transported by rail.

Given the higher percentage of oil transported by pipelines, the average transportation cost for Bakken crude should have decreased. Interesting, however, that the price differential between the well-head Bakken sweet crude and WTI has remained within the $10-12/bbl range.

Bakken Crude Production and Takeaway Capacity
Source: RBN

AlexS says: 11/18/2016 at 7:06 pm
This article from Platts explains better than me:

Analysis: Bakken discounts deepen as competition heats up

Houston (Platts)–16 Nov 2016
http://www.platts.com/latest-news/oil/houston/analysis-bakken-discounts-deepen-as-competition-27711340

Bakken Blend differentials at terminals close to North Dakota wellheads held their lowest assessment since December Tuesday, closing at the calendar-month average of the NYMEX light sweet crude oil contract (WTI CMA) minus $6.25/b.

While one factor dragging on Bakken differentials has clearly been a tight Brent/WTI spread - trading around 42 cents/b Tuesday, well in from the steady $2/b seen this summer - the return of Louisiana Light Sweet to the Midwest market may also be having an impact, according to traders.

One trader said there was an increase in volumes heading up the Capline pipeline, however, differentials suggest LLS is still too expensive, at least compared to Bakken. Platts assessed LLS at WTI plus $1.15/b Tuesday.

Considered by some to be the "champagne of crudes," it is unclear what appeal LLS still has for a Midwest refiner as margins for LLS actually - and unusually - lag those for Bakken.

S&P Global Platts data shows LLS cracking margins in the Midwest closed at $3.30/b Monday, compared to Bakken cracking margins of $6.37/b. In fact, the advantage of cracking Bakken has grown steadily since August.

Platts margin data reflects the difference between a crude's netback and its spot price.

Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

What is clear however, is that the steeper discounts available for Bakken provide the biggest incentive for a Midwest refiner.

The cost of getting Bakken to this market is around $3.48/b, according to Platts netback calculations, compared to just $1.02/b for LLS.

These costs make up a significant portion of the Bakken discount.

Further, LLS moving up the Capline after many years of relative inactivity does not necessarily suggest a new trend is in the making. However, recent pipeline reversals between Texas and Louisiana mean more Permian crudes are capable of reaching Louisiana refineries, and thus, if priced accordingly, could displace incremental volumes of LLS from its home market.

With current pipeline capacity out of North Dakota typically full, the marginal Bakken barrel often gets to market via rail, and this cost has traditionally sets the floor to Bakken's discount to WTI. And part of the recent downturn in Bakken could be chalked up to an increase in railed volumes to the US Atlantic Coast, as Bakken cracking margins there are again in the black.

In fact, Association of American Railroad's latest monthly and weekly data shows crude and refined product rail movements appear to have bottomed, having grown in September from August.

Weekly data bears this out as well, showing increases in three of the last four weeks.

It remains to be seen how long this will last, however, should Energy Transfer Partners Dakota Access Pipeline go ahead as planned.
Linefill for the pipeline could boost Bakken differentials, potentially making the grade too expensive to rail east. However, the devil is in the details.

Traders and analysts have pegged Dakota Access pipeline tariffs between $4.50-$5.50/b for uncommitted shippers between North Dakota and Patoka, Illinois. A further $6.50/b would be needed to bring the crude south from Patoka to Nederland, Texas, sources have said.

If this $11-$12/b combined pipeline estimated cost were to pan out, it would be more expensive than the $10.20/b Platts assumes in its Bakken USAC rail-based netback calculation.

AlexS says: 11/18/2016 at 8:59 pm
U.S.oil rig count was up 19 units last week, the largest weekly gain in 16 months.
Gas rig count is up 1 unit.

Permian basin: + 11 oil rigs
Bakken: -1
Eagle Ford: -1
Niobrara: +2
Cana Woodford: unchanged
Other shale plays: +2
Conventional basins: +6

Oil rig count in the Permian is up 73.5% from this year's low – the biggest increase among all US basins.
It is still only 41% of October 2014 peak, but this is much better than the Bakken and especially the Eagle Ford where drilling activity remains depressed.

AlexS says: 11/18/2016 at 9:30 pm
The number of horizontal rigs drilling for oil in the Permian is now 54% of the 2014 peak.

Oil rig count in the Permian basin
source: Baker Hughes

AlexS says: 11/18/2016 at 9:42 pm
Weak drilling activity in the Bakken and the Eagle Ford helps to explain continued declines in their oil production

Oil rig count in 4 other tight oil plays

Roger Blanchard says: 11/19/2016 at 8:17 am
Alex,

As of September 2016, 4 counties produced 90.1% of all the Bakken/Three Forks oil production in North Dakota: McKenzie, Mountrail, Williams and Dunn. Relative to December 2014, North Dakota Bakken/Three Forks oil production is off 243,098 b/d relative to December 2014 while the number of producing wells is up 1861 based upon data from the state.

Based upon state data, the number of producing wells/square mile is 1.29 in Mountrail County, 1.22 in McKenzie County, 1.02 in Willams County, and 0.86 in Dunn County. How high can the number of producing wells/square mile go?

Is there something more than reduced drilling to explain the drop in production?

George Kaplan says: 11/19/2016 at 8:35 am
This shows well density and production from last September. The distance is concentric from a "production centre of gravity" – i.e. weighted average by production for all wells. The core area ("sweet spot") is a circle of about 50 to 60 kms only (it's squashed out a bit to the west and missing a bite in the SW). Maximum well density (and with the best wells is 120 to 160 acres, and falls off quickly outside the core. The core is getting saturated.

AlexS says: 11/18/2016 at 9:53 pm
From a recent EIA report:

"U.S. drilling activity is increasingly concentrated in the Permian Basin . The Permian now holds nearly as many active oil rigs as the rest of the United States combined, including both onshore and offshore rigs, and it is the only region in EIA's Drilling Productivity Report where crude oil production is expected to increase for the third consecutive month."