fracking – Page 6 – Outrun Change

Two superb primers on energy

Without cheap, abundant, and reliable energy neither the construction, illumination, nor activity after dark you see here would be possible. Photo courtesy of DollarPhotoClub.com. — Without cheap, abundant, and reliable energy none of the construction, illumination, or activity after dark you see here would be possible. Photo of San Diego skyline courtesy of DollarPhotoClub.com.

I found two more in-depth discussions of energy. I’m writing this blog to help me learn what is going on around us. If you are tagging along on my learning journey, you really oughta’ check these out:

8/21 – Daniel Yergin at Wall Street Journal – The Power Revolutions /Natural gas, solar power and data-driven efficiency are making big gains, but history shows that the shift away from coal and oil won’t be fast or neat – Anything you see in print from Mr. Yergin is worth reading.

He points out that it takes an extremely long time to make any major transition in sources of energy.

Continue reading “Two superb primers on energy”

Open frontier, energy edition, 8/24

Two rigs on same pad. Photo by James Ulvog.

In spite of dropping prices for crude oil and turmoil in the energy markets, the long-term trend of abundant oil and gas is encouraging. The oil ‘glut’ isn’t going away, meaning we will have abundant crude for quite a while, and refracking may open the door to recovery of even more gas and oil.

7/6 – Bloomberg Business – Refracking Is the New Fracking – Graph of estimated production from shale oil guesses output will rise from about 2.2M bopd in 2012 to under 3.5M bopd now to 5.5M bopd each year from about 2018 to 2023. Then production will tail off to about 4.5M bopd from 2032 through 2040.

That is somewhere in the range of around 48 billion barrels of oil that was untouchable a decade ago. My untouchable I mean there-is-noway-we-will-ever-get-to-that-stuff untouchable. (Calc as a very rough average of 4.5M bopd x 365 days a year x 29 years {2040 less 2012}.)

It is possible refracking might come close to doubling that output.

Continue reading “Open frontier, energy edition, 8/24”

Who will break first, Saudi Arabia or the American shale oil industry?

Ras Tanura oil terminal, Saudi Arabia, photo courtesy of DollarPhotoClub.com — Ras Tanura oil terminal in Saudi Arabia. Photo courtesy of DollarPhotoClub.com

VERSUS

5 oil pads in North Dakota, 1 with drilling rig and one cleared ready to drill. Photo by James Ulvog — 5 oil pads in North Dakota, 1 with drilling rig. Each pad may eventually have 3 or 10 wells. Photo by James Ulvog. October 2014. Yeah, yeah, I’m not much of a photographer.

Three fascinating articles to give some perspective on global oil market. Might want to get a fresh cup of coffee, this will be a long read.

From immediate appearances, Saudi Arabia is in financial distress because of low oil prices. On a longer-term perspective they are in extremely severe trouble. OPEC as an organization is essentially done. Entertaining to watch one writer tried to blow off all of the above information.

First, the immediate indication that Saudi Arabia is having serious trouble now.

8/5 – Financial Times – Saudi Arabia plans $27bn in bond issues – Saudi Arabia has already borrowed $4B in the bond market. They are floating ideas of borrowing $5.3B a month through the end of the year for an additional $27B debt.

With selling around 10.3M barrels a day at price of around $50 which produces somewhere around $188B a year, why are they tiptoeing back into the debt market?

Continue reading “Who will break first, Saudi Arabia or the American shale oil industry?”

News from around the Bakken – 7/27

Mancamp near Ray, ND. Photo by James Ulvog

Williston city and Williams County are working to cut back mancamp housing, which will have the expected unintended consequence of putting upward pressure on housing prices. The new airport in Williston is moving forward. Biggest news is indication that newest wells aren’t seeing production deplete as rapidly as in the past. Continue reading “News from around the Bakken – 7/27”

Upside possibilities of refracking and different ideas on what Saudi Arabia is doing

Initial reports hint that refracking an existing well might pay off big time. Also, what is Saudi Arabia after?

7/12 – Million Dollar Way – Random Update Of a Recently Re-Fracked MRO Well in Killdeer Oil Field – Re-fracking is going to be the next big thing, based on articles I have read. Here is an illustration of the concept –

This well had been producing about 1,100 barrels of oil a month from June 2014 through November. Re-fracking took place in December or January. February production was almost 14,000 barrels. The next three months were about 10,000 in each month.

Continue reading “Upside possibilities of refracking and different ideas on what Saudi Arabia is doing”

What do the economics of one Bakken well look like?

OLYMPUS DIGITAL CAMERA — Two traditional pump jacks aside two of Chinese design. Photo by James Ulvog. I see two or three million barrels of oil from that pad over the next few decades.

Prof. Mark Perry pulled together some estimates on the economics of a Bakken well in North Dakota in his post Top ten things I learned on my summer trip to the Bakken oil fields, Part II. Previously discussed Part I and Part II.

Here was his data:

Average cost to drill, frack and complete a Bakken oil well: $9 million

Expected production life of a Bakken oil well: 45 years

Lifetime oil production per well: 615,000 barrels

Expected lifetime revenue generated per well: $46.125 million at $75 per barrel

Total operating expenses per well: $2.3 million

Royalty payments to mineral owners per well over 45 years: $7.3 million

Taxes Paid per well: $4.325 million total ($2.1 million gross production taxes, $1.8 million extraction tax and $425,000 in sales taxes)

Total employee salaries and wages per well: $2.125 million

Average Profits Generated per Bakken well: $20 million net of costs and taxes

Let me rework those numbers –

This is a really rough guess of what the lifetime income statement might look like for one well: Continue reading “What do the economics of one Bakken well look like?”

