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.

Archive for the category “Energy”

Change in Saudi Arabia power structure. News on oil prices.

Photo , in the public domain, of Mohammed bin Salman (now crown prince of Saudi Arabia) meeting with President is courtesy of The White House.

Lots of developments in the oil world.

Biggest news, I think, is the change leader in Saudi Arabia has been appointed to the position of crown prince, meaning he is first in line for the throne.

Lots of news on dropping oil prices, which are due to increasing production, primarily in the U.S.

6/22/17 – Wall Street Journal – The Saudi Shake-Up Has One Goal: Drag the Country Into Modern Era – King Salman bin Abdulaziz has appointed his son, Mohammed bin Salman, as crown prince, making him the designated successor to the throne. The previous crown prince, Mohammed bin Nayef who was in charge of security, is now in retirement.

Mohammed bin Salman is the person pushing the modernization efforts in the country, trying to move the country away from dependency on oil production and massive subsidies to the population and toward a diversified economy with widespread entrepreneurial mindset. One part of that transition is taking Saudi Aramco public.

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More graphs of North Dakota oil production in April 2017

Yesterday’s post described the 2.4% increase in North Dakota oil production. Here are a few more graphs to tell the story.

Here is the average sweet crude price in the state by month:

 

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Oil production in North Dakota up 2.4% in April 2017

Big increase in production in the state. Increase of 2.43%, from average of 1,025,690 bopd in March (revised) to 1,050,630 bopd in April (preliminary). That is the highest average production since March 2016. The April production was only 160,700 below the high water mark of 1,207,276 bopd in July 2015.

 

That upslope since last fall is not quite what OPEC+Russia had in mind.

Million Dollar Way pointed out the production increased at the same time as the number of inactive wells increased and the fracklog increased. I sure don’t understand the dynamics.

Producing wells increased 122 to 13,434; fracklog increased 141 to 830; inactive well count increased 167 to 1,466. Some of that is a recovery from drops in March.

Here is another graph of production, for a longer term perspective:

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News from Bakken oil patch

Rig in western North Dakota. Photographer was given tour of site resulting in many nice photos. “Oil Rig” by Lindsey G is licensed under CC BY 2.0

A few tidbits from western North Dakota:

  • More signs of a rebound
  • Amy Dalrymple joins staff of Bismarck Tribune
  • Dakota Access Pipeline begins commercial operations

6/3/17 – Star Tribune – North Dakota oil industry shows signs of a rebound – Drilling and employment is picking up in the North Dakota oil patch. Article illustrates this by telling the tale of several guys who have been out of work for a while but have been rehired.

Several analysts are quoted saying the industry is bouncing back.

Interesting stats in the article:

  • An oil rig is 13 stories tall, weighs 275 tons, and costs somewhere between $50,000 and $70,000 per day to operate.
  • Rig count: 51 now, 218 at high point in December 2012, 27 at low point in May 2016.
  • Oilfield employment in the state is 16,400 in April 2017, which is up 10% over same month in 2016.
  • Online postings for open jobs were at the highest in April over the last year and are up 94% from prior year. A trade group representative says there are likely 1,000 open oil jobs in western North Dakota.
  • Total production in Bakken is down 1.5% in the last 12 months. Meanwhile production in the Permian basin is up 25% in the last year.

Efficiency drivers:

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How to cope with the intermittent output from solar power plants during a solar eclipse? Turn off your air conditioning and sweat it out.

For one day in August the Ivanpah facility won’t be incinerating as many birds as usual, due to the solar eclipse. Photo by James Ulvog.

Yeah, turn up the a/c temp is what those of us in California should do during the solar eclipse on August 21, according to the CPUC. Sweat it out.

The eclipse will start about 9 a.m. and hit maximum sun coverage about 10:20, with full sun resuming about 11:54 a.m.

Two issues. That is the front end of peak solar production during the day and August 21 is likely to be a hot day. That means output from solar plants will be lower than usual while demand for electricity will likely be higher than usual.

Drop in amount of sunlight is expected to be about 62% in SoCal, around 76% in northern part of state.

During the eclipse, about two-thirds of the solar production will be lost at the time of day when about 40% of our electricity comes from solar plants. Using those numbers means we will lose about 27% of our electricity production during that three hour time frame.

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Peak Oil Demand. A real thing? Or only as real as Peak Oil Supply?

Photo of oil refinery courtesy of Dollar Photo Club prior to their merger into Adobe Stock.

Will demand for oil decline in the next decade or two? Or will demand continue to grow? Sorting out questions like that makes my brain hurt.

