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Great condensate con

Condensate is the shale oil and gas boom’s redheaded stepchild

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The essence of Great condensate con was aptly formulated by Jeffrey Brown in this econbrowser.com post (

)

http://econbrowser.com/archives/2016/01/world-oil-supply-and-demand#comment-194595

My premise is that US (and perhaps global) refiners hit, late in 2014, the upper limit of the volume of condensate that they could process, if they wanted to maintain their distillate and heavier output–resulting in a build in condensate inventories, reflected as a year over year build of 100 million barrels in US C+C (Crude + Condensate) inventories.

Therefore, in my opinion the US and (and perhaps globally) C+C inventory data are fundamentally flawed, when it comes to actual crude oil inventory data. The most common dividing line between actual crude oil and condensate is 45 API gravity, although the distillate yield drops off considerably just going from 39 API to 42 API gravity crude, and the upper limit for WTI crude oil is 42 API. . . .

Note that (in 2015) 22% of US Lower 48 C+C production consists of condensate (45+ API gravity) and note that about 40% of US Lower 48 C+C production exceeds the maximum API gravity for WTI crude oil (42 API).

Similar observations can be found in

http://www.reuters.com/article/2015/03/23/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source.

Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. . . .

Many executives say that the crude oil blends being created in Cushing are often substandard approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to, and favored by, many refiners in the region.

Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian Select, itself a blend, is about 20.

While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.

The blends tend to produce a higher proportion of fuel at two ends of the spectrum: light ends like gasoline, demand for which has dimmed in recent years, and lower-value heavy products like fuel oil and asphalt. What’s missing are middle distillates like diesel, where growing demand and profitability lies.

The distinction between crude and condensate is a matter of opinion. One standard the energy industry uses to compare different types of oil is called API gravity – a measure of how heavy or light petroleum is relative to water. Lighter crudes have higher gravity. For instance, West Texas Intermediate – known as WTI – is a predominant U.S. light crude and has traditionally measured an API gravity of 39 degrees on this scale. Anything above 45 degrees API can be considered condensate, depending on who you ask. Some of the stuff pouring out of wells in Texas, North Dakota, and Colorado is coming in at a range of 50 to 60 degrees API.

In the USA condensate is extracted in large quantities as a byproduct  of  gas producing wells from Texas to Pennsylvania. When underground condensate is mostly a gas, but it condenses into a liquid when pumped to the surface. Condensate was the natural gas production boom’s redheaded stepchild. Until natural gas production started to ramp up in U. S. shale formations, the distinction between crude and condensate didn’t matter much, and the small amounts of condensate pumped from the ground were left mixed in the crude. Now as much as 12% of daily U.S. crude production might qualify as condensate, according to energy investment bank Simmons & Co. International.

Condensate contains only around 60 – 70% of the  energy content of crude oil in the same volume.

Natural-gas condensate - Wikipedia, the free encyclopedia

Natural-gas condensate is a low-density mixture of hydrocarbon liquids that are present as gaseous components in the raw natural gas produced from many natural gas fields. It condenses out of the raw gas if the temperature is reduced to below the hydrocarbon dew point temperature of the raw gas.

The natural gas condensate is also referred to as simply condensate, or gas condensate, or sometimes natural gasoline because it contains hydrocarbons within the gasoline boiling range. Raw natural gas may come from any one of three types of gas wells:[

  • Crude oil wells — Raw natural gas that comes from crude oil wells is called associated gas. This gas can exist separate from the crude oil in the underground formation, or dissolved in the crude oil. Condensate produced from oil wells is often referred to as lease condensate.[3]
  • Dry gas wells —These wells typically produce only raw natural gas that does not contain any hydrocarbon liquids. Such gas is called non-associated gas. Condensate from dry gas is extracted at gas processing plants and, hence, is often referred to as plant condensate.[3]
  • Condensate wells —These wells produce raw natural gas along with natural gas liquid. Such gas is also called associated gas and often referred to as wet gas.

There are many condensate sources worldwide and each has its own unique gas condensate composition. However, in general, gas condensate has a specific gravity ranging from 0.5 to 0.8, and is composed of hydrocarbons such as propane, butane, pentane, hexane, etc. Natural gas compounds with more carbon atoms (e.g. pentane, or blends of butane, pentane and other hydrocarbons with additional carbon atoms) exist as liquids at ambient temperatures.[4] Additionally, condensate may contain additional impurities such as:[5][6][7][8]

condensate - Schlumberger Oilfield Glossary

A low-density, high-API gravity liquid hydrocarbon phase that generally occurs in association with natural gas. Its presence as a liquid phase depends on temperature and pressure conditions in the reservoir allowing condensation of liquid from vapor. The production of condensate reservoirs can be complicated because of the pressure sensitivity of some condensates: During production, there is a risk of the condensate changing from gas to liquid if the reservoir pressure drops below the dew point during production. Reservoir pressure can be maintained by fluid injection if gas production is preferable to liquid production. Gas produced in association with condensate is called wet gas. The API gravity of condensate is typically 50 degrees to 120 degrees.

Chemical composition of condensate is different then gasoline produced by cracking and it has a lower octane number than conventional commercial distilled gasoline (Natural gasoline - Wikipedia, the free encyclopedia):

Natural gasoline is a natural gas liquid with a vapor pressure intermediate between natural gas condensate (drip gas) and liquefied petroleum gas and has a boiling point within the range of gasoline. The typical gravity of natural gasoline is around 80 API.

This hydrocarbon mixture is liquid at ambient pressure and temperature. It is volatile and unstable but can be blended with other hydrocarbons to produce commercial gasoline.

The natural gas hydrocarbons mixture is mostly pentanes and heavier (smaller amounts of C6 and C6+), extracted from natural gas, that meets vapor pressure, end-point, and other specifications for natural gasoline set by the Gas Processors Association.[1] Includes isopentane which is a saturated branch-chain hydrocarbon, (C5H12), obtained by fractionation of natural gasoline or isomerization of normal pentane.[2]

Natural gasoline is often used to denature ethanol produced for E85. Natural gasoline has a lower octane content than conventional commercial distilled gasoline, so it cannot normally be used by itself for fuel for modern automobiles. However, when mixed with high concentrations of ethanol such as mid-level blends, like E50 or E85, the octane content is raised high enough to be used easily in flex-fuel vehicles. It may be sourced from production of natural gas wells (see "drip gas") or may be produced by extraction processes [3] in the field, as opposed to refinery cracking of conventional gasoline.

http://www.reuters.com/article/2015/03/23/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source.

Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. . . .

Many executives say that the crude oil blends being created in Cushing are often substandard approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to, and favored by, many refiners in the region.

Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian Select, itself a blend, is about 20.

While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.

The blends tend to produce a higher proportion of fuel at two ends of the spectrum: light ends like gasoline, demand for which has dimmed in recent years, and lower-value heavy products like fuel oil and asphalt. What’s missing are middle distillates like diesel, where growing demand and profitability lies.


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[Oct 11, 2017] I am absolutely convinced that the commercial inventory number on the EIA weekly report is not real

Oct 11, 2017 | peakoilbarrel.com

Guym

says: 10/10/2017 at 3:58 pm
I am quite sure I am not the only one, but at constantly looking at the commercial inventory number on the EIA weekly report, I am absolutely convinced it is not real. The only time I have seen it adjusted is when they decided to discontinue reporting of lease storage oil. As if they had any idea of what that amount was. In accounting, it is required to take an annual inventory. Only one other company I know of actually attempts to do a physical count of stored oil inventory, and they only do some areas. I've never heard of EIA ever doing a physical inventory of that number.
When I know the production figure is way off each week, it make me keep looking at that funky looking, stagnant number. The rest of the world's inventory is dropping fast, but we still use a decades old funky number. And calculate to its upward or downwards movement with completely false numbers.

[Oct 06, 2017] It really appears to me that US production is closer to 8,900,000 barrels a day versus 9,200,000 a day. EIA data are wrong

Notable quotes:
"... Inventory numbers are not a count of oil. They are a mathematical calculation of what had to be used, based upon baseless numbers. One could base an argument, that because production was really lower, more should be deducted from inventory each week. Some have made that claim. I just think all of the numbers are highly suspect. It is materially in error, and all of the numbers should be questioned. ..."
"... It really appears to me that US production is closer to 8,900,000 barrels a day versus 9,200,000 a day. ..."
"... You would imagine that Customs must know how much oil is traded per month. And that refineries must know how much oil they use. But even looking at the monthly data it's difficult to know what is accurate and what isn't. ..."
Oct 06, 2017 | peakoilbarrel.com

Guym: 10/02/2017 at 11:02 pm

Looked at what EIA posted for "final" numbers for Texas for July. 3474. Now, July 2016 had higher numbers for initial production than July 2017. Much higher with condensate, though I can't find the original condensate number, but they were running over 9 million at the time.

Texas final number for July 2016, at this point, is 3110. EIA has 3161 for July 2016. I don't need to do a lot of mathematical computations by looking backwards.

Just using EIA numbers for 2016, its over by about 313,000. Undoubtedly more.

Substituting, that puts US production at 8,925,000. Even though we had the shutdowns Aug and Sep for Harvey, EIA has production on the latest weekly at 9,547,000.

Does seem a might high, and that doesn't count a questionable increase in the GOM on the EIA July "final" numbers.

If the production is that far off, what else on the weekly report is way off? Total inputs, imports, exports, inventory draws?

Guym: 10/03/2017 at 10:26 am
At first, my thought was, why are they doing this? Then the more I thought of it, there is no nefarious intention. Any organization who uses their calculation to come up with "drilling productivity", can't have both oars in the water. Or, as a popular movie reiterates: "stupid is, as stupid does".
Dennis Coyne: 10/04/2017 at 12:47 pm
Hi Guym,

The EIA estimates (tight oil estimate) about a 510 kb/d increase in US tight oil production from July 2016 to July 2017, about 411 kb/d was from the Permian Basin (Texas and New Mexico). See

https://www.eia.gov/petroleum/data.php#crude

Click on "Tight Oil Production Estimates".

Energy News: 10/03/2017 at 11:47 am
I was thinking that the EIA's monthly Supply and Disposition numbers are more accurate that the weeklies. But even the monthly figures have an adjustment factor and it spiked up to +558 kb/day in July. So far, it seems that only the inventory figures are reliable.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRUA_NUS_2&f=M

Guym: 10/03/2017 at 12:20 pm
Inventory numbers are not a count of oil. They are a mathematical calculation of what had to be used, based upon baseless numbers. One could base an argument, that because production was really lower, more should be deducted from inventory each week. Some have made that claim. I just think all of the numbers are highly suspect. It is materially in error, and all of the numbers should be questioned.

It really appears to me that US production is closer to 8,900,000 barrels a day versus 9,200,000 a day.

Energy News says: 10/03/2017 at 12:23 pm
You would imagine that Customs must know how much oil is traded per month. And that refineries must know how much oil they use. But even looking at the monthly data it's difficult to know what is accurate and what isn't.

If you calculate monthly production using the equation but without the adjustment you get the blue line on the chart
Refinery Input = Production + Imports – Exports + Inventory Change + Adjustment
Analysts version on Twitter: https://pbs.twimg.com/media/DLIILKvVoAE_dMS.jpg

Energy News says: 10/03/2017 at 1:15 pm
The EIA did make some changes but looking at weekly vs monthly it is still the export/import numbers that show the largest revisions. Although also wondering how accurate the monthly data is.

MarketWatch – Aug 31, 2016 – Oil market cheers EIA changes to weekly statistics

On Wednesday, the EIA's Today in Energy report said the agency is now publishing its weekly petroleum export and consumption estimates based on "near-real-time export data" provided by U.S. Customs and Border Protection. It was previously using weekly export estimates based on monthly official export data published by the U.S. Census Bureau about six weeks following the end of each reporting month.

"Exports should be more accurate, and 'net imports' should be better, but still with uncertainty," said Michael Lynch, president of president of Strategic Energy & Economic Research.

http://www.marketwatch.com/story/oil-market-cheers-eia-changes-to-weekly-statistics-2016-08-31

Energy News says: 10/04/2017 at 5:24 am
(I meant to type differences rather than revisions in the post above)

If the monthly data is accurate (?) then compared to the weeklies the USA is exporting more and importing slightly less than reported in the weeklies.

Monthly vs Weekly Trade Volumes, the average difference from Jan-2016 to Jul-2017

Exports: Monthly – Weekly = +124 kb/day (average over 19 months since Jan-2016)
Imports: Monthly – Weekly = -33 kb/day
Net Imports: Monthly – Weekly = -157 kb/day

Energy News says: 10/04/2017 at 6:28 am
The same exercise for refinery input

U.S. Refinery & Blender Net Input
Monthly vs Weekly, the average difference from Jan-2016 to Jul-2017
Monthly – Weekly = -32 kb/day (average over 19 months since Jan-2016)

If you just look at January, for the last 4 years, the January weeklies underestimate the demand drop every year
Monthly – Weekly = -189 kb/day (average over last 4 Januarys)

Monthly vs Weekly, the average difference from Feb-2016 to Jul-2017 (without Jan-2017)
Monthly – Weekly = -7 kb/day (average over 17 months since Feb-2016, without Jan-2017)

[Sep 26, 2017] Too much condensate, too little real oil

Sep 26, 2017 | peakoilbarrel.com

Watcher

says: 09/21/2017 at 11:01 am I don't scroll much on tablets. So somewhere up above there was talk of condensate and why GOR in the Bakken meant or didn't mean something . . . for reported oil production.

Condensate has definition problems. When used casually it usually means liquid that flows from an OIL well, though the proper term for that liquid would be lease condensate. Condensate from gas wells is generally NGLs and not liquid at room temp/pressure.

But Lease Condensate is liquid at room temp/pressure. Nat Gas from a crude oil well, creating or associated with a flow of NGLs AND lease condensate, will essentially mean a flow of liquid-at-roomtemp with API 45-75 added in with the crude oil liquid. That's definition for lease condensate. API 45-75. It won't have hardly any diesel or kerosene in it.

Lots of potential for fuzzing up pricing. There seems to be a glib wave of the hand and a "the higher the API, the easier it is to refine so it's more valuable." But this can't be so if a refiner has diesel and kerosene customers to serve.

The Bakken API number is higher than previous claims, per Statoil's February assay. This is all getting no attention. Reply

George Kaplan says: 09/21/2017 at 11:13 am

No, I'm afraid you have that completely wrong. Lease condensate comes from a gas well, as the pressure is let off some liquid drops out (it's a complicated process and can be due to the gas cooling as it expands and a phenomenon called retrograde condensation – it depends where the starting and finishing points are in relation to the phase envelope). That is condensate (mostly pentanes with some heavier, and lighter stuff absorbed). The gas left over goes to a gas plant and NGLs are removed (C2, C3 and C4). Associated gas from an oil well also goes to a gas plant and NGLs get removed from it as well, there may be some drop out from the gas in the pipeline which arrives at the gas plant – that is also called condensate, but it is not lease condensate as it is metered separately (i.e. it is part of the gas a far as the lease owner is concerned).
Watcher says: 09/21/2017 at 4:18 pm
Lease condensate
When most people talk about condensates they are referring to lease condensates, so defined because they are produced at the lease level from oil or gas wells. These condensates can be produced along with significant volumes of natural gas and are typically recovered at atmospheric temperatures and pressures from the wellhead gas production. These "raw" condensates come out of the ground as mixtures of various hydrocarbon compounds including NGLs, pentanes (C5s, so called because they have five carbons in the molecules), C6s (hexanes), and depending on the condensate, a menagerie of heavier hydrocarbons in the C7, C8 and even heavier range.

A lease condensate has an API gravity ranging between 45 to 75 degrees. Those with a high API contain lots of NGLs (including ethane, propane and butane) and not many of the heavier hydrocarbons. These condensates are clear or translucent in color. The condensates with a lower API gravity down at the 45 degree level look more like crude oil (black or near black) and have much higher concentrations of the heavier C7, C8 and heavier compounds.

The WestTexas guy posted a graph some time ago showing relative concentration of middle distillates as a function of API degree number. The amount crashes around API 42. Looking for link . . . .

Someone can find his post if they like. I stored the chart and am uploading it to imgur.

https://imgur.com/a/IdYcw

George Kaplan says: 09/22/2017 at 1:27 am
All that is correct – but to a first approximation all the condensate comes from gas wells and none from oil wells.

[May 30, 2017] Inventory levels are still at an all time high in America and the bulk of that is light tight condensate

Notable quotes:
"... Canada is the 10th largest oil consuming nation in the world, Mexico the 11th and the UK the 18th. America, on the other hand, is the largest oil consuming nation in the world, by a wide margin. We do not have the LTO resources to achieve, nor sustain, hydrocarbon independence. Forget the costs, and the additional burden that attempting to achieve hydrocarbon independence would place on our national debt, it can't be done. There is not enough of it. ..."
"... I dislike the American shale oil industry, in general, because it cannot function without borrowed capital and it no longer has the ability, in my opinion, to pay back the hundreds of billions of dollars it owes. ..."
"... I also dislike the lying the shale oil industry engages in that convinces other stupid people that we have all the shale oil we ever need in America, enough for ourselves, and anybody else in the world that wants to buy it. ..."
"... I also embrace oil price stability as that leads to employment stability and a healthier oil industry for America's future. I also believe it is important to conserve our remaining hydrocarbon resources in America and to otherwise develop what is left of those resources at a pace that is commensurate with the world crude oil market. ..."
May 30, 2017 | peakoilbarrel.com
Mike says: 05/30/2017 at 6:35 pm
Got it tee-tee; America is still a net importer of crude oil. That's some good investigative reporting there.

Look, inventory levels are still at an all time high in America and the bulk of that is light tight condensate. The export ban has been lifted in the US for over three years now; nobody afar wants to import LTO, or much of it, and we still can't lower those inventories. The price of oil is low, and volatile. In the mean time all those big wells you own in Oklahoma are just making the problem worse. And while all this is going on, hold onto your knickers .oil imports into America are going UP, not down. Google it.

Canada is the 10th largest oil consuming nation in the world, Mexico the 11th and the UK the 18th. America, on the other hand, is the largest oil consuming nation in the world, by a wide margin. We do not have the LTO resources to achieve, nor sustain, hydrocarbon independence. Forget the costs, and the additional burden that attempting to achieve hydrocarbon independence would place on our national debt, it can't be done. There is not enough of it.

I dislike the American shale oil industry, in general, because it cannot function without borrowed capital and it no longer has the ability, in my opinion, to pay back the hundreds of billions of dollars it owes. I understand that doesn't bother you, and I understand why.

I also dislike the lying the shale oil industry engages in that convinces other stupid people that we have all the shale oil we ever need in America, enough for ourselves, and anybody else in the world that wants to buy it.

Personally, I would rather sell my oil for a higher price than current prices, but then again I have to pay to get it out of the ground, unlike yourself, I am sure, who gets it free and clear of all costs.

I also embrace oil price stability as that leads to employment stability and a healthier oil industry for America's future. I also believe it is important to conserve our remaining hydrocarbon resources in America and to otherwise develop what is left of those resources at a pace that is commensurate with the world crude oil market.

Again, I understand completely why you don't get that. I can't help you.

[Feb 21, 2017] Canadian oil sand per barrel break even cost is around 60 dollars per barrel for SAGD project and around $75 for a standalone mine.

Feb 21, 2017 | peakoilbarrel.com
Energy News says: 02/17/2017 at 7:47 am
In their 11th annual review of oil sands supply costs, the Canadian Energy Research Institute (CERI) concludes all new oil sands projects unprofitable (at current oil prices) . . .

The plant gate supply costs, which exclude transportation and blending costs, are C$43.31/bbl for a SAGD project and C$70.08/bbl for a stand-alone mine.

After adjusting for blending and transportation, the WTI equivalent supply costs at Cushing for SAGD projects is US$60.52/bbl, and US$75.73/bbl for a stand-alone mine. In comparison to last year's update, the WTI equivalent costs for a greenfield SAGD project are 25 percent lower and 16 percent lower for a stand-alone mine based on lower operating costs, changes in US/CDN exchange rate assumption and a lack of premium on diluent costs. At current WTI prices of just above US$50/bbl, one can assume that these greenfield projects are not economic or have to accept a lower rate of return.
http://resources.ceri.ca/PDF/Pubs/Studies/Study_163_Executive_Summary.pdf

Suncor Energy announced a scope change, construction delay and capital cost increase for its upcoming Fort Hills Oil Sands Mine. The revisions were blamed on the Alberta wildfires and design changes made to the plant's Froth Treatment facility. Despite the cost increase, Suncor says the project's capital intensity remains in-line with its sanction guidance of CAD$80,000 to $83,000 per flowing barrel, excluding foreign exchange impacts.

Partner Teck Resources put out a more cautious forecast and estimates the plant will produce 186,000 bbl/day over the life of the project. Factoring in a lower Canadian dollar (which has declined over 20% since the project was sanctioned in 2013), capital intensity could be as high as C$91,000/bbl.

As a point of comparison, capital costs for Imperial Oil's Kearl Oil Sands project (which has a comparable process and product), were estimated at $22 billion for 220,000 bbl/day of bitumen production, or C$100,000 per flowing barrel.
http://www.oilsandsmagazine.com/oilsands-weekly/2017/2/10

Western Canadian Select (WCS), Jan 2017: CAD$52.3 and USD$39.6

aws. says: 02/15/2017 at 10:55 pm
Alberta's Growing $30-Billion Liability: Inactive Wells

Compared to other jurisdictions, province lets oil firms off the hook when it comes to cleaning up.

By Andrew Nikiforuk 13 Feb 2017 | TheTyee.ca

aws. says: 02/15/2017 at 10:53 pm
No more profits to be capitalized, time to socialize the costs.

Alberta orphan oil well tally jumps as Lexin licenses suspended

By Nia Williams | Reuters | CALGARY, Alberta Wed Feb 15, 2017 | 2:41pm EST

The provincial regulator ordered privately-held Lexin to cease all production, saying it failed to comply with multiple orders and lacked enough staff to manage its more than 1,600 sites.

Calgary-based Lexin also owes more than C$1 million to Alberta's orphan fund and more than C$70 million in security for its obligations to clean up its oil and gas facilities at the end of their producing life.
--
Alberta's Orphan Well Association (OWA) is responsible for cleaning up wells that have no owners financially able to deal with abandonment and decommissioning costs. It is overseen by the AER and funded by levies from the oil and gas industry.

The enforcement action by the regulator means the 1,380 wells belonging to Lexin are now in the care and custody of the OWA, taking the total numbers of ownerless wells in Alberta to 2,970.

[Feb 20, 2017] Spending on oil sand plummeted amid low oil prices

Feb 20, 2017 | peakoilbarrel.com
Energy News says: 02/17/2017 at 3:28 pm
Canadian Oil Sands – Wall Street Journal – 2017-02-17
Oil sands projects can require billions of dollars in upfront investment and seven to 10 years, or more, to bring returns. Instead, companies are increasingly focusing on new sources of crude oil, such as shale, that don't require the same massive investment and that can get from development to production much more quickly.

To be sure, oil output isn't expected to fall in Canada as it has in the U.S., and some projects for which money has already been spent may go forward, a sign of the resilience of oil sands investments once money has been spent. That is because the cash cost of producing barrels once projects are up and running is low.
https://www.wsj.com/articles/energy-companies-face-crude-reality-better-to-leave-it-in-the-ground-1487327406

Boomer II says: 02/17/2017 at 11:27 pm
I can't see the original article since it is behind a paywall.

But this appears to be the text of the article without the above graph.

Energy Companies Face Crude Reality: Better to Leave It in the Ground | Fox Business : "Once considered a safe bet, Canada's vast deposits are emerging as among the first and most visible reserves at risk of being stranded by a combination of high costs, low prices and tough new environmental rules."

[Feb 20, 2017] Canadian oil sand per barrel break even cost is around 60 dollars per barrel for SAGD project and around $75 for a standalone mine.

Feb 20, 2017 | peakoilbarrel.com
Energy News says: 02/17/2017 at 7:47 am
In their 11th annual review of oil sands supply costs, the Canadian Energy Research Institute (CERI) concludes all new oil sands projects unprofitable (at current oil prices) . . .

The plant gate supply costs, which exclude transportation and blending costs, are C$43.31/bbl for a SAGD project and C$70.08/bbl for a stand-alone mine.

After adjusting for blending and transportation, the WTI equivalent supply costs at Cushing for SAGD projects is US$60.52/bbl, and US$75.73/bbl for a stand-alone mine. In comparison to last year's update, the WTI equivalent costs for a greenfield SAGD project are 25 percent lower and 16 percent lower for a stand-alone mine based on lower operating costs, changes in US/CDN exchange rate assumption and a lack of premium on diluent costs. At current WTI prices of just above US$50/bbl, one can assume that these greenfield projects are not economic or have to accept a lower rate of return.
http://resources.ceri.ca/PDF/Pubs/Studies/Study_163_Executive_Summary.pdf

Suncor Energy announced a scope change, construction delay and capital cost increase for its upcoming Fort Hills Oil Sands Mine. The revisions were blamed on the Alberta wildfires and design changes made to the plant's Froth Treatment facility. Despite the cost increase, Suncor says the project's capital intensity remains in-line with its sanction guidance of CAD$80,000 to $83,000 per flowing barrel, excluding foreign exchange impacts.

Partner Teck Resources put out a more cautious forecast and estimates the plant will produce 186,000 bbl/day over the life of the project. Factoring in a lower Canadian dollar (which has declined over 20% since the project was sanctioned in 2013), capital intensity could be as high as C$91,000/bbl.

As a point of comparison, capital costs for Imperial Oil's Kearl Oil Sands project (which has a comparable process and product), were estimated at $22 billion for 220,000 bbl/day of bitumen production, or C$100,000 per flowing barrel.
http://www.oilsandsmagazine.com/oilsands-weekly/2017/2/10

Western Canadian Select (WCS), Jan 2017: CAD$52.3 and USD$39.6

[Feb 10, 2017] From IEA figures suggest that while OPEC was pumping flat out in Q4/2016 we still were in a deficit

Notable quotes:
"... OECD stocks fell 800,000 bpd in Q4/2016. This is before any OPEC cuts. ..."
"... Am I the only one who thinks this is worrying? OPEC was pumping flat out at that point and we still were in a deficit? ..."
"... Strange graph though. Where did the oil go? http://www.iea.org/newsroom/news/2017/february/omr-the-first-cut-is-the-deepest.html It looks like a stock build up of ~500,000 bpd in Q4/2016 but OECD inventories are down 800,000 bpd in the same period. ..."
"... Some of it is probably China, but where did the rest of the 1.3 mbd go? tankers? ..."
Feb 10, 2017 | peakoilbarrel.com
daniel says: 02/10/2017 at 4:45 am
IEA numbers out today. One jumped out to me:

OECD stocks fell 800,000 bpd in Q4/2016. This is before any OPEC cuts.

Am I the only one who thinks this is worrying? OPEC was pumping flat out at that point and we still were in a deficit?

Jeff says: 02/10/2017 at 5:14 am
Strange graph though. Where did the oil go? http://www.iea.org/newsroom/news/2017/february/omr-the-first-cut-is-the-deepest.html
It looks like a stock build up of ~500,000 bpd in Q4/2016 but OECD inventories are down 800,000 bpd in the same period.

Some of it is probably China, but where did the rest of the 1.3 mbd go? tankers?

[Jan 24, 2017] Trump Revives Keystone Oil Pipeline That Obama Blocked

Jan 24, 2017 | economistsview.typepad.com
anne : , January 24, 2017 at 09:01 AM
https://www.nytimes.com/2017/01/24/us/politics/keystone-dakota-pipeline-trump.html

January 24, 2017

Trump Revives Keystone Oil Pipeline That Obama Blocked
By PETER BAKER and CORAL DAVENPORT

President Donald J. Trump continued dismantling his predecessor's policies by clearing the way for a project that stirred years of debate over the balance between energy production and preventing climate change.

Barack Obama rejected the proposed 1,179-mile pipeline in 2015, arguing that it would undercut American leadership in curbing the reliance on carbon energy.

pgl -> anne... , January 24, 2017 at 09:03 AM
More profits for Big Oil.
libezkova -> pgl... , January 24, 2017 at 09:16 AM
Big oil is in deep knockdown. They need all help they can get.

Less transportation cost to refineries is somewhat beneficial for customers too.

The key problem here is quite different: is there enough staff to transport?

pgl -> anne... , January 24, 2017 at 09:07 AM
"Studies showed that the pipeline would not have a momentous impact on jobs or the environment, but both sides made it into a symbolic test case of American willingness to promote energy production or curb its appetites to heal the planet."

It does not require a lot of high paying jobs to build a pipeline. I have no idea about the potential risks to the environment but I do know that the owners of oil in Canada wanted to see their prices in line with prices of oil producers in the North Sea. In other words, more profits. That is really what this debate is about. Not jobs - just profits.

libezkova -> pgl... , January 24, 2017 at 09:38 AM
"the owners of oil in Canada wanted to see their prices in line with prices of oil producers in the North Sea"

Nonsense.

The cost for Canadian oil should be higher as oil sands is a more expensive source of oil then the deep sea drilling. Also this heavy oil requires dilution.

It might well be that $55 is a minimum for them (actually depends of the method of extraction used). And average is probably around $65 or higher. And this is just "break-even" cost.

http://www.ogj.com/articles/2014/07/ceri-costs-up-for-oil-sands-production.html

== quote ==
The new estimates of plant-gate supply costs: $50.89/bbl (Can.) for SAGD, $71.81/bbl for stand-alone mining, and $107.57/bbl for integrated mining. CERI estimates the cost of stand-alone upgrading at $40.82/bbl.

... ... ..
Total capital requirements during 2014-48 in the oil sands, excluding those for primary production and EOR, are $597.9 billion (Can.) in the reference case, $636.6 billion in the high case, and $590.2 billion in the low case.

-->

[Jan 24, 2017] How Much Does It Cost To Produce 1 Barrel Of Oil From Oil Sands? - Part I

Jan 24, 2017 | seekingalpha.com

I have applied the cost model on 3 important Canadian oil sand producers: Suncor (NYSE: SU ), Imperial Oil (NYSEMKT: IMO ) and Canadian Oil Sands ( OTCQX:COSWF ). These companies were together responsible in 2013 for a production of 726k barrel oil per day from oil sands. All companies are listed on Canadian stock exchanges, therefore have to comply with accounting standards and to publish regular reports. Whenever a currency transfer was necessary, I have used CAD1 = US-$0.94. In this article, I have used the numbers from the company's annual reports for 2013.

The results can be found in the table below:

2013 Suncor Imperial Oil COS
Lifting costs 45.23 32.84 59.59
Non-income related taxes 5.64 8.86 4.57
Total cost of sales 50.87 41.7 64.15
Depreciation 16 5.34 12.55
SG&A, R&D 1.28 1.78 1.08
Financial costs 0.89 0.08 1.15
Total costs 69.04 48.9 78.93
Production [kbpd] 392.5 236 98.1
Realized price per barrel 85.88 72.85 93.58

[Jan 11, 2017] 01/09/2017 at 1:25 pm

Jan 11, 2017 | peakoilbarrel.com
SPR Drain - Buy High – Sell Low ?
http://www.zerohedge.com/news/2017-01-09/us-sell-8-million-barrels-oil-strategic-petroleum-reserve
Watcher says: 01/09/2017 at 3:02 pm
Why? To fund the pumps and stuff that have rusted away.
Boomer II says: 01/09/2017 at 5:53 pm
Even if the money is needed for repairs and infrastructure, why sell when prices are low? Why didn't they sell when the prices were high?
Watcher says: 01/09/2017 at 6:10 pm
More SPR things:

720 million barrels in the US SPR when full. It's usually not 100% full and when it is (last happened Dec 2009) it's not really full because you can't recover 100% of what you store. Oil gets into pores in the rock and won't come out. Just like less than 100% recovery of oil from an oil field.

The usual calculation is 720 / 20 mbpd US burn = 36 days of consumption storage. With US production at about 8.5 mbpd that number seems to rise to a little less than double - call it 70 days.

But not true. Maximum extraction rate is only 4.4 mbpd (takes 13 days from the word go for the first barrels to enter the system). Not 11.5. So the total embargo of imports scenario because Canada wants to save it for their grandkids means the country goes from 20 mbpd consumption to 12.9 mbpd - for 160ish days (720/4.4) and then just the 8.5 is all we have to function.