More great things to learn about Bakken – part 2

Prof. Mark Perry did a heap of learnin’ on his trip to Williston in May. He wraps up comments at his post, Top ten things I learned on my summer trip to the Bakken oil fields, Part II

My comments on part I here.

If you are looking for a primer on the oil revolution or Bakken or fracking, check out his articles.

A few highlights from his 3,000+ word post and a few of my thoughts. Continue reading “More great things to learn about Bakken – part 2”

Peak Oil doctrine is still dead. #40

Previously discussed an amazing article by Mark Perry at Carpe Diem. Post provides yet another reminder that Peak Oil is a failed concept.

Check out the June 23 post from Carpe Diem at American Enterprise Institute: Bakken updates: 1) Williston as ground zero for the American spirit and 2) Here comes Shale 2.0!

Recoverable oil

The post quotes a correspondent who works for a drilling company and has deep knowledge. This correspondent says the expectation at the beginning of the boom was 3.5% of the original oil in place would be recovered. Industry estimates today suggest the recovery rate is 15-18%. With additional technological developments, the correspondent’s guess is there could be another 5% of the oil recovered.

Get a fresh cup of coffee and journey with me as my little brain processes through what this means.

Continue reading “Peak Oil doctrine is still dead. #40”

Don’t bet against shale oil

So many articles are pointing toward the idea that shale will be a major player for a long time.

What do you suppose would happen to new and used car dealers if automobile prices dropped by 50% in the next 6 months with no indication when (or even if) the prices will recover? What would happen to retail bookstores if prices of books dropped by half?

How many new car lots, used car dealers, or bookstores would be open after 6 months?

A few articles on shale in general and Williston in particular:

Continue reading “Don’t bet against shale oil”

Great things to learn about Bakken – part 1

Prof. Mark Perry provides his first report on the few days he was able to spend in Williston at the end of May. From Carpe Diem on June 16: Top ten things I learned on my summer trip to the Bakken oil fields, Part I

I was there for a few days last month also. I however, did not get a two-day personal tour of Continental’s drilling sites. What a blessing for him!

If you need a primer on Bakken, I heartily recommend his post.

Here are the first five of his points with my comments:

Continue reading “Great things to learn about Bakken – part 1”

Fracking doesn’t contaminate groundwater

That is now the conclusion of the EPA.

The Wall Street Journal reports Fracking Has Had No ‘Widespread’ Impact on Drinking Water, EPA Finds. A senior official from the office of research and development said:

“Hydraulic fracturing activities in the U.S. are carried out in a way that have not led to widespread, systematic impact on drinking water resources … In fact, the number of documented impacts to drinking water is relatively low when compared to the number of fractured wells.”

The risk is in proper construction of the wellbore as it passes through the water table. I’ve previously learned there is an outer casing liner which is sealed in concrete. Then the well bore is placed inside the casing. It is sealed with another round of concrete-like material, which prevents water from moving, should it get through the other concrete and steel in the bore.

Continue reading “Fracking doesn’t contaminate groundwater”

Oil exploration and production moves to manufacturing stage

The shale revolution is transitioning into a manufacturing stage where production can be turned on and off based on minor price fluctuations.

6/1 – Donald Luskin and Michael Warren at Wall Street Journal – The Shale Boom Shifts Into High Gear / Oil production is becoming a modern manufacturing process, with frackers using the ‘just-in-time’ approach

Think of it as Moore’s Law applied to oil production.

Combine two factors, increased efficiencies and rapid depletion. Continue reading “Oil exploration and production moves to manufacturing stage”

The energy future is so bright we may have to trade in our sunglasses for welder’s goggles

Here are two resources I came across on the same day that point to why the future is so incredibly bright that regular sunglasses might not be enough:

Shale 2.0 – Technology and the Coming Big-Data Revolution in America’s Shale Oil Fields, by Mark Mills, of the Manhattan Institute

Economic Impact and Legal Analysis of the Shale Oil and Gas Activities in Mexico, preliminary report – by University of Texas San Antonio and others. Prof Thomas Tunstall is the principal investigator and Javier Oyakawa is the lead investigator at UTSA.

I have just started reading both of the reports. Plan to finish them in the next few days and will have more to say then.

A couple of initial thoughts:

The Manhattan Institute study suggests the shale revolution of the last five or seven years is barely getting started. The technological innovations in the last couple of years are going to accelerate.

Continue reading “The energy future is so bright we may have to trade in our sunglasses for welder’s goggles”

More on the revolution in energy, specifically shale oil

It is astounding to watch what is happening in the energy arena. U.S. petroprenuers have kicked off an energy revolution.

The staggering idea is this whole shale thing could just be getting started. Consider the following:

5/26 – Mark Perry at Investors Business Daily – Saudis’ Drive to Kill U.S. Shale Has Backfired – Prof. Perry points out the Saudis have now acknowledged their goal was to take out shale production. They think they have substantially succeeded based on the drop in recount.

I think the conceptual error is to assume there is a direct correlation between rig count and production. There are so many fallacies in that concept.

The ironic thing is there is a huge fracklog of wells drilled but are awaiting completion. As soon as prices come up a bit (exact point we may soon find out) there are a lot of wells for which it will be economic to finish. In North Dakota there are around 800 wells that just need to be fracked and they can come on the market. For context that’s just under half a years worth of new drilling.

One of the highly unintended consequences is to accelerate efficiencies and technological innovation. The article calls attention to those factors.

Continue reading “More on the revolution in energy, specifically shale oil”

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 Journal – What 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.

Continue reading “More good stuff from the wide open energy frontier – 5/8”