The Wall Street Journal had an extra report section 5/22/17 called Innovations in Energy. Some interesting comments:

5/22/17 – Wall Street Journal – Get Ready for Peak Oil Demand – In yet another complete repudiation of the foolish forecasts of Dr. M. King Hubert, there is a gathering consensus that instead of Peak Oil, meaning we will use up all the oil someday, we may be facing Peak Oil Demand, which is the idea that oil consumption may fall because of various factors such as improved  efficiency  in vehicles, electric/hybrid cars, and reliance on solar/wind power.

There are a lot of implications of Peak Demand, if that actually turns out to be a real thing.

For starters, there is massive impact on oil companies and the impact on oil prices. One additional factor is there would be an end to the severe pressure to always be finding more oil.

Article provides guesses from 7 major players in the energy world as to when we will see peak oil demand:

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OPEC+Russia extend production cuts

Those five pads have 7, 1, 2, 3, and 6 wells. I’ll guess each pad will eventually have about 7 or 8 wells. That would be about 40 reasons OPEC+Russia had no choice but to extend production cuts. Photo by James Ulvog.

I don’t publish more than one post a day anymore, but with the following headline showing up today, gotta’ run another:

5/25/17 – Wall Street Journal – OPEC Extends Oil Output Cuts but Glut Fears Persist – OPEC plus Russia plus 10 other producers agreed to extend their production cuts until March 2018.

Article says this has strengthened the relationship between Saudi Arabia and Russia, the worlds’ two largest oil producers.

The combined cuts for all the participants is around 1.8B bopd down from a year ago.

Article points out the obvious: OPEC+Russia had no choice but continue the cuts. If they didn’t, the extra oil would further drive down oil prices. Their production cut hasn’t actually succeeded in pulling prices up where they wanted, but the alternative would have been even lower prices.

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Poor economics for batteries at the industrial scale and to power a home

Industrial backup power system consisting of many batteries. Photo courtesy of Adobe Stock.

Someday some wizard will develop a chemistry breakthrough that will do for storage of electricity what horizontal drilling and hydraulic fracturing has done for oil and gas production.

In the meantime, the cost for battery storage of electricity is staggering.

5/22/17 – Wall Street Journal – The Race to Build a Better Big Battery – The unreliable intermittent nature of solar power is a massive problem blocking the way of solar being a viable substitute for fossil fuels.

Major efforts are underway to figure out some way to store electricity on an industrial scale.

One cited experiment is being run by Greet Mountain Power. They have a 7,722 panel solar plant which has a theoretical capacity of providing the power to 2,000 homes when the weather conditions are right.

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Lots of good news for consumers about oil. Not so good news for OPEC.

How much oil to pump?   Oil pump jacks in the desert of Bahrain, Middle East. Photo courtesy of Adobe Stock.

Lots of articles lately describing what is going on in the oil market. If you are a consumer, the news is rather good. If you are a part of OPEC, the news is quite grim. If you are a U.S. producer, there is a lot of opportunity.

5/17/17 – Daniel Yergin at Wall Street Journal – The Struggle Behind Oil’s Ups and Downs – Another must read, but then anything Mr. Yergin writes is in that category.

Here is my feeble try at a summary:

Mr. Yergin sees two forces at play in the oil market.

First is the pressure to balance supply and demand. US shale producers increased production a lot in 2014 which created an imbalance in the supply, which pushed prices down. Instead of dropping production to maintain prices, Saudi Arabia increased production, which further oversupplied the market and caused prices to collapse.

When prices dropped further than expected, the Saudis worked out a deal to cut production last November. That brought prices up.

In turn, that motivated shale producers to increase drilling, which is increasing US production, which will put more US shale oil on the market than expected, which will put substantial downward pressure on prices later this year.

Second is the recalibration of technology and internal pricing to reduce the cost of production.  The innovation and efficiency gains in the last two years are remarkable.

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More explanation of the serious downside of wind power

Part of the cost of wind power is externalized with great force on the wings and torsos of critters like this. Image of Golden Eagle in flight courtesy of Dollar Photo Club before their merger into Adobe Stock.

Two recent articles point out the serious limits and negative consequences of wind power.

5/13/17 – Matt Ridley at The Spectator – Wind turbines are neither clean nor green and they provide zero global energy – There are many economic, ecological, and environmental problems with wind power. Author focuses on three issues:

  • Tiny portion of total energy consumption provided by wind
  • The massive number of new turbines needed just to keep up with growth in energy use, let alone reduce the amount of fossil fuels consumed
  • The massive amount of natural resources needed to manufacture that many new turbines

I will summarize the article with my expansion on select points.

Amount of wind production worldwide

Close up of following view. Compare the size of the turbines to the roads. Photo by James Ulvog.

How much of the total consumption of energy across entire planet do you think came from wind during 2014?

