Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Oil prices – Trends don’t continue in a straight line forever

Thousands of wells can come on line when prices edge up. Photo of two wells about to start production by James Ulvog.

Thousands of wells can quickly be drilled and come on line when prices edge up. Three wells in 9/15 about to start production. Photo by James Ulvog.

Here are three very different articles on the future of crude oil prices.

One of the memorable things I learned in grad school was the idea that you can’t project the current trend of something into the future forever.

Keep in mind that West Texas Intermediate price was somewhere in the region of $100 a barrel in mid ’14. WTI is now about $26. Let me round off some calculations for simplicity. Let’s call that a current price of $30. Let’s call that a year and a half.

So we see a drop of about $70 in 1.5 years. A straight line projection would calculate out as another $45/bbl in another year. Thus, by 12/31/16 WTI price will be  $30 minus $45, or a negative $15. Yes, you read that right. A straight line projection means that oil producers will be paying refineries $15 for every barrel the refiners agree to take off the producer’s hands. Gas prices will consist only of the refining costs, a humongous list of taxes, with an offset for the negative cost of raw material.

You can’t do straight line projections forever.

Here are three superb articles that help me understand what is going on in the world of crude oil…

  • After the Carnage, Shale Will Rise Again
  • Helms predicts oil prices to rise again in foreseeable future
  • Rumors Swirl Around the Saudi Throne

1/18 – Mark P. Mills at The Wall Street Journal – After the Carnage, Shale Will Rise Again / Vast swaths of shale will be profitable with oil at about $40 a barrel, and the nimble industry is ready – If you actually pay attention to my blog, Mr. Mills’ article is a must-read.

Oil prices are quite cyclical. He points out there have been six extremes since the’73-’74 oil embargo. The extremes create turmoil. At the moment we are in the carnage stage of the cyclical extremes.

Read more…

Background on collapse in crude oil prices – 1/20

Slightly out of focus photo by James Ulvog.

Slightly out of focus photo by James Ulvog.

All the world’s players are reacting to the sustained drop in crude oil prices. Here are a few articles I’ve found of interest lately. Another post soon.

1/12 – CNN money – OPEC considering emergency action on oil prices – Article hints that OPEC may have an emergency meeting as soon as February. Next scheduled meeting is in June. Goal would be to get production cuts which will pull oil off the market and increase prices.

Article asserts Saudi Arabia started the price war (which is now the appropriate word) to go against shale producers in the US. That has been my assumption all along. Most articles I see in print now state that as common knowledge.

OPEC may be about ready to blink.

12/28 – Bloomberg News at Calgary Herald – Shale drillers running out of tricks to survive as OPEC keeps up pressure Shale drillers have done all they obvious things to cope with $50 oil: lay off staff, focus on the best spots, increase amount of sand, drill smarter, drill faster, and squeeze suppliers. That has allowed the industry to essentially maintain production.

But now oil is at $35.

Read more…

Official estimates of capital costs for electricity sources

Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

I’ve been tracking the actual costs of various electricity projects as I come across them in my reading. Came across a superb source for future reference.

The Energy Information Administration calculates the costs to build a wide variety of generating plants. The 2014 data is here: Table 8.2 Cost and performance characteristics of new central station electricity generating technologies

I’m probably in over my head with this table, but here is what I’ve learned. The total overnight cost is the estimated amount if the project were to be built instantly. I think that represents what most people would consider to be the cost of construction.

Read more…

More graphs showing North Dakota oil production – 1/18

Workover rig on a 3-well pad in city limits of Willison. Photo by James Ulvog.

Workover rig on a 3-well pad located inside the city limits of Williston. Photo by James Ulvog.

Mentioned Saturday there was a small increase in oil production during November. Here are a few more graphs.

Value of the production is dropping fast due to the world-wide drop in prices. These reflect the discount to allow for transportation costs to the Gulf, East, or West coast.

Read more…

Fun news on the incredibly wide open frontier of private space exploration – 1/18

SpaceX Dragon capsule in orbit. Photo by SpaceX released to public domain.

SpaceX Dragon capsule in orbit. Photo by SpaceX released to public domain.

If you want to know why I remain so optimistic for our future even though the national political, geopolitical, and economic news is so depressing, check out the space news I’ve noticed in the last week. As Behind the Black often says, the competition is heating up.

One bit of not-so-great news. From Space.com: Video Shows SpaceX Falcon 9 Rocket Land on Droneship, Then Fall Over and Explode. The video is here. SpaceX’s Falcon 9 landed almost dead center on the drone floating 200 miles south of Vandenberg. The engine cut off which means it was landed successfully. Then one of the legs gave out, the rocket tipped over, then exploded. Preliminary guess is that something (a lockout collet?) iced over while on the launch pad.

1/14 – Behind the Black – Orbital ATK and SpaceX win Air Force contracts – ULA does not have engines for its rockets and thus must rely on Russian engines to get our military launches into space. Orbital ATK and SpaceX both have contracts to develop new engines.

The obvious story line here that gives me such encouragement is two new-on-the-scene, privately owned space companies have been called in to help the mega-contractor ULA get out of its mess.

Another big contract:

Read more…

For an illustration why I use Oxford commas…

… check out this tweet from my friend, John Bredehoft:

oxford comma

My favorite illustration goes like this:

In his lifetime, the journalist interviewed JFK, a drug user and philanderer.

Oil production in North Dakota increases about half a percent in November ’15

Many more wells will be on that site when all the drilling is done. Slight flaring as photo taken by James Ulvog.

Many more wells will be on that site when all the drilling is done. Slight flaring as photo taken by James Ulvog.

Production information was released for North Dakota yesterday. In November, production increased to 1,176,314 bopd (prelim) from 1,171,119 bopd (revised). That is an increase of 5,195 bopd, up for a second month. Percentage change is up 0.44%.