Gonna have to compute oil consumption required to haul/deliver food to stores and for people to drive to stores to get it. Tricky for the haulage from central america (fruits).

Fernando Leanme says: 01/10/2017 at 9:44 am
Salt dome storage caverns don't have pores. They're caverns.
Fernando Leanme says: 01/10/2017 at 9:51 am
The Venezuela figure is BS. The reserves outlook gets grimmer by the year, because the current development strategy is incompatible with enhanced recovery. The areas under development are mostly the "sirloin steak" in the Orinoco heavy oil belt, and these high graded areas are now being gutted by pdvsa and partners. They are going after quick kill primary recovery, ruining the reservoirs. This means that not only is the 300 billion barrel figure a poor number, the "real number" is gradually degrading as they continue to lower reservoir pressures and allow water to penetrate the developed reservoirs.
Dennis Coyne says: 01/10/2017 at 4:11 pm
Hi Fernando,

Based on what you know I think your estimate for URR for Orinoco is about 100 Gb, if I remember correctly, due to the poor development you outline above.

Please correct me if I am remembering incorrectly. Thanks.

[Jan 08, 2017] How much confidence do we have on oil storage accounting? According to Art Berman much of it is unaccounted for oil. Looks like a very good way to manipulate oil prices.

Jan 08, 2017 | peakoilbarrel.com
Ron Patterson says: 01/02/2017 at 1:20 pm
SW, just curious but what do you think will cause this turnaround. That is from the current glut to demand outstripping supply. US storage is near its all time high and OECD storage is 300 million barrels above its 5 year average.

IEA Oil Market Report

OECD commercial inventories fell in October for the third month in a row. They have drawn 75 mb since reaching a historical high in July, but remain 300 mb above the five-year average. Product stocks have fallen twice as quickly as crude during that period. Preliminary data show stocks falling further across the OECD in November.

Javier says: 01/02/2017 at 8:49 pm
How much confidence do we have on oil storage accounting? According to Art Berman much of it is unaccounted for oil. Looks like a very good way to manipulate oil prices.

My take is that the powers of the world are very much afraid of what a new global recession could do to the shenanigans they have been running at the Central Banks to keep the system from imploding and are very much decided to do everything on their power to prevent a new global recession, and a very important part of it is to keep oil price affordable to prevent the economy from stalling. They cannot control neither production nor demand except by staging a war, but as price is determined by the effect of the production/demand ratio on oil storage, they can control price by rigging the storage reporting. Unaccounted for oil could be the tool to do that.

Ron Patterson says: 01/03/2017 at 7:08 am
For most of the world's oil storage, there is no reporting. We have only the USA and a wild ass guess at OECD storage. We have nothing for Eastern Europe, Africa or Asia.

WTI jumps up and down a few cents when the US storage figures come out each week, but that's about it. And when that happens the price very quickly reverts to what the actual supply and demand dictates.

If there were actually storage reporting for most of the world's oil, then your conspiracy theory might hold water. But there is not and it does not.

Don Westlund says: 01/03/2017 at 12:33 pm
https://www.energyaspects.com/company/events/amrita-sen-ons-2016-conference-appearance?utm_medium=banner

This is a presentation by Amrita Sen at Energy Aspects a few months ago. At the 4:30 minute mark she discusses worldwide crude draws. She is claiming the only place in the world we are getting builds is in the U.S. Not sure where they are getting their information.

Matt Mushalik says: 01/03/2017 at 3:33 pm
Our post was NOT about conspiracy theories. It has number crunching on the statistical fact that there is a huge discrepancy between US crude oil production, imports, exports and refinery intakes.

8/10/2016
U.S. Storage Filling Up with Unaccounted-For Oil
http://crudeoilpeak.info/u-s-storage-filling-up-with-unaccounted-for-oil

Javier says: 01/04/2017 at 7:28 am
Matt,

I know the article said nothing about intentional overreporting of crude oil stocks. It just occurred to me that if intentional it could have a clear effect on oil prices.

Ron,

That USA is the only one reporting crude oil stocks makes it easier to manipulate them, not harder.

Is the following correct?:

How do we know that there is a huge global excess in crude oil?
We know there is some excess from multiple sources, but we only know that there is a large excess from USA reported oil storage.

Where is that large excess in USA crude oil storage coming from?
We don't know as 4 out of 5 barrels in USA crude oil storage are from unaccounted-for oil.

I think the situation demands an explanation as large unaccounted-for oil is a new phenomenon that started when oil prices were very high.

AlexS says: 01/02/2017 at 9:09 pm
"OECD storage is 300 million barrels above its 5 year average."

When the IEA and all other oil market observers compare current storage levels with 5-year average they miss two important things:

1) Global oil demand continues to increase. Therefore, in relative terms (inventories as % of annual demand) the volume of oil in storage is not as big as if we compare absolute volumes for this year and previous years.
Thus, according to the IEA, global oil demand in 2017 should average 97.51 mb/d. This is 7.94 mb/d higher than in 2011 (89.57 mb/d) and 5.39 mb/d higher than 5-year (2011-2015) average (92.12 mb/d).
7,94 mb/d = 2898 million barrels/year
5.39 mb/d = 1966 million barrels/year
Now compare this with the 300 mbbls surplus in crude inventories vs 5-year average.

2) There are two "market buffers" that were always used as a measure of over/under supply in the oil market.
The first are crude and product inventories. They are indeed above 5-year average.
The second is OPEC spare capacity, which is well below historical averages.

OPEC output cuts will result in decreasing inventories, but spare capacity will increase.

SW says: 01/04/2017 at 9:44 am
I was simply commenting on the chart at the top of the post. Perhaps I misread it?

[Jan 08, 2017] 01/02/2017 at 9:49 pm

Jan 08, 2017 | peakoilbarrel.com
I thought it might be useful/amusing to have a look at a decade old IEA forecast (2006) to see how it panned out
I went back to the Oil Drum
http://www.theoildrum.com/story/2006/6/20/231220/551
and had a look at Stuart Staniford´s graphs
Third graph down
Eyeballing the numbers for 2016
Total liquids – a smidgeon under 100 million barrels a day (over by about 4%)
OPEC about 38-39 million barrels a day – spot on
Unconvential about 8 million barrels a day (and no one was talking about LTO then)
AlexS says: 01/02/2017 at 11:51 pm
It's not IEA (International Energy Agency).
It's EIA (Energy Information Administration) International Energy Outlook, 2006 edition.

There is no numbers for each year, particularly for 2016. But we can compare the EIA's projections for 2015 made in 2006 with actual numbers for 2015 from the EIA Short-Term Energy Outlook, Dec. 2016.

I would say that at least the aggregate numbers from a forecast issued 10 years ago look surprisingly good:

World liquids supply in 2015: EIA IEO-2006 projections vs. actual (mb/d)

AlexS says: 01/03/2017 at 12:16 am
If we take into account supply outages (particularly, in Libya), which were difficult to predict 10 years ago, and the sharp drop in oil prices, which had a negative impact on non-OPEC output, the EIA's projections made in 2006 look extremely good.

I'm sure, projections made by the TOD contributors 10 years ago were much worse.

Especially funny now looks the comment to the last graph in the article:

"Note the bump in historical US production from the late 1970s on is due to the startup of Alaskan production. Apparently, the EIA has found a domestic oil source significantly better than Alaska, and production from it will be starting soon."

We now know that this domestic source was LTO, and actual U.S. total liquids (C+C+NGLs+biofuels) production is even higher than shown in the chart below from
Mr. Staniford's article:

US total oil production: EIA IEO 2006 projections
source: http://www.theoildrum.com/story/2006/6/20/231220/551

Stoney says: 01/03/2017 at 5:25 am
The EIA forecast from 2006 must also be viewed in light of their price prediction. They assumed oil price would drop again from 60$/b at the time and hover around 50$ until 2030. What would US and world oil production be now if oil price had stayed at 50$?

Also consider the message they were sending the time when there was a supply crunch imminent, seriously threatening the world economy. Move along, nothing to see here, everything will be back to normal.

This was most definitely not competent forecasting.

AlexS says: 01/03/2017 at 6:55 am
What supply crunch was imminent in 2006?
There was a temporary decline in demand during the 2008-09 global recession, and subsequent cut in OPEC supply ( >2 mb/d) in order to support prices. But between 2005 and 2015 global petroleum and other liquids supply increased by 11 mb/d. That's less than projected by the EIA, but 11 mb/d increase is not a crunch

[Dec 20, 2016] How accurate are U.S. DOE/EIA Projections?

Dec 20, 2016 | peakoilbarrel.com
Roger Blanchard says: 12/17/2016 at 3:18 pm
How accurate are U.S. DOE/EIA Projections?

Here are some projections I made in 1999 which are compared to what the EIA projected in 1999.

Author's Projections Peak Prod. Year Peak Prod. (mb/d) 2010 Projected Prod. (mb/d) % Error

Norway           2001     ..3.2            .1.6           +14.4
U.K.             1999     ..2.7            .1.5           -22.0
Sum                 ..      5.9            .3.1           .0.0
U.S. DOE/EIA's Projections
Norway          ..2005     .3.9            .3.7           +97.9
U.K.             ~2006      3.3            .3.0          ..+143.9
Sum                 ..      7.2            .6.7          ..+116.1
Actual Production Values
From U.S. DOE/EIA
Norway          ..2001     .3.226          1.87
U.K.          ..  1999     .2.684          1.23
Sum                 ..      5.91           3.1 

The 2010 values for the US DOE/EIA are based upon an interpolation between the peak projected values and the 2020 projected values

Actual Production data is based upon data from the US DOE/EIA

Mexican Oil Production

In 2003, the U.S. DOE/EIA was projecting that total liquid hydrocarbons production (crude oil + condensate + liquefied petroleum gas + biofuels + refinery gain) for Mexico would rise above 4.2 mb/d by 2010. Specifically, here is what they stated in their International Energy Outlook 2003:

"Mexico is expected to adopt energy policies that will encourage the efficient development of its resource base. Expected production volumes in Mexico exceed 4.2 million barrels per day by the end of the decade and remain near that level through 2025."

It was clear by 2003 that Cantarell complex oil production (crude oil + condensate) would start declining in approximately 2005. Since the Cantarell complex produced about 60% of Mexico's oil production in 2002, it appeared obvious that as Cantarell complex oil production started declining, it would bring down Mexico's oil production as well as its total liquid hydrocarbons production.

Mexico's oil production peaked in 2004 at 3.48 mb/d. By 2010, it was down to 2.62 mb/d, a decline of ~860,000 b/d. In 2010, Mexico's total liquid hydrocarbons production was down to 2.98 mb/d according to US DOE/EIA data. The U.S. DOE/EIA was high by at least 1.22 mb/d for their 2010 Mexican production forecast.

[Dec 11, 2016] These EIA projections are indeed to be taken with a grain of salt especially concerning the USA

Dec 11, 2016 | peakoilbarrel.com
Verwimp says: 12/08/2016 at 5:37 pm
These EIA projections are indeed to be taken with a grain of salt, I think. Especially concerning the USA. Why would the production suddenly stabilise? There has been a -10% decrease over the course of the last 1,5 year. (= a severe decline). And now, miraculously, things will stabilise?
I think, over the course of the next 365 days, the USA will lose another million barrels per day of oil production.
Guy Minton says: 12/08/2016 at 6:53 pm
Wasn't going to be the first one to go that far. Pretty sure we have another half million to go by end of 2017. Including the Gulf. Still, that would be about a million barrels less than EIA is projecting.
Javier says: 12/09/2016 at 6:54 am
Supposedly the increase in oil price should stabilize US production that has been severely affected by low prices. It remains to be seen if OPEC+Russia cuts (no article on this?) in 2017 realize and if US production can increase to compensate for the cuts. Obviously OPEC+Russia think not or they would not be cutting production, unless it is a fake cut in the first place.

[Dec 11, 2016] The EIA oil production forecast for the GOM is a complete fabrication

Dec 11, 2016 | peakoilbarrel.com
Coolreit says: 12/08/2016 at 1:10 am
The EIA oil production forecast for the GOM is a complete fabrication! Here is proof:

Nawar has a list of 2016 new projects that itemize the new GOM projects here:
http://www.investorvillage.com/groups.asp?mb=19176&mn=3794&pt=msg&mid=16582044

The new projects list is derived from the leading independent energy analysts, Energy Aspects!

They include three US projects: all GOM:

Heidelberg 80k b/d
Stones 50kb/d
Julia 34k b/d

Hedelberg forecast directly from the operator forecasts a production rise from ~12k b/d to ~32k b/d by end of 2016:

p6 of their latest presentation:

file:///C:/Users/kopel/Downloads/Anadarko+Jefferies+Presentation.pdf

Stones: From the press release of the startup: " September 6, 2016. Shell announces today that production has started from the Stones development in the Gulf of Mexico. Stones is expected to produce around 50,000 barrels of oil equivalent per day (boe/d) when fully ramped up at the end of 2017

That would suggest a gradual ramp all the way from Sept. 2016 through December 2017. At best a 20% initial flow in September or 10k b/d

Julia: The first well came on line in April and the 2nd one was to start a few weeks later:
ExxonMobil starts up Julia oil field in the deepwater Gulf of Mexico
04/19/2016

Offshore staff

IRVING, Texas – Exxon Mobil Corp. has started oil production at the Julia field in the deepwater Gulf of Mexico under budget and ahead of schedule. The first production well is now online and a second well will start production in the coming weeks.

The Julia development is located about 265 mi (426 km) southwest of New Orleans in water depths of more than 7,000 ft (2,134 m). The initial development phase uses subsea tiebacks to the Chevron-operated Jack/St. Malo production facility.

According to ExxonMobil, the development includes the use of subsea pumps that have one of the deepest applications and highest design pressures in the industry to date.

Neil W. Duffin, president of ExxonMobil Development Co., said: "Successful deepwater developments like Julia, located more than 30,000 ft [9,144 m] below the ocean's surface, benefit from ExxonMobil's disciplined project execution capabilities and commitment to developing quality resources using advanced technology.

"This initial production will provide ExxonMobil with insight into the potential future development of the reservoir."

The Maersk Viking drillship is currently drilling a third well, which is expected to come online in early 2017.

http://www.offshore-mag.com/articles/2016/04/exxonmobil-starts-up-julia-oil-field-in-the-deepwater-gulf-of-mexico.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+offshore-latest-news+(OS+-+Latest+News)

So when you consider the start dates and the companies own reports, then there is no evidence of any material GOM oil production growth from the GOM starting October 2016. Furthermore, there is not one 2017 GOM project. So, the EIA forecasting oil production growth of 500k b/d by the end of 2017 is pure fiction. To compound the error, the EIA excludes GOM depletion of what I recall is ~22% depletion in the GOM for 2017 of ~300k b/d (1.5 million b/d of production @20%).

The EIA oil production forecast for the GOM is a complete fabrication!

Guy Minton says: 12/08/2016 at 6:18 am
Thanks, Coolreit! With 15% decline rates, I can't imagine much of an increase, overall.
AlexS says: 12/08/2016 at 3:54 am
Here is the list of projected deepwater GoM field start-ups from February 18, 2016 issue of Today In Energy
http://www.eia.gov/todayinenergy/detail.php?id=25012

AlexS says: 12/08/2016 at 4:00 am
EIA C+C production projections for the Gulf of Mexico: STEO Dec 2016 vs. STEO January 2016

George Kaplan says: 12/08/2016 at 7:36 am
This shows production from the new leases reported to BOEM since 2015, except Hadrian South which is mainly a gas field, but including Julia which EIA missed. Also missing is Gunflint (nameplate 60 kbpd) which hasn't reported any production although supposed to have started in early 2016. Son of Bluto 2 started early and looks to be watering out quickly. Dantzler also cut a lot of water early and is in decline. Silvertip was tied in as part of Great White (Perdido spar). West Boreas and Deimos South are considered part of Mars B (tied into Olympus spar I think) but I can't tell if they are operating (there are two new leases that appear to have started in 2016). Stones only started operating in September. Heidelberg has a very slow ramp up. Julia has two wells on line but is only at half nameplate (I don't know if it is limited by capacity at the Jack hub. As others I don't see where 300 kbpd of new capacity is supposed to come from, especially given high declines in mature deep water fields.

George Kaplan says: 12/08/2016 at 7:46 am
I noticed I missed off Big Bend – that started up October last year hit an early plateau and looks to be in slight decline at 16 kbpd at the moment. (note the graph is stacked production, oil only – none of the leases reported condensate).
SouthLaGeo says: 12/08/2016 at 7:48 am
Thanks George,

Gunflint is probably identified by BOEM as Freedom/Gunflint – but I don't see any reported production for that either through September.
Julia production is not limited by Jack capacity. Jack capacity is around 170 kbopd, and is currently around 120 (with Jack, St. Malo and Julia).

SouthLaGeo says: 12/08/2016 at 8:14 am
George,
I think what you show as Horn Mountain Deep and Holstein Deep are actually just the base production from those fields. I don't think either Horn Mountain Deep or Holstein Deep are on production yet - I think.
George Kaplan says: 12/08/2016 at 9:29 am
Agreed probably – the numbers are given by lease number only. Sometimes there can be more than one well to a lease (they give the number of completions so sometimes you can see when something starts up then), but additional complications are that BOEM sometimes use different names from the E&P company, and there are often several leases per field. Tie backs, even if given a particular name, are listed against the main filed only. I think there is a way to apportion production to particular wells and from there to a particular tie-back, but it's beyond may attention span at the moment. I was more interested in the overall shape of the curve – which shows a clear flattening. Horn Mountain Depp added two completions in March/April, I need to check further on Holstein, I might have screwed up there as the curve looks suspiciously similar to Horn Mountain Deep. I think there probably is another 150 kbpd ramp up nameplate capacity between Gunflint, Stones, Heidelberg and Julia and maybe 50000 extra tiebacks if they are drilled – but that would only just about cover decline over the next 15 to 18 months.

It's also interesting that, though now in decline, Dantzler and Big Bend initially exceeded expected production capacity, and still do.

Another correction: Son of Bluto 2 didn't cut a lot of water, I looked at the wrong column, so I don't know why it declined so fast. I think it may have capacity for a second well there.

AlexS says: 12/08/2016 at 8:25 am
Interesting, that, in the Annual Energy Outlook 2016, the EIA projects further growth in the U.S. Federal offshore (ex Alaska) oil production to 1.93 mb/d in 2021.

Given high decline rates for deepwater fields, that implies new start-ups or ramp-ups.
One of these projects is BP's Mad Dog Phase 2 . Is there anything else?

Guy M says: 12/08/2016 at 9:58 am
Mad Dog Phase 2 is expected to start drilling in 2021. There is no explanation for why EIA is reporting increased production, as they are.
SouthLaGeo says: 12/08/2016 at 1:10 pm
The additional ones I can think of are Stampede and Big Foot, both in 2018, and Shell's Appomattox, but I don't know when that is slated to come online.
In addition, there will be a fair number of 1-3 well tiebacks to existing facilities. (Maybe 3-4 a year??)
AlexS says: 12/08/2016 at 1:44 pm
Guy M, SouthLaGeo,

Thanks

George Kaplan says: 12/08/2016 at 2:26 pm
There are Thunder Horse South tie backs next year (BP, nameplate maybe 42,000 bpd), Heidelberg Phase II might add another 30,000 in 2021, small tie backs to Delta House (Odd Job next year at 5000, maybe others), Vita (c/w Power Nap) has gone out for FEED but I don't think it could get done before 2022 now, possibly Caesar/Tonga additions next year (20,000 ??), and I think Typhoon (or might be called Tornado now) might have started up recently at 13,000 tie back to Helix producer.
George Kaplan says: 12/08/2016 at 3:07 pm
So I corrected Holstein Deep (I don't think there have been any new tie ins and it is in gradual decline), added Big Bend, Gunflint (though it is zero flow) and Pheonix (no change in the dates shown but Tornado has started up at 20 kbpd this month and will be choked to 13 to 16 kbpd at plateau (this used to be Typhoon I think, but all these names are quite confusing) there are other tie-back options for Phoenix, which is serviced by the Helix producer, in the future, including a second Tornado well and Motormouth.

The plateau through 2016 is maintained but I think there will be a jump in October and then a steady rise at least for a few months. I don't know the issue with Gunflint but if it has a lot of predrilled wells and is just waiting on getting the production facilities operating there could be another big increase then.

Also I had a thought on Julia and Horn Mountain Deep: it's possible that the completions listed by BOEM include producer and injector pairs so at the moment Julia has only one producer, but two wells, and therefore with another producer to come to give full capacity (at up to 35 kbpd).

AlexS says: 12/08/2016 at 5:43 pm
Thanks George,

Do you still think that the EIA's projections for the GoM are unrealistic?

If so, is that because of depleted resource base, or likely project delays, high costs, etc.?

George Kaplan says: 12/08/2016 at 7:26 pm
Alex – I don't think there will be as high a peak as they say – I don't see where the projects ramping up or in late development stages are that could achieve that (I still go for around 1.85 mmbpd sometime in mid 2017 as peak). But equally the decline might be less steep than they show and the tail fatter. Two other projects not yet approved are Shenandoah and Kaskida. I think they would both be about 150 kbpd nameplate, but they are high temperature / high pressure and Kaskida has sand issues I think (maybe they both do), and both might need relatively many wells – so very expensive. There's also Tiber / Gila / Gibson / Guadelupe (I don't know much about that but over 100 kbpd), Anchor (also about 100 kbpd), some fields around Tahiti for tie backs and Constellation (ex-Hopkins) which used to be considered a big find with BP but know looks like a smaller tie back (30 kbpd maybe) for Anadarko. After those only bits and pieces are left, and with not much frontier exploration going on so little prospect of big finds either. Anadarko and BP have a lot of the prospects which would tend to mean they'll get spread out a bit. I've also been surprised at how long the schedules are for Appomatox and Mad Dog II (and also Trion on the Mexican side) they all are around 7 years from FID to plateau rates.

[Oct 28, 2016] The Billion Barrel Oil Swindle 80% Of U.S. Oil Reserves Are Unaccounted

Oct 07, 2016 | oilprice.com
U.S. crude oil storage is filling up with unaccounted-for oil. There is a lot more oil in storage than the amount that can be accounted for by domestic production and imports.

That's a big problem since oil prices move up or down based on the U.S. crude oil storage report . Oil stocks in inventory represent surplus supply. Increasing or decreasing inventory levels generally push prices lower or higher because they indicate trends toward longer term over-supply or under-supply.

Why Inventories Matter

Inventory levels have reached record highs since the oil-price collapse in 2014. This surplus supply is a major factor keeping oil prices low.

Current inventories are 45 million barrels higher than 2015 levels, which were more than 100 million barrels higher than the average from 2010 through 2014 (Figure 1). Until the present surplus is reduced by almost 150 million barrels down to the 2010-2014 average, there is little technical possibility of a sustained oil-price recovery.

(Click to enlarge)

Figure 1. U.S. Crude Inventories Are ~150 Million Barrels Above Average Levels. Source: EIA, Crude Oil Peak and Labyrinth Consulting Services, Inc.

U.S. inventories are critical because stock levels are published every week by the U.S. EIA (Energy Information Administration). The IEA (International Energy Agency) publishes OECD inventories, but that data is only published monthly and it measures liquids but not crude oil. It also largely parallels U.S. stock levels that account for almost half of its volume. Inventories for the rest of the world are more speculative.

Understanding U.S. Stock Levels

Understanding U.S. stock levels should be straight-forward. Every Wednesday, EIA publishes the Weekly Petroleum Status Report which includes a table similar to Figure 2.

Figure 2. EIA publishes adjustments and defines them as "Unaccounted-for Oil." Source: EIA U.S. Petroleum Status Weekly (Week Ending September 16, 2016), Crude Oil Peak and Labyrinth Consulting Services, Inc.

The calculation to determine the expected weekly stock change is fairly simple:

Stock Change = Domestic Production + Net Imports – Crude Oil Input to Refineries

Domestic production and net imports account for crude oil supply, and refinery inputs account for the volume of oil that is refined into petroleum products. If there is a surplus, it should show up as an addition to inventory and a deficit, as a withdrawal from inventory.

But that's not how it works because EIA uses an adjustment in order to balance the books (Table 1).

Table 1. Calculation of Crude Oil Stock Change. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

The logic is that estimated stock levels in tank farms and underground storage are relatively dependable and that any imbalance must be from less reliable production, net import or refinery intake data.

Related: Nigerian Oil Anxieties Mount, Even With OPEC Exemption

There is nothing wrong with adjustment factors if they are small in comparison to what is to be balanced. In the Table 1 example from September 2016, however, the adjustment is 60 percent of the stock change–a bit too much.

A one-off perhaps? No, it's a permanent problem that has gotten worse during the last several years.

Figure 3 shows that crude oil supply and refinery intake of oil vary considerably on a weekly basis. The balance is cumulatively negative over time beginning with a zero balance in January 1983. That suggests that crude oil stocks should be falling over time but instead, they have been rising.

(Click to enlarge)

Figure 3. Difference between U.S. crude oil supply and refinery intake. Source: EIA Petroleum Status Weekly.

The vertical bars show the weekly crude supply from production and net imports either exceeding the refinery input requirements (positive, green) or not reaching these requirements (negative, red). The solid red line is the cumulative.

Between 1991 and 2002, the deficit increased to a whopping 1.3 billion barrels.

Looking at only recent history, an additional gap of nearly 200 million barrels developed as refinery intake exceeded crude oil supply for most of 2010 through 2014 (Figure 4).

(Click to enlarge)

Adjustments were introduced in late 2001 so let's look at the period starting January 2002 (Figure 5).

(Click to enlarge)

Figure 5. EIA adjustments to supply to reconcile stock changes. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

There are both upward (blue) and downward (red) adjustments. Upward adjustments resulted in a 420-million-barrel stock increase over the period January 2002 through September 2016.

All together now

Expected or implied stock changes calculated from weekly crude oil balance indicate falling inventories from May 2009 through the present. Yet, EIA makes adjustments to that balance in order to match observed inventory levels. Rising inventories result after those adjustments are added to the physical balance or implied stock changes (Figure 6).

(Click to enlarge)

Figure 6. Unaccounted-for oil in U.S. storage: the result of adjustments to the supply balance. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

The green area represents the physical balance (crude production plus net crude imports minus crude refinery intake). The gray area shows the unaccounted-for (adjusted) stocks.

The adjustment for unaccounted-for oil averaged about 15 percent from 2002 through 2010. In 2016, almost 80 percent of reported stocks are from unaccounted-for oil.

When You Have Eliminated The Impossible

There is no obvious solution for the mystery of unaccounted-for oil in U.S. inventories. Possible explanations, however, include:

1. Crude field production is underestimated
2. Net crude oil imports are underestimated
3. Refinery inputs are over-reported
4. Crude oil stocks are over-reported

or any combination of those possibilities.

Production, imports and refinery inputs are taxable transactions. It is likely that reporting errors are largely self-correcting over time because of the financial incentive for government to collect its due.

State regulatory agencies are the source of production data. Their principal objective is to assess production taxes. It is unlikely that states would consistently under-estimate production and forego substantial tax revenue.

Related: Is Russia Diversifying Away From Oil Fast Enough?

Also, producers must state crude oil production in their SEC (U.S. Securities and Exchange Commission) filings and pay federal income tax on revenues from oil sales. It seems improbable that the SEC and U.S. Treasury would consistently accept under-reported production and associated lower tax payments.

Crude oil imports are subject to both tariffs and excise taxes so it seems unlikely that the U.S. government would consistently fail to identify under-payment of those revenues.

Similarly, taxes are involved when refiners buy crude oil and sell refined products. It seems improbable that they would over-state those transactions and consistently over-pay associated taxes.

The principal components of supply balance-production, imports and refinery intake-are shown in Figure 7. In a general way, increased production and decreased imports tend to cancel each other out. Refinery intake has increased since about 2010.

Those trends determine the physical balance or implied stocks. The inescapable conclusion is that implied stocks (in light blue) are substantially less than reported stocks (in gray).

Adjustments for unaccounted-for oil are unreasonable and out of proportion to the underlying factors that determine crude oil stock levels.

(Click to enlarge)

Figure 7. Components of unaccounted-for oil in U.S. storage. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

It would be speculation to blame anyone for this apparent statistical disaster. Nevertheless, there is a problem that has major implications for oil price and the reliability of reported data.

In several of his Sherlock Holmes mystery stories, Arthur Conan-Doyle wrote, "When you have eliminated the impossible, whatever remains, however improbable, must be the truth."

We have not eliminated any impossible explanations. We have, however, eliminated the three most improbable explanations for unaccounted-for oil.

The truth-however improbable-is that inventories are probably much lower than what is reported.

By Art Berman for Oilprice.com Lotanna on October 11 2016 said:

This does not appear good. Those reports have been driving oil price speculations for over a decade. If this is true, then the US has been gradually influencing the oil price dynamics unethically. I hope stock traders read this. The world would not be happy with the US. But then again, I expect them to point the fingers at one individual, jail him and find a new strategy to play the same game [I believe Strategic Petroleum Reserve was the last try].
JACK MA on October 12 2016 said:
In 2015, 800,000 BPD went missing. This was faked oversupply to drive down prices and collapse Russia. The last time this much oil was missing was 22 years ago as a ploy to collapse Russia on low oil prices and back then it worked. This time, Russia simply allied with China.


There is no oversupply of oil and any slight surplus that did exist in now in China's reserves on the cheap. Kerry really goofed when trying a old play-book to collapse Russia by ordering SA to flood the markets. What we will now see in 2 years is a 'absolute price shock up' on real billions in cap x cuts due to the fake oversupply driving down real prices.


This is the oil super cycle driven by the petro-dollar collapse and Dedollarization by Russia and the BRICS. Globalization is failing obviously as is the dollar. Problem is we cannot simply bomb Russia and China so easily like the ME, as these two super powers will actually shoot back and the Western war-hawks are not used to a real enemy that shoots back.

Warmest regards to all, and do your own homework and seek the truth.

Edwards on October 12 2016 said:
Must be the result of common core math, so confusing that even experts can't figure it out. What about the 6.5 TRILLION bucks that is unaccounted for at the pentagon. The last time 2.3 TYRILLION was unaccounted for we had 9/11 the next day. Is this an omen for something big to happen imminently?
Ward on October 13 2016 said:
What a conclusion - the 450MM barrels are not in inventory. Give me a break - ofc the physical inventory is there. Physical inventory is most reliable and verifiable parameter n calculation. You can stick a tank to know how much is in it.

EIA (aka Obama)started underestimating "reported" production around 2011 according to figure 6. That's when the big changes start.

Big assumption in article is that crude production as as estimated from taxes and EIA report are in-sync. Seems like reasonable assumption but there's no evidence in article that is the case. They can still get their taxes and EIA under reports the production because no one sync's up the EIA data with tax data.

James Rose on October 17 2016 said:
Its more plausible to believe the SPR is being sold into the commercial storage than that the EIA is faking reports. The reason is the if the EIA is faking reports, they've got to deputize the API to fake their reports as well. They're different, but not this different.

[Sep 12, 2016] MARCH 16, 2015 AT 5:06 PM

Notable quotes:
"... The EIA and IEA work for banksters trying to destroy the oil industry so they can buy it up cheap ..."
Sep 12, 2016 | peakoilbarrel.com

If, as the IEA believes, oil prices average about $55/bbl in 2015 and not reach $73 until 2020, a lot of assumptions will have to be modified: Because, these prices are clearly well below those needed to justify investment in and exploitation of expensive-oil options like tar sands and Arctic oil.

It seems to me as if a new reality is being signaled by the many recently stalled or cancelled mega-projects. For example, Shell has abandoned plans for a huge petrochemical plant in Qatar; Chevron shelved its plan to drill in the Beaufort; and, Statoil has turned its back on Greenland. If Majors are moving away from expensive future projects it's probably because they doubt their viability, not because they can't raise the cash.

