Out of focus photo of drilling rig and four not-yet-in-production wells by James Ulvog (yeah, yeah, I know – don’t give up my day job.)
Bruce Oksol wonders whether Bakken oil production is entering the manufacturing phase after a frantic construction phase.
2/3 – The Million Dollar Way – Idle Chatter on DUCs and Related Data Points – Before a big factory or electrical plant or other major project begins production there is a massive construction effort. The number of jobs to run the facility is a fraction of the number of workers needed to construct the thing. When completed, the number of jobs at the facility drops off.
Mr. Oksol uses the illustration of a natural gas plant being built. During construction there will be around 2,000 temporary jobs. When that gas is turned into electricity, the plant will employ 45. That’s 2,000 temporary and 45 permanent jobs.
He wonders if Bakken is like that, having finished the ‘construction’ and now moving into manufacturing.
Photo of multi fuel power plant courtesy of DollarPhotoClub.com
Bruce Oksol at The Million Dollar Way provides an updated scorecard on what he is seeing as the cost to construct a variety of electricity generating plants.
A few articles of interest to me over the last two months: baby deliveries increase, airline boardings down, adjustments to low prices continue.
1/15 – Amy Dalrymple at Oil Patch Dispatch – While oil boom has slowed, births still booming– number of births in Williston and my not word a record number last year. The count at Williston’s Mercy Medical Center:
Long term housing for human traffickers. Duration of residence for Keith Graves has yet to be determined. Photo courtesy of DollarPhotoClub.com
Checked the docket in the federal PACER system again today for the now-convicted, felon, sex-trafficker Keith Graves.
No change since my last update on December 18. No new filings in district court. I can’t find any appeals in the 8th Circuit.
Sentencing is still set for February 17. That is just under four weeks away.
What’s noticeable by being absent is the sentencing recommendations from the federal Probation Office, opposition from Mr. Graves’ attorney, and rebuttal by US Attorney. At this point it sure seems to me there should be several filings regarding the recommended sentence. As of this morning, nothing has been filed regarding the sentence.
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
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.
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.
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.
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.
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.
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.
Sort of looks like a plateau.
Here is the long-term picture of state-wide production:
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.
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.
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?
