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.

More good stuff from the wide open energy frontier – 5/8

Some articles on the amazing things going on in the energy world:  oil factories, fracklog, greener fracking and calculating the Saudi cash burn rate.

5/6 – Russell Gold at Wall Street JournalWhat the Future of Oil Drilling Will Look Like – think “oil factory”. Liberty resources is developing a 10,000 acre complex that will have 96 wells when complete. It will be called Stomping Horse.

A pipeline corridor will link all the drill sites to each other allowing oil and natural gas to be gathered to one location. Freshwater can be pumped from a central location and saltwater gathered by pipe at the disposal well.

This will dramatically reduce truck traffic. This will reduce staffing. This will use large pads with 10 or a dozen wells on one site, all of them drilled sequentially and then fracked simultaneously.

If I understand the article correctly, the company claims it will give them a $3 per barrel cost-saving. There’s one comment that the total cost will be about $800M, which would be about $8.3M per well. Again if I get it correctly, that’s a decent price, I think.

Article does not say so, but I’m guessing that there will be a pipeline run to the central collection point to connect to the natural gas system. Likewise I’m guessing there will be a pipeline to get the oil from this location to a crude-by-rail loading facility.

The development is north of Tioga, North Dakota. I might try to swing out there and see it sometime.

4/26 – Jamie at American Interest – The American Fracklog is Huge – And GrowingHere is my new vocabulary word for the day – Fracklog.

That is the backlog of drilled wells that are awaiting completion. Fracking backlog.  Fracklog. Cool.

Drillers are putting wells in the ground and holding off on completion. Two reasons. First, that postpones a huge portion of the costs, perhaps half. Second, everyone expects that the prices are going to be substantially higher one or three or six months out compared to today. Getting that initial surge of production at $60 or $70 is a lot better than $50.

Article quotes Bloomberg as stating there are over 4700 wells across the country waiting to be fracked.

Article also points out, quite correctly I think, that as prices come up and wells start to get fracked, the supply of oil will increase noticeably, which will in turn drive down prices.

Drillers in the US are learning to adjust to the lower prices. I wonder if the petrostates are ready to adjust to prices we see now staying in place for a very long time.

4-20 – American Interest (Jaime) – Are You Ready for Greener Fracking? – It will be here soon.

One of the national laboratories in the DoE system has developed a new fracking fluid that will increase volume by factor of 2.5 when carbon dioxide is added. That will reduce the amount of water for fracking. When the pressure is removed, the fluid shrinks and can be removed from the rock. That will allow being recycled into future fracking.

That ought to dramatically reduce the amount of water used.

When you get to the point of calculating a burn rate for Saudi Arabia, things are really bad: 4/20 Financial Times – Saudi Arabia burns through foreign reserves

Article says reserves were $708B in March, down $16B for the month, $20B in February, and down a total of $47B since October.

Here’s my recap of those numbers:

  • $755B – 10/31
  • $744B  1/31
  • $724B – 2/28
  • $708B – 3/31

Drawing down reserves by $20B in February and another $16B in the next month is an average of $18B a month. At that rate $708B will last 39 more months, or until perhaps around June 2018.

Here’s my calculations of the burn rate (current balance divided by current burn):

  • 16.9 yr – January (for drain over 3 months)
  • 3.0 yr – February
  • 3.7 yr – March

Average of the last five months gives 6.3 years left.

My guess is the Saudis will blink long before oil production across the US drops by a million BOPD.

5/4 – Bakken.com – Bakken crude refinery begins production – The first refinery built in about 30 years has started production. The Dakota Prairie Refinery is in Dickinson. It will use 20K bopd as input producing 7K bopd of diesel and 6.5K bopd naphtha.

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