And committing to mega-projects is committing to a predictable future. Could it be that Big Oil has decided the next decade contains too many unknowns: AGW issues, upsurge in renewables, a mega recession, you name it? Or, maybe they've just discovered Ron's Blog?<

Coolreit , 03/16/2015 at 11:58 am
Ron:

The EIA lies. Your posts comparing Texas oil production vs. the EIA's report of Texas oil production highlights the growing lies from the EIA. Each month the EIA adds roughly 50k/b/d for at least the last 12 months. How can that be? Texas has been dropping rigs almost as fast as North Dakota. Their production has surely been dropping now and quite probably since January.

The EIA and IEA work for banksters trying to destroy the oil industry so they can buy it up cheap . Next month, Goldman Sacks is starting a distressed energy bond fund. How convenient that they and the media and the EIA and IEA paint a bearish picture of oil fundamentals now.

Watcher , 03/16/2015 at 12:03 pm

"Next month, Goldman Sacks is starting a distressed energy bond fund. "

Where did you get this?

Coolreit , 03/16/2015 at 12:29 pm
http://www.nytimes.com/2015/02/25/business/dealbook/goldman-seeks-to-raise-fund-to-buy-energy-sector-debt.html?_r=0
Watcher , 03/16/2015 at 12:46 pm
That's a good find. It looks like it adds up (among Goldman, Blackstone and others) to about $25 Billion and the word is energy, not shale. The Goldman offering is not all junk bonds, either.

This doesn't look like the required bailout, but it's definitely money risked - maybe with people like Transocean.

SRSrocco , 03/16/2015 at 12:07 pm
EVERYONE,

A Bit off topic, but thought I would share the newest interview on the Russia-Ukraine-USA-Europe situation by John Bachelor and Prof. Stephen Cohen. Normally, Prof. Cohen does a weekly interview, but was off for 10 days as he and another U.S. Professor, experts on Russia, spoke to a large group of German Bankers last week on the subject of Russia & the Ukraine.

http://www.tfmetalsreport.com/podcast/6679/batchelor-cohen-return

Petro , 03/16/2015 at 12:41 pm

…indeed Steve,
sadly!

Listen to what a former joint chiefs of staff member, a major general- a true and utter moron, really and actually- said a few days ago:
https://www.youtube.com/watch?v=b6Nnn8S1XbE

Sadly, he and people akin to him lead this country now…
That is the real reason I commented (in response to Dennis and Mac) in an earlier post that there will be no market for oil or anything in 2030-2050.
Oil is falling again and when, this time, what was drilled and put on line BEFORE oil reached $50-$60 peaks and starts the 40%-80% per year decline rate shale oil well "army", the morons like the general in the video will gain ground…and then power….and then russians (or chinesse, or anybody) and Putin shall be the "devil" that crushed our economy….and the false flag type of events whe marines are floating drowned in blood killed by the "evil Putin" soldiers are going to make the fat moronic masses "patriotic"…and then, the 99.99% brainwashed, fat moronic herd who think that our soldiers are fighting for our freedom will "volunteer" to go to war and defeat the ennemy.
As alwayz, they shall be blissfully ignorant of the fact that "the ennemy" this time has more nucelarweapons than us and we all shall lose.
It is an unwineable war!
And us few who say otherwise shall be the unpatriotic "spies" who must be eleminated…because "generals" like the one in the video and crowds who dump vodka on the streets (like they did with french wine in 2003 when french refused to join bush-chenney in irak) will take over.
The everlasting historic lesson:
"when all fails, govt takes you to war!"
Even your beloved gold and silver shall not save us this time….pray.

The next few yoars seem to be very "interesting"
Be well and hedge accordingly!

Petro

P.S.: great article Ron! Thank you for updating us.

BC , 03/16/2015 at 7:45 pm
Steve,

US real after-tax income less debt service ("rentier taxes") and "illth" care (a.k.a. as "dis-ease" or "health" care) spending peaked YoY in Q1-Q2 '14 and rapidly decelerated and contracted YoY in Q3-Q4 '14.

Moreover, the oil and gas extraction and energy-related transport sectors have heavily skewed higher capital goods orders, business sales, and industrial production (IP) since 2011-12 to an unsustainable cyclical rate.

It's not surprising, therefore, that retail sales, business sales, orders, nominal real hourly earnings, and IP/IP mfg. have been falling since last summer-fall, the point at which the price of oil began crashing. This is the stuff of cyclical business cycle contractions.

And the point, Mr. BC, one might ask? The powers that be (TPTB) are keenly aware of the foregoing and know that the US economy is decelerating rapidly in response to the deflating of the shale bubble, weather and port and refinery labor strikes notwithstanding, along with the rest of the world economy. The current cyclical trajectory is not unlike that which occurred in summer 2001 (prior to 9/11) and winter-spring 2008, both instances coinciding with the US economy having already rolled over into recession.

Thus, the US is due yet another imperial war cycle in order to goose the goods-producing sector (especially the "defense" sector) in response to recession, which in turn will justify increasing fiscal deficits, maintenance of ZIRP/NIRP, and a resumption of the Fed's QEternity/QEn+1 later in the year.

IOW, economics is politics. Politics is war by other means. The business of empire is war. War is good business for imperialists. Ergo, economics is politics is war is the business of empire, and the owners and financial facilitators, i.e., Wall St. and The City, of Anglo-American-Zionist empire need another regional (or eventual world) war for business, geopolitical (say again imperial business), and domestic social control purposes.

Wall St., DC, the Saudi royals, Bibi and his thugs, and the US-UK war profiteers are maneuvering to release yet again the ravenous hounds of war for profits and power against "Radical Islam", Putin's Russia, and, if history and human nature are a guide, eventually a regional war (or Cold War- or cyberwar) in the Pacific against China.

This begs the question of what kind of "Pearl Harbor-like" event will be required this time to compel the unsuspecting American and western public to support (tacitly acquiesce to) the next phase of the never-ending war for Anglo-American-Zionist, rentier oil empire (in the post-growth, LTG era)?

Same as it ever was . . .

Caelan MacIntyre , 03/17/2015 at 8:11 pm
Parable of The Violent Tribe

This is a 46 second-long video worth watching and/as it seems to put a cherry on top of BC's good comment.

Longtimber , 03/17/2015 at 1:45 pm
Same program from JB podcast 3/10/15
http://johnbatchelorshow.com/podcasts/tues-31015-hr-2-jbs-stephen-f-cohen-nyu-princeton-professor-emeritus-author-soviet-fates
Don't hear about American misinformation or complete loss of confidence of american foreign policy in the MSM. West drives Putin into a corner, extremely dangerous situation.
DuaneX , 03/17/2015 at 6:51 pm
Along these lines, I found these words from Malcolm Fraser Ozzie PM '75-'83 interesting:

here's one paragraph snip:

As painful as a reassessment of relations may be for intellectual and policy elites, there are four principal reasons why one is long overdue. First, despite much blather about a supposed unanimity of national purpose, the truth is that the United States and Australia have substantially different values systems. The idea of American exceptionalism is contrary to Australia's sense of egalitarianism. Second, we have seen the United States act in an arbitrary, imprudent and capricious fashion. It has made a number of ill-advised and ill-informed decisions concerning Eastern Europe, Russia and the Middle East. Third, at the moment, because of U.S. military installations in Australia, if America goes to war in the Pacific, it will take us to war as well-without an independent decision by Australia. Finally, under current circumstances, in any major contest in the Pacific, our relationship with America would make us a strategic target for America's enemies. It is not in Australia's interest to be in that position.

http://nationalinterest.org/feature/america-australias-dangerous-ally-11858

PeakOil NOT , 03/16/2015 at 12:57 pm
EIA production numbers include NGLs, Texas RRC numbers do not. Texas RRC acknowledges as much on their website:

The production data in PDQ doesn't match the data I get from the federal Energy Information Administration. Can you explain the difference?

The Railroad Commission of Texas' crude oil production data reflects only crude oil produced from oil leases as reported by operators. The Commission's data does not include condensate, which are liquid hydrocarbons produced from a gas well. Our data comes directly from production reports filed by operators.

Watcher , 03/16/2015 at 1:05 pm
Who is "our"?
PeakOil NOT , 03/16/2015 at 1:20 pm
Texas RRC.

There are other issues as well. (Producers not reporting, Reporting late, etc.

The website is very helpful.

Marcus , 03/16/2015 at 4:52 pm
PeakOil NOT does this mean you represent or are somehow affiliated to the Texas RRC?
Futilitist , 03/16/2015 at 11:12 pm
Hi PeakOil NOT.

Nice screen name. What made you choose it?

Danlxyz , 03/18/2015 at 5:35 pm
Peak Oil NOT,
I agree that this web site reports only C+C unless otherwise noted. It is Ron's site and that is what he wants to report. I appreciate the effort he puts in especially the graphs.
But total liquids would seem to give a better picture of supply and production changes. After all NGLs, refinery gain, and the other differences are part of mix which make the economy produce.
Dennis Coyne , 03/18/2015 at 6:01 pm
Hi Danlxyz,

One problem with total liquids is that it is not adjusted for energy content. The typical barrel of NGL contains only 65% of the energy of crude, same is true of ethanol. So total liquids adjusted to barrels of oil equivalent is useful, also some NGL is not really used for energy (ethane is used mostly as an industrial input in plastic and cryogenic processes, rather than burned for energy). This is more work than just using C+C data. Also we can use BP data in tonnes of oil to estimate barrels f oil equivalent.

Caelan MacIntyre , 03/16/2015 at 1:19 pm
a carryover thank you
It read as a sort of age-targeted unemployed-wage-slave flyer/ad for the unsustainable North Dakota shale/fracking industry, complete with age, income, corrupted values, etc..
And much more in the crony-capitalist plutarchy global industrial uneconomic monster– which farts in our general direction, Gerd– and that we just can't help feeding… with our children, alive (like those two in question if they are real or part of the monster, or both), as well as with our values, future, and planet.

Pushpush, toolpusher. Make 'er scream. We know abuse when we see it .

toolpush , 03/16/2015 at 6:32 pm
Hey Ron,

Any chance of an ignore button?
That way it would avoid a lot of knee replies one is temped to write.

Throbbing Orville Reddenbudders , 03/16/2015 at 10:27 pm
"I mix with professional people and and I know i have earnt up to double their pay scale…" ~ toolpusher

[Sep 12, 2016] 03/17/2015 at 10:37 am

Notable quotes:
"... "I find it curious that anybody would chose a peak oil blog to tout the merits of shale oil, or shale gas, particularly now, when it has its pants down around its knees, its hands overs its privates , but so be it… ..."
"... The real oil and gas business… is very difficult at the moment; we are all working 24/7, confused about the direction of prices, and having to watch every penny we spend, right down to washing poka dot gloves every evening to wear them again the next day… I have had 50 good men ask me for work the past 3 weeks , all coming out of the stinking shale business, with little hope for the future… As you can clearly (lol) tell, I am not a fan of the stinking shale business … I think [it] …has mismanaged my countries limited hydrocarbon resources in a very bad way. It took advantage of cheap money, little risk, absolutely no regard for conservation practices, and drilled itself into a 9 line bind, in my learned opinion. It lied to the American public, misled its work force , borrowed money it cannot pay back and helped drive the price of both oil and natural gas down to levels that will ultimately hurt, not help Americans. Now its all unraveling… Dickheads in the Bakken and Eagle Ford want to export condensate to stay on their drilling hamster wheels; how does selling American resources, cheap, to buy them back tomorrow, from people that hate our guts and want to kill us, help America? It doesn't. It is stupid… I am reminded of numerous times in the history of oil and gas in the United States where an unregulated industry drilled itself literally into oblivion… More recently, the shale gas industry imploded from over drilling and the corresponding collapse of gas prices. My industry cannot seem to keep from making the same mistakes again, over and over. It gets caught up in it own bullshit far too often… I have to lay off a couple of kids today that have been with me for 5 years, one just got married … Is shale oil extraction a resounding success story in America, a benchmark for free-market enterprise? Bullshit . The debt those guys has accumulated would choke a big horse; its begged, borrowed and essentially stole money from grandma's all around the county that bought their stock based on propaganda. It has not made a dime of profit yet. The wealth of retired people who invested in the shale oil business, even people that didn't, is now being decimated because of the shale oil industry. Every stinking shale well drilled uses sufficient fresh water for 168,000 humans to consume in one day and nearly 400 tons of steel. The crop and ranch land that is lost to shale well pads and roads is heart wrenching. All that for a couple of months of $ 2.00 gasoline? … The shale oil industry shot itself in the foot. Along the way it shot me, and thousands of other operators in America, in the back. It is helping to facilitate a train wreck around the world, actually . I have been to West Africa, the ME, all over S. America, everywhere in the world there is oil production and I am telling you straight away, there are now lots of very, very afraid people out there in the world. Hungry, thirsty, sick people whose countries cannot help them any longer. Why? In part because of stinkin' shale oil industry greed. I am mad at them sumbitches this morning… I gotta go let some good kids go . Damn, I hate that… The shale oil industry will not survive 50 dollar oil …Now oil prices are low, and getting lower, and the money tree is going to fall over. Anybody promoting the shale oil industry at this point must be getting paid to do so. …" ..."
"... ~ Mike @ The POB ..."
"... "So long story short don't believe all the negative people saying you should go home now because there are still plenty of jobs around you can get in the Bakken and be making six figures in no time ." ~ dn_girl ..."
"... "We had a proud young woman post yesterday about her… optimism about… future in the oilfields of North Dakota. It is a powerful message that we should have all embraced … She probably won't be back …" ~ Mike ..."
"... "Things are getting tough out here in the oilfield right now, its time for me to get tougher… But this is going to be my last post for awhile." [January 10, 2015 at 12:41 pm] ~ Mike ..."
"... "Mike, I hope my comments didn't tick you off and that's the reason your going to cut back on posting… If I did say something that ticked you off, I am sorry." ~ TechGuy ..."
"... "It is like attacking the soldiers in Iraq because you don't like the lies that caused them to be there." ~ shallow sand ..."
"... "…all forms of organization, regardless of how democratic they may be at the start, will eventually and inevitably develop oligarchic tendencies, thus making true democracy practically and theoretically impossible, especially in large groups and complex organizations. The relative structural fluidity in a small-scale democracy succumbs to 'social viscosity' in a large-scale organization. [Accordingly] …democracy and large-scale organization are incompatible." ~ Wikipedia ..."
"... "The shale oil industry shot itself in the foot. Along the way it shot me, and thousands of other operators in America, in the back. It is helping to facilitate a train wreck around the world, actually… ..."
"... I gotta go let some good kids go. Damn, I hate that… Anybody promoting the shale oil industry at this point must be getting paid to do so …" ~ Mike @ The POB -- "So long story short don't believe all the negative people saying you should go home now because there are still plenty of jobs around you can get in the Bakken and be making six figures in no time ." ~ dn_girl "We had a proud young woman post yesterday about her… optimism about… future in the oilfields of North Dakota. It is a powerful message that we should have all embraced … She probably won't be back …" ~ Mike ..."
"... "The culture as a whole and most of its members are insane." ~ Derrick Jensen ..."
"... embrace that powerful message ..."
"... female ..."
"... (Another fine on-the-fly comment crafted with the Patterson Press™ Comment Editor) ..."
"... I think we should reflect on this. ..."
"... "By the way, what did you make of my "The Mask of the Red Death" allegory post?" ~ Futilitist ..."
Sep 12, 2016 | peakoilbarrel.com
Ron, Is it possible the EIA is intentionally trying to push oil prices down for political reasons? But has to do some back-peddling in order to try to save face and retain some credibility. EIA must fully understand how oil prices react to what they are saying. They are also a government agency there for can be used for political purposes. Do you notice a trend of misinformation coming from the EIA? Have you ever in the past noticed a trend of misinformation where maybe the incorrect numbers coming from the EIA actually pushed prices up instead of down over any given period of time?
StuckinWalkerWorld , 03/17/2015 at 10:48 am
The effects of the price collapse is beginning to take a serious bite out of Canadian tar sands exploration and extraction activity. Last week's rig count in Canada dropped by 80, according to the most recent Baker Hughes report. Imports from Canada have declined slightly in the last month, though they are still quite high. And there's the news brief (Note link to original article is broken).

http://ieefa.org/1000-layoffs-overnight-by-tar-sands-developer

Watcher , 03/17/2015 at 10:56 am
Pretty sure spring thaw is the seasonally normal time for canadian oil rig decline.
Doug Leighton , 03/17/2015 at 11:16 am
Correct. Spring breakup = mud and road restrictions up here. When Western Canada thaws dirt roads/drill sites become soupy messes, drill rigs stop. Affects truck logging and mining exploration as well.
Ron Patterson , 03/17/2015 at 11:24 am
Nevertheless the Canadian rig count during this same week last year stood at 522. It now stands at 220, a drop of 302 rigs, season point last year to same season point this year.
Watcher , 03/17/2015 at 12:35 pm
Now that's more meaningful.
Ron Patterson , 03/17/2015 at 11:15 am
Sawdust, No, I don't think the EIA is being dishonest for political reasons. Who's politics would that favor? I think they are honest and looking at their algorithm and just reporting the data is spits out. Art Berman puts it this way:

EIA and IEA ultimately get their U.S. production data from the states. State reporting on oil production is lagged by at least 3 months and it takes another month or two for adjustments to be included. IEA and EIA use sampling methods of certain large producers that are then put into algorithms to approximate recent production. So, what we get from these organizations is a pretty good guess that will be revised later.

Their algorithm just gave them some bum production numbers. That's really all I think that happened. But when they saw those numbers from North Dakota they realized they had really screwed up and began to backtrack. They may very well be backtracking further however.

Watcher , 03/17/2015 at 11:43 am
Ya pretty much that. If you've spent time in DC you've spent time on the Metro and it's filled in the morning with guys who got up, looked in the mirror, shaved, and went to work. They don't do that every day to make it their job to lie.

Errors can be systemic. They can be using a source that no longer is valid. The measurement itself may no longer matter - like the newly famous sales by refinery affiliated retail outlets. Those outlets were sold off. The number remaining is few. So retail sales of gasoline appears to have crashed. Doesn't measure the same thing anymore.

This sort of thing is likely underway with Jeffrey's API focus, and there WAS that article I posted here from the WSJ announcing a redefinition of WTI.

Back when night baseball became prominent in the late 1960s (first night game in the 30s, but prominence took time) to generate ticket sales from people who could not take off work, a recognition of pitched balls being harder to see under lights than natural sunlight led to a lowering of the mound. Baseball's org watched as pitchers became more and more dominant (1968 was "the year of the pitcher") and so they made that choice for 1969. All to make the game's historical stats still comparable (and to keep fans happy, who preferred home runs to shutouts).

The redefinition of WTI will specifically make historical stats NOT comparable, but unlike with baseball, that is going to be desirable. As will be an appearance of steady growth, the home run of oil.

Doug Leighton , 03/17/2015 at 11:52 am
Watcher, you're being strangely rational today (or, at the moment). Should we be worried?
Watcher , 03/17/2015 at 12:33 pm
Making peace with our Maker. We'll all be dead soon in the die-off.
Doug Leighton , 03/17/2015 at 12:44 pm
Figured it would pass; I'm breathing MUCH easier now. :)
Watcher , 03/17/2015 at 12:55 pm
Oh don't be too glib. Lowering the mound doesn't kill people.

Claiming you got BTUs you don't got will start wars.

Sam Taylor , 03/17/2015 at 12:26 pm
Ron,

Just how much influence does a single EIA report actually have on the direction of oil markets? I find it difficult to believe that a single report from them which might be slightly over-optimistic, could start the market in London dropping as well as New York.

Ron Patterson , 03/17/2015 at 12:40 pm
Your correct, a single report, that is the Weekly Petroleum Status Report could not have that much influence. However two other EIA monthly reports gave similar bullish assessments. They were thee Short Term Energy Outlook and the Drilling Productivity Report

Then to top those three EIA reports the IEA chimed in with an even more bullish report for oil, (but bearish for prices of course). The IEA Oil Market Report .

Global supply rose by 1.3 mb/d year-on-year to an estimated 94 mb/d in February, led by a 1.4 mb/d gain in non-OPEC. Declines in the US rig count have yet to dent North American output growth. Final December and preliminary 1Q15 data show higher-than-expected US crude supply, raising the 2015 North American outlook.

Got that, non-OPEC up by 1.4 million barrels per day in February and the declining rig count is yet to dent North American output growth. That was enough to drive prices in the dirt.

Dennis Coyne , 03/17/2015 at 3:29 pm
Hi Ron,

Several people, Art Berman, Steve Kopits, and Jeffrey Brown are expecting that oil prices should rebound by years end at minimum. I agree with that assessment.

Impossible to say with any confidence when prices will rise or by how much, but I still like $75/b or more before Sept 30, 2015.

Looks like my guess that oil had reached a bottom in Jan 2015 was not right, it looked good for a month and a half. It will be interesting to see if it breaks through $40/b, I doubt it, but some experts have mentioned $38/b. If we adjust the Dec 2008 bottom for inflation we get $33.65/b for the lowest price since 2003. There would be some serious resistance to oil prices less than $33/b.

In 2008 the bottom was about $30/b in nominal terms and the oil price closed below $35/b for only 4 trading days, by March 2009 the oil price was back to $45/b and by June it was up to $70/b.

Hard to say what will happen this time, but OPEC is predicting that demand will be robust, so we may see prices behave somewhat like 2009. Even without cuts by OPEC, the World economy is in much better shape in 2015, than it was in 2009, so oil demand should be higher.

Jeffrey J. Brown , 03/17/2015 at 3:39 pm
For the current oil price decline, the monthly low (so far) for Brent was $48 in January. I don't think that there's any real chance that March will average below $48, since the average for the first half of March was in the high 50's.

Monthly price data for six month after the $40 monthly Brent low during the 2008/2009 decline:

12/08: $40

1/09: $43
2/09: $43
3/09: $47
4/09: $50
5/09: $57
6/09: $69

toolpush , 03/17/2015 at 9:55 pm
Ron,

On the Permian page, there seems to be an extremely sharp upturn in the Permian's productively, Around about 20% increase in a couple of months. Not sure if it because they are saying all the rigs that have shut down, contributed very little to production, or what? Maybe a little fudge factor to catch up on past errors?
Without that upturn, I believe their minor increase in production would be a negative number.

http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf

Ron Patterson , 03/17/2015 at 10:29 pm
Toolpush, that has to be an error in their chart. If you go here:

Drilling Productivity Report

Then click on: X Report data (aggregated by region)

That will download the Excel spreadsheet for all regions. Then you can go to the Permian page and get the data through April. Of course the last four months is just their guess as to what the Permian will produce but the data they do show shows a very sharp downturn in the last two months.

The data below is their predicted barrels per day. The chart below is the actual increase in barrels per day they are predicting.
Permian
Dec-14 1,845,634
Jan-15 1,888,536
Feb-15 1,929,450
Mar-15 1,960,259
Apr-15 1,981,512

toolpush , 03/17/2015 at 11:03 pm
Ron,

This was on productivity per well.
The top left chart. Brown line going from around 400 bpd per well to nearly 500 bpd per well?

http://www.eia.gov/petroleum/drilling/pdf/permian.pdf

Ron Patterson , 03/18/2015 at 7:19 am
Well there is no data to support that. In fact there is no data at all for April because April and in fact there is no data for March. Why they would make such a wild speculation is beyond me. But this is a prediction that is beyond reason. Productivity per well could not possibly change that fast.
Dennis Coyne , 03/18/2015 at 8:09 am
Hi Ron,

It may be that if a lot fewer vertical wells are completed that productivity per rig will increase. The horizontal wells in the Permian are far more productive (on a per well basis) than the vertical wells.

The EIA may be accounting for the rising percentage of horizontal rigs which will increase the productivity per rig.

I agree that this change is unlikely to happen as quickly as shown in the DPR, which was your main point.

Dennis Coyne , 03/19/2015 at 7:57 am
Hi toolpush,

I think you read the chart wrong, the rig productivity is on the left vertical axis and the rig count is on the right. The increase was from 202 b/d/rig in March to 240 b/d/rig in April.

This could easily be explained by the higher percentage of horizontal rigs now running in the Permian due to a lot of the vertical rigs being stacked there.

toolpush , 03/19/2015 at 8:19 am
Dennis,

I stand corrected, and thanks for checking it out, but the change in slope is the stand out thing. What ever the numbers you are looking at approx 20% increase in productivity in one or two months.
It is either due to a heap of low productive vertical rigs being stacked, or a statistical error.
I believe we will just have to watch out for it next month, to see if there is any change? Though I believe this little uptick conveniently keeps the oil supply estimate in the positive side of the page. smiles

Dennis Coyne , 03/19/2015 at 4:38 pm
Hi Toolpush,

Yes it is a 20% increase either way, in the Bakken it seems that rig efficiency has been increasing and in the Permian the rigs are being stacked faster so the percentage of horizontal to vertical rigs has increased a lot. Currently about 71% of Permian rigs are horizontal rigs, at the rig high point it was about 62% horizontal rigs, so we have fewer vertical rigs which would tend to increase output per rig and in this price environment they may be focusing on sweet spots so that the wells that are fracked have a better chance at positive cash flow.

Futilitist , 03/17/2015 at 11:39 pm
Hi Ron,

"Their algorithm just gave them some bum production numbers."

That is because their algorithms don't work any more. Not since the aggregate cost of oil production overtook our civilization's ability to pay the full cost of that production. This occurred around June of 2014. The EIA seems to be as surprised as everyone else (except me). Here is how they put it:

Steep drops in the US rig count have been a key driver of the price rebound. Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations.

Meaning that production is just not falling fast enough to raise oil prices sufficiently enough to ensure continuing oil production. This is not a temporary condition. There is simply no way to fix the problem. We have experienced a paradigm shift.

The oil industry has begun shutting down .

The cost of production continues to rise. And we don't seem to be getting richer. If the industry needs $100+ oil to maintain current production and bring on future production, then any price lower than $100 will result in the oil industry shrinking.

How could it be otherwise?

Kam , 03/18/2015 at 6:30 am
Coal industry has also started shutting down. And coal is the second source of energy for world economy. It will be fast now. Party's over (Heinberg was 12 years early :) ).
Futilitist , 03/18/2015 at 6:50 am
Hi Kam.

I did some research on the ETP model you pointed me to. It turns out that I haven't been the only person to point out what the giant wedge pattern in the price of oil meant:

"Oil prices are plunging. According to my opinion (and it seems that your theory says so), this is because now we cannot afford a functioning economy at 100 USD per barrel of oil . From now on, any price collapse will lead to the destruction of supply; and a price hike will destroy the demand (And I think that as time passes by, the ceiling at which the demand will be destroyed will only go down). It seems that both factors (supply destruction and demand destruction) have met in the graph and we just hit a collision point …"
~ Observerbrb at peakoil.com

He even made a graph just like mine!

And here is the answer to his question from one of the originators of the ETP model:

"You're right!"
~shortonoil

Wow. So my cute little independently arrived at theory has also occurred to many other people. Well, of course it did! It is so obvious, I think I could explain it to a 6 year old! But for some strange reason, I can't seem to be able to explain it to anyone here, except for a select few.

I wonder why?

Kam , 03/18/2015 at 5:04 pm
I thought that you were familiar with the ETP model, because you sounded like you are. If you figured it out by yourself, then congratulations! :)
Also look at this (link). This chart was first made long time ago (2 years?). This is the updated version. I don't believe that you didn't see this earlier 😛
http://www.economic-undertow.com/wp-content/uploads/2015/03/Triangle-of-Doom-030315-1024×689.png
Futilitist , 03/18/2015 at 8:46 pm
Hi Kam.

I just found that "traingle of doom" chart the other day, when I was looking at the link you gave me to the ETP model, and I wanted to find out more. I looked around and ended up seeing the chart at a discussion at peakoil.com. It looks like charts I was making before 2013.

I have been expecting a collapse for quite a while, so I started watching the wedge form pretty early on. I began to develop the idea that there would be an oil spike when the lines crossed!!! Ha ha. I could probably find where I posted my big prediction for a spike in June 2014!!! Right timing, wrong direction.

I really had had the wrong idea about the cost of production. I thought that would be the impossible line to breach. But that doesn't factor in heavy finance in the oil industry. The affordability line was the real problem. Of course, as soon as oil plummeted, I began to get a clearer idea of the dynamics. I started to get the idea that the price of oil would keep falling. At Thanksgiving at my moms house, I announced that the collapse of industrial civilization began in June of 2014. It was not a welcome topic. It is not welcome here, either.

The ETP model peaks in 2012. Check out this post:

http://peakoilbarrel.com/eia-confusion/comment-page-1/#comment-504805

When seen relative to interest rates, 2012 is the highest price oil ever reached (higher than 2008)! The chart "squeeled" (non-linear dynamics) at the peak. The whole thing fits together.

And that makes this next post really interesting:

http://peakoilbarrel.com/eia-confusion/comment-page-1/#comment-504784

It shows how the FED used QEx and operation twist to extend the wedge by raising the affordability line. Especially twist in 2012. Stick save.

Anyway, thanks for the link, Kam. It really helped me bring the whole thing into sharper focus in my mind. I understand collapse much better now.

I have been debating certain people on the site, and they really don't get it, or they are really pretending hard not to get it. I think I am explaining it pretty well, but…

…Anyway, check out the debate or better yet join it. I could sure use some help.

Boomer II , 03/17/2015 at 3:45 pm
Ron, Is it possible the EIA is intentionally trying to push oil prices down for political reasons?

If there has been any intentional push to be overly optimistic, hasn't it been from the oil industry itself? The whole "energy independence" thing.

So if the net result would also drive down oil prices, wouldn't the industry, rather than government, be the one to blame?

Watcher , 03/17/2015 at 11:25 am
A little bit of data reconciliation here:

the mazamascience.com/oilexport link puts it all on one graph by country/region and is based on BP's data. They also have a button to flip from tonnes to barrels. My personal fave.

This from BP:

Oil production data includes crude oil, tight oil, oil sands and NGLs (the liquid content of natural gas where this is recovered separately). Excludes liquid fuels from other sources such as biomass and derivatives of coal and natural gas.

World oil production tables are in both thousand barrels daily and million tonnes.

There is no mention of condensate in that. It could be called NGL, one supposes. So it's not a pure crude measure. We can't be happy about that, but it IS all on one graph (with consumption). Further, three cheers for BP, they adjust for leap years to get the extra day out for annual quotes.

So their graph for China consumption is pointing at 11+ mbpd. That includes all of the above.

This from China's official org:

China's implied oil demand will grow 3 percent this year versus last year, the country's top energy group forecast, little changed from the pace of growth in 2014 as calculated by Reuters.

State-owned China National Petroleum Corporation (CNPC) saw the nation's oil demand rising to 10.68 million barrels per day (bpd) in 2015, some 310,000 bpd higher than last year.

The forecast, in an annual report released by CNPC's research institute on Wednesday, also put the country's net crude imports up 5.4 percent at 6.49 million bpd for this year.

China, the world's second-largest oil consumer, raised crude imports by nearly 10 percent last year, or an additional 530,000 bpd, largely to boost government and commercial reserves as oil companies took advantage of the more than 50 percent fall in global benchmark prices from mid-June.

The CNPC forecast was higher than a recent report by the International Energy Agency (IEA) that put China's oil demand growth for 2015 at 2.5 percent, down from 2.7 percent last year.

No sign of reduced Chinese consumption.

SAWDUST , 03/17/2015 at 11:46 am
I'm looking ahead to tomorrows FOMC announcement at 2:00-2:30pm ish. If Fed comes off hawkish i think we will see oil below $40 very soon if their statement is dovish we get a price rebound though it might be a short lived one. I also think if they come out hawkish the dollar will initially strengthen but when stocks roll over and bonds yields start collapsing towards zero they are going to drag the dollar down with it. Which in itself might support oil prices at least in some small manner.
Watcher , 03/17/2015 at 12:31 pm
http://finance.yahoo.com/news/china–carmakers-overcharging–selling-defective-products-175034116.html

This is mostly a vid. The audio content and the text has no value. It's Yahoo talking heads pretending they know something. Turn the audio off.

Rather watch the video. The imagery. LOOK AT THOSE CHINESE TRAFFIC JAMS, on open highways. About the 2:00 mark.

SAWDUST , 03/17/2015 at 12:59 pm
Beyond cars issues. A lot of the stuff manufactured in China eventually will be replaced by 3D printers. Combine that with China's move to De-dollarize. Setting up a alternative to SWIFT and selling US bonds. How will they be able to keep their currency pegged to the dollar? Which is what keeps those Chinese factories humming. In the long run how will they continue to keep hundreds of millions of people working?
Watcher , 03/17/2015 at 2:15 pm
I don't think you embrace the theme of this blog.