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Various updates from Bakken

Another dozen reasons OPEC is in distress. Two reasons are quite visible. Another 10 reasons are the open spaces on that large pad where additional wells are going to be drilled someday. Notice the large number of storage tanks, which is far more than what’s needed for just 2 wells. Photo by James Ulvog.

Here is a variety of news tidbits I’ve noticed lately from Bakken:

  • airport construction underway
  • lots more jobs opening up
  • EURs now in range of a million barrels of oil
  • oil starts flowing through DAPL
  • frac sand mines running full steam ahead

4/14/17 – The Million Dollar Way – New Airport Work to Begin Next Week – Official groundbreaking ceremony was in October 2016. The start of massive grading and site work starts the week of April 17, 2017.

4/14/17 – Amy Dalrymple at Oil Patch Dispatch – ND Oil Production Up 5 Percent; Bakken Needs 1,000 Workers to Fill Oil Jobs, Regulator Says – Mr. Lynn Helms, director of the Department of Mineral Resources was surprised by the 5% increase in production in February.

He expects aggressive drilling in the summer, after a lull in the spring due to load restrictions.

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OPEC asks US frackers to curtail production

Three more reasons OPEC is in distress. Eventually there will likely be 6 or 15 wells on that site. Photo by James Ulvog.

Pressures on OPEC continue.  Several recent articles point to OPEC’s request that the US cut back its oil production. Creating financial distress didn’t work to take out US producers, so OPEC will instead try asking frackers nicely to curtail production.

Anyone want to guess how that will turn out?

Another article explains that the reversal of austerity moves by Saudi Arabia is due to internal political maneuvering.

5/11 – CNN Money – OPEC to U.S.: Please don’t pump so much oil! – How do you think this will work: In their monthly report, OPEC said that all oil producers need to work together to reduce the oversupply (hint so they can all make more money) and dropped a strong hint that producers in the US should cut back production.

Yeah, that’s a great plan! OPEC can bank on that working.

5/12 – Daily Caller – Saudi Arabia Whines US Has Too Much Control Over World’s Oil – One commentator observes the Saudis have realized they don’t have as much control as they did a decade ago.

America imported 60% of its oil in 2007 but only 27% in 2014. That is a massive loss in market for OPEC.

There is a lot of pressure on Saudi Arabia, both internally and externally.

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North Dakota oil production steady in March ’17

Average daily oil production dropped 0.83% in March, from 1,034,248 bopd (revised) to 1,025,638 bopd (preliminary). Director’s report for the month is not out as of the time of posting this discussion. This month, I’ll just show two graphs of production:

 

 

Here is a longer term view:

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OPEC is still in a jam and a few of the reasons why.

14 wells on one pad. That would be 14 of the thousands of reasons OPEC is in distress. Photo by James Ulvog.

The scheduled production cuts from OPEC are nearing the expiration date as oil prices drop further. Why are they in such a difficult position? Photo above illustrates 12 specific things contributing to their discomfort.

Some articles describing their troubles and why the troubles won’t be going away anytime soon:

5/3/17 – Wall Street Journal – Oil Forecast to Fall Sharply if OPEC Doesn’t Extend Production Cuts – Article says the oil market has priced in an extension of the OPEC production cut. If correct, that means oil prices will fall if the production cut is not extended during meetings this month.

Article has a graph showing forecasts from 14 banks of their guesses on oil prices through the end of the year. For 4th quarter, the estimates range from mid-$40s to almost $70, with most of the estimates in the high $50s or very low $60s.

Article speculates that without an extension, price could drop into $40s.

5/5/17 – Bloomberg – OPEC Runs Out of Options as Bid to Boost Oil Price Fizzles – Article says the OPEC producers have kept to their agreed upon production cuts. That pushed prices up for a while but now prices are back to where they were when the cuts were announced.

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Saudi Arabia still in financial trouble, reverses salary and benefit cuts

Image courtesy of Adobe Stock.

Saudi Arabia and OPEC are still in trouble.

Just a few of the articles making that point lately:

  • Is OPEC near an end?
  • Saudi Arabia reverses course on salary and subsidy cuts
  • Continued drain of foreign reserves

3/31/17 – Oil Price – The End of OPEC is Near – Author Rakesh Upadhyay defines a cartel as:

…a group of like-minded producers, who act in concert—or collusion—to achieve a shared goal of increasing their profits by means of restricting supply, fixing prices, or destroying their competition by illegal means.

Article provides a history of OPEC’s efforts to control oil prices over the decades and then gives a recap of last few years.

OPEC tried to take out American shale drillers in 2014. Prices dropped further than they expected. Over 100 US producers went BK. US output dropped from 9.7M bopd to 8.9M bopd.

However, the drillers that survived developed more economical, more productive, and more effective techniques. Huge numbers of driller survived.

So, taking out US shale drillers didn’t work.

Thier next step? (Which also didn’t work?)

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