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.

About those dropping oil prices – #10

Have a long backlog of articles on oil that I wanted to mention. Will start getting caught up:

12/30 – McKenzie County Farmer – As I see it – Editor Neal Shipman:

The only thing that is certain is that oil prices go up and they go down. Some oil experts believe that there is still room for oil prices to go lower. Others believe that this drop in oil prices is short-lived, and that they will soon return to previous levels. (emphasis added)

I think both set of experts are correct. Oil prices will go up and they will go down.

1/2 – Wall Street Journal – Low Oil Prices May Be New NormalSome of the expectations from unnamed sources for near term oil prices. I’m guessing this is a composite of the obviously large number of sources consulted for the story:

  • Currently low prices are considered by some to be the new normal
  • Prices may recover in second half of 2015
  • Current glut of oil will take many months to clear
  • Oversupply at the moment is around 2M bopd
  • Prices may drop a bit more in the next one or two months

Imports of oil to US have dropped from 10.8M bopd in 6/05 to 7.5M bopd in 9/12.

12/22 – Alberta Oil Magazine – Not Your Father’s Rig – New rigs are highly automated, which reduces the number of workers needed on site, especially the roughnecks who move pipes by brute force. That helps reduce this ever-present problem:

“You just can’t seem to get people who want to work in the middle of night, in the middle of winter, in the middle of nowhere,”

Next round of rigs are called automated drilling rigs, or ADR. They have more sensors and automation above ground further reducing staffing needs. More importantly, they have more sensors at the drill bit providing instantaneous feedback on vibration, torque, and weight on the drill bit. That’s called measurement-while-drilling, and will make drilling faster and more effective, thus more profitable.

Newest ADR will be able to change direction as well as walk. That means instead of only side-stepping a few feet from one well to the next well on the same pad, it will be able to ‘walk’ off the pad, turn 90 degrees, walk down the road to the next pad, turn again, walk on to the pad, and walk to the exact position for the next well. That will save a huge amount of money by avoiding the rig-up-rig-down time.

1/10 – Bakken.com – Exclusive: New U.S. well permits rise slightly in December after crude oil plunge – Article says the number of permits to start a well increased under 1% in December after falling 40% in November. Number of permits in 12/14 is same as December in the prior two years.

1/13 – Wall Street Journal – As Oil Slips Below $50, Canada Digs In for Long Haul – There are about 3 million bopd of Canadian oil-sand coming into the U.S. Producers there aren’t planing to cut back production. I don’t understand the concept, but apparently most of the cost of oil-sand is the development, just getting started. Once production is going, it is apparently inexpensive to keep producing. Several sources say producers there can make money down to $30 a barrel.

1/12 – Million Dollar Way – As The Price of Oil Drops, How Low Does It Need To Go? – What prices would it take for producers to start shutting in wells? The Saudis are hoping to hit those prices to take production off the table.

Article quotes Wood Mackenzie as suggesting the following factors to shutting down:

  • Stripper wells – $20-$50 to maintain them; presumably below that, it would make more sense to seal them in
  • Canadian tar sands – hard to stop and restart; also most of cost is development so would likely need really low prices to warrant shutting down
  • North Sea – expensive to stop and wells might not produce again when stopped

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