If the oil isn't there, people go to war and die. It doesn't matter who prints what piece of paper, you can't print oil and you can't feed 7 billion without oil.

Scarcity begets tanker seizure. Japan can't survive if the tankers going to Tokyo go to Shanghai, and outbidding doesn't matter if China HAS to have that oil.

SAWDUST , 03/17/2015 at 3:11 pm
I totally embrace the theme of this blog. But before scarcity sets in and nations start taking other nations oil supply by force. Some economic tremors will be felt which will lead nations to use force to secure oil supplies. Economic hardship is a prerequisite. We will actual need more than economic tremors. We will need some economic earthquakes. Before bombs and bullets start flying. I don't think nations will attack each other the minute oil starts get scarce. It wont be until their economies can't function properly anymore and respective governments see no other alternative. It will be when growth ceases to exist and economies can do nothing but contract. Chinese tankers can very well be seized themselves. China doesn't own the seas.
Watcher , 03/17/2015 at 3:17 pm
Pretty much.
hermit , 03/18/2015 at 2:37 pm
Watcher if you thought that one was bad. take a look at this one

http://www.bbc.com/autos/story/20150317-how-smart-traffic-signals-may-ease-your-commute

Ronald Walter , 03/17/2015 at 12:17 pm
In 1953 there was one well in the Bakken.

In 1988, there were finally 99 wells.

In 2009, the number of wells in the Bakken Formation then reached 1000 plus wells.

In 2015, there is a Bakken/Three Forks well count of 9052 .

Nine thousand times more wells in a 62 years.

It is entirely possible to shut them all down and forget about the oil, but I wouldn't stand on one leg or hold my breath.

The place where Congress gets the job done.

Watcher , 03/17/2015 at 12:40 pm
Re systemic data issues. ZH just splashed one of their strong points, noticing inconsistency. There may be an explanation for it, but whoever is going to make it better start cracking:

http://www.zerohedge.com/news/2015-03-17/something-strange-going-nonfarm-payrolls

Gist is this morning's Housing Starts number was down sharply for February. But the February Non Farm Payrolls number showed a sharp increase in residential construction employment. Naturally, any time there is bad data this time of year it is attributed to winter. But it's winter for hiring too, and it didn't show there.

My opinion is the NFP measurement is taken the 3rd week of months. I suspect things have been done to take advantage of that knowledge.

Fernando Leanme , 03/17/2015 at 2:45 pm
What's "soon"?
Watcher , 03/17/2015 at 3:18 pm
Best you not know.
clueless , 03/17/2015 at 3:19 pm
Watcher – we had a small back and forth a short time ago, in which I think (do not shoot me if I am wrong) your biggest complaint about today's economics was lack of transparency. This article seems to show what I believe. Do not look for transparency, because you will never find it. People/institutions can put forth as much data and/or reasoning as anyone could possible want, but in the end it is not transparent. You just have to look at the information and decide for yourself if it is reasonable and what it means.
I am big on analogies (in case no one noticed). Everyone watches a football game and sees what they perceive to be a stupid play call. The sportswriters cannot wait to ask the coach about it. He gives some reasoned answer. Pointless. He went brain dead at the time, but he will never give that as the reason.
So, I look at what the Fed does, and try to figure out why I think that they did what they did. I never accept their reasoning at face value. Same with about most things. I read the WSJ every day for 45 years, not necessarily to gain information, but rather trying to figure out if I agreed or not with whatever point someone was trying to make.
With respect to investing, about the only time you can make a lot of money is when almost everyone else is wrong, but you are right. Generally, pretty hard to do.
Watcher , 03/17/2015 at 3:24 pm
With respect to investing, about the only time you can make a lot of money is when almost everyone else is wrong, but you are right.

If oil was the engine of all things (and it was) throughout your investing personal database, then being right was just betting on an index and letting increased BTUs assert themselves and eventually appear in macro economics. This was why "a problem delayed is a problem solved" worked pre 2008. Oil's derived growth would fix everything if you just could buy time.

That's all gone away and it's never coming back.

That sentence cannot be uttered or embraced, so money will be printed to extend and pretend and buy time for the mechanism that no longer works.

learner2 , 03/17/2015 at 1:05 pm
How do you guys think about the current meme that the nuclear deal with Iran (maybe even by month end) is going to result in extra 800k to 1M bpd coming to market soon? That is the reason being given for price declines.
Watcher , 03/17/2015 at 3:19 pm
That stuff hits the rumor mill every time an Iranian deadline approaches.
Longtimber , 03/17/2015 at 2:06 pm
Bit off Topic for Hydrocarbons. but, another reason to be prepared.

Of all our infrastructure, the electrical power grid is the most fragile. In the 2013 Infrastructure Report Card, prepared by the American Society of Civil Engineers, Energy received a grade of D.
http://www.survivopedia.com/the-power-grid-could-collapse/

Competition in Li Pak's are getting interesting.. Capacity and features evolving every few months.
Take any ratings with a grain of salt. There are no test standards. Would love to see reviews.

http://www.amazon.com/600A-Peak-Current-Discharging-Ultra-bright-smartphones-USB-charged/dp/B00QC7EVG4/ref=sr_1_3?s=electronics&ie=UTF8&qid=1426618910&sr=1-3&keywords=LI+jump+starter

sunnnv , 03/17/2015 at 4:07 pm
http://www.manufacturing.net/news/2015/03/when-oil-prices-are-down-worker-deaths-are-up-in-the-bakken

"Low oil prices and subsequent cutbacks in the field by drilling companies could be contributing to a rash of worker fatalities in North Dakota, according to a report in the Wall Street Journal.

The state saw eight oilfield employee deaths since October, a five-month total than exceeded the number for the previous 12-month span. October also coincided with the beginning of a decline in the number of oil rigs operating in the state.
"

For those with access to WSJ:
http://www.wsj.com/articles/oil-deaths-rise-as-bakken-boom-fades-1426187062

And in the same issue of manufacturing.net:
http://www.manufacturing.net/news/2015/03/dow-signs-on-to-develop-massive-wind-farm
"…The wind farm, to be complete in first quarter 2016, will span nearly 35,000 acres, and will supply Dow's Freeport Texas Manufacturing facility with 200 MW of wind power …"

Boomer II , 03/17/2015 at 4:24 pm
Centralized power generation and distribution is going to be replaced as soon as it can be.

You Don't Need An Energy Company When You Can Buy Power From Your Friends

Rune Likvern , 03/17/2015 at 4:52 pm
A couple of articles which will affect the oil price

Iran Can Add Million Barrels a Day of Oil If Sanctions Halt
http://www.bloomberg.com/news/articles/2015-03-16/iran-can-add-million-barrels-a-day-of-oil-if-sanctions-are-ended

"If sanctions are lifted, we can raise our exports by one million barrels per day within a few months," Oil Minister Bijan Namdar Zanganeh said Monday in Assaluyeh, Iran. The Persian Gulf nation shipped 1.2 million barrels a day last month, the International Energy Agency said in a March 13 report.

Oil hit by stockpile fears; dollar offsets some loss
http://www.reuters.com/article/2015/03/17/us-markets-oil-idUSKBN0MC1TC20150317

Industry group American Petroleum Institute (API) said after the market's settlement that crude stockpiles rose by 10.5 million barrels in the week to March 13, far ahead of the 3.8 million forecast by analysts polled by Reuters. If correct, the API number would lift total U.S. inventories to 450 million barrels.

Watcher , 03/17/2015 at 5:35 pm
$42.xx following the report, which is post US close pre Asia open. Some futures trading still goes on.

Of more concern, for the 2nd time this week I have seen "22 Trillion in oil derivatives". No idea where that's coming from. That's a lot of HY paper swaps plus options, one supposes. It spells Apocalypse, actually.

Yetanother Mike , 03/17/2015 at 5:03 pm
Found this on chron.com, along with a few other stories about the shale slowdown:

http://fuelfix.com/blog/2015/03/17/oil-production-falling-in-three-big-shale-plays-eia-says/

Boomer II , 03/17/2015 at 6:12 pm
I'm behind on reading the comments on some of the other posts. So I don't know if this has already been posted.

Watch Four Years of Oil Drilling Collapse in Seconds

Longtimber , 03/17/2015 at 11:11 pm
Fantastic, You can filter by play. wish you could filter horizontal and they had one for NG. Hope it's updated for all of 2015.
Watcher , 03/17/2015 at 10:17 pm
Okay. What is the rationale here?

I'm seeing talk that at these price levels some number of wells will get fracked that is a lower number than used to get fracked.

Why? Why are these wells going to get fracked at these price levels and who is going to pay for them post March 31 when revaluation occurs? I thought the plan was allegedly to frack nothing until you got a better price. So . . . who is going to pay for it, and why do it if you're not getting enough price and are oh so very sure you're going to get better price upcoming aka soon? Is this all about paying your people? Are the lenders interested in paying your people, or getting their money back?

Oh, and the big guys buying the small guys theory . . . how does that work at a wellhead price of $25? The for-sale company has $XXXX in revalued assets and $YYYYYYYYYYYYYYY in debt. Who buys that company? Someone should be paying someone to take that company, not the reverse. So . . . maybe the for-sale company says psssssst, maybe I'll just sell you the assets so I can have cash to keep the doors open. Well, didn't the lenders have those assets as collateral? Can we spell fraud?

If the price stays in this ballpark for a while (and note it was around this price for FIVE SOLID YEARS 2000-2005 (which btw was in this century, not last one) all of this is going to disintegrate.

As for who thinks it's going higher, which expert says this or that, let's make this a pure experience. Show me that expert taking out extra mortgages on his house and levering up his 401K to make the bet on higher soon. If he ain't betting, then he's indulging in fantasy.

Watcher , 03/17/2015 at 10:25 pm
hmm never saw that before Ron. "You do not have permission to edit that comment." The edit button is there. That's the message that appears. Plenty of time left.
Ron Patterson , 03/17/2015 at 10:40 pm
Try it now. I have changed the time to 2 hours. Otherwise I don't know what the problem is.
Watcher , 03/17/2015 at 10:58 pm
It's not the time.

I clicked edit just now and a window appeared saying "comment loaded successfully", but it's empty, there's nothing there to edit.

Maybe it will fix itself. Give it overnight.

Futilitist , 03/18/2015 at 12:01 am
It is a glitch that happens every once in a while. Just hit the X, and then hit the edit button again. That works for me.
Caelan MacIntyre , 03/18/2015 at 2:57 am
New and improved! Now an hour+! ^u'
clueless , 03/18/2015 at 10:37 am
Who thinks it is going higher?
Well, just looking at the numbers "somebody" does. To my knowledge, importers of oil do not have long term contracts obligating them to buy oil and import it. So in less than a year, oil inventories are up in the US by 100 million barrels, over 9 million more last week per this mornings EIA report. We have consistently been importing over 1 million bbls/day more than we need and putting it into storage. Imported oil is probably closer to Brent in cost. So let's guess that somebody has put 100 million barrels into storage at an average cost of $55/bbl. That cost somebody $5.5 billion plus monthly storage fees, plus cost of money. I doubt that whoever "somebody" is, is looking for an opportunity to sell it all for $40 and lose close to $2 billion on all in costs. So, if not, then they must think that they will make money at some reasonable time in the future.
This is also somewhat puzzling to me. I know that the majors have access to that kind of money, but after not seeing US oil imports back off one bit since the plunge started, I have concluded that it is above my pay grade to try to figure it out.
Skywalker , 03/19/2015 at 10:46 pm
Current oil future curve is in contango, which means future price is higher than spot price. If the spread between spot and future prices is large enough to cover the storage costs, many people will try to take advantage of that "free" money by buying the oil at spot price, putting them into storage and then shorting the oil future 3 or 6 months out, which enables them to fix the selling price in the future.

Many people are doing this kind of arbitrage right now. Some are even leasing the whole oil tanker as the storage and that is why the tanker rate has been skyrocketing.

Futilitist , 03/19/2015 at 11:21 pm
Desperate measures and a product of the optimism bias in all humans.
Skywalker , 03/20/2015 at 12:54 am
It has nothing to do with biases but everything to do with making risk-free profits. The arbitragers may not have a view as of where the oil price will be in 3 or 6 months time. They simply make money from the spread.

I would do the same if I have the resources.

WeekendPeak , 03/20/2015 at 8:47 am
that's exactly what it is.
rgds
WP
Fernando Leanme , 03/18/2015 at 5:58 pm
Watcher, properties will be purchased by those who have a price forecast high enough to deliver a solid risk weighed return. The evaluation is fairly straightforward. We look at the cash flow from existing wells, perform an estimate for wells being drilled, but consider delaying the completion until prices increase. We also look at undrilled well locations and prepare an estimate for those as well. If it's an outright company purchase we have to look at other topics, for example environental liabilities, pending lawsuits, and labor issues.

I can't go beyond this basic outline. But I assume you do realize there are plenty of players who have very large amounts of cash to buy. If the sales don't go through is because the seller has a really inflated view of what the property is worth. Or is one of those ego driven types who wants to be an oil tycoon and just doesn't want to sell. I ran into one not too long ago. He didn't want to discuss business, was mostly interested in discussing politics, so the sale fell through. I bet right now he's a bit shook up.

Andy Hamilton , 03/17/2015 at 11:07 pm
Investors in US shale oil junk bonds take yet another bath:
http://www.bloomberg.com/news/articles/2015-03-17/energy-junk-bond-revival-cut-short-as-7-billion-lost-in-10-days
"'Oil prices have fallen more than 15 percent since March 4 to a six-year low of $43.5, wiping out $7 billion of market value of high-yield debt issued by energy companies. Prices on $1.45 billion of notes sold less than two weeks ago by Energy XXI Ltd., an oil producer that was being squeezed by its lenders, have fallen by as much as 10 percent. Comstock Resources Inc.'s $700 million of securities have declined by more than 7 percent since March 6.

The latest slump in crude is rekindling concern that oil companies will struggle to service the $120 billion of high-yield, high-risk debt they took on in the past three years amid the U.S. shale boom. That's a sharp reversal from February when yield-starved bond investors were loading up on the debt again, pushing down borrowing costs to a two-month low. "'

Yalza!

Caelan MacIntyre , 03/18/2015 at 2:15 am
"I find it curious that anybody would chose a peak oil blog to tout the merits of shale oil, or shale gas, particularly now, when it has its pants down around its knees, its hands overs its privates , but so be it…

The real oil and gas business… is very difficult at the moment; we are all working 24/7, confused about the direction of prices, and having to watch every penny we spend, right down to washing poka dot gloves every evening to wear them again the next day… I have had 50 good men ask me for work the past 3 weeks , all coming out of the stinking shale business, with little hope for the future…

As you can clearly (lol) tell, I am not a fan of the stinking shale business … I think [it] …has mismanaged my countries limited hydrocarbon resources in a very bad way. It took advantage of cheap money, little risk, absolutely no regard for conservation practices, and drilled itself into a 9 line bind, in my learned opinion. It lied to the American public, misled its work force , borrowed money it cannot pay back and helped drive the price of both oil and natural gas down to levels that will ultimately hurt, not help Americans. Now its all unraveling…

Dickheads in the Bakken and Eagle Ford want to export condensate to stay on their drilling hamster wheels; how does selling American resources, cheap, to buy them back tomorrow, from people that hate our guts and want to kill us, help America? It doesn't. It is stupid…

I am reminded of numerous times in the history of oil and gas in the United States where an unregulated industry drilled itself literally into oblivion… More recently, the shale gas industry imploded from over drilling and the corresponding collapse of gas prices. My industry cannot seem to keep from making the same mistakes again, over and over. It gets caught up in it own bullshit far too often…

I have to lay off a couple of kids today that have been with me for 5 years, one just got married

Is shale oil extraction a resounding success story in America, a benchmark for free-market enterprise? Bullshit . The debt those guys has accumulated would choke a big horse; its begged, borrowed and essentially stole money from grandma's all around the county that bought their stock based on propaganda. It has not made a dime of profit yet. The wealth of retired people who invested in the shale oil business, even people that didn't, is now being decimated because of the shale oil industry. Every stinking shale well drilled uses sufficient fresh water for 168,000 humans to consume in one day and nearly 400 tons of steel. The crop and ranch land that is lost to shale well pads and roads is heart wrenching. All that for a couple of months of $ 2.00 gasoline?

The shale oil industry shot itself in the foot. Along the way it shot me, and thousands of other operators in America, in the back. It is helping to facilitate a train wreck around the world, actually . I have been to West Africa, the ME, all over S. America, everywhere in the world there is oil production and I am telling you straight away, there are now lots of very, very afraid people out there in the world. Hungry, thirsty, sick people whose countries cannot help them any longer. Why? In part because of stinkin' shale oil industry greed. I am mad at them sumbitches this morning…

I gotta go let some good kids go . Damn, I hate that…

The shale oil industry will not survive 50 dollar oil …Now oil prices are low, and getting lower, and the money tree is going to fall over. Anybody promoting the shale oil industry at this point must be getting paid to do so. …"

~ Mike @ The POB

--

"So long story short don't believe all the negative people saying you should go home now because there are still plenty of jobs around you can get in the Bakken and be making six figures in no time ." ~ dn_girl

"We had a proud young woman post yesterday about her… optimism about… future in the oilfields of North Dakota. It is a powerful message that we should have all embraced She probably won't be back …" ~ Mike

"Things are getting tough out here in the oilfield right now, its time for me to get tougher… But this is going to be my last post for awhile." [January 10, 2015 at 12:41 pm] ~ Mike

"Mike,
I hope my comments didn't tick you off and that's the reason your going to cut back on posting… If I did say something that ticked you off, I am sorry." ~ TechGuy

shallow sand , 03/18/2015 at 6:14 am
I said I wasn't going to post awhile, and am still going to limit my posts because I really need to focus on much more important things than the internet, no offense to Ron's blog, which I appreciate very much.

Assuming the young lady from ND is real, which we know is always an issue on the net, I do not understand attacking her. It is like attacking the soldiers in Iraq because you don't like the lies that caused them to be there.

Living in a place like ND is not easy. Working outdoors in the winter there is not easy. Working in the oilfield is not easy. I do not understand why there would be lack of respect for people who have little to nothing, who move up there to bust their butt to make a living.

While I'm here, I know us small producers are upset with shale overproduction. However, I think the real culprit is our unregulated financial system. No good reason for oil to have hit $147 in 2008, which contributed to crashing the economy and putting millions out of work. Now, no good reason for oil to fall below $40, which means $20-30 at the well. It is so far below the cost of developing new production, its almost a joke. It is also below the cost of most US production too, when you figure in all the costs. Add in the bubble financing, and here we are.

If you are going to attack people, at least try to focus on those who are responsible for this shale mess, not people who are trying to avoid the destruction hitting our middle class by going to work a thousand miles from home in the elements to make a buck.

Futilitist , 03/18/2015 at 6:27 am
Hi shallow sand,

Good to see you again.

Since you dropped by, I would like to ask you a question, if you have time.

How much do you know about the Petroleum Price Curve and the ETP model?

Ronald Walter , 03/18/2015 at 7:24 am
You're getting close on the 'unregulated financial system' part.

At the heart of it all, there is no financial system, it fell down years ago.

What is there is but a vestige of what it really once was, it is now a shriveled carcass. Probably by design and plan, but that will probably never be known and remains to be seen.

Still, somehow, it all trudges on through the dreaded drudgery.

Futilitist , 03/18/2015 at 7:27 am
Not for much longer, I think.
Caelan MacIntyre , 03/18/2015 at 8:01 am
"It is like attacking the soldiers in Iraq because you don't like the lies that caused them to be there." ~ shallow sand

Which is precisely why you need to short circuit those lies bloody fast, shallow sand, and sometimes tell the kids what they don't want to hear. My kid would not be on here like that, singing the praises of ND, etc., nor part of the bombing the tar out of Iraq, that's for sure.

We don't like our children very much, nor ourselves, nor our planet, nor the creatures on it.

If you are in this industry– one of the reprehensible attacks on the aforementioned– your shallow sand seems to be turning to quicksand. I hope so. May your work sink hard and fast along with it.

And this is spot on topic too. If low prices hurt the fracking, etc., industries, you have my 'opinion piece' right here.

Oh, and ironically, as if you hadn't noticed, Mike is, in a sense, with me all the way on this and makes many of my points for me. Have you read it?

And if dn_girl is real, save her and girls and boys like her! Risk pissing them off about their attitudes and choices if you don't agree with them.

If an arm is gangrenous, sometimes you have to hack it off, possibly to the protest of someone you love. I love my planet and some industries need to be hacked off fast.

Caelan MacIntyre , 03/18/2015 at 8:47 am
By the way, Mike may not realize it, may be grappling with it, but he is perched on the precipice of anarchy:
He clearly despises his industry, but it is merely a manifestation of the larger crony-capitalist plutarchy; the violence-based governance structure; the parable of the violent tribe gone large-scale, overcomplex, global, amok.
Push him off!

"…all forms of organization, regardless of how democratic they may be at the start, will eventually and inevitably develop oligarchic tendencies, thus making true democracy practically and theoretically impossible, especially in large groups and complex organizations. The relative structural fluidity in a small-scale democracy succumbs to 'social viscosity' in a large-scale organization. [Accordingly] …democracy and large-scale organization are incompatible." ~ Wikipedia

Paulo , 03/18/2015 at 8:38 am
Nicely said, Shallow. I have always subscribed to the theory that most folks are doing the best that they can with what they have. The villians are the manipulators of finance and people who do so for their own gain, not the workers who have limited opportunities and influence.

regards

John B , 03/19/2015 at 3:34 am
"I do not understand attacking her."

Try thinking in terms of a hopeless misogynistic psychotic.

Then you'll understand.

Caelan MacIntyre , 03/19/2015 at 7:44 am
Way to go, Father John B.
Show us how it's done. Give your 'hopeless misogynistic psychotics' a few pointers. 'u^

"The shale oil industry shot itself in the foot. Along the way it shot me, and thousands of other operators in America, in the back. It is helping to facilitate a train wreck around the world, actually…

I gotta go let some good kids go. Damn, I hate that…

Anybody promoting the shale oil industry at this point must be getting paid to do so …"

~ Mike @ The POB

--

"So long story short don't believe all the negative people saying you should go home now because there are still plenty of jobs around you can get in the Bakken and be making six figures in no time ." ~ dn_girl

"We had a proud young woman post yesterday about her… optimism about… future in the oilfields of North Dakota. It is a powerful message that we should have all embraced She probably won't be back …" ~ Mike

"The culture as a whole and most of its members are insane." ~ Derrick Jensen

People, I call upon you today to embrace that powerful message … Because, well, assuming it is, it is a message that appears like it came from a female … and one must always embrace and never be cheeky or sarcastic with a message that might come from a female . Good god no, because then… then that is just plain attacking … and misogynistic , no if and or buts about it. And will land you in hell. Or you will become blind if you do it too much. ^u^

BTW, John B, I get along very well with women (and men and even those in-between); the willfully-ignorant ones, less so. It's not about gender, but about deliberate stupidity.

(Another fine on-the-fly comment crafted with the Patterson Press™ Comment Editor)

John B , 03/19/2015 at 3:14 pm
Maybe it's about gender identification, and envy?
Futilitist , 03/19/2015 at 3:50 pm
John B,

"Homosexuals are hardly better than criminals and ought to be severely punished."

1) Disagree Strongly
2) Disagree Mostly
3) Disagree Somewhat
4) Agree Somewhat
5) Agree Mostly
6) Agree Strongly

Skywalker , 03/20/2015 at 1:55 am
Very well said. Those working in the oil industry are not the ones to blame. They are just earning their livings by honest work. The biggest culprit, in my view, is the Fed, whose QEs and ZIRP encourage over risk-taking, which helped fuel the frenzy in the shale business.
Futilitist , 03/20/2015 at 3:41 am
If the FED had not done what they did, with ZIRP, NIRP, endless QE's, and operation twist, we would all be dead already.

So, unfortunately, the FED is not the culprit, either. We all are. The FED was just giving us what we wanted.

And since June of 2014, the FED has pretty much lost all of it's effectiveness. They are out of ammo. Physics is in charge now.

Futilitist , 03/18/2015 at 10:36 am
Hey Caelan.

+100

I didn't mean to seem harsh on your style earlier (referencing the chicken and the dn_girl). And I obviously spoke *WAY* too soon. Forgive me. Now I think I understand. I had no idea you were building up to this! Your post above is an absolute work of art. The three posts together now form a kind of tryptic masterpiece.

And I do now think you may have uncovered something profoundly important, in terms of elephants in rooms. Bravo.

By the way, what did you make of my "The Mask of the Red Death" allegory post?

http://peakoilbarrel.com/opec-crude-plus-more-on-eia-estimates/comment-page-1/#comment-504992

Who is Prince Prospero? Who is The Red Death? 😉

Caelan MacIntyre , 03/19/2015 at 10:48 am
It's 'laughable' and kind of curious, the hypocrisy and fairly misplaced self-righteous net-nannyism of some.

I think it had less to do with this dn_girl and more that I stepped on Mike's tail, maybe a few others'; the wish of $110 oil. I mean, what if you lost ~50% of the value of something overnight? Well that's what happened of course. (Many in certain situations might well come to this blog for insights and answers; some in less than the best of moods and frames of mind– and as time goes on. I think we should reflect on this. . This is the time of peak oil; of the decline of global industrial civilization. A New Era. How often do new eras occur? In the middle of single lifetimes?)
I hear many men, especially, more than women, if we want to talk sex, are prone to greater difficulty when it comes to work issues. Like, work is 'everything' to some of them.

The thought did occur that if dn_girl is/was not a 'writeup', then maybe she is related to someone on here, even Mike, himself. In which case she might as well be a writeup.
I mean, aside from the vitriol he laid down about his own industry, he did seem desperate in some of his comments. 'Stabbed me in the back'?…
If your business is literally hemorrhaging, would you want to, somewhat less mindfully even, given your state, attempt to drum up business in any way you can? I would.

In any case, if Mike read some of my comments, he might have got a sense that I am against wage-slavery ('the jobemployee') and against certain forms of industry (like Mike's), against hierarchy ('boss/employee') and my comments with the girl, of course, making fun of company-ownership (Mike has one?). So I think it was less about the girl and simply that, over time, Mike's head was pumped and pumped by his work and my commentary until it exploded.

Everything But The Girl (for Mike)

Caelan MacIntyre , 03/19/2015 at 11:52 am
"By the way, what did you make of my "The Mask of the Red Death" allegory post?" ~ Futilitist

Oh ya, that one. And you think my chicken was over the top?! 'u^
In these Times of Twitter Texts, it is a long read, but I do like Poe who died way to young for my taste.
I am heading out but will grab a nice warm tea and read it over candlelight later tonight. Maybe prop my laptop half on the closed toilet seat and half on the bathtub edge and read it and its original reference in the bath after Russia Today.

до свидания

[Jul 14, 2016] IEA Gasoline Glut Could Cause Oil Price Rout

naked capitalism
Robert Hahl

Perhaps the true purpose of financial austerity is to reduce oil consumption world wide.

tegnost

indeed perhaps, as our financial overlords have such clear benevolent foresight and care about people, not profits or perhaps demand has never recovered from $4/gal gas in 2007 and it's much simpier than that but perhaps the $4/gal gas was done on purpose in order to kill demand and reduce oil consumption, first by high price and then by austerity, perhaps they just wanted to find out what price of gas (apparently $4/gal) would crash the economy so they could save the world through austerity, but first they wanted to get some money in the bank so they could survive his "austerity period" because their kids can't take out student loans because they create an austerity rich environment that the children of the world benefit from but their kids were brought up right so they don't need austerity to be good global citizens, or perhaps crows communicate through quantum vibration and that's why we can't understand the meanings in their throaty calls .

Robert Hahl

If peak oil is a problem, austerity is a solution.

rjs

it's not a demand side problem; it's supply, which built up as refinery margins were near record highs and contango made it profitable to store products

ambrit

Local fuel prices show a more 'nuanced,' which is business speak for rent extraction oriented, situation. Sunday, we went to Laurel, a town some twenty miles north of Hattiesburg. The cheapest gasoline in Hattiesburg cost $1.99 per gallon. Laurel had gasoline selling for $1.76 per gallon, all over town, not in isolated pockets. This price disparity was consistent across brands and types of location. Laurel does not have it's own refineries.
The Oil business has a few rules of it's own, which lowly consumers are not privy to.

Isotope_C14

Seeing as Hattiesburg is in the northern part of Forrest County, and Laurel is in Jones County, could the price disparity be a component of county taxes?

Also, EPA requirements include a variety of fuel formulations depending on desired pollutant reduction in a given air-space. Some formulations are for reduced volatile organics and they may have varying prices.

MLS

day-to-day fuel prices are heavily influenced by all sorts of factors like local tax rates, the cost of operating any convenience store or auto service on premises (local ordinances regarding wages, for example), the volume of business they do, whether a particular city or county has a specific ordinance relating to gasoline formulations, the cost of transporting the fuel from refinery to the station (generally speaking farther = more expensive), and so on. That you're seeing different prices 20 miles apart is not necessarily evidence of rent extraction.

Chauncey Gardiner

Puzzling that the price of ethanol, a lower btu and more corrosive fuel that is added to and blended with petroleum-based gasoline by refineries, has been maintained in a tight price range since late 2015 and is currently priced near its all-time highs. This while the price of gasoline has fallen. Why?

NeqNeq

Wasn't there a post a few days ago which showed the US EIA' weekly data was not lining up with actual monthly numbers? Meaning that there were large revisions being made to prior (2) month volumes?

Why should last weeks EIA inventory numbers be considered as anything but a noisy estimate subject to lots of revisions?

ambrit

The more cynical among us wonder in what direction the 'revisions' should really go.

NeqNeq

I get that. And I am sympathetic. That doesn't change the fact that any prognostication (on the supplied info) is mood affiliation. Using your gut is fine. Hell, it might be instrumentally better than reasoned argument in certain situations. No need to claim its something other than your gut though. Unless, you are trying to sell something. Then its probably useful to engage in post-hoc rationalization.

Pwelder

Two points to remember about "glut" chatter in the Oil and Gas space:

1) The IEA – and to a lesser extent, the EIA – work for governments of nations which are net importers of crude and products. These governments prefer low prices. This doesn't mean that their published data is deliberately bad. It does mean that if there's a number that lends itself to a bearish interpretation, they'll make sure you know about it.

2) One way to generate such numbers is to shift inventories from jurisdictions with low transparency on storage levels (e.g. the Persian Gulf) to jurisdictions where reporting is somewhat better (US, Western Europe.) The Saudis have been doing quite a bit of this, as part of their war on Iranian/Russian oil revenues. This will be coming to an end within a year or so, as realities of supply and demand overwhelm operations aimed at "painting the tape".

a different chris

>The Saudis have been doing quite a bit of this

Funny how oil has gotten so messed up – the major producers want to broadcast the fact that there is a glut. Ah Capitalism in all its contradictions

Something to point out to the goldish bugs – the people who just have to have currency attached to something physical, since gold is a hilarious currency anchor in this day and age* they have been switching to recommending oil as the baseline. Wonder how they will spin this?

*think about explaining to an intelligent and even sympathetic-to-backed-currency alien, without any historical reference, why you would pick gold

[Jun 15, 2016] Oil Pares Losses After U.S. Crude Supplies Decline a Fourth Week

Notable quotes:
"... Crude inventories fell by 933,000 barrels last week, according to the U.S. Energy Information Administration. A 2.33 million barrel decline had been projected by analysts in a Bloomberg survey ahead of the release. ..."
"... Crude output dropped to the lowest level since September 2014, the EIA data show ..."
"... Nationwide crude supplies fell to 531.5 million barrels in the week ended June 10, according to the EIA. ..."
Jun 14, 2016 | Bloomberg

Crude inventories fell by 933,000 barrels last week, according to the U.S. Energy Information Administration. A 2.33 million barrel decline had been projected by analysts in a Bloomberg survey ahead of the release. The American Petroleum Institute was said to report Tuesday that inventories rose 1.16 million barrels.

Crude output dropped to the lowest level since September 2014, the EIA data show

... ... ...

