Pumps on new wells being installed in 9/15. Not exactly a sign of a collapsed industry. Photo by James Ulvog. Check out that beautiful sky.
Two previous posts discussed OPEC’s decision to maintain production and some of the implications. Here are a few more articles on the impact of low prices. Also, great illustrations of how the assets will be bought up by stronger players at bargain prices.
12/4 – Reuters media at Dickinson Press – Shares of Bakken Shale oil producers plummet after OPEC decision – Lack of a production cut and realization that OPEC production will actually exceed their announced limit combined with Iran ready to jump into the market pushed oil prices down. That in turn pushed down stock prices of North Dakota producers.
One industry representative is quoted as saying OPEC’s goal is to
“… outlast {U.S.} shale oil exploration and production…”
Yeah, I think that’s the worldwide consensus on the OPEC, I mean Saudi, goal.
Previously discussed the decision by OPEC on 12/4/15 to maintain production. That will keep prices low and sustain the worldwide glut of oil. Also mentioned my opinion that OPEC is now the front for Saudi Arabia.
12/2 – Million Dollar Way – OPEC’s Pyrrhic victory – Post pointed me to the following two articles. The MDW post includes quotes of key paragraphs from both articles.
Pyrrhic victory?
11/30 – John Kemp at Reuters at Rigzone – OPEC Risks Pyrrhic Victory With Oil Policy – Article starts by explaining how King Pyrrhus won a big victory over the Romans but lost a huge number of men leaving him no reserves and also costing him most of his generals. The Romans merely advanced a few more legions and were ready to go again. King Pyrrhus? Not so. The two victories emptied his army.
Energy source for electric vehicles in Netherlands, China, and many places in the U.S. Photo courtesy of DollarPhotoClub.com. Um, by the way, that’s a coal plant.
In addition to having distance capacity which may or may not be sufficient to get you where you want to go in a day, electric vehicles (EVs) are frequently powered by coal, can drain the grid during the day, and eventually they may force replacement of every neighborhood transformer in the grid.
11/23 – The Washington Post – Electric cars and the coal that runs them – Electric vehicles require huge amounts of electricity. Article says one charge takes as much electricity as a refrigerator uses in a month and a half. That electricity has to come from somewhere, even more so when a country has dramatically increased the amount of EVs on the road.
In Netherlands electricity to charge EVs comes from coal. Yes, coal.
To handle the huge increase in electricity demand because of EVs, the country has built three brand-new coal-fired power plants, of which two are at the Rotterdam Harbor.
Oil prices will remain low after an OPEC decision on December 4 not to reduce production. Sure looks to me like OPEC is now essentially Saudi Arabia. What the Saudis decide is what OPEC will do. And what the Saudis have decided is to maintain production. Thus prices will continue at the current low level and the worldwide glut of oil will continue. In addition the OPEC producers will continue to burn up their foreign reserves.
The Williston city commissioners have moved forward with their plan to shut down man camps and throw housing business to the hotels and apartments in town.
11/24 – Amy Dalrymple at Oil Patch Dispatch – Compromise possible for Williston crew camps– On 11/24 the commissioners held their ‘second reading’ and voted 3-2 to eliminate all crew camps within the city and their one-mile extraterritorial reach. That means all man camps they can touch will have to be closed by June 30, 2016.
Oil companies say they need temporary housing for workers that cycle in to the area for short or unknown lengths of time.
The mayor indicates there might be some room for some sort of compromise.
Here are two of the more interesting articles I’ve seen recently about the impact of low oil prices on drilling and production. Also another article speculating there will be no change in policy coming out of the OPEC meeting later this week.
11/19 – Wall Street Journal – Oil Producer Bankruptcies Keep Piling Up – the severe pressure of oil dropping from the average $93 in 2014 to something in the range of $50 this year is creating severe pressure. As you would fully expect, a number of weaker players have already filed for bankruptcy. More are expected.
Fifteen wells on one pad (15!) with room for another 15 wells. Drilling rig in background. Goal of OPEC is to shut down those wells. Photo by James Ulvog.
Doesn’t look like Saudi Arabia will be cutting back production anytime soon. Seems they want to keep crude prices low. Drillers are responding creatively to the price pressure.
10/2 – Bloomberg at Calgary Herald – Drillers taking it slow on shale wells in bid to squeeze out more oil – Drillers are intentionally slowing down initial output of shale wells. That is called choking back. Apparently this has the effect of keeping more frac sand in the ground instead of being flushed out with the high initial flow of oil. Article says drillers choking back are seeing higher total recoveries from their wells than other drillers.
In addition to increasing production, this defers some production to later, when prices are expected to be higher.
This also means that initial production amounts (IP) are not necessarily an indicator of the estimated ultimate production (EUP).
In addition, this suggests total production from Bakken and Eagle Ford won’t be dropping as quickly as you would expect by the drop in drilling rigs.
Finally, you can file this in the category of human ingenuity always increases production. Also, file this under Peak Oil Is Still Wrong.
11/8 – Financial Times – Saudi Arabia will not stop pumping to boost oil prices– Links to the paper indicate Saudi Arabia has no intentions of dropping their production. They intend to keep prices on the worldwide market very low.