A few graphs today and a few more Monday. Here is what the state-wide and Bakken-only production looks like, along with a what-if guess based on average increases having continued.

oil prod state y bakken 1-16

Sort of looks like a plateau.

Here is the long-term picture of state-wide production:

Read more…

How about $60 oil by 12/16 for a strongly contrarian opinion?

 

Photo in Sept '15 by James Ulvog.

Photo in Sept ’15 by James Ulvog.

Somewhere around $60 by December is Harold Hamm’s prediction. If such a comment wasn’t from Mr. Hamm, I would have ignored the article.

Main coverage is at Wall Street Journal:  Continental Resources CEO Sees Oil Prices Doubling by Year End. He thinks Saudi Arabia made a serious mistake by pumping so much oil. That pushed prices way down. It also moved the US to allow exporting crude oil.

Read more…

Do conditions in Williston look like a collapse or return to normal growth?

I estimate there are 42 storage tanks on this pad. There will be far more than 6 wells by the time all the drilling is done here. Photo in September 2015 by James Ulvog.

I estimate there are 42 storage tanks on this pad. There will be far more than 6 wells at this site by the time all the drilling is done. Photo in September 2015 by James Ulvog.

The Wall Street Journal has a great article on 1/14: North Dakota Cities Use Oil to Regroup / Williston, which saw its population so during the energy boom, sees a chance to catch up after Catholic growth, plan for the future – It highlights all levels of governments are using the slowdown as a time to play catch-up.

Take a look at these indicators of what is going on in the state. Does this look like a collapse to you? Or does this look like a return to something that resembles a normal growth market?

Read more…

Rig count in North Dakota, update through early January ’16

Workover rig in October 2014. Photo by James Ulvog.

Workover rig in October 2014. Photo by James Ulvog.

Here is a recap of the North Dakota rig count, all from Million Dollar Way. Some older data repeated for context: Read more…

More news from the Middle East that could affect the oil market and prices

Here are a few articles that caught my interest. Two on Aramco possibly floating an IPO and two on increasing tensions between Saudi Arabia and Iran.

1/7 – The Economist – Saudi Arabia is considering an IPO of Aramco, probably the world’s most valuable company Read more…

Long distance travel times now and 100 years ago

Standard travel in 2016. Image courtesy of DollarPhotoClub.com

Boeing 747. Standard method of long distance travel in 2016. Image courtesy of DollarPhotoClub.com

Max Roser sent the following tweets on January 7:

Max Roser ‏@MaxCRoser [1 of 2] Travel times from London in 1914

 

State of the art travel in 1912. Image courtesy of DollarPhotoClub.com

H.M.S. Titanic. State of the art long distance travel in 1912. Image courtesy of DollarPhotoClub.com

Read more…

Stretching my brain on the commercial space launch business

Ariane 5 liftoff for VA227 launch. Credit: Arianespace.

Ariane 5 liftoff for VA227 launch. Credit: Arianespace.

One of the major reasons I blog is to learn. Nothing stretches me more than reading a fascinating article and commenting in public on it. Putting my thoughts out on the never-to-go-away Internet requires a very careful reading of articles.

So if you want to stretch your brain too, stay tuned while I comment on Space News’s coverage on January 6 of a press conference: Arianespace Surpassed SpaceX in Commercial Launch Orders in 2015.

Launch rates

The organization’s CEO provided the following count of commercial orders for 2014. I think this is the count of launches into geo-stationary transfer orbit:

  • 9 – Arianespace
  • 9 – SpaceX

Article says that reflects Arianespace catching up with SpaceX.

Here is the count of 2015 contracts for geostationary launches: Read more…

Update on the open frontier of private space exploration; recovery of booster

Launch of Orbcomm mission on top of Falcon 9 booster. Photo courtesy of SpaceX released to pubic domain.

Launch of Orbcomm mission on top of Falcon 9 booster. Photo courtesy of SpaceX released to pubic domain.

A few more articles on the wide open frontier of space:

12/23 – Popular Mechanics – Two Quick Illustrations to See How Badly SpaceX Beat Blue Origin/Jeff Bezos may have gone for the glory, but he only had a fraction of the challenge – Blue Origin may have been the first company to nail landing of a reusable booster. SpaceX had a far more difficult challenge as illustrated by two graphics in the article.

Recovery of booster. Photo courtesy of SpaceX released to pubic domain.

Recovery of booster. Photo courtesy of SpaceX released to pubic domain.

Read more…

Update on Thunder Spirit wind farm. Project sold to MDU.

Birds that are at risk of finding out why turbines are called slice-and-dicers. Pictures courtesy of DollarPhotoClub.com.

Birds that are at risk of finding out why turbines should be called slice-and-dicers. Pictures courtesy of DollarPhotoClub.com.

The Million Dollar Way quotes a press release from Montana-Dakota Utility without a link. MDU has purchased the Thunder Spirit wind farm project from Allete Clean Energy. MDU currently has a commitment to buy all the electricity from the project on a 25 year contract. Now MDU owns the wind farm.

Project consists of 43 towers with rated capacity of 107.5 mW. Cost is reported in the press release to be $220M.

At cost of $220M for 107.5 mW, that works out to $2.05M/mW.

Keep in mind in the upper plains the average capacity of wind farms is about 34%. See EIA graph here. Peak is about 43% in fall and low is about 21% in the late summer for about 2 months. The upper plains have a flatter capacity curve than other regions. Looks like about 40% can be achieved for half of a year.

Theoretical output (also called nameplate) is 107.5 mW. Average output will likely be 36.6 mW (107.5 x 34%).

So the actual cost for each mW of actual average output would be: Read more…

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