Nationwide crude supplies fell to 531.5 million barrels in the week ended June 10, according to the EIA. Stockpiles climbed to an 87-year high of 543.4 million barrels in the last week of April, EIA data show.

Oil-market news:

[Jun 09, 2016] Oil Holds Steady As EIA Confirms 3.2M Barrel Draw

OilPrice.com

Official data released early on Wednesday confirms expectations of a U.S. crude oil inventory draw, with the Energy Information Administration (EIA) showing inventories down by over 3.2 million barrels for the week ending 3 June.

The EIA's latest weekly status report, released at 10:30am EST, reported a 3.226-million draw on U.S. crude inventories, while the consensus had called for a drop between 2.7 million to 3.4 million barrels. The new data puts U.S. crude oil inventories at 532.5 million barrels-a figure that is still historically high for this time of year.

The EIA's report follows Tuesday's inventory report from the American Petroleum Institute (API), which shows a draw of 3.56 million barrels, slightly more than the official figures just released.

Oil rose above $50 on Tuesday, following the API report, and was holding steady, close to $52 in early Wednesday trading prior to the EIA's weekly status report release.

The Weekly Petroleum Status Report showed gasoline inventories with a build of +1.01 million and distillate inventories with a build of +1.754 million.

U.S. Crude refinery inputs averaged 16.4 barrels per day, according to Wednesday's numbers. That number is 211,000 barrels per day more than the previous week's average. Refineries were at 90.9% of their operable capacity this past week, and gasoline production increased, averaging over 10.1 million barrels per day.

Related: India Putting Floor Beneath Oil Prices As Demand Continues To Soar

U.S. crude oil imports averaged 7.7 million barrels per day last week, which was down by 134,000 barrels per day from the week before. Total motor gasoline imports averaged 815,000 barrels per day. Distillate fuel imports averaged 167,000 barrels per day last week.

Total commercial petroleum inventories increased by 3.2 million barrels.

The EIA notes that total motor gasoline inventories increased by 1.0 million barrels last week, and are well above the upper limit of the average range.

By Lincoln Brown for Oilprice.com

[Jun 08, 2016] EIA Short Term Energy Outlook

Notable quotes:
"... The longer it takes the EIA to correct this the more dramatic the market reaction will be. I could see a severe price reaction since WTI is now firmly above $50, and the overwhelming sentiment/fear is that frackers will all instantly completing thousands of wells at that price. It would be an incorrect conclusion, but the timing between $50 WTI and revisions that show increased production would match the sentiment perfectly and oil prices would surely experience a significant correction. ..."
peakoilbarrel.com

Peak Oil Barrel

Well hell, if you can cut capex by 62% and continue to produce at record highs, then I say go for it.

...In November 2014 the [rig] count stood at 3,570 rigs. Last month the count was 1,405, a drop of 2,165 rigs or 61%.

...If my prediction of 2015 as the year crude oil peaked is to be proven wrong, it looks like those making that claim will have to wait a few years to make their case. I know, there is nothing about OPEC in this report but OPEC is looking pretty shaky right now.

Brian Rose, 06/07/2016 at 4:38 pm

Dennis,

When would you expect it to become clear to the markets that U.S. production has been higher than forecast for several months?

The EIA's weekly inventory and production data comes out tomorrow morning. Any chance that they will start moderating their weekly production decline estimates tomorrow, or even say production increased to make up the gap?

Anyone here know what the time lag is likely to be?

I mean, the gap has become wide enough that they must be aware that their stated production is too low, right?

The longer it takes the EIA to correct this the more dramatic the market reaction will be. I could see a severe price reaction since WTI is now firmly above $50, and the overwhelming sentiment/fear is that frackers will all instantly completing thousands of wells at that price.

It would be an incorrect conclusion, but the timing between $50 WTI and revisions that show increased production would match the sentiment perfectly and oil prices would surely experience a significant correction.

learner2, 06/07/2016 at 6:01 pm

If the EIA comes out saying production had increased to fill the gap, I would think the market will see that the price went up in real time, meaning supply and demand already balancing, implying that demand must be really high to soak up all the supply. I don't think thats a reason to sell, quite the opposite in fact.

[Jun 07, 2016] Short-Term Energy Outlook June 2016

IEA is probably OK for use as historical data source, but any use of their forecasts is a sign of gross negligence, based on their track record. Their 'waterfall" style forecasts are just propaganda.
My feeling is that 80 dollars bbl are needs to increase production. Before that it will might be continue to decline. Saudis are a spent bullet. So chances of them coming into play again to suppress oil price are close to zero.
If so, the key question we need to answer is when oil will hit this magic price point.
U.S. Energy Information Administration (EIA)

U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015. Production is forecast to average 8.6 million b/d in 2016 and 8.2 million b/d in 2017, both unchanged from last month's STEO. EIA estimates that crude oil production for May 2016 averaged 8.7 million b/d, which is more than 0.2 million b/d below the April 2016 level, and approximately 1 million b/d below the 9.7 million b/d level reached in April 2015.

[Jun 06, 2016] Exported oil from Canada totals 120,000,000 barrels per month, 4,000,000 bpd.

peakoilbarrel.com
R Walter , 06/04/2016 at 7:10 am
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTIMUSCA1&f=M

Exported oil from Canada totals 120,000,000 barrels per month, 4,000,000 bpd.

Imported oil from Canada included in the net import numbers?

11 cars of crude from the Bakken derailed in Oregon today and caught fire. likbez , 06/04/2016 at 12:41 pm

There is another nuance here that was discussed before: It looks like EIA does not subtract imported from the USA dilutant in the total volume of oil exports from Canada overstating the total heavy oil production by this amount (double counting).

Raw bitumen must be blended with around 30% of diluent. At the moment Canada uses for diluent about 200,000 to 250,000 bpd of condensate, most of that imported from the United States. Much of it travels from the U.S. Gulf Coast, where supply is abundant so there are significant transportation costs involved.

http://www.reuters.com/article/us-canada-oil-condensate-idUSKBN0EH18420140606

Dennis Coyne , 06/04/2016 at 1:45 pm
Hi likbez

This might effect net exports, but if done properly it does not.

First and barrel of condensate is exported then it is imported, the net is zero.

likbez , 06/05/2016 at 10:58 pm

It overstates the world total production by the amount of condensate used for dilution, is not it?

In this case EIA adds production numbers from all countries, but it do not take into account that part of Canadian oil and Venezuelan oil was "already produced" and accounted in the USA production stats.

So Dennis your world production figures are fudged :=)

Dennis Coyne, 06/06/2016 at 10:25 am
Hi Likbez,

The production statistics include the oil produced, not the oil shipped.

So no the production statistics may not be overstated.

Canadians are pretty smart, I believe they know how much oil they produce and are not counting the condensate imported to ship the bitumen as "produced oil".

My guess is that the secondary sources that estimate Venezuelan output also know they should not count imported condensate as oil production.

The calculation is really quite simple, if one counts production by what flows through the pipeline, just deduct the imported condensate used to create the dilbit.

The World numbers are not that accurate so any number reported is no more than a rough guess (+/- 1 Mb/d).

[Jun 02, 2016] EIA Once Again Contradicts API Reports Crude Draw

Notable quotes:
"... The United States Energy Information Administration (EIA) reported a draw of 1.366 million barrels of crude oil on Wednesday, falling short of what experts predicted would be a 3.1-million barrel decrease in US crude oil supplies. ..."
"... Last week, crude oil inventories reported by the EIA decreased by 1.4 million barrels, but still represented "historically high levels for this time of year," an official document read. Tuesday's American Petroleum Institute (API) figures said crude inventories increased by 2.35 million barrels, once gain contradicting the EIA's numbers, but also defying its own forecasts. ..."
"... Last week's API report said supplies of the unrefined substance experienced a 5.1 million barrel drop - the largest such event since December. The market responded to the decrease and Brent oil prices almost hit $50 a barrel - a seven month high. ..."
"... many of the U.S.' major energy producing states saw slightly lower production rates during May, including Texas and North Dakota. Offshore drilling sites in the Gulf of Mexico represented a notable exception, which saw a month-over-month increase of 4.1 percent in crude oil production. ..."
finance.yahoo.com

The United States Energy Information Administration (EIA) reported a draw of 1.366 million barrels of crude oil on Wednesday, falling short of what experts predicted would be a 3.1-million barrel decrease in US crude oil supplies.

Last week, crude oil inventories reported by the EIA decreased by 1.4 million barrels, but still represented "historically high levels for this time of year," an official document read. Tuesday's American Petroleum Institute (API) figures said crude inventories increased by 2.35 million barrels, once gain contradicting the EIA's numbers, but also defying its own forecasts.

The decrease suggests a greater demand for oil in the United States, according to the source's analysis.

Last week's API report said supplies of the unrefined substance experienced a 5.1 million barrel drop - the largest such event since December. The market responded to the decrease and Brent oil prices almost hit $50 a barrel - a seven month high.

On June 2nd, the barrel price of oil reached $50.10 cents as the OPEC meeting commenced in Vienna, according to NASDAQ's estimates.

Gasoline inventories also faced a draw of 1.492 million barrels after enjoying a two million barrel EIA-reported increase during the week ending on May 27th.

The agency's monthly report released earlier this week said many of the U.S.' major energy producing states saw slightly lower production rates during May, including Texas and North Dakota. Offshore drilling sites in the Gulf of Mexico represented a notable exception, which saw a month-over-month increase of 4.1 percent in crude oil production.

[May 20, 2016] As we moved closer to il deficit, suddenly, an extra outage will cause meaningful rallies instead of being mostly written off

I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious.
Notable quotes:
"... Eventually market sentiment focused on the recency bias of a 2 year glut is going to shift into the realization that disruptions, depletion, and growing demand have thrown the global balance into a dearth where inventories are being drawn to meet demand – such as the news about Saudi's relying on inventory to meet demand, the "missing" 800,000,000 barrels of OECD inventory from Q1 2016, or next weeks inevitable U.S. inventory draw. ..."
"... Suddenly, an extra outage (like… say… if anything happens to Venezuela) will cause meaningful rallies instead of being mostly written off. ..."
"... The best, live, interactive charts I am most fond of are here: https://www.dailyfx.com/crude-oil ..."
"... I expect one last fight around $50, a few day consolidation move lower. Then market realities will push WTI past $50, and shorts will have to cover pushing it even higher. ..."
"... Next thing you know were range bound in the mid-$50s at the end of June as everyone questions if shale production will magically skyrocket overnight. Maybe the rig count will go up by 3 or 4, and it'll spark a sell-off back to or below $50 because of the psychological recency bias of a "repeat of 2015". ..."
"... I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious. ..."
"... Most people are simply incapable of seeing a bigger picture, and they'll simply never understand the relationship between depletion, economic and population growth, and the long-term fact that this equals higher prices (and probably also, in the long run, higher poverty and unemployment). ..."
"... It is for that exact same reason that so many people we know will simply never get it. Physics doesn't have agency, it cannot be avoided, cajoled, or "blamed". It simply is, and that is so unsettling to our psyche that most people have a strong, unconscious drive to negate and ignore that conclusion even if they will acknowledge it is a sound and true explanation of how economics, growth, employment, wealth, energy (physics and thermodynamics), and depletion are woven of the same fabric. ..."
"... Brian – I think you are closer to reality than EIA or USGS, it will be interesting to see how it plays out against your scenario. ..."
"... There doesn't necessarily have to be more social breakdown in Venezuela to have an impact – Haliburton and Schlumberger are pulling out and will have immediate effect as the extra heavy oil production needs continuous attention to the wells. I'm surprised Angola and Algeria haven't seen disruptions yet either. ..."
peakoilbarrel.com

Brian Rose , 05/19/2016 at 11:04 pm

Big news from Canada today:

http://www.reuters.com/article/us-canada-wildfire-idUSKCN0YA0Z1

"The joint-venture Syncrude project told customers to expect no further crude shipments for May, trading sources said on Thursday, extending a force majeure on crude production from earlier in the month."

Eventually market sentiment focused on the recency bias of a 2 year glut is going to shift into the realization that disruptions, depletion, and growing demand have thrown the global balance into a dearth where inventories are being drawn to meet demand – such as the news about Saudi's relying on inventory to meet demand, the "missing" 800,000,000 barrels of OECD inventory from Q1 2016, or next weeks inevitable U.S. inventory draw.

Suddenly, an extra outage (like… say… if anything happens to Venezuela) will cause meaningful rallies instead of being mostly written off.

In fact, judging by the price action on oil over the last 24 hours, I'd say that sentiment is very close to a shift. From 11 AM forward crude oil marched higher relentlessly, even in opposition to dollar strength. Most every single commodity was down, as we're most every stock market… except oil.

The best, live, interactive charts I am most fond of are here: https://www.dailyfx.com/crude-oil

I expect one last fight around $50, a few day consolidation move lower. Then market realities will push WTI past $50, and shorts will have to cover pushing it even higher.

Next thing you know were range bound in the mid-$50s at the end of June as everyone questions if shale production will magically skyrocket overnight. Maybe the rig count will go up by 3 or 4, and it'll spark a sell-off back to or below $50 because of the psychological recency bias of a "repeat of 2015".

That is, until rational minds, or the market itself pushes prices back up as it becomes obvious that a slowdown in U.S. production declines will mean little in the face of mounting production declines around the globe, and "surprisingly" strong demand – because apparently predicting that lower prices will cause stronger than average demand growth is beyond the economic capability of the EIA or IEA, and markets tend to take their word as gospel.

I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious.

Every step of the way analysts and talking heads will be confused that prices aren't dropping back to $30 just like they were for 5 straight years from 2003 to 2008. They'll predict Saudi's will raise production to 12 mbpd any day now, or that shale will magically take off overnight.

They'll never even realize that they don't understand the history of Saudi production, or the logistical and financial complexities of shale production rising as fast as it did before. Instead they'll blame the banks, or speculators, or Big Oil for artificially making oil prices rise (without questioning why they let them fall for 2 years in the first place)

But then again if gas is cheap, which average people are fond of, their brain says "I like this, so it must be right". If gas is expensive their brain says "I don't like this, it must be wrong, what evil force made this happen?!?"

Most people are simply incapable of seeing a bigger picture, and they'll simply never understand the relationship between depletion, economic and population growth, and the long-term fact that this equals higher prices (and probably also, in the long run, higher poverty and unemployment).

Their lives will have ups and down, growth and recession, but they'll know and feel it is generally getting harder. They'll never be aware that this is the "fault" of nothing but physics and thermodynamics, even if told directly and shown all the rather clear evidence (I know every one of you has experienced this as I have). Instead, they'll blame those dang immigrants, or the Chinese, or the Congress, or regulations.

They'll blame anything that fits their paradigm enough to allow cohesiveness so their fragile lives can at least MAKE SENSE. You can't blame physics, and, frankly, I think that is a large psychological barrier for people comprehending what is happening. We need to have some agent to blame for things, and physics has no agency. Blaming something for a problem is settling because it gives us something to focus on to solve the problem, or, at the very least, avoid it. The evolutionarily beneficial need to assign agents as the cause of events is what pre-disposes us to believing that events we cannot easily assign agency to are, nonetheless, the will of… a greater, invisible, omnipresent agent.

It is for that exact same reason that so many people we know will simply never get it. Physics doesn't have agency, it cannot be avoided, cajoled, or "blamed". It simply is, and that is so unsettling to our psyche that most people have a strong, unconscious drive to negate and ignore that conclusion even if they will acknowledge it is a sound and true explanation of how economics, growth, employment, wealth, energy (physics and thermodynamics), and depletion are woven of the same fabric.

George Kaplan , 05/20/2016 at 1:36 am
Brian – I think you are closer to reality than EIA or USGS, it will be interesting to see how it plays out against your scenario.

A couple of other impacts are summer maintenance season in North Sea (Buzzard and, I think, Ekofisk have major turnarounds), Alaska and Canada (maybe Russia as well) and increased demand from driving season in USA and AC use in Middle East.

There doesn't necessarily have to be more social breakdown in Venezuela to have an impact – Haliburton and Schlumberger are pulling out and will have immediate effect as the extra heavy oil production needs continuous attention to the wells. I'm surprised Angola and Algeria haven't seen disruptions yet either.

[May 19, 2016] EIA has not a clue as to what US oil production will be down the road

Current production will have to continue to fall at current rates all though 2016 to reach current projection and end near 8.2 mbd.
Notable quotes:
"... Basically, the EIA is projecting much higher LTO production from mid-2020s, with continuing rising trend, instead of the peak in 2020 in AEO-2015. ..."
"... [According to EIA forecast] The cumulative tight oil output for the reference case from 2015 to 2040 is 57 Gb. I think that is too optimistic by a factor of 2 at least. My guess, based on the USGS 2013 study of the Bakken/Three Forks and work by David Hughes on other LTO plays in Drilling Deeper is about 30 Gb for US LTO output (2005 to 2050) if prices go to over $100/b and remain close to the AEO reference oil price scenario for 2020 to 2040. Those prices might not even be high enough (in other words 30 Gb is an optimistic estimate, or pessimistic if one believes very high oil prices will be needed for a transition to alternatives). ..."
"... It ain't just what US C+C production will be down the road. See my post further up. Hint, some observers think they are way out of left field on renewables as well. ..."
peakoilbarrel.com
Sorry for posting this down here instead of replying to one or the other AEO 2016 comments but I wanted to get it wide enough.

Just looking at the difference in C+C predictions for each year leaves one to believe that the EIA has not a clue as to what US C+C production will be down the road.

 photo AEO 2016_zpsgx8dxwkn.jpg

AlexS , 05/17/2016 at 1:31 pm
Ron,

Basically, the EIA is projecting much higher LTO production from mid-2020s, with continuing rising trend, instead of the peak in 2020 in AEO-2015.

Projected conventional production is lower than in AEO-2015

LTO was a "black swan" in 2010-14, and it remains one of the biggest uncertainties for future global oil production
-------–
In the early release, the EIA does not explain its assumptions for the LTO output. All they say is:

"Lower prices through 2017 has the greatest impact on tight oil
production, which drops to 4.2 million b/d in 2017 before
increasing to 7.1 million b/d in 2040. The general increase in
tight oil production is largely attributed to the higher oil prices
and the ongoing exploration and development programs that
expand operator knowledge about producing reservoirs."

Dennis Coyne , 05/17/2016 at 2:10 pm
Hi Ron and AlexS,

[According to EIA forecast] The cumulative tight oil output for the reference case from 2015 to 2040 is 57 Gb. I think that is too optimistic by a factor of 2 at least. My guess, based on the USGS 2013 study of the Bakken/Three Forks and work by David Hughes on other LTO plays in Drilling Deeper is about 30 Gb for US LTO output (2005 to 2050) if prices go to over $100/b and remain close to the AEO reference oil price scenario for 2020 to 2040. Those prices might not even be high enough (in other words 30 Gb is an optimistic estimate, or pessimistic if one believes very high oil prices will be needed for a transition to alternatives).

I think we may reach a peak that is 10% to 20% higher than the March 2015 peak in LTO output in 2021 and then output will start to decline rapidly by 2025, the maximum decline rate will be about 12% per year in 2027 and by 2032 decline will become more moderate at about 7%/year (this is US LTO output only).

Stoney , 05/18/2016 at 9:38 am
In addition to the 57 Gb of cumulative LTO production until 2040 they project 7 mb/d production on an upward trend at that point implying at least 50 Gb remains to be produced after that. So it's more like optimistic by a factor of 4 since you and Hughes rightly predict that LTO production will have declined to a low level by 2040-50.
Dennis Coyne , 05/18/2016 at 1:03 pm
Hi Stoney,

If we assume the decline has a similar slope of opposite sign, you would be correct, in the case of LTO I expect a pretty steep decline for 2 or 3 years (maybe a 15% overage decline rate over that period.)

So maybe a factor of 3 too high, but I agree more than a factor of 2 is definitely correct (if my 30 Gb estimate is roughly correct.)

Caelan MacIntyre , 05/17/2016 at 2:49 pm
Ron, your comment and that graph made me chuckle.

islandboy , 05/17/2016 at 3:13 pm

Just looking at the difference in C+C predictions for each year leaves one to believe that the EIA has not a clue as to what US C+C production will be down the road.

It ain't just what US C+C production will be down the road. See my post further up. Hint, some observers think they are way out of left field on renewables as well.

[May 17, 2016] Fire Nears Enbridge Oil-Sands Tanks, Workers Removed From Camps

peakoilbarrel.com
Duncan Idaho , 05/16/2016 at 10:22 pm
oops!
dependent origination:
Fire Nears Enbridge Oil-Sands Tanks, Workers Removed From Camps

http://www.bloomberg.com/news/articles/2016-05-16/alberta-blaze-nears-enbridge-oil-sands-terminal-as-flames-spread

[May 17, 2016] Workers evacuated from Alberta oil camps due to wildfire

permianshale.com

Some 8,000 workers at oil camps north of the fire-ravaged Canadian city of Fort McMurray were ordered to evacuate late Monday as authorities continued the battle to bring wildfires under control.

...Suncor, one of the major operators working on Canada's oil sands, issued a news release late Monday confirming it had "started a staged and orderly shutdown of our base plant operations" and that personnel were being transported to work camps further north. It stressed there has been no damage to Suncor infrastructure.

[May 15, 2016] The U.S. Department of Energys EIA projections continue to miss the mark.

Notable quotes:
"... And whatever the arcane arguments made by EIA, the fact remains that even without the impact of new policies, the agency's scenarios remain utterly incongruent to current reality. ..."
peakoilbarrel.com
islandboy , 05/13/2016 at 3:32 pm
The U.S. Department of Energy's EIA projections continue to miss the mark.

Much ink has been spilled over the vast difference between the scenarios put forward by the U.S. Department of Energy's Energy Information Administration (EIA) and reality. And whatever the arcane arguments made by EIA, the fact remains that even without the impact of new policies, the agency's scenarios remain utterly incongruent to current reality.

Unlike the agency's Annual Energy Outlook (AEO), International Energy Outlook focuses on global trends. But like AEO, the report misses the boat on renewable energy and makes projections about the fossil fuel industry which run counter to facts on the ground.

International Energy Outlook 2016's section on electricity forecasts that total generation from renewable energy sources will rise 2.9% annually under the baseline scenario to reach 29% in 2040, driven by non-hydro renewable energy rising 5.7% annually. By contrast, EIA expects global coal use to rise 0.8% annually, and for coal to still represent 29% of global electricity generation in 2040, the same amount as renewable energy.

[May 14, 2016] The Other Fire Fort McMurrays Slow Burn

Notable quotes:
"... As the project's most hight cost producers started to bleed cash, corporations laid off 40,000 engineers, labourers, cleaners, welders, mechanics and trades people with little fanfare and even less thanks. ..."
"... In fact bitumen has lost so much of its global investment lustre that, even before the Fort Mac blaze, Bloomberg reported that no new supplies of low-grade bitumen will enter the market in 2018. This would mark the first time in more than a decade that the rate of bitumen extraction, now at 2.4 million barrels a day, will not increase. ..."
"... Since the 1980s Koch Industries has been buying Canada's bitumen crude and turning it into high value jet fuel and gasoline at their Pine Bend refinery. In fact Koch Industries now gobbles up 300,000 barrels of bitumen a day and remains the single largest buyer of Canada's dirtiest crude. To the Kochs it's a no brainer: bitumen offers some of the most attractive refinery margins in the world. ..."
"... Bloomberg reported that no new supplies of low-grade bitumen will enter the market in 2018. ..."
"... With the oil price collapse the Kochs keep on making more money, while Alberta gets poorer.In February the Alberta government set a minimum value for bitumen at $10 per cubic metre. That equates to a value of about $1.50 per barrel of bitumen. But in 2014 the government's monthly report valued bitumen at $421 per cubic metre. The data suggests that bitumen has lost 97 per cent of its value during the price collapse. In other words companies once worth billions are now worth millions. ..."
"... When oil prices stood at $100, rash bitumen development made some sense. But when prices fell below $45 the gamble turned into Russian roulette. Unlike Saudi oil, most bitumen projects require prices of at least $60 to $70 a barrel to survive. ..."
"... And so most tar sands extractors (except those who own refineries) are now bleeding cash; many banks have developed nervous twitches; and thousands of workers have found themselves unemployed. The overproduction of bitumen explains why, says Rubin, "the oilsands morphed from an engine of economic growth into the epicenter of a made-in-Canada recession." ..."
"... Oil is currently over 45 bucks a barrel, but as Nikiforuk points out the values - especially related to raw bitumen - are insanely low and are simply cannon fodder for the Koch brothers war chest to unseat the Democrats. ..."
"... It seems to me another aspect of this is how quarterly profit driven short term thinking has ruled the day so completely that the reality that the solar energy bound up and stored in the tar-sands isn't going to evaporate is overlooked by the bean counters. One day, hopefully, someone will invent a technology that can harvest this energy without causing all the various pollution problems our current technologies create. ..."
"... Its easy to understand why the Koch brothers as but one of several parties are happy to oblige Alberta by buying low and selling high as Andrew Nikiforuk details. ..."
"... However none of the analyses exposes by what process are "Most Albertans and most Fort McMurray residents" silenced into the Koch brothers serfdom ..."
"... I quite appreciate how you observe what the problem politic is when you say "Their beliefs included 'big government is bad; the only good government is a small government' and 'self-regulation' and 'private industry always does it best'. Even after more than 35 years of spectacular failures these nutjobs still think they are on to something grand." ..."
"... Chris Hedges, from the US, a much more dysfunctional society than ours, sees violent revolution as the only way forward with many, many losers and his side being the winner. I'm in favour of that outcome but I fear it's far from certain who will be the winner while it is absolutely certain that there will be many losers. Without some immediate and significant change to our way of life both the natural environment and the social environment will soon reach a tipping point. Then there will no end to the missing people and carnage and wasted resources. ..."
"... My point is that I bought into Mr. Rubin's $200 dollar peak oil forecast. He had lots of facts and figures then too. He was still completely wrong. He may be completely wrong again today. ..."
thetyee.ca
by Andrew Nikiforuk

At the end of the day the $10-billion wildfire that consumed 2400 homes and buildings in Fort McMurray may be the least of the region's problems.

Although the chaotic evacuation of 80,000 people through walls of flame will likely haunt its brave participants for years, a slow global economic burn has already taken a nasty toll on the region's workers.

That fire began last year when global oil prices crashed by 40 percent and evaporated billions of investment capital in the tarsands.

As the project's most hight cost producers started to bleed cash, corporations laid off 40,000 engineers, labourers, cleaners, welders, mechanics and trades people with little fanfare and even less thanks.

Many of these human "stranded assets" endured home foreclosures and lineups at the food bank.

Worker flights to Red Deer and Kelowna got cancelled and traffic at the city's new airport declined by 16 per cent. Unemployment in Canada's so-called economic engine soared to nearly nine percent.

In fact bitumen has lost so much of its global investment lustre that, even before the Fort Mac blaze, Bloomberg reported that no new supplies of low-grade bitumen will enter the market in 2018.

This would mark the first time in more than a decade that the rate of bitumen extraction, now at 2.4 million barrels a day, will not increase.

... ... ...

Since the 1980s Koch Industries has been buying Canada's bitumen crude and turning it into high value jet fuel and gasoline at their Pine Bend refinery. In fact Koch Industries now gobbles up 300,000 barrels of bitumen a day and remains the single largest buyer of Canada's dirtiest crude. To the Kochs it's a no brainer: bitumen offers some of the most attractive refinery margins in the world.

Up in smoke? Even before the Fort Mac blaze, Bloomberg reported that no new supplies of low-grade bitumen will enter the market in 2018.

With the oil price collapse the Kochs keep on making more money, while Alberta gets poorer.In February the Alberta government set a minimum value for bitumen at $10 per cubic metre. That equates to a value of about $1.50 per barrel of bitumen. But in 2014 the government's monthly report valued bitumen at $421 per cubic metre. The data suggests that bitumen has lost 97 per cent of its value during the price collapse. In other words companies once worth billions are now worth millions.

... ... ...

When oil prices stood at $100, rash bitumen development made some sense. But when prices fell below $45 the gamble turned into Russian roulette. Unlike Saudi oil, most bitumen projects require prices of at least $60 to $70 a barrel to survive.

And so most tar sands extractors (except those who own refineries) are now bleeding cash; many banks have developed nervous twitches; and thousands of workers have found themselves unemployed. The overproduction of bitumen explains why, says Rubin, "the oilsands morphed from an engine of economic growth into the epicenter of a made-in-Canada recession."

Selected Skeptical Comments

Kevin Logan

Oil is currently over 45 bucks a barrel, but as Nikiforuk points out the values - especially related to raw bitumen - are insanely low and are simply cannon fodder for the Koch brothers war chest to unseat the Democrats.

The business case in the tarpit was always very dependent on massive subsidy, low royalty and political interference. Now that Alberta is just another Province with an NDP government and not the conservative mecca that rules the land from coast to coast, I suspect they will dole out much more pain for average folks.

Once the NDP there instills a massive tax regime with carbon taxes, sales tax and fees etc, to balance the budget on the backs of the people the conservatives will once again take back power and upscale the fleecing of the natural resource.

BC is on the same path, right now its the land of milk and honey because they need to build out the infrastructure to fleece us, but once the LNG facilities are in and the pipes are pumping, the pain will come. Fortunately for us they already are taxing us into the ground and hydro, fees licensing etc is already in place, so the fleecing of our natural resource wealth will result in less volatile boom and bust but no less of a complete fleecing - to be sure.

bruce kay > Kevin Logan

No one in Canada is being "taxed into the ground". that is an entirely fallacious statement, especially Alberta. Now you can certainly argue that the Tax regime is not particularly progresive in that the wealthier are proportionally under taxed but there is no doubt, particularly if one simply views other (generally more socially successful) countries, that taxation is a key element in creating opportunity where otherwise it does not exist.

That is at least one element that perpetuates the corporate dominance of our public policy that you talk about

Kevin Logan > bruce kay

Trust me, for Alberta to fix their woes, the plebes will feel as if they have been taxed into the ground. For decades the low tax environment of Alberta was its single pride and joy - the Alberta Advantage. Which is why the Cons would not mess with new taxes. The NDP was elected to get fair returns from the industry, but instead they capitulated and implemented a carbon tax they did not run on that only average folk pay as oil companies can write it off against their royalties. Bizarrely the new government plans to take that new 3 billion in annual revenue from average folk and hand it to industry to green up and what not, as there is no specifics released yet.

Letting off the oil companies, leaving royalty structures in tact and balancing the budget with new taxes on average Albertans was not what they ran on, but its what they delivered and its why the wildrose now polls first place way ahead of the NDP at some 25% in the polls.

bruce kay > Kevin Logan

Maybe I missunderstood your intent. I can't argue with that, on both counts. I'm not familiar with how the carbon tax revenue will be directed but certainly, lower income taxpayers need to avoid punitive costs simply because they can't avoid driving.

Otherwise, as you say the fury of populist revolt will sabotage whatever gains are made and the Trumps will fill the power void

RiversidePaulo > Kevin Logan

You'll never see an LNG plant built in BC. That ship sailed long ago.

WWallace Mud > Kevin Logan

Hi Kevin,

It seems to me another aspect of this is how quarterly profit driven short term thinking has ruled the day so completely that the reality that the solar energy bound up and stored in the tar-sands isn't going to evaporate is overlooked by the bean counters. One day, hopefully, someone will invent a technology that can harvest this energy without causing all the various pollution problems our current technologies create.

Future Canadians, our kids and grand-kids or theirs, will need energy to power whatever industries exist in the future, industries that will create their jobs and their future weal.

i say leave it in the ground, it'll only be worth more in the future. For sure this isn't the best plan from the banker's and shareholder's perspective, but it's the best plan for Canada and Canadians in the long term.

Tierra y Liberdad

I really enjoy reading Mr. Nikoruk's research on the future of oil. Clearly the numbers do not lie. The reality of certain laws are coming home to roost: the law of supply and demand, as well as the law of diminishing returns means bad news for the oil industry....and Canada thanks to past government's myopic, narrow oil-orgy led policies.

political ranger > Tierra y Liberdad

Read Rubin's report for a very sobering look at our near-term future.

cliche guevera > political ranger

I think people either get it or they don't want to get it.