Check out all those wells. That is a huge pad. Photo by James Ulvog.
One thing that struck me during my September 2015 visit to Williston is the number of well pads with lots of pumps. Two years ago I was impressed by two or four pumps on one site. This trip, I noticed a lot of pads with 6 working pumps and lots of pads that were far too large for the one or two pumps in place. Obviously there are plans to put more wells on each of those pads.
Photo by James Ulvog.
The most amazing sight for me was a pad with 15 wells. Yes, 15. There are three in a row on the west side of the pad, six in a middle row, and six more in a row on the east. Will have several more shots of the site included in this post. The pad is at the end of a private road so all the pictures I have were taken from the nearby public roads.
Yet another slice-and-dice operation is moving toward approval in North Dakota. Interesting tidbits in the middle of articles about the project point out the infinitesimal fines for killing a bald or golden eagle. Conversation in two articles helps me understand why the potential fines for offing eagles aren’t stopping any wind turbine projects.
Why will the possible fines not stop any wind farm?
The cost is trivial, and that is assuming you even get caught and assuming you get prosecuted and assuming you actually get convicted.
11/18 – Bismarck Tribune – Rolette County wind farm approved – ND Public Service Commission approved the Rolette Power Development LLC to construct up to 59 slice-and-dicers with theoretical capacity of 100 MW at estimated cost of $175M. That is about $1.75M per turbine and an average 1.7MW per tower.
Those 6 wells in North Dakota will soon start pulling huge amounts of oil out of the ground. Twenty years ago it was impossible to reach that oil. Technological innovation makes oil recoverable that was previously untouchable. Photo by James Ulvog.
Innovation leading to technological advances creates wealth, improves health, and makes everyone better off. Some people in some places have been left behind by the dramatic economic improvements of the last two centuries. The best way to make life better for those folks is to continue innovating and make cheap, small, fast, highly economical tools and resources available to them.
The book as so many explanations and illustrations. I’d love to describe dozens of things that caught my eye. I will mention merely a few.
You will often see the foolish and erroneous statement that we only have X years of some resource left on the planet. When you look at the built-in calculation you see the presence of the silly fallacy of dividing known reserves by current consumption.
The reason that calculation is so foolish is it completely ignores exploration that finds new fields, innovation in recovering more resources, and economic changes that make it worthwhile to gather something that was uneconomical before.
Consider for a moment the idea that we are going to run out of oil because at current consumption rates will use up all the proven reserves in however many years. The formula is
proven reserves
divided by current consumption
equals years until we completely, totally exhaust all of that item on the entire planet
Each of those little spots of light brown is a well pad with 1 or 4 wells, with each well likely to produce around half a million barrels of oil. Two decades ago every drop of that oil was completely unrecoverable. Visual proof of the foolishness of Peak Oil. Photo by James Ulvog.
Remember that Peak oil doctrine states unequivocally that production peaks and then begins an irreversible, inevitable, unavoidable slide to zero. The curve of production inevitably follows a pattern that looks roughly comparable to a bell curve.
That means that by 2015 we should have already approached the point of very minimal oil production worldwide. Yesterday’s post described a century’s worth of failed predictions.
Where is production today? Umm…not exactly approaching zero.
Production is running so high in spite of collapse prices and in spite of increasing demand that there is a worldwide glut of crude. Having enough space to store all of the surplus oil is becoming an issue.
Here are just a few of the articles I have seen in the last week on point. This does not include another six or eight articles I’ve seen in the last month that make the same point.
According to conclusive predictions over the last 100 years, the oil coming out of those wells can’t exist, because we have already used up all the oil on the planet. Perhaps the wells are just a figment of my imagination that is as fertile as the plains of North Dakota. Photo and sarcasm by James Ulvog.
It is so entertaining to read about all the failed predictions of when we will run out of oil or some other critical resource. I keep coming across more and more absolute guarantees of when we already ran out of oil.
At its core, Peak Oil is merely another variation of the long discredited Malthusian arguments that we will run out of stuff. Such thinking is foolishly and fatally flawed.
Remember that until just a few years ago it was universally agreed by eeeeeevery scientist and researcher on the planet that we would absolutely run out of oil. It was settled science. No debate or argument necessary. No disagreement allowed.
For this particular journey down the trail of failed predictions, I thank Rob Port, writing at Say Anything Blog, for pointing me to the trail head for this expedition. In his article Settled Science: America Will Be Out Of Oil By 2015, he wrote
Because, you see, peak oil was settled science. Except, it also turned out to be wrong science, as most malthusian projections do, because it failed to take into account humanity’s infinite capacity to invent and innovate. In 2015 the big problem for the oil industry isn’t that they can’t find more oil, but rather that the market is being flooded with oil and that’s driving down prices.
Here are a few more graphs on crude production in North Dakota as released by the state on 11/13/15. First the fracklog and then the number of working rigs.
Fracklog for September is 1,091. That is the estimated number of wells waiting to be completed. They are drilled to depth, temporarily closed, and only need to be fracked in order to start producing.