WAC

If I was an unemployed homeowner in McMurray, I would take the insurance money and run!

cliche guevera > WAC

And the 72 week E.I.Program Trudeau announced today, to re-train and get a new job skill that might even pay better than the Fort Mac daily grind.

Mindcraft

Thank you Andrew Nikiforuk you have brought to light all the questions missing yet again in the mainstream media my wife has been spouting. It is unfortunately a gold rush town.

Eduard Hiebert > Mindcraft

If "gold rush" is an appropriate metaphor, in view of recent federal and provincial politics is it anywhere appropriate to limit this "rush" to an image of a "gold rush town"?

Mindcraft > Eduard Hiebert

http://movies.netflixable.com/ ...

It's all in Canadian History, repeat, delete, repeat.

Mindcraft > Eduard Hiebert

I have agonized over making examples from the beginning of the 1990's

If an industry creates waste, including premature death, it must invest in building ways to remedy the fallout and not employ a cover up team to continue the self distructive end game which is the lateral part of corporate un sustainability. The pulp mill near me has many fine hands on tech people all willing to address problems in their own time as a community yet they are constantly seen as a threat to shareholders achieving monetary gain from experimenting with the unknown in diversifying into creative sub groups.

No different than the Lego (before its forecasted demise many years ago) company letting parents decide, explore products of reality and culture. We have silo's of control in every level of governance.


Eduard Hiebert

Its easy to understand why the Koch brothers as but one of several parties are happy to oblige Alberta by buying low and selling high as Andrew Nikiforuk details.

However none of the analyses exposes by what process are "Most Albertans and most Fort McMurray residents" silenced into the Koch brothers serfdom when Nikiforuk concludes "Most Albertans and most Fort McMurray residents never wanted reckless growth. In a heartbeat they would have voted to slow down the tarsands years ago with higher royalties and better regulations, but their political masters refused to put on the brakes"?

def > Eduard Hiebert

The processes you refer to include the pathologies of capitalism and corporate 'democracy'. The therapy includes 'economic democracy' in which economic decision are based upon the control of all people effected by any given economic decision.

However, after decade after decade of corporate brainwashing such thoughts are not sufficiently sophisticated for serious consideration by present media, thoughtless talking heads, political propagandists, or god forbid, being explored in the curricula of the education system. It has proved to be a voracious and merciless process that shows few if any signs of relenting.

Eduard Hiebert > def

Since its the many who bear the costs of what the few impose on us, from beginning to your end agreed that "It has proved to be a voracious and merciless process that shows few if any signs of relenting."

Surely you are not suggesting say the Koch brothers initiate and do the necessary change for us as in to us when you yourself see that the answer involves "The therapy includes 'economic democracy' in which economic decision are based upon the control of all people effected by any given economic decision"?

Mindcraft > ScottyonDenman

6 hours ago

It is a mining camp that is sustained by federal gambling, how shrinkable is any gambling. Sustainability starts with no waste. Corporatists start with abuse and suckers to trample on, ie the ignoramus conmunitas.

disqus_Wf91wKMTsJ

Jeff Rubin, CIBC's former chief economist, notes that the world economy is stagnating; but the shrinking demand for tar sands oil is just part of the reason.

Rubin, along with most folks pushing for "green" energy, are being overly optimistic if they believe "an orderly transition that protects communities and oilsands workers, and rewards them for the economic contributions they've made by providing funds for retraining and industry diversification", will allow folks to avoid the economic pain that accompanies global resource scarcity.

Aside from nuclear energy, which has its own unique problems, there isn't another source of energy that has the same energy density and the same portability that fossil fuels provide.


political ranger > Eduard Hiebert
6 hours ago

In Klein's world there was no planning, no short & long term, only the here and now. They had, the PC's and wild-rosecrucian's still have, a rigid belief in their ideology, much like the religious zealots in the far east, or anywhere. Their beliefs included 'big government is bad; the only good government is a small government' and 'self-regulation' and 'private industry always does it best'. Even after more than 35 years of spectacular failures these nutjobs still think they are on to something grand.
Nobody cared when the riches were just flowing out of the ground. Now, as you say, the blindfolds are not working so well.

Eduard Hiebert > political ranger

I quite appreciate how you observe what the problem politic is when you say "Their beliefs included 'big government is bad; the only good government
is a small government' and 'self-regulation' and 'private industry always does it best'. Even after more than 35 years of spectacular failures these nutjobs still think they are on to something grand."

I not that by defining the ones who are doing this to us as "they" you too are not part of that group. So how instead of us the masses being silence, do we get to have our say and not be beholden tho the relatively few you refer to as "they"?

political ranger > Eduard Hiebert

2 hours ago

Sorry Ed, I don't know what you've written. Extensively or otherwise. Please state your thesis, perhaps not so extensively.
I'm not advocating bloodshed, nor to be clear, do I advocate more of the status quo. We quite clearly need a more immediate method of making culture-wide change.
How? I don't have The Solution, I'm afraid. I have advocated for a strong, aggressive and activist government. It would likely be their one and only time at bat but perhaps they might start the change (for the better) process.

Chris Hedges, from the US, a much more dysfunctional society than ours, sees violent revolution as the only way forward with many, many losers and his side being the winner. I'm in favour of that outcome but I fear it's far from certain who will be the winner while it is absolutely certain that there will be many losers.
Without some immediate and significant change to our way of life both the natural environment and the social environment will soon reach a tipping point. Then there will no end to the missing people and carnage and wasted resources.

anthony rose
5 hours ago

In my opinion:

I see what is going on at the Tyee. Any one who has anything that does not fit the pr-ordained narrative regarding Jeff Rubin, is deleted. Why?

Jeff Rubin is a man who predicted peak oil of $200 USD 10 years ago. He was wrong then and he is likely wrong now. Why do you accept his ideas as correct all the time? What happened to journalistic ethics and objectivity? So sad.

political ranger > anthony rose

5 hours ago

read his report. It's chock full of facts, figures and statistics about all kinds of things that in his OPINION leads to a decline in the petro-biz in Albaturda.
If you disagree with any of the aforementioned facts, figures and statistics; well let fly, we'd love to hear about it. Some of us are, after all, here in the Tyee, data junkies and logic zombies always looking for our next fix. Tell us what data is deficient and what should replace it or what flaw in the argument could lead to a different conclusion.
If you have a different opinion, don't hold back. We've heard just about everything from your kind. There is always a chance that one of you will actually make some sense.

anthony rose > political ranger

2 hours ago

In my opinion:

Here is a link to an article entitled: Jeff Rubin gets peak oil wrong from Canadian Business: www.canadianbusiness.co by the way what do you mean by the phrase : " from your kind"?

anthony rose > political ranger

an hour ago

In my opinion:

My point is that I bought into Mr. Rubin's $200 dollar peak oil forecast. He had lots of facts and figures then too. He was still completely wrong.
He may be completely wrong again today.

Again I ask what you meant by your phrase " From your kind?" ›

Jack Lumber

Oil will boom again. Global consumption continues to rise, but the global glut has stalled investment on new extraction. So our extraction levels will flatten out, but consumption will still rise. Eventually it will catch up. Hopefully it does so slowly, or there could be a future energy crisis.

[May 13, 2016] EIA completely missed the beginning of the LTO production decline amd continue to overestimate production because they are using mainly economical models for thier forecasts

Notable quotes:
"... We just did some work on the EIA/IHS report on well costs that came out a little while ago. We suspect that these longer peaking wells may be possible due to lower service costs. Operators have switched to natural sand, and lots of it. Not being an engineer, this is only an educated guess, but the general gist I can gather is that natural sand crushes more easily than artificial ceramic proppant, but is significantly cheaper. ..."
"... The decline after peak of new wells appears to be significantly steeper than previous years, so when companies claim 40% IP increase = 40% EUR increase, one should be extremely skeptical. By month 7 of production, the average 2014 well had produced 18% more oil than the average 2010 well at the same stage of its life – but by month 26, that difference was down to 7.6%. In month 3, the average 2014 well had produced nearly 9% more than the average 2013 well – by month 26, that was down to 2%. Those are total cumulative oil produced figures, btw. ..."
peakoilbarrel.com
Enno Peters , 05/13/2016 at 4:58 am

Thanks for the post Ron.

@Alex,

coming back to your comment at the end of last post:

" The chart below shows that both the EIA Drilling Productivity Report and the EIA/DrillingInfo monthly LTO production statistics tend to underestimate the resilience of tight oil production, at least in the case of the Bakken. The EIA estimates for February and March will likely be revised upward. I think that even bigger upward revisions will be done for the Eagle Ford."

The small declines in Feb & March is indeed surprising. Based on the new well count, and on 2015 1H well profiles, I expected declines around 20-25kbo/d. It does appear that the average well that started in the 2nd half of 2015 behaves quite differently, peaking for a few months longer than usual. This is caused for a large part by wells from Burlington, XTO, CLR & QEP. That has messed a bit with my projections, and probably also the EIA. If those wells had behaved more like earlier wells, ND production would be at least 20 kbo/d lower in March.

Questions in my mind now are:

  1. How will these "higher for longer" flow rates behave over the next couple of months?
  2. Will we see the same behavior in all new wells?
  3. Will we see something similar in other basins?

I think you could be right about those upward revisions. To me it shows that there is quite some new uncertainty caused by these changing dynamics.

AlexS says: 05/13/2016 at 5:38 am

Enno,

Thanks very much, that's really surprising. Perhaps they are using some new completion techniques? Will try to find something in companies' presentations.

gwalke says: 05/13/2016 at 5:47 am

Great comment, Enno, as ever. It's important to remember that the EIA's forecasts seem to generally be very "smooth", and their models are mostly done at an economic level, meaning they aren't working from number of wells upwards. This meant they completely missed the beginning of the production decline – their initial forecasts kept on adding ~30kbpd a month to Bakken until April15, for example. Now they are a little to heavy to the downside.

We just did some work on the EIA/IHS report on well costs that came out a little while ago. We suspect that these longer peaking wells may be possible due to lower service costs. Operators have switched to natural sand, and lots of it. Not being an engineer, this is only an educated guess, but the general gist I can gather is that natural sand crushes more easily than artificial ceramic proppant, but is significantly cheaper.

Our assumption on the interests of operators like CLR and WLL is that they currently want to maximise short-term production to boost revenue, and they care significantly less about maximising recovery. Using lots of natural sand fits in with that – though the sand will be crushed more quickly than if artificial proppant will be used, more fractures will be propped open in the short term.

Many of these short term production gains may be given up shortly after any price increase, as the service costs will also rise, and the short term revenue considerations will become less important. That's the theory we're working under currently, anyway…

The decline after peak of new wells appears to be significantly steeper than previous years, so when companies claim 40% IP increase = 40% EUR increase, one should be extremely skeptical. By month 7 of production, the average 2014 well had produced 18% more oil than the average 2010 well at the same stage of its life – but by month 26, that difference was down to 7.6%. In month 3, the average 2014 well had produced nearly 9% more than the average 2013 well – by month 26, that was down to 2%. Those are total cumulative oil produced figures, btw.

[May 12, 2016] The EIAs International Energy Outlook 2016 is out today

peakoilbarrel.com
The EIA's International Energy Outlook 2016 is out today

The new projections imply 1% annual-average growth in global liquids consumption for the period 2012-2040, including virtually zero growth in the OECD countries and 1.9% annual average growth in non-OECD countries.

World liquids consumption by region, Reference case (mb/d)

AlexS , 05/11/2016 at 9:37 am
World total energy consumption by source, Reference case
(Quadrillion Btu)

AlexS , 05/11/2016 at 9:51 am
Share of various sources in total world energy consumption (%)

Ron Patterson , 05/11/2016 at 11:56 am
Thanks for the chart Alex. I fail to see any exponential growth in renewables, (other in this case and that includes hydro and geothermal), or any exponential shrinkage in liquids. I think the EIA would have a strong disagreement with Dennis. :-)
AlexS , 05/11/2016 at 12:17 pm
Ron,
Assuming that growth in hydro is very low, other renewables are likely to increase at a high rate, but from a very low base. So fossil fuels will retain their dominating position in total energy consumption. That's a common view among all key energy forecasting agencies

"I think the EIA would have a strong disagreement with Dennis."

And with many other contributors to this blog :-)

[May 07, 2016] Winds of up to 70 km per hour helped fuel the fire growth to 101K hectares on Friday -- an area more than 10 times the size of Manhattan – up from just 10K ha earlier in the week.

www.theguardian.com

Unseasonably hot temperatures, extremely dry conditions and winds of up to 70km/h (44mph) helped fuel the fire's spectacular growth to 101,000 hectares on Friday – an area more than 10 times the size of Manhattan – up from just 10,000ha earlier in the week.

With temperatures expected to hit 27C (80F) on Saturday, officials said the fire could double in size by end of the day.

On Friday, Rachel Notley, the premier of Alberta, said Fort McMurray was still trapped in the grip of the inferno. "The city of Fort McMurray is not safe to return to and this will be true for a significant period of time," she told the thousands of evacuees scattered across the province.

The extent of the destruction wreaked by the fire was evident in a video uploaded to YouTube on Thursday . Apparently shot by a firefighter, the footage shows a devastated landscape dotted with piles of blackened rubble and the burned out frames of pickup trucks. A thick haze of smoke still hangs overhead, while small fires flare among the ruins.

[May 07, 2016] 500,000 Barrels And $1 Billion In Losses The True Cost Of Canada's Wildfire

OilPrice.com
"As more information comes in, it appears that the impact on production of the wildfires in Alberta will be significant," said analysts at JBC Energy in Austria. Analysts noted that Shell shut its Albian Sands mine and Suncor shut its base plant, while producers Syncrude Canada and Connacher Oil & also reduced output in the region.

"Taken together this amounts to some 0.5 million b/d of capacity that is currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed. On top of that, trains are not operating near Fort McMurray, according to the Canadian National Railway," said the analysts.

But the most comprehensive answer so far comes from Morgan Stanley's Benny Wong who estimates that the total number of offline capacity will be anywhere between 400 and 500 mbbl/d, with the shut-in expected to last about 10 days, potentially reducing total market output by as much as 5 million barrels.

[May 05, 2016] Wildfire in Albertas energy heartland forces thousands to flee

Notable quotes:
"... Suncor said evacuees were welcome at its Firebag oil sands facility, while Canadian Natural Resources Ltd (CNQ.TO) said it was working to ensure any affected CNRL workers and their families could use its camps. ..."
"... Shell Canada (RDSa.L) also said it would open its oil sands camp to evacuees and was looking to use its airstrip to fly out non-essential staff and accommodate displaced residents. ..."
"... Most oil sands facilities are to the north and east of the city. Representatives of Syncrude, CNOOC (0883.HK) subsidiary Nexen Energy and pipeline company Enbridge all said their operations were unaffected. ..."
Reuters
Alberta is racing to evacuate thousands of people as an uncontrolled wildfire burns near Fort McMurray, in the heart of Canada's oil sands region, forcing residents to flee north to safety on Tuesday.

Alberta appealed for help from other provinces and Ottawa to help fight the fire and airlift people from the city. Authorities issued a mandatory evacuation order for all of Fort McMurray, which affects the city's 80,000 residents.

The 2,650-hectare (6,540-acre) fire, which was discovered on May 1, shifted aggressively with the wind on Tuesday afternoon to breach city limits. The blaze closed off the main southern exit from the city, prompting residents to head north towards the oil sands camps

... ... ...

Suncor Energy (SU.TO), whose oil sands operations are closest to the city, said its main plant, 25 km (16 miles) north of Fort McMurray, was safe, but it was reducing crude production in the region to allow employees and families to get to safety.

Suncor said evacuees were welcome at its Firebag oil sands facility, while Canadian Natural Resources Ltd (CNQ.TO) said it was working to ensure any affected CNRL workers and their families could use its camps.

Shell Canada (RDSa.L) also said it would open its oil sands camp to evacuees and was looking to use its airstrip to fly out non-essential staff and accommodate displaced residents.

... ... ...

Suncor said evacuees were welcome at its Firebag oil sands facility, while Canadian Natural Resources Ltd (CNQ.TO) said it was working to ensure any affected CNRL workers and their families could use its camps.

Shell Canada (RDSa.L) also said it would open its oil sands camp to evacuees and was looking to use its airstrip to fly out non-essential staff and accommodate displaced residents.

... ... ...

Most oil sands facilities are to the north and east of the city. Representatives of Syncrude, CNOOC (0883.HK) subsidiary Nexen Energy and pipeline company Enbridge all said their operations were unaffected.

The fire is the second major one in the oil sands region in less than a year. Last May, wildfires led to the evacuation of hundreds of workers from the region, and a 9 percent cut in Alberta's oil sands output.


[May 04, 2016] Canada's Oil And Gas Industry To Lose 24,000 Jobs In 2016 Report

Notable quotes:
"... Capital spending in the industry has fallen from around $35.7 billion in 2014 to $25 billion in 2015. The report says the only reason capital spending has remained as high as it has is because companies are focused on completing late-stage mining projects. It expects capital spending to drop off even further after 2018 once those projects are completed, with a forecast for 2010 of $17.9 billion. That's a decline of more than 50 per cent. ..."
Alberta Oil Magazine

PetroLMI, a division of Calgary-based Enform, projects the industry will lose between 16,530 and 24,425 jobs in 2016 alone due to the economic slowdown. That's on top of the 28,145 jobs, or 12 per cent, the firm says the industry lost in 2015.

... ... ...

The report blames the drop in capital spending in the industry, which it says is due to the low oil price environment, for the decline in jobs. Capital spending in the industry has fallen from around $35.7 billion in 2014 to $25 billion in 2015. The report says the only reason capital spending has remained as high as it has is because companies are focused on completing late-stage mining projects. It expects capital spending to drop off even further after 2018 once those projects are completed, with a forecast for 2010 of $17.9 billion. That's a decline of more than 50 per cent.

[Apr 29, 2016] Why Canadas Oil Industry May Never Be the Same

Notable quotes:
"... Canada produces 7 million barrels of oil equivalent per day of bitumen, crude oil, natural gas liquids and natural gas, making it the fifth largest hydrocarbon-producing jurisdiction in the world. The country won't be going off the oil and gas business anytime soon, ..."
"... One of the attractions of Canada in recent years is foreign capital was welcome to develop massive, if expensive, oil reserves. Now Iran is said to be open for business. ..."
OilPrice.com

Canada Down But Not Out

Canada produces 7 million barrels of oil equivalent per day of bitumen, crude oil, natural gas liquids and natural gas, making it the fifth largest hydrocarbon-producing jurisdiction in the world. The country won't be going off the oil and gas business anytime soon, so keeping it going will remain good business and the largest resource industry in Canada.

But the current mantra of "lower for longer" is wrong. This is only the price of oil. In terms of the Canadian oil and gas industry [oil production] there are multiple reasons it could be "lower for a long time, possibly forever." For a country that performs all elements of producing still-essential hydrocarbons as well or better than anyone else in the world – everything from broad economic participation to worker safety to environmental protection – that is a tragedy.

... One of the attractions of Canada in recent years is foreign capital was welcome to develop massive, if expensive, oil reserves. Now Iran is said to be open for business. As is Mexico. Saudi Arabia wants to diversify its economy away from oil and sell its refining operations to global investors. The Saudis are talking bravely about an economy no longer dependent upon oil profits as soon as 2030.

Western Canada is not the only oil-producing jurisdiction wondering about its future. It is, however, the highest cost oil-producing jurisdiction wondering about its future.

[Apr 23, 2016] 04/21/2016 at 1:39 pm

Notable quotes:
"... In response to continued low oil prices, onshore crude oil production in the Lower 48 states is expected to decline from an average of 7.41 million barrels per day (b/d) in 2015 to 6.46 million b/d in 2016 and to 5.76 million b/d in 2017. ..."
"... EIA's April STEO forecasts Brent crude oil prices averaging $35/b in 2016 and $41/b in 2017, with the December 2017 price averaging $45/b. ..."
"... In contrast to the forecast of declining Lower 48 onshore production through 2017, federal Gulf of Mexico oil production is projected to increase from 1.54 million b/d in 2015 to 1.66 million b/d and to 1.82 million b/d in 2016 and 2017, respectively. Alaska's oil production is projected to slightly decrease from 0.48 million b/d in 2015 to 0.47 million b/d in 2016 and to 0.46 million b/d in 2017. ..."
"... Increased production from the federal Gulf of Mexico (GOM) is not enough to offset those declines, with total projected U.S. production falling from 9.43 million b/d in 2015 to 8.04 million b/d in 2017. ..."
"... Eyeballing the decline of Q1 2015, onshore : it appears to drop from about 7.5 to 5.0 in 1 year time (33%). That's an even higher decline rate than I expected. Looks like not only the production I'm tracking is declining at a rapid rate. ..."
"... In my view we will see actually a massive decline in wells due to plugging of wells. The latest RRC report for March 2016: http://www.rrc.state.tx.us/oil-gas/research-and-statistics/well-information/monthly-drilling-completion-and-plugging-summaries/ shows already a net decline of 1000 wells per month. So, a 33% decline of production is realistic and probably even too conservative. ..."
"... The plugged wells are stripper wells with output of 5 b/d or less. So if 1000 of these wells are plugged each month that's 5 kb/d lower output each month or a 60 kb/d total decrease over 12 months. Not really much of a factor. ..."
"... US production will be declining dramatically over the next months. Even the CEO of Pioneer and the IEA admit the decline. The only difference is that I think the decline will last much farther than Sep 2016 and will last well into 2017. ..."
"... The permits minus plugged is not really very useful. Oil wells completed relative to wells plugged is of greater interest. Every well completed (average of about 250 kb/d for first year) covers about 50 plugged stripper wells (with an average of under 5 b/d). So about 20 completed wells will make up for 1000 plugged wells. ..."
"... Using EIA data, TX decline rate is 9% from March to Jan 2015. Using Dean's data from March 2015 to Dec 2015 the decline is 6.1% (Jan was anomalous so I threw it out, if it is included the decline rate is 4.2%) ..."
"... As regards projections for the rest of this year and 2017, I agree that the EIA's price assumptions are too low. Higher prices may result in higher volumes. That said, I do not expect a quick rebound in drilling/completion activity as most shale companies are in a difficult financial situation and will not rush to increase capex. And even in the shale industry, with its short investment cycle, there is a time lag between a decision to increase capex and first production. ..."
"... The EIA's projections may be too low, but I still do not expect a quick rebound in the US C+C output. ..."
peakoilbarrel.com
EIA's US C+C output projections for 2016-17.
The numbers are from the April STEO, but with some additional details.

Source: http://www.eia.gov/todayinenergy/detail.cfm?id=25892

In response to continued low oil prices, onshore crude oil production in the Lower 48 states is expected to decline from an average of 7.41 million barrels per day (b/d) in 2015 to 6.46 million b/d in 2016 and to 5.76 million b/d in 2017.

The number of active onshore drilling rigs in the Lower 48 states fell 78% (from 1,876 to 412) between the weeks ending on October 31, 2014, and April 15, 2016. The decline in active rigs and well completions is projected to result in month-over-month onshore oil production declines of 120,000 b/d through September 2016.

EIA projects that the number of operating rigs in the Lower 48 states will continue to decrease through mid-2016 before beginning to slowly increase. However, expected Lower 48 production will continue to decline-although at a slowing rate-throughout 2017.

EIA's April STEO forecasts Brent crude oil prices averaging $35/b in 2016 and $41/b in 2017, with the December 2017 price averaging $45/b.

AlexS , 04/21/2016 at 1:45 pm
continued

In contrast to the forecast of declining Lower 48 onshore production through 2017, federal Gulf of Mexico oil production is projected to increase from 1.54 million b/d in 2015 to 1.66 million b/d and to 1.82 million b/d in 2016 and 2017, respectively. Alaska's oil production is projected to slightly decrease from 0.48 million b/d in 2015 to 0.47 million b/d in 2016 and to 0.46 million b/d in 2017.

Increased production from the federal Gulf of Mexico (GOM) is not enough to offset those declines, with total projected U.S. production falling from 9.43 million b/d in 2015 to 8.04 million b/d in 2017.

Enno Peters , 04/21/2016 at 2:09 pm
Great intel Alex, thanks for posting.

Eyeballing the decline of Q1 2015, onshore : it appears to drop from about 7.5 to 5.0 in 1 year time (33%). That's an even higher decline rate than I expected. Looks like not only the production I'm tracking is declining at a rapid rate.

I'm curious to see if we indeed will see the projected pick up in rig count this summer already.

AlexS , 04/21/2016 at 2:26 pm
Enno,

Your charts for the Bakken and some other sources show that LTO output drops by some 35% in 12 months if no new wells are completed.
Given that the EIA chart for Lower 48 onshore includes conventional production and still assumes that new wells are drilled and completed, a 33% decline indeed looks too big.

Apparently, they assume continuing decline in conventional output, primarily due to shut-down of the stripper wells. BTW, according to the EIA, between April 2015 and January 2016, US conventional onshore production was down 300 kb/d (bigger in relative terms than the drop in LTO output).

In addition, the EIA's oil projections are too low, in my view. Therefore, they may assume a small number of well completions

Heinrich Leopold , 04/22/2016 at 12:47 am
AlexS,

In my view we will see actually a massive decline in wells due to plugging of wells. The latest RRC report for March 2016: http://www.rrc.state.tx.us/oil-gas/research-and-statistics/well-information/monthly-drilling-completion-and-plugging-summaries/ shows already a net decline of 1000 wells per month. So, a 33% decline of production is realistic and probably even too conservative.

Dennis Coyne , 04/22/2016 at 9:13 am
Hi Heinrich,

The plugged wells are stripper wells with output of 5 b/d or less. So if 1000 of these wells are plugged each month that's 5 kb/d lower output each month or a 60 kb/d total decrease over 12 months. Not really much of a factor.

Heinrich Leopold , 04/22/2016 at 12:52 pm
Dennis,

It is difficult for me to check how big these wells are. However, the main point here is about a huge sea change (see below chart) in net wells. Add the dramatic decline in use of proppant, the drop in rig counts (natural gas rigs are just at 88 versus 1600 in 2008)….. I can see the writing on the wall.

US production will be declining dramatically over the next months. Even the CEO of Pioneer and the IEA admit the decline. The only difference is that I think the decline will last much farther than Sep 2016 and will last well into 2017.

Dennis Coyne , 04/22/2016 at 2:52 pm
Hi Heinrich,

Everyone agrees there will be some decline. Some estimates are more reasonable than others. So far decline in Texas has been relatively modest at an annual decline rate of 8%. There are still a lot of horizontal oil rigs operating in the Texas Permian Basin (over 100), and the horizontal wells produce much more oil than the vertical wells in that Basin. I am talking about oil only here, I don't follow natural gas as closely, at some point gas output will fall and natural gas prices will rise, no idea when that will happen though.

The permits minus plugged is not really very useful. Oil wells completed relative to wells plugged is of greater interest. Every well completed (average of about 250 kb/d for first year) covers about 50 plugged stripper wells (with an average of under 5 b/d). So about 20 completed wells will make up for 1000 plugged wells.

The first 3 months of 2016 there were 2482 new drill oil completions in Texas and 1453 oil wells plugged. The plugged wells are equivalent to taking away 29 of the new wells drilled, so the net new wells would be 2453 new wells or about 818 new wells per month for the first 3 months of the year. In March about 300 of these wells were in districts 1 and 2 (Eagle Ford most likely) and about 450 wells in Districts 7C, 8 and 8A (Permian Basin).

There has continued to be quite a lot of activity in Texas at least through March 2016.

Dennis Coyne , 04/21/2016 at 2:44 pm
Hi Enno,

Are you accounting for possible incomplete data in Texas? Are you seeing 33% decline rates outside of Texas? I am talking at the field level, rather than individual wells or counties. So for the Niobrara, or New Mexico Permian, the decline is certainly not 33% in the north Dakota Bakken, or not through February at least. Based on Dean's data for Texas and even the EIA data for Texas, the statewide decline rate is not anywhere close to 33% per year.

Using EIA data, TX decline rate is 9% from March to Jan 2015. Using Dean's data from March 2015 to Dec 2015 the decline is 6.1% (Jan was anomalous so I threw it out, if it is included the decline rate is 4.2%)

Dennis Coyne , 04/22/2016 at 9:17 am
Looking at the Bakken, the decline rate from June 2015 to July 2016 will be close to 20% per year if the completed wells fall to 50 new wells per month on average for the rest of 2016, so decline is pretty steep, just not 33%/year. After July 2016 if the completion rate levels off at about 40 completions per month the decline rate moderates to about 10% per year for July 2016 to July 2017.
Dennis Coyne , 04/21/2016 at 2:22 pm
Hi AlexS,

I think the EIA is overestimating the decline because they are underestimating the oil price. With the DUCs available, the decline for the rest of 2016 in the LTO plays could be as little as 350 kb/d. The EIA is estimating almost a 1 Mb/d drop for the rest of 2016, the conventional L48 onshore was about 3300 kb/d in Jan 2016, a 650 kb/d drop in output from L48 onshore conventional would be a 20% drop, if we assume an 8% drop, that would be about 270 kb/d, for a total of 620 Kb. The EIA is also underestimating Texas output, if Dean's estimates are correct. If we assume no acceleration in the decline rate for L48 onshore, we get the following, with 2017 output about 6200 kb/d for L48 onshore.

AlexS , 04/21/2016 at 2:46 pm
Dennis,

The EIA has a long record of underestimating US oil production, not only during the shale boom, but also during the current downturn. In particular, they have been underestimating volumes produced in Texas. But I think that the most recent Dean's estimate for Texas may be too high. TRRC is now receiving production data from operators in electronic form, which may have shortened the reporting time. Hence, the underreported volumes for the most recent months are probably less in relative terms than previously. My conclusion is that historical numbers are somewhere in between Dean's and the EIA's estimates.

As regards projections for the rest of this year and 2017, I agree that the EIA's price assumptions are too low. Higher prices may result in higher volumes. That said, I do not expect a quick rebound in drilling/completion activity as most shale companies are in a difficult financial situation and will not rush to increase capex. And even in the shale industry, with its short investment cycle, there is a time lag between a decision to increase capex and first production.

The EIA's projections may be too low, but I still do not expect a quick rebound in the US C+C output.

shallow sand , 04/21/2016 at 3:51 pm
AlexS. Although maybe not moving the needle much, I think US stripper well production may not decline as much as it has recently because of:

Actually many times both A. & B. apply. We have some wells that must be shut in when the temperature drops below a certain level. Shutting in requires some work, as does resumption of production. When oil prices were high, we would only shut in during the cold weather. This past winter, we just shut in at the first sign of cold weather, and did not start up until winter was over.

I do think, however, US conventional will continue to drop because there are very few vertical oil rigs running, far lower than even in 1998-1999. Also, I do not think a price increase will result in many conventional rigs coming back to the field this year. Balance sheets must be healed first. Conventional producers do not have a shocking decline like the LTO companies, so skipping another year of new wells is not as big of a problem.

AlexS , 04/21/2016 at 3:59 pm
Thank you shallow sand,

I actually wanted to ask you if you expect a return of shut-in stripper wells with higher oil prices

[Apr 17, 2016] Canada's Oil Industry To See 62% Decline In Investment

oilprice.com
- 17 Apr 2016

[Apr 17, 2016] A new definition from EIA. market stabilization now means oil price increase.

Notable quotes:
"... The sharp reduction of drilling activity shows already some effect on oil production and there are tentative signs of market stabilization: ..."
"... A new definition. Stabilization now means increase. A $1 drop would be market devastating volatility. ..."
peakoilbarrel.com

Heinrich Leopold , 04/14/2016 at 10:15 am

The sharp reduction of drilling activity shows already some effect on oil production and there are tentative signs of market stabilization:
https://www.iea.org/oilmarketreport/omrpublic/
http://oilpro.com/post/23776/falling-us-production-not-doha-move-oil-markets-to-start-stabiliz
Watcher , 04/15/2016 at 2:54 am
A new definition. Stabilization now means increase. A $1 drop would be market devastating volatility.

[Apr 10, 2016] The great condensate con Is the oil glut just about oil by Kurt Cobb

Notable quotes:
"... Refiners are already complaining that so-called "blended crudes" contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con. ..."
"... Exactly how much of America's and the world's presumed crude oil production is actually condensate remains a mystery. The data just aren't sufficient to separate condensate production from crude oil in most instances. ..."
"... Brown explains: "My premise is that U.S. (and probably global) refiners hit in late 2014 the upper limit of the volume of condensate that they could process" and still maintain the product mix they want to produce. That would imply that condensate inventories have been building faster than crude inventories and that the condensate is looking for an outlet. ..."
"... Brown believes that worldwide production of condensate "accounts for virtually all of the post-2005 increase in C+C [crude plus condensate] production." What this implies is that almost all of the 4 million-barrel-per-day increase in world "oil" production from 2005 through 2014 may actually be lease condensate. And that would mean crude oil production proper has been nearly flat during this period--a conjecture supported by record and near record average daily prices for crude oil from 2011 through 2014 . Only when demand softened in late 2014 did prices begin to drop. ..."
"... "Oil traders are acting on fundamentally flawed data," Brown told me by phone. Often a contrarian, Brown added: "The time to invest is when there's blood in the streets. And, there's blood in the streets." ..."
"... He explained: "Who of us in January of 2014 believed that prices would be below $30 in January of 2016? If the conventional wisdom was wrong in 2014, maybe it's similarly wrong in 2016" that prices will remain low for a long time. ..."
"... Brown points out that it took trillions of dollars of investment from 2005 through today just to maintain what he believes is almost flat production in oil. With oil companies slashing exploration budgets in the face of low oil prices and production declining at an estimated 4.5 and 6.7 percent per year for existing wells worldwide, a recovery in oil demand might push oil prices much higher very quickly. ..."
January 17, 2016 | Resource Insights

My favorite Texas oilman Jeffrey Brown is at it again. In a recent email he's pointing out to everyone who will listen that the supposed oversupply of crude oil isn't quite what it seems. Yes, there is a large overhang of excess oil in the market. But how much of that oversupply is honest-to-god oil and how much is so-called lease condensate which gets carelessly lumped in with crude oil? And, why is this important to understanding the true state of world oil supplies?

In order to answer these questions we need to get some preliminaries out of the way.

Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs and exit through the top of an oil well. This condensate is less dense than oil and can interfere with optimal refining if too much is mixed with actual crude oil. The oil industry's own engineers classify oil as hydrocarbons having an API gravity of less than 45--the higher the number, the lower the density and the "lighter" the substance. Lease condensate is defined as hydrocarbons having an API gravity between 45 and 70. (For a good discussion about condensates and their place in the marketplace, read "Neither Fish nor Fowl – Condensates Muscle in on NGL and Crude Markets.")

Refiners are already complaining that so-called "blended crudes" contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con.

Brown points out that U.S. net crude oil imports for December 2015 grew from the previous December, according to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. U.S. statistics for crude oil imports include condensate, but don't break out condensate separately. Brown believes that with America already awash in condensate, almost all of those imports must have been crude oil proper.

Brown asks, "Why would refiners continue to import large--and increasing--volumes of actual crude oil, if they didn't have to--even as we saw a huge build in [U.S.] C+C [crude oil plus condensate] inventories?"

Part of the answer is that U.S. production of crude oil has been declining since mid-2015. But another part of the answer is that what the EIA calls crude oil is actually crude plus lease condensate. With huge new amounts of lease condensate coming from America's condensate-rich tight oil fields--the ones tapped by hydraulic fracturing or fracking--the United States isn't producing quite as much actual crude oil as the raw numbers would lead us to believe. This EIA chart breaking down the API gravity of U.S. crude production supports this view.

Exactly how much of America's and the world's presumed crude oil production is actually condensate remains a mystery. The data just aren't sufficient to separate condensate production from crude oil in most instances.

Brown explains: "My premise is that U.S. (and probably global) refiners hit in late 2014 the upper limit of the volume of condensate that they could process" and still maintain the product mix they want to produce. That would imply that condensate inventories have been building faster than crude inventories and that the condensate is looking for an outlet.

That outlet has been in blended crudes, that is heavier crude oil that is blended with condensates to make it lighter and therefore something that fits the definition of light crude. Light crude is generally easier to refine and thus more valuable.

Trouble is, the blends lack the characteristics of nonblended crudes of comparable density (that is, the same API gravity), and refiners are discovering to their chagrin that the mix of products they can get out of blended crudes isn't what they expect.

So, now we can try to answer our questions. Brown believes that worldwide production of condensate "accounts for virtually all of the post-2005 increase in C+C [crude plus condensate] production." What this implies is that almost all of the 4 million-barrel-per-day increase in world "oil" production from 2005 through 2014 may actually be lease condensate. And that would mean crude oil production proper has been nearly flat during this period--a conjecture supported by record and near record average daily prices for crude oil from 2011 through 2014. Only when demand softened in late 2014 did prices begin to drop.

Here it is worth mentioning that when oil companies talk about the price of oil, they are referring to the price quoted on popular futures exchanges--prices which reflect only the price of crude oil itself. The exchanges do not allow other products such as condensates to be mixed with the oil that is delivered to holders of exchange contracts. But when oil companies (and governments) talk about oil supply, they include all sorts of things that cannot be sold as oil on the world market including biofuels, refinery gains and natural gas plant liquids as well as lease condensate. Which leads to a simple rule coined by Brown: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil.

The glut that developed in 2015 may ultimately be tied to some increases in actual, honest-to-god crude oil production. The accepted story from 2005 through 2014 has been that crude oil production has been growing, albeit at a significantly slower rate than the previous nine-year period--15.7 percent from 1996 through 2005 versus 5.4 percent from 2005 through 2014 according to the EIA. If Brown is right, we have all been victims of the great condensate con which has lulled the world into a sense of complacency with regard to actual oil supplies--supplies he believes have been barely growing or stagnant since 2005.

"Oil traders are acting on fundamentally flawed data," Brown told me by phone. Often a contrarian, Brown added: "The time to invest is when there's blood in the streets. And, there's blood in the streets."

He explained: "Who of us in January of 2014 believed that prices would be below $30 in January of 2016? If the conventional wisdom was wrong in 2014, maybe it's similarly wrong in 2016" that prices will remain low for a long time.

Brown points out that it took trillions of dollars of investment from 2005 through today just to maintain what he believes is almost flat production in oil. With oil companies slashing exploration budgets in the face of low oil prices and production declining at an estimated 4.5 and 6.7 percent per year for existing wells worldwide, a recovery in oil demand might push oil prices much higher very quickly.

That possibility is being obscured by the supposed rise in crude oil production in recent years that may just turn out to be an artifact of the great condensate con.

[Apr 05, 2016] At this stage of oil price cycle I do not think that the size of inventories is not a material factor affecting the oil price

Notable quotes:
"... Although it makes little sense, US stocks make a huge impact on the worldwide oil price. Until US inventories meaningfully drop, the oil price will stay low, sub $50. ..."
"... Inventory can be manipulated by importing more and as a consequence keep pressure on price. ..."
"... At this stage of oil price cycle I do not think that the size of inventories is a material factor, affecting the oil price. It is played as such by Wall Street, but that's just reflects the power of "paper oil" producers. They can choose something else (S&P transportation index readings, for example) and use it to depress the oil price. ..."
peakoilbarrel.com
shallow sand , 04/04/2016 at 12:12 am
Although it makes little sense, US stocks make a huge impact on the worldwide oil price. Until US inventories meaningfully drop, the oil price will stay low, sub $50.

Not seeing a sign of that happening yet. Hopefully will soon.

Dennis Coyne , 04/04/2016 at 11:05 am
Hi Shallow sands,

It is strange that anybody pays attention to US crude stocks, for the past 4 weeks average net imports of crude have been about 7.6 Mb/d, there are about 200 Mb of excess crude stocks (above normal levels), reduce imports by 1.6 Mb/d and the excess stocks are drawn down to normal levels in 125 days (about 4 months).

It would make more sense to look at the change in refinery inputs and US crude output.

Ovi , 04/04/2016 at 8:19 pm
I also do not understand the focus on inventory. Inventory change is a function of "Crude in less crude out". Inventory can be manipulated by importing more and as a consequence keep pressure on price.

Why does inventory keep going up? It is related to the contango in the oil futures market. In the attached table the front month contango is $1.34, today. If an investor owns storage, he can take delivery today and sell one month forward for a gain of $1.34 less about 50¢ for storage costs. As long as the front month contango stays above $1, inventory will continue to grow.

likbez , 04/04/2016 at 11:15 am
Although it makes little sense, US stocks make a huge impact on the worldwide oil price.

Very true.

At this stage of oil price cycle I do not think that the size of inventories is a material factor, affecting the oil price. It is played as such by Wall Street, but that's just reflects the power of "paper oil" producers. They can choose something else (S&P transportation index readings, for example) and use it to depress the oil price.

What it probably reflects at this stage of the cycle is the level of pure greed.

[Mar 27, 2016] Canadian Oil Sees Silver Lining To Decline In U.S. Shale

oilprice.com

OilPrice.com

By Irina Slav
Posted on Sat, 26 March 2016 00:00 | 0 After the slow and painful death of Canadian oil exports - helped along by crashing oil prices, a global supply glut, and the languishing Keystone XL Pipeline - Canada has opened up some other outlets for exporting its crude oil to refineries on the U.S. Gulf Coast, experiencing a two-fold increase since 2014.

According to new data, Canadian crude oil exports to U.S. Gulf Coast refineries topped 389,000 barrels per day last year-double the amount in 2014-and it was all made possible by new pipelines that came on stream over the course of last year.

The three new pipelines to the Gulf Coast-Seaway, Southern Access, and Cushing Marketlink-added a combined throughput capacity of 1.85 million bpd to the transport system for crude between Canada and the U.S., said Canada's National Energy Board's market analyst Melissa Merrick.

Related: Offshore Lease Sale Disrupted by Protestors Shouting "Shut it Down"

All in all, Canada exported most of its 3.87 million bpd output, or 3.035 million barrels. Of this, 3.009 million barrels went to the U.S.

In the first week of January , Canadian crude oil exports to the U.S. reached an all-time record of 3.4 million barrels per day, according to preliminary data from the U.S. Energy Information Administration (EIA).

However, while this is good news for Canada, the figures aren't quite as sensational as the headlines tend to be. The actual amount heading to the U.S. Gulf Coast is a relatively small portion of overall Canadian crude exports to its southern neighbor. The bulk goes to the U.S. Midwest, which received 1.916 million bpd last year from Canada.

At the same time, oil imports also increased , to 736,000 bpd, of which crude from down south accounted for 62.4 percent, or almost 500,000 bpd, up from around 340,000 bpd in 2014.

What's more, according to Beth Lau from the Canadian Association of Petroleum Producers, the twofold increase is unlikely to be repeated this year because there is not enough throughput capacity.

Related: Brussel's Terror Attack Drives Europe Further Into Terrorism Rabbit Hole

This brings us back around to Keystone XL, which could have added 830,000 bpd of throughput capacity to the pipelines carrying crude to the Gulf Coast refineries had it not been cancelled by the Obama administration in November 2015. That's not an insignificant amount of oil capacity, given the fact that Western Canadian Select (WCS) is trading at a substantial discount to WTI. The May contract for the Canadian crude closed at a bit over $13 per barrel on March 24, while WTI is well over $30 at the moment.

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WCS is a real bargain for U.S. refineries. But it's not going to come through Keystone.

But the absence of Keystone simply means that Canadian crude has to find other routes, both rail and alternative pipelines.

TransCanada , the would-be operator of Keystone XL, has now agreed to buy Houston-based Columbia Pipeline Group Inc. for $10.2 billion, which owns some 15,000 miles of gas pipeline running from New York to the Gulf of Mexico, along with one of the biggest underground storage systems in the U.S.

Related: $40 Billion LNG Project In Australia Cancelled Amid Low Prices

At the end of the day, some believe that Canadian export figures indicate that Canada is gaining U.S. market share as a result of the oil price crisis, and as U.S. shale production gets shut in, waiting for better days.

"That's the one piece of puzzle you don't hear too much about - the market share Canada is gaining in the U.S.," said Carl Evans, senior crude oil analyst at energy research firm Genscape, told the Financial Post .

But you don't hear too much about it because it's a bit of a red herring. According to Platts , Alberta's crude is selling at a major discount because it doesn't have enough export outlets. That means that if it wants to get overseas, it's got to go through the U.S. for the most part, and even then, pipeline space is limited and more expensive (and dangerous) rail is often the only option.

By Irina Slav of Oilprice.com

[Mar 11, 2016] Market Currents Seven reasons for a crude oil sell-off today - Fuel Fix

fuelfix.com

4) The drop of 4.5 million barrels for gasoline inventories was split betwixt PADD 1 (East Coast) and PADD 3 (Gulf Coast). While the drop can in part be attributed to winter blend stocks being drawn down, the driving force (pardon the pun) has been rising demand. On the more-reliable, less-noisy four-week moving average, gasoline product supplied is up 7% year-on-year. Robust.

[Mar 10, 2016] The Top Ten RBN Energy Prognostications for 2016

Notable quotes:
"... We hated to disappoint all those hopeful condensate exporters last year, but the handwriting was on the wall. Regardless of unfettered export regs, if it is worth more here than it is there, then you ought to keep it here. Only about 100 Mb/d of newly legal condensate exports left U.S shores in 2015, because the economics were upside down. A harbinger of things to come for crude exports? Absolutely. ..."
RBN Energy
5. It is nice that condensate exports are legal, but the economics of condensate exports don't make much sense.
We hated to disappoint all those hopeful condensate exporters last year, but the handwriting was on the wall. Regardless of unfettered export regs, if it is worth more here than it is there, then you ought to keep it here. Only about 100 Mb/d of newly legal condensate exports left U.S shores in 2015, because the economics were upside down. A harbinger of things to come for crude exports? Absolutely.

[Mar 09, 2016] Exposing The Oil Glut Where Are The 550 Million Missing Barrels!

Notable quotes:
"... "Of the 1 billion barrels reportedly produced but not consumed, roughly 420 million are being stored on land in member countries of the Organization for Economic Cooperation and Development (OECD). Another 75 million barrels are thought to be stored at sea or in transit by tanker somewhere from the oil fields to the refineries. That leaves 550 million "missing barrels" unaccounted for, apparently produced but not consumed and not visible in the inventory statistics..." ..."
oilprice.com
March 09, 2016 | OilPrice.com

If any of you have seen my early writings on OilPrice.com, you would know I have been steadfast in my criticism of the media exaggerating the extent of the oil glut. Furthermore, I have also documented the pattern of exaggeration from both the EIA/IEA with their statistics.

I realize that no one is perfect, forecasting the future is notoriously difficult, and these entities have their difficulties in obtaining reliable and timely data to make accurate predictions. However, the IEA in particular has a track record of overstating oil supplies – even back in 1999 the agency was questioned for exaggerating a supply glut, and now it seems to have occurred again.

Related: Chevron Protects Dividend, Cuts Another 36 Percent Off Spending

(Click to enlarge)

The chart above shows the "missing barrels," unexplained oil volumes that have shown up in IEA data over time. John Kemp from Reuters, who has done some of the best coverage of the market, put together this data to illustrate the problem with the reported data. He recently wrote this piece, confirming all my suspicions of the past. In it he states the following:

"Of the 1 billion barrels reportedly produced but not consumed, roughly 420 million are being stored on land in member countries of the Organization for Economic Cooperation and Development (OECD). Another 75 million barrels are thought to be stored at sea or in transit by tanker somewhere from the oil fields to the refineries. That leaves 550 million "missing barrels" unaccounted for, apparently produced but not consumed and not visible in the inventory statistics..."

Related: Six Reasons The Current Oil Short Covering May Have Legs

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So, in other words, OVER HALF of the supposed glut that the IEA has reported is unaccounted for. Not 5 or 10 percent, but greater than a whopping 50 percent. Does anyone believe that half of the glut is just missing?

In the article John explains that it could be in hidden or unaccountable locations. But that doesn't seem credible. It is hard to believe that HALF of the entire world's excess supply cannot be justified with the data? At $40 oil, that is some $22 billion in oil that is squirreled away somewhere that millions of people simply don't know where it is?

Related: How Algorithmic Trading Makes Money On Energy

Yet does anyone care to even question such non-sense? No, of course not, just like every other government statistic that is taken at face value and traded on by headline-driven algorithms. There used to be a time when Wall Street did real research, but that appears to be gone now. Either demand has been understated by the IEA, or supply has been vastly overstated...any rational person would conclude the same.

Please view my video channel for further insight on this topic: https://www.youtube.com/channel/UCkA46F9sbOLfDVM0V17sZcw

By Leonard Brecken for Oilprice.com

[Mar 09, 2016] Where has the oil gone? Missing barrels and market rebalancing by John Kemp

Notable quotes:
"... Of the 1 billion barrels reportedly produced but not consumed, roughly 420 million are being stored on land in member countries of the Organisation for Economic Cooperation and Development (OECD). Another 75 million barrels are thought to be stored at sea or in transit by tanker somewhere from the oil fields to the refineries. ..."
"... That leaves 550 million "missing barrels" unaccounted for, apparently produced but not consumed and not visible in the inventory statistics ("Oil Market Report", IEA, Feb. 2016). ..."
"... The last time the miscellaneous to balance item was this large and positive (implying an oversupplied market) was in 1997/98 when the issue triggered fierce criticism of the IEA's statistics. Critics accused the IEA of over-estimating supply, under-estimating demand, contributing to perception of a glut, depressing prices, and causing unnecessary hardship to the oil industry ("There Are No Missing Barrels", Simmons, 1999). Senator Pete Domenici, chairman of the U.S. Senate Budget Committee, asked the General Accounting Office to investigate the IEA's statistics and the question of missing barrels. In a report published in May 1999, GAO concluded "missing barrels are not a new condition, and the amount and direction of missing barrels have fluctuated over time". "At any point in time, the historical oil supply and demand as well as the stock data reported by IEA could be overstated or understated by an unknown magnitude." It was not possible to "quantify how much of the missing barrels are due to statistical limitations and how much are the result of physical oil storage in unreported stocks". In 1997/98 episode, the IEA concluded most of the missing barrels went into non-OECD storage and uncounted OECD inventories ("Oil Market Report", IEA, June 1999). ..."
"... The question of what has happened to the missing barrels, and whether some of them exist at all, is critical because it could affect how quickly the oil market rebalances. ..."
Mar 08, 2016 | Reuters.com
Where has the oil gone? Missing barrels and market rebalancing: Kemp Fuel pumps are pictured at a gas station in Sidi Allal El Bahraoui, Morocco, February 7, 2016. REUTERS/Youssef Boudlal Fuel pumps are pictured at a gas station in Sidi Allal El Bahraoui, Morocco, February 7, 2016. Reuters/Youssef Boudlal Where has the oil gone? Missing barrels and market...X By John Kemp LONDON (Reuters) - Global oil production exceeded consumption by just over 1 billion barrels in 2014/15, according to the International Energy Agency (IEA).

Production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015 (tmsnrt.rs/1pvIEw8).

Of the 1 billion barrels reportedly produced but not consumed, roughly 420 million are being stored on land in member countries of the Organisation for Economic Cooperation and Development (OECD). Another 75 million barrels are thought to be stored at sea or in transit by tanker somewhere from the oil fields to the refineries.

That leaves 550 million "missing barrels" unaccounted for, apparently produced but not consumed and not visible in the inventory statistics ("Oil Market Report", IEA, Feb. 2016).

Missing barrels are recorded in the "miscellaneous to balance" line of the IEA's monthly Oil Market Report as the difference between production, consumption and reported stock changes. The miscellaneous item reflects errors in data from OECD countries, errors in the agency's estimates for supply and demand in non-OECD countries, and stockpile changes outside the OECD that go unrecorded. IEA data currently shows a miscellaneous to balance item of 0.5 million barrels per day in 2014 and 1.0 million barrels per day in 2015. Missing barrels have been a feature of IEA statistics since the 1970s ("International Energy Agency: How the Agency Prepares its World Oil Market Statistics", U.S. General Accounting Office, 1999).

Over time, errors have occurred in both directions, and have ranged up to 1 million or even 2 million barrels per day (tmsnrt.rs/1pvIBjQ). Most of the time, the oil market ignores the miscellaneous to balance item, but it tends to become controversial when it becomes very large, either positive or negative.

ERRORS AND OMISSIONS

The last time the miscellaneous to balance item was this large and positive (implying an oversupplied market) was in 1997/98 when the issue triggered fierce criticism of the IEA's statistics. Critics accused the IEA of over-estimating supply, under-estimating demand, contributing to perception of a glut, depressing prices, and causing unnecessary hardship to the oil industry ("There Are No Missing Barrels", Simmons, 1999). Senator Pete Domenici, chairman of the U.S. Senate Budget Committee, asked the General Accounting Office to investigate the IEA's statistics and the question of missing barrels. In a report published in May 1999, GAO concluded "missing barrels are not a new condition, and the amount and direction of missing barrels have fluctuated over time". "At any point in time, the historical oil supply and demand as well as the stock data reported by IEA could be overstated or understated by an unknown magnitude." It was not possible to "quantify how much of the missing barrels are due to statistical limitations and how much are the result of physical oil storage in unreported stocks". In 1997/98 episode, the IEA concluded most of the missing barrels went into non-OECD storage and uncounted OECD inventories ("Oil Market Report", IEA, June 1999).

In the current episode, it is also very likely some of the 550 million barrels unaccounted for in 2014/15 have gone into unreported storage outside the OECD. China's government is known to have been filling its Strategic Petroleum Reserve. More barrels are likely to have gone into commercial storage in China and in other countries outside the OECD. But it is at least possible some of the missing barrels have been caused by the IEA over-estimating oil supplies or under-estimating demand.

CLEARING THE OVERHANG

The question of what has happened to the missing barrels, and whether some of them exist at all, is critical because it could affect how quickly the oil market rebalances. The IEA and most other forecasters predict the oil market will remain oversupplied throughout 2016 and the first half of 2017, ensuring stockpiles continue growing. In its "Medium-Term Oil Market Report", published last month, the IEA predicted consumption would not exceed supply on a full-year basis until 2018. Some analysts argue the market will need to eliminate the excess supply and work down some proportion of the inherited stocks before oil prices can rise sustainably. With the oil market expected to remain in surplus throughout 2016 and "already awash in oil" the IEA has said that "it is very hard to see how oil prices can rise significantly in the short term." To the extent the miscellaneous to balance item reflects oil that has gone into unreported storage, it will take longer to clear the overhang of stocks that built up in 2014/15 and continue to build in 2016. But to the extent the missing barrels are the result of over-estimating supply and under-estimating demand, or have been absorbed into China's strategic stocks, the overhang could clear more quickly.

POSSIBLE PRODUCTION FREEZE

Following the 1997/98 episode, the missing barrels that accumulated in unreported non-OECD storage were drawn down in 1999, according to the IEA ("Oil Market Report", IEA, Dec 1999). In December 1999, the IEA wrote: "The weight of (the) evidence is that the missing barrels did exist and that they have now returned to the market." "The return was triggered by the reversal in the shape of the forward price curve and the need for additional barrels following OPEC's effective production limitation" which began in March 1999. By the end of 1999, the oil market was seeing excess demand and prices were rising. But the rapid recovery depended on very strong economic growth in North America and Asia (after the East Asian financial crisis in 1997/98). It also depended on substantial production cuts by OPEC in conjunction with production restraint from non-OPEC countries.

And it was both heralded and caused by a shift in the forward price curve from contango to a state of backwardation (which made oil less profitable to store). The events of 1999 illustrate the factors needed to clear an inherited glut of oil (strong demand, production restraint and a shift in the shape of the forward price curve). Current circumstances share some similarities with 1998/99 but there are also important differences which should not be overlooked. The current stock build has been caused by oversupply thanks to the shale revolution rather than a slowdown in demand as in the 1997/98 Asian financial crisis. The winter of 1997/98 also saw a strong El Nino, which suppressed oil demand as it has this winter.

The current oversupply is not as bad as it was in the earlier episode, and the missing barrels problem is much smaller. The smaller (relative) surplus should make rebalancing faster this time around. In 1997/98, the market was oversupplied by 2.1 million barrels per day compared with total demand of around 74 million barrels per day, according to the IEA. In 2015, the oil market was also oversupplied by 2.0 million barrels per day but consumption was running at more than 94 million barrels per day, around 25 percent higher. At present, oil demand is growing strongly, just as it was in 1999, though there are concerns about the health of the global economy.

The major oil exporting countries have not so far agreed to cut production, unlike 1998/99, but there has been discussion about a possible production freeze. Futures prices remain resolutely in contango, which is both a symptom of excess stockpiles and creates a financial incentive to continue holding them. There is no sign of the market moving into backwardation yet, which would indicate the supply-demand balance was shifting and would also create a financial incentive to release oil from storage. Several key OPEC and non-OPEC producers have announced a provisional production freeze which could speed up the rebalancing, assuming it is implemented. But it might not be enough to eliminate the glut quickly; outright production cuts may be needed to accelerate the process, depending on what happens to demand and production from other countries.

(Editing by David Evans)

[Mar 09, 2016] March 2016 EIA STEP removed another 200 thousand bbl from US 2016 oil production

Notable quotes:
"... U.S. crude oil production is projected to decrease from an average of 9.4 million b/d in 2015 to 8.7 million b/d in 2016 and to 8.2 million b/d in 2017. ..."
"... EIA expects U.S. crude oil production to decline from 9.1 million b/d in the first quarter of 2016 to an average of 8.0 million b/d in the third quarter of 2017. Production of 8.0 million b/d would be 1.7 million b/d below the April 2015 level, which was the highest monthly production since April 1971. Production is expected to begin increasing modestly in the fourth quarter of 2017, as productivity improvements, lower breakeven costs, and anticipated oil price increases are expected to end more than two years of declines in the Lower 48. The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators. ..."
"... EIA oil price projections are unrealisticly low IMO. Removing 1.5 million bopd from USA, plus world wide demand growth of 1-1.2 in 2016, plus other worldwide declines that Ron has illustrated, add up to more than Iraq and Iran can boost production. KSA appears to be incapable of going past 10.5 million. Russia cannot quickly increase production. ..."
peakoilbarrel.com
AlexS, 03/09/2016 at 9:23 am

The EIA has further reduced its forecast for U.S. oil production in 2016-17 (by 200-300 kb/d for 2017).
Apparently this is related with lower oil price assumptions, which are based on futures prices, and the recent cuts in E&P companies capex guidance.

From the report (STEO, March 2016):

"U.S. crude oil production is projected to decrease from an average of 9.4 million b/d in 2015 to 8.7 million b/d in 2016 and to 8.2 million b/d in 2017. The forecast reflects an extended decline in Lower 48 onshore production driven by persistently low oil prices that is partially offset by growing production in the federal Gulf of Mexico.
EIA estimates total U.S. production has fallen 0.6 million b/d since April 2015, to an average of 9.1 million b/d in February, with the entire production decline coming from Lower 48 onshore. With WTI prices currently below $40/b and projected to remain below that level through the first half of 2017, EIA expects oil production to decline in most Lower 48 onshore oil production regions.

The expectation of reduced cash flows in 2016 and 2017 has prompted many companies to scale back investment programs, deferring major new undertakings until a sustained price recovery occurs. The prospect of higher interest rates and tighter lending conditions will likely limit the availability of capital for many smaller producers, giving rise to distressed asset sales and consolidation of acreage holdings by more financially sound firms.

EIA expects U.S. crude oil production to decline from 9.1 million b/d in the first quarter of 2016 to an average of 8.0 million b/d in the third quarter of 2017. Production of 8.0 million b/d would be 1.7 million b/d below the April 2015 level, which was the highest monthly production since April 1971. Production is expected to begin increasing modestly in the fourth quarter of 2017, as productivity improvements, lower breakeven costs, and anticipated oil price increases are expected to end more than two years of declines in the Lower 48. The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators.

Projected crude oil production in the Gulf of Mexico rises during the forecast period, and oil production in Alaska falls."

U.S. C+C production: STEO March 2016 vs. Feb. 2016

AlexS, 03/09/2016 at 9:36 am

Projections for Lower 48 states (ex GoM) production in 2017 were revised down by 310 kb/d in 2017,
including a 350 kb/d revision for 4Q17.
EIA now expects Lower 48 output to decline from the peak of 7.73 kb/d in March 2015 to 5.84 kb/d in October 2017 (-1.88 kb/d)

Lower 28 states (excl. GoM) C+C production: STEO March 2016 vs. Feb. 2016

AlexS, 03/09/2016 at 9:40 am

WTI oil price assumptions (based of futures prices)

shallow sand, 03/09/2016 at 10:02 am

ND rigs at 33. Burlington has one to stack. My estimate is rigs will bottom at 26-27.

EIA oil price projections are unrealisticly low IMO. Removing 1.5 million bopd from USA, plus world wide demand growth of 1-1.2 in 2016, plus other worldwide declines that Ron has illustrated, add up to more than Iraq and Iran can boost production. KSA appears to be incapable of going past 10.5 million. Russia cannot quickly increase production.

Things can change fast regarding oil prices, witness the volatility since 1/1/16. We are hearing there could be a real supply squeeze coming and are seeing real evidence of that anticipation based upon some long term offers to hedge well above the current strip, sharply increased local basis and refinery planning chatter. All are anecdotal, but are not signifying worries of tanks topping.

[Mar 08, 2016] EIA Short-Term Energy Outlook for March 2016

EIA tried to play inventory card to talk down oil prices. This is wrong. Inventory matter only during initial priod of "oil glut". One and a half yeay into the oil price crash they are reflecting maily grid of Wall Street operators then anything else.
Notable quotes:
"... With large global oil inventory builds expected to continue in 2016, oil prices are expected to remain near current levels. Forecast Brent prices average $34/b in 2016, $3/b lower than forecast in last month's STEO. ..."
"... Prices reach an average of $45/b in the fourth quarter of 2017, as the oil market becomes relatively balanced at that point, with the potential for inventory draws beyond the forecast period. ..."
"... WTI futures contracts for June 2016 delivery, traded during the five-day period ending March 3, averaged $37/b, while implied volatility averaged 50%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in June 2016 at $24/b and $58/b, respectively. ..."
www.eia.gov
Brent crude oil spot prices increased by $1/b in February to a monthly average of $32/b. Accelerating reductions in the U.S. rig count and market reactions to news of a potential OPEC/non-OPEC supply freeze gave support to oil prices in February that offset the downward price pressure from ongoing growth in global oil inventories and uncertainty over the strength of global oil demand growth.

With large global oil inventory builds expected to continue in 2016, oil prices are expected to remain near current levels. Forecast Brent prices average $34/b in 2016, $3/b lower than forecast in last month's STEO.

Global oil inventories are expected to grow by an average of 1.6 million b/d in 2016 and by 0.6 million b/d in 2017, both higher than in last month's STEO. Inventory builds are higher in this month's STEO as a result of recent updates to historical data showing continued resilience from non-OPEC oil producers in the current low-price environment and as a result of a reduction in forecast global oil demand growth. Higher forecast inventory builds and slower market rebalancing contribute to a more limited price recovery in 2017 than previously forecast, with Brent prices forecast to average $40/b, $10/b lower than in last month's STEO. Prices reach an average of $45/b in the fourth quarter of 2017, as the oil market becomes relatively balanced at that point, with the potential for inventory draws beyond the forecast period.

Forecast West Texas Intermediate (WTI) crude oil prices average the same as Brent crude oil prices through the forecast period. The price parity of WTI with Brent in the forecast period is based on the assumption of competition between the two crudes in the U.S. Gulf Coast refinery market, as transportation differentials are similar to move the crudes from their respective pricing points to that market.

The expectation of continuing large inventory builds is a major source of uncertainty in the price forecast, as the capacity of global oil storage to absorb builds of the forecast magnitude is unknown. If global storage capacity becomes stressed, the cost of storage will rise to reflect more expensive marginal storage options such as floating inventories on crude oil tankers. The higher storage costs would lower near-month crude oil prices. Additional uncertainty stems from the pace of global economic growth and its contribution to oil demand growth, and also from the responsiveness of oil producers to sustained low oil prices.

The current values of futures and options contracts highlight the heightened volatility and high uncertainty in the price outlook (Market Prices and Uncertainty Report) . WTI futures contracts for June 2016 delivery, traded during the five-day period ending March 3, averaged $37/b, while implied volatility averaged 50%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in June 2016 at $24/b and $58/b, respectively.

The 95% confidence interval for market expectations widens over time, with lower and upper limits of $20/b and $81/b for prices in December 2016. At this time last year, WTI for June 2015 delivery averaged $54/b, and implied volatility averaged 46%. The corresponding lower and upper limits of the 95% confidence interval were $36/b and $80/b.

[Mar 07, 2016] MSM try to sell under oil glut banner contango based frenzied hoarding of oil by traders in anticipation of higher prices

nikbez, 03/06/2016 at 1:23 pm
peakoilbarrel.com
Rush of demand for oil storage while oil is available at below $40 prices:

http://fuelfix.com/beaumont/2016/03/04/fairway-project-targets-a-strained-market-for-houston-storage/

With available storage facilities for oil filling up in Houston, Fairway Energy Partners said the time is right for the 11 million barrels of crude storage space it's currently developing.

Fairway Energy Partners plans to convert three salt dome caverns more than 2,000 feet under Southwest Houston into crude oil storage. The company, which is backed by Haddington Ventures, is targeting a completion date of late 2016.

… … …

The Texas Gulf Coast has about 128 million barrels stored at refineries and terminals. It's also about 60 percent full, Genscape said.

… … …

"We're seeing storage levels that we've never seen across the U.S.," Hilgert said. "Crude is piling up everywhere, Cushing is effectively full, and that's started to domino down to the Gulf Coast."

I think frenzied hoarding of oil in anticipation of higher prices is the phenomenon that MSM does not cover. They try to sell it under "oil glut" banner.

[Mar 07, 2016] EIA The Drilling Productivity Report for March 2016

Oil production from major U.S. shale fields is expected to fall by 106,000 barrels a day in April from March to total 4.871 million barrels a day. but this is nothing but an optimistic forecast as EIA usually overestimate production on the down slope. So it can well be closer to 0.2Mb/d drop.
www.eia.gov
The Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions. EIA's approach does not distinguish between oil-directed rigs and gas-directed rigs because once a well is completed it may produce both oil and gas; more than half of the wells produce both.

While shale resources and production are found in many U.S. regions, at this time EIA is focusing on the seven most prolific areas, which are located in the Lower 48 states. These seven regions accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14.

[Mar 06, 2016] Filling up of oil storage early in the cycle is an indicator of oversupply. while late in the cycle it is a useless indicator

Notable quotes:
"... So, bottom line is, filling up of oil storage early in the cycle is an indicator of oversupply. But in the current late cycle of low oil prices [1.5 yrs already] it is a useless indicator of future oil price movement, oil demand or supply. ..."
peakoilbarrel.com
Gaurav , 03/06/2016 at 11:29 pm
Ron, I am a regular reader of your blog and find it very insightful. I have not seen much written about Oil super contango and reasons for oil storage at multi decade high so would like to highlight below.

When there is a temporary over supply, it fills up storage, as more and more storage get filled up it leads to an increase in storage cost. This in turn lead to a contango, meaning future oil prices being at premium. Currently premium stands at 20% for 1 year forward contract. This is super contango and a bonanza for oil traders. If you can find a place to store oil you can make risk free returns of 20% – (storage cost). So, why storage space are filling up so fast its because commodity traders are scrambling to make this trade. It's a positive feedback loop. It can only end when supply falls below the consumer demand.

So, bottom line is, filling up of oil storage early in the cycle is an indicator of oversupply. But in the current late cycle of low oil prices [1.5 yrs already] it is a useless indicator of future oil price movement, oil demand or supply.

[Mar 06, 2016] Traders Are Hoarding Oil In These Colossal Ships While They Wait For Prices To Bounce Back by Mike Bird

January 20, 2015 | finance.yahoo.com

Traders are in a mad dash to rent some of the world's biggest oil tankers so they can store crude while prices remains in record-low territory.

The Wall Street Journal reports that TI Oceania, which has been booked by oil traders Vitol, is stationed off Singapore and is likely to remain there for most of 2015.

China's Unipec booked Oceania's sister ship, TI Europe, way back in September, when oil prices dropped below $100 per barrel (let's hope they didn't buy the oil then).

The ships are giant. Here's the TI Europe, for example:

ESB TI Europe

Christelle Hall, YouTube

As oil prices continue to plunge amid a supply glut and weaker demand, companies reckon they can make more money from simply hoarding the oil and selling it at later date, when prices rebound.

This phenomenon is known as "contango," a term for when the price of commodity futures is higher than the current price. In this case, traders believe there is more money to be made from simply sitting on oil, if they can bear the costs of storing it.

TIEurope

Euronav

Oil prices will stay low if there continues to be space to store it. However, once storage is full, producers will finally be forced to slow output because there will not be anywhere to put the surplus. From that point, the price has a chance to rebound, assuming demand doesn't keep falling.

According to Goldman Sachs, however, that turnaround probably won't happen as quickly while more firms decide to store rather than sell oil. The investment bank is expecting a slow "u-shaped" recovery, rather than a rapid "v-shaped" bounce in prices:

Not only has the US expanded storage capacity significantly, but Europe has also shuttered refining capacity that can be used as storage, and the global crude tanker fleet has grown by 100 million dwt since 2008 - while oil at sea has remained stagnant given the dominance of onshore drilling. We believe at least a 1.0 million barrel per day surplus can be maintained for a year before any significant problems would arise.

contango storage

Goldman Sachs
NOW WATCH: This Video Of The Largest Breakage Of Ice From A Glacier Ever Filmed Is Absolutely Frightening

[Mar 04, 2016] EIA has a tendency to underestimate production in rising conditions, but will overestimate in falling conditions

peakoilbarrel.com

kamakiri , 03/01/2016 at 4:54 am

"The EIA continues to underestimate US oil production in its forecasts."

I think they have a tendency to underestimate in rising conditions, but will overestimate in falling conditions.
http://cdn.oilprice.com/images/tinymce/2016/ThisSC2.jpg
from this article:
http://oilprice.com/Energy/Energy-General/Is-The-EIA-Too-Optimistic-On-US-Oil-Output.html

Their weekly estimates appear to lag actual inflections by 2-3 months.

[Mar 01, 2016] EIA sophisticated form of deception of mathematically challenged public

Notable quotes:
"... In other words EIA operating with four meaningful digit on the data with error margin at or above 1% is just a sophisticated form of deception of (mathematically challenged) public creating an impression of precision were it does not exist. ..."
peakoilbarrel.com

likbez , 03/01/2016 at 9:49 am

If we assume error margin 1% for EIA data that means that EIA data should be rounded to two meaningful digits before making any conclusions.

That makes minimum meaningful difference 100,000 bbl. Everything below that should be considered to be statistical noise.

In other words EIA operating with four meaningful digit on the data with error margin at or above 1% is just a sophisticated form of deception of (mathematically challenged) public creating an impression of precision were it does not exist.

And if the addition is below the error margin it can't be considered statistically meaningful because the value 9,262 is in reality an interval from 9.162 to 9.362 within which the precise value lies.

Jeffrey J. Brown , 03/01/2016 at 9:54 am
I generally try to use two significant figures, e.g., global C+C production increased from 74 million bpd in 2005 to 78 million bpd in 2014.

[Mar 01, 2016] Ive been misunderestimating oil production most of my life and fool me once as EIA pricinples of publishing of oil staitstics

peakoilbarrel.com
likbez , 02/29/2016 at 4:31 pm
Alex,

U.S. oil production in December 2015 was 9,262 kb/d,
65 kb/d higher than the EIA's forecast in the February Short-Term Energy Outlook (9,197 kb/d)

One percent (probably the most charitable estimate of error margin for EIA STEO ) for 9,262 kb/d will be 93 kb/d

From this point of view your statement does not make any sense. Those two values are equal within the margin or error +-93.

AlexS , 02/29/2016 at 6:01 pm
likbez,

The 65 kb/d difference between the most recent estimate for December 2015 published on Feb 29 and previous estimate issued on Feb 12 is a fact
How can a fact make no sense?

My statement is that the EIA has been constantly underestimating US oil production volumes and therefore had to revise upwards its previous forecasts.
Thus, the estimate for September 2015 has been revised by 480 kb/d between September STEO and today's Monthly Production Report (MPR).
Compared to 480 kb/d, 65 kb/d is not much, but there might be further revisions.

EIA's US monthly oil production estimates for 2015: from STEO Sep.15 to MPR Feb.16

likbez , 02/29/2016 at 11:17 pm
Alex,

My statement is that the EIA has been constantly underestimating US oil production

IMHO you are missing possible correlation of "misunderestimation" of US oil production with "cheerleading" of oil price slump. Please note that this is not about some "wild" conspiracy theory :-)

As unforgettable Bush II said "I've been misunderestimated most of my life." North Charleston, South Carolina; February 15, 2016

and

"There's an old saying in Tennessee-I know it's in Texas, probably in Tennessee-that says, 'Fool me once, shame on…shame on you. Fool me - you can't get fooled again.'"[12] - Nashville, Tennessee; September 17, 2002

The same is true about EIA estimates of the USA oil production :-)

[Feb 28, 2016] Shale producers will continue pumping untel default on thier bonds

Art Berman thinks that the glut of oil of oil is glut of condensate and light oil. Banks basically has given shale operator a pass in 2015. At one point analogy with subprime will became too evident to hide it and then crash starts. Art Berman recommended to watch Big Short to see what is happening on shale patch.
peakoilbarrel.com
Amatoori, 02/28/2016 at 11:31 am
A good but long podcast with Art Berman, not so much new stuff for the people here but gives a great over all picture on the oil market right now.

http://www.macrovoices.com/podcasts/MacroVoices-2016-02-25-Art-Berman.mp3

[Feb 26, 2016] EROEI and distillates consumption in the USA

peakoilbarrel.com

Amatoori , 02/25/2016 at 11:40 am

http://in.reuters.com/article/oil-demand-kemp-idINL8N1644QU
Jef , 02/25/2016 at 6:28 pm
Nice piece of the puzzle Amat. Distillates is the glut.

SO diesel demand has been tanking but gas remains strong. The economy is tanking but people are still driving around in circles.

likbez , 02/25/2016 at 8:25 pm
Amatoori,

Very good --

Some (albeit vague) support for a growing day-by-day "glut deniers" movement :-) . The newer part of the the argument revolves on fixed ratio of gasoline to distillate in refining process. Which supposedly caused a growth of distillate inventories due to weather induced low demand :

In the last year, U.S. refiners have been fairly successful in matching gasoline production and stockpiles with demand. Gasoline production remains at the centre of their operational planning.
Crude stocks have continued to increase, reflecting worldwide oversupply, though stockpiles are rising somewhat more slowly than at the start of 2015.

But refiners lost control of distillate stocks in the second half of 2015 as freight demand slowed and El Nino ensured a warmer than normal winter across the United States and other parts of the northern hemisphere.

Winter heating demand across the United States has been around 17 percent below average, according to the National Oceanic and Atmospheric Administration.

And by the end of 2015, the volume of freight being moved across the United States by road, rail, pipeline, barge and air had fallen by more than 2 percent compared with the same period at year earlier.

Over the last four weeks, U.S. implied distillate consumption has averaged just 3.5 million barrels per day, which is 12 percent below the long-term average and 16 percent below the same period in 2015.

The fact that refiners have lost control of distillate stocks should come as no surprise because distillate is essentially a by-product of gasoline production.

Refineries have operated to maximise gasoline production but in the process created an enormous and growing oversupply of distillate.

There is some limited flexibility in the refining system to switch from distillate production to gasoline but it is typically only on the order of a few percentage points.

Massive overproduction of distillate has pushed gross refining margins for the fuel to the lowest level since 2010.

But refining margins for gasoline have been much healthier, at least until recently, which has encouraged refiners to continue maximising crude throughput.

As long as gasoline demand remains strong, refiners will continue to meet it, which is why the outlook for U.S. gasoline consumption is so critical for the oil market in 2016.

Toolpush , 02/25/2016 at 10:40 pm
Amatoori,

It always surprises me, that when people talk about the year on year drop in diesel consumption, nobody mentions the fact of 1000 less drilling rig working, plus the lower demand from less fraccing, the transport of train loads of sand per well, etc.

I would have thought, the EROI boys would be all over it. As I feel this is where the theory of EROI being very low for unconventional oil and gas, actually starts to show up in day to day numbers.

likbez , 02/25/2016 at 11:46 pm
Hi Toolpush,

It always surprises me, that when people talk about the year on year drop in diesel consumption, nobody mentions the fact of 1000 less drilling rig working, plus the lower demand from less fraccing, the transport of train loads of sand per well, etc.

You made a very good point -- Thank you.

As EROEI boys are lazy bunch let me fill in. Let's assuming EROEI 10 for shale oil (which might be charitable; some sources claim 3-5)
https://en.wikipedia.org/wiki/Oil_shale_economics#Energy_usage

A 1984 study estimated the EROEI of the different oil shale deposits to vary between 0.7–13.3:1.[21] More recent studies estimates the EROEI of oil shales to be 1–2:1 or 2–16:1 – depending on if self-energy is counted as a cost or internal energy is excluded and only purchased energy is counted as input.[20][22] According to the World Energy Outlook 2010, the EROEI of ex-situ processing is typically 4–5:1

So we need 4.2 gallon per bbl.

The EIA estimates in the Annual Energy Outlook 2015, that about 4.2 million barrels per day of crude oil were produced directly from tight oil resources in the United States in 2014.

So we are talking about 0.4 Mb/day of diesel consumption. Which is respectable 10% out of 4 Mb/d total US distillates consumption. So 2% drop (which amount to 20% drop of diesel consumption in oil patch) might be fully attributable to the lower activity of shale patch.

In other words you are right --

[Feb 26, 2016] Distillates overproduction by US refineries as another part of the Great Condensate Con

The hypothesis is that in order to satisfy the glowing demand for gasoline the US distillers overproduce distillates which go into storage and create the impression of the glut.
Notable quotes:
"... But refiners lost control of distillate stocks in the second half of 2015 as freight demand slowed and El Nino ensured a warmer than normal winter across the United States and other parts of the northern hemisphere. ..."
"... Over the last four weeks, U.S. implied distillate consumption has averaged just 3.5 million barrels per day, which is 12 percent below the long-term average and 16 percent below the same period in 2015. ..."
"... But refining margins for gasoline have been much healthier, at least until recently, which has encouraged refiners to continue maximising crude throughput. ..."
"... It always surprises me, that when people talk about the year on year drop in diesel consumption, nobody mentions the fact of 1000 less drilling rig working, plus the lower demand from less fraccing, the transport of train loads of sand per well, etc. ..."
peakoilbarrel.com

Amatoori , 02/25/2016 at 11:40 am

http://in.reuters.com/article/oil-demand-kemp-idINL8N1644QU
Jef, 02/25/2016 at 6:28 pm
Nice piece of the puzzle Amat. Distillates is the glut.

SO diesel demand has been tanking but gas remains strong. The economy is tanking but people are still driving around in circles.

likbez, 02/25/2016 at 8:25 pm
Amatoori,

Very good --

Some (albeit vague) support for a growing day-by-day "glut deniers" movement :-) . The newer part of the argument revolves around the fixed ratio of gasoline to distillate in refining process. Which supposedly caused a growth of distillate inventories due to the weather induced low demand :

In the last year, U.S. refiners have been fairly successful in matching gasoline production and stockpiles with demand. Gasoline production remains at the centre of their operational planning.
Crude stocks have continued to increase, reflecting worldwide oversupply, though stockpiles are rising somewhat more slowly than at the start of 2015.

But refiners lost control of distillate stocks in the second half of 2015 as freight demand slowed and El Nino ensured a warmer than normal winter across the United States and other parts of the northern hemisphere.

Winter heating demand across the United States has been around 17 percent below average, according to the National Oceanic and Atmospheric Administration.

And by the end of 2015, the volume of freight being moved across the United States by road, rail, pipeline, barge and air had fallen by more than 2 percent compared with the same period at year earlier.

Over the last four weeks, U.S. implied distillate consumption has averaged just 3.5 million barrels per day, which is 12 percent below the long-term average and 16 percent below the same period in 2015.

The fact that refiners have lost control of distillate stocks should come as no surprise because distillate is essentially a by-product of gasoline production.

Refineries have operated to maximise gasoline production but in the process created an enormous and growing oversupply of distillate.

There is some limited flexibility in the refining system to switch from distillate production to gasoline but it is typically only on the order of a few percentage points.

Massive overproduction of distillate has pushed gross refining margins for the fuel to the lowest level since 2010.

But refining margins for gasoline have been much healthier, at least until recently, which has encouraged refiners to continue maximising crude throughput.

As long as gasoline demand remains strong, refiners will continue to meet it, which is why the outlook for U.S. gasoline consumption is so critical for the oil market in 2016.

Toolpush, 02/25/2016 at 10:40 pm

Amatoori,

It always surprises me, that when people talk about the year on year drop in diesel consumption, nobody mentions the fact of 1000 less drilling rig working, plus the lower demand from less fraccing, the transport of train loads of sand per well, etc.

I would have thought, the EROI boys would be all over it. As I feel this is where the theory of EROI being very low for unconventional oil and gas, actually starts to show up in day to day numbers.

likbez, 02/25/2016 at 11:46 pm
Hi Toolpush,

It always surprises me, that when people talk about the year on year drop in diesel consumption, nobody mentions the fact of 1000 less drilling rig working, plus the lower demand from less fraccing, the transport of train loads of sand per well, etc.

You made a very good point -- Thank you.

As EROEI boys are lazy bunch let me fill in. Let's assuming EROEI 10 for shale oil (which might be charitable; some sources claim 3-5)
https://en.wikipedia.org/wiki/Oil_shale_economics#Energy_usage

A 1984 study estimated the EROEI of the different oil shale deposits to vary between 0.7–13.3:1.[21] More recent studies estimates the EROEI of oil shales to be 1–2:1 or 2–16:1 – depending on if self-energy is counted as a cost or internal energy is excluded and only purchased energy is counted as input.[20][22] According to the World Energy Outlook 2010, the EROEI of ex-situ processing is typically 4–5:1

So we need 4.2 gallon per bbl.

The EIA estimates in the Annual Energy Outlook 2015, that about 4.2 million barrels per day of crude oil were produced directly from tight oil resources in the United States in 2014.

So we are talking about 0.4 Mb/day of diesel consumption. Which is respectable 10% out of 4 Mb/d of the total US distillates consumption. So 2% drop (which amount to 20% drop of diesel consumption in oil patch) might be fully attributable to the lower activity of shale patch.

In other words you are right --

[Feb 25, 2016] Can you please explain how in oversupplied Europe Iran suddenly found customers

Notable quotes:
"... So who placed an order for oil they weren't going to sell to someone else who would then burn it? Answer: No one did. They had customers and the customers placed orders for it because they needed to burn it, and then took possession of it and burned it. ..."
"... Some of the tankers being used for storage hold gasoline, not crude. (You may already have mentioned this elsewhere.) ..."
"... This is going circular, despite some good procedural information. The issue is this. Does KSA put oil on a tanker and send it to . . . whatever destination with no order for it. Now that's rhetorical in that the correct question could be Does KSA let oil leave that tanker without being a promise of payment. ..."
"... You're not making your point. Are you saying KSA and other exporters pumped that much oil out without being paid for it? ..."
peakoilbarrel.com
Watcher, 02/23/2016 at 3:02 pm
Yes, has anyone noticed swimming pools filled with oil in their neighborhood?

I haven't.

Why would anyone let oil go on a tanker and leave port unless they were paid for it? Answer: They wouldn't. They get paid for it because they had an order for it and filled the order. Why would they cut output and refuse to fill customer orders?

So who placed an order for oil they weren't going to sell to someone else who would then burn it? Answer: No one did. They had customers and the customers placed orders for it because they needed to burn it, and then took possession of it and burned it.

Why contort thinking on this? It's simple and clear.

Dennis Coyne , 02/23/2016 at 3:41 pm
Hi Watcher,

Yes it is very clear that there is an excess of oil being produced and that is why prices are so low, to everyone except you.

AlexS , 02/23/2016 at 4:05 pm
"Why would anyone let oil go on a tanker and leave port unless they were paid for it? "

This is a common practice. The tankers leave ports and can several times change directions as the owner/seller of oil is trying to find the best buyer.

Watcher , 02/23/2016 at 5:22 pm
Interesting. How about offloading? That ever happen without paying the producer? Because if the theory proposed here is all the storage is in tankers, you're going to have to find about a billion barrels sitting unpaid for - all whilst KSA says they produce what they have orders for.
AlexS , 02/23/2016 at 5:46 pm
Read, for example, this article:

Why oil speculators are turning to ships as floating storage

The Globe and Mail, Monday, Feb. 22, 2016
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/why-oil-speculators-are-turning-to-ships-as-floating-storage/article28846311/

Other recommended reading:

IEA Oil Market Report, January 2016, p.33

Watcher , 02/23/2016 at 6:18 pm
About 20 to 25 of the world's 650 supertankers, which can hold two million barrels and are called very large crude carriers, are in use as floating storage,

That's 2 X 25 = 50 million barrels. The alleged oversupply of 3 mbpd for 20 mos (since June 2014) is 20 X 30 X 3 = 1.8 billion barrels.

Do they offload without paying the producer?

AlexS , 02/23/2016 at 7:14 pm
There was never 3 mb/d oversupply, not to say for 20 months. The oversupply peaked at 2.2-2.4mb/d in 2Q15, according to various estimates (see the chart below).

From IEA OMR, January 2016:

"A notional 1 billion barrels of oil was added to global inventories over 2014 – 2015 and our latest supply and demand balances suggest builds will persist with up to 285 mb expected to be added to stocks over the course of 2016. Despite estimations of current space storage capacity and the outlook for significant capacity expansions over 2016, this stock build will likely put midstream infrastructure under pressure and could see floating storage become profitable. "

The volume in floating storage is a small part of total global inventories. It can belong to producers (particularly, the NOCs) or to large traders.

Watcher , 02/23/2016 at 9:52 pm
One more time. Do they offload without paying the producer? "I don't know" is an entirely solid answer.
AlexS , 02/23/2016 at 10:41 pm
Who "they"?

Oil stored in tankers may belong to:

  1. Oil producers, particularly the NOCs (national oil companies). For example, Iran's ~40 million barrels of crude and condensate stored in tankers belongs to the Iranian national oil company.
  2. Oil traders, who have bought that oil and are storing it in tankers in a hope that they could sell it later at a higher price.
likbez , 02/23/2016 at 10:50 pm
Alex,

Can you please explain how in oversupplied Europe Iran suddenly found customers for more then 0.3 Mb/d (Italy, Greece and France; Spain is next).

You should see inventories rising by the same amount because according to the "oil glut" theory this oil can't be consumed, don't you ? And 0.3Mb/d is 9 Mb/month. Most large oil contracts are long term and you can't break them without penalties.

Also in the USA no producer with reasonably good quality oil ("sweet" with reasonable API gravity) has any difficulties selling any volume he can produce. Moreover buyers ask for additional volumes. Note the word "selling", not putting in storage at his own expense.

Theoretically within "oil glut" framework there is no place for this oil to go other then in storage. And storage costs now are very high in Continental US so there should be reasonable attempts to minimize losses due to large amount of stored oil, which should limit "new" oil buying.

So it looks like "glut theory" (which is essentially an extension of neoclassical supply/demand model) has some serious holes in it.

AlexS , 02/23/2016 at 11:35 pm
"Can you please explain how in oversupplied Europe Iran suddenly found customers for more then 0.3 Mb/d (Italy, Greece and France; Spain is next). "

Iran is selling its oil in Europe at a big discount trying to regain its market share in this region. The customers are happy to buy Iranian oil at a lower price than the Saudi or Russian oil. The market is oversupplied, therefore part of oil supplies goes to storage.

"You should see inventories rising by the same amount because according to the "oil glut" theory this oil can't be consumed, don't you ? And 0.3Mb/d is 9 Mb/month."

1) Inventories in Europe are rising. Thus, according to the IEA, in December, even prior to the restart of Iranian exports, they have increased by 0.29 mb/d, or 9 million barrels.

2) Oil exporters are constantly adjusting their geographical mix of oil supplies. So with increasing volume of Iranian oil directed to Europe, Russia and others may have redirected part of their supplies to China.

"Most large oil contracts are long term and you can't break them without penalties."

Oil is not natural gas. Contracts are much shorter than typical take-or-pay contracts for gas supplies. A lot of oil is sold in the spot market. In general, the oil market is very flexible.

"Also in the USA no producer with reasonably good quality oil ("sweet" with reasonable API gravity) has any difficulties selling any volume he can produce. Moreover buyers ask for additional volumes. Note the word "selling", not putting in storage at his own expense."

When a customer in US or any other country buys oil, it may consume (process) it or put in storage. With the current low price of oil and a steep contango, it makes sense to put oil (or refined products) in storage. Therefore, oil and product stocks in the US are increasing.

"Theoretically within "oil glut" framework there is no place for this oil to go other then in storage. And storage costs now are very high in Continental US so there should be reasonable attempts to minimize losses due to large amount of stored oil, which should limit "new" oil buying."

The contango in the oil market justifies storing oil even at a high cost. If not, customers are ready to buy oil only at a lower price. That explains the current downward pressures on the oil price.

"So it looks like "glut theory" (which is essentially an extension of neoclassical supply/demand model) has some serious holes in it."

The oil glut in the market is empirical reality and has nothing to do with the neoclassical theories. You and Watcher are the only ones who deny this.

Ves , 02/24/2016 at 12:12 am
@likbez

"Glut" is emotional word and it is has negative connotation if you are oil producers and very likely it is misused in the press in order to provide certain perception of abundance.

or pick word "Oligarch" or "Businessman" which is more emotional to you?

Better word would be "over-supply" of oil. But the real question is how much of over-supply there is?

Synapsid , 02/24/2016 at 12:44 am
AlexS,

Some of the tankers being used for storage hold gasoline, not crude. (You may already have mentioned this elsewhere.)

Watcher , 02/24/2016 at 2:19 am
This is going circular, despite some good procedural information. The issue is this. Does KSA put oil on a tanker and send it to . . . whatever destination with no order for it. Now that's rhetorical in that the correct question could be Does KSA let oil leave that tanker without being a promise of payment.

Simply that, and you seem to be dodging. Is oil coming out of the ground - or if you're happier, coming out of the tanker, without agreement to pay. And again, your reference made clear you're talking about 50 and only 50 lousy million barrels. The decline in prices started June 2014. Quotes of oversupply have been up to 3 mbpd. Even that graph you posted would add up to hundreds upon hundreds of millions of barrels.

You're not making your point. Are you saying KSA and other exporters pumped that much oil out without being paid for it?

Dennis Coyne , 02/24/2016 at 11:51 am
Hi guys,

The oil of course is paid for, but the price is very low. A "glut" means an oversupply, how do we know there is an oversupply? Because many producers are selling their product at a loss.

For a commodity like oil which does not deteriorate in storage (like apples) there can be oil traders that buy and store oil in hopes of selling later for a higher price.

To make things simple glut=low price.

[Feb 25, 2016] Inventory glut

peakoilbarrel.com

Alberto, 02/24/2016 at 1:36 pm

Every single business in the world must increase its inventory when it increases it sales unless it is somehow able to get more efficient with its inventory turns. When growth is very fast like it has been in the US oil industry over the past few years, inventory turns almost always get less efficient, particularly if there are bottlenecks in product flows due to insufficient infrastructure or logistics which struggles to catch up with that growth. So when you are producing and selling record or near record amounts of a good then your inventory of that good should be at or near record levels. Also, when you build more inventory capacity you are going to carry more inventory particularly if you don't like the price that you can sell that inventory now as is the case in the oil business.

The inventory in the US will turn much quicker than people think as the production declines accelerate or more importantly the price goes up. Assuming either of those things ever happen again….

[Feb 25, 2016] Glut of no glut

peakoilbarrel.com
Ron Patterson , 02/24/2016 at 12:45 pm
The Weekly Petroleum Status Report came out earlier today. The biggest news is that oil inventory levels increased by another 3.5 million barrels. They are at an all time high.

I understand that there are some folks out there who do not believe that there is currently a glut in the oil supply. I wonder how they would explain this record in stored oil. Of course this is just not in the US, there are similar stories around the world. We are running out of places to store oil. That's not a glut? Then what the hell would you call it.

 photo Storage.jpg_zpslhssywqu.png

US crude oil production dropped by 33,000 barrels last week, according to the EIA's algorithm that tries to track production. Understand that this is not an actual measurement of oil produced but a mathematical equation that tries to figure it out.

 photo Weekly CC.jpg_zpsmdjujpug.png

Jeffrey J. Brown , 02/24/2016 at 1:41 pm
A glut of condensate?

As US C+C inventories increased by 100 million barrels from late 2014 to late 2015, US net crude oil imports increased:

http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua

The most recent four week running average data (through Mid-February), show that US net crude oil imports increased year over year, from 6.8 million bpd in 2/15 to 7.4 million bpd in 2/16. And US net crude oil imports, as a percentage of C+C inputs into refineries, rose year over year from 44% last year to 47% this year (four week running average data).

And links to articles from last year and this year that discuss refiners' unhappiness with "Synthetic WTI" blends of heavy crude and condensate:

http://www.reuters.com/article/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

https://rbnenergy.com/just-my-imagination-how-full-is-cushing-crude-oil-storage-capacity-really

shallow sand , 02/24/2016 at 1:54 pm
Ron, do we know what worldwide C + C storage levels have done since 2013?

If I am a US refiner, I would be filling every available inch of storage at sub $30 oil.

Are oil exporters doing the same?

Ron Patterson , 02/24/2016 at 2:29 pm
Well we have the OECD storage levels for the last 6 years, courtesy of the IEA Oil Market Report And, as you can see they are at a high since January 2010.

 photo OECD Storage_zpsaglch8my.jpg

Chris , 02/24/2016 at 4:06 pm
If you substract US storage increase from OECD numbers, I think you should see a plateau. So the majority of the increase in oil storage is in the US, at least for OECD.
shallow sand , 02/24/2016 at 4:33 pm
I have tried in the past to find information about non-OCED and OPEC storage. I have been unable to do so. If anyone has this information (AlexS?) I would appreciate it very much.

Per IEA, total supply, including refinery gains and biofuels stood at 97.1 million bopd. Of that, OCED was 24 million bopd, with refinery gains and biofuels in OCED making up another 4.6 million bopd.

This means that a little over 70% of world wide supply (production) is non-OCED and OPEC. So, without storage information for non-OCED and OPEC, seems it is a little difficult to obtain a clear picture of how much higher worldwide storage is now than it has been in the past?

It would seem if non-OCED exporters and OPEC desired to sell into this market and draw down crude oil storage inventories, they very well could do so, as refiners in importing countries would be inclined to buy as much oil as they could store, assuming that low prices will not remain forever. OTOH, when oil shot up to $140, clearly refiners in importing countries tried to keep from buying anymore crude than necessary, as there is much more risk in storing $140 oil losing value than $30 losing value.

Also, when we get right down to it, strategic petroleum reserves should be included into the mix. However, what weight they should be given is difficult, given the uncertainty of if and when they would be accessed.

The inventories for countries producing 29.5% of C + C, including refining gains and biofuels, have increased from about a five year average of 58 days, to 65 days supply. I wonder what has happened with regard to storage for the remaining 70.5% of world wide production?

I will give you an example of what I mean through a stripper well oil producer. Stripper well production is separated from water and goes into a stock tank. When the stock tank is full, the tank is picked up by a tanker truck and driven to a refinery.

In January, a stripper well operator may start with 1,000 barrels of oil on hand, produce 1,000 barrels in the month, sell 1,200 barrels in the month, and end the month with 800 barrels on hand. The next month, the operator may start with the 800 barrels, produce another 1,000 barrels, sell just 600 barrels, and end the month with 1,200 barrels on hand.

We know the operator produced 1,000 barrels each month. However, if I had not told you that, you might very well think the operator produced 1,200 barrels in January and 600 barrels in February.

Is it not possible that this game is occurring with regard to large producers for which we have no storage data?

For example, I sincerely doubt KSA suddenly shuts in wells to cut production, or opens up wells to increase production. I assume they have considerable storage, and when they ramped up production greatly, they really didn't, they put a lot of stored oil on the market. I think it would be tough to suddenly increase or decrease production by 1 million bopd. Maybe they do, but I doubt it happens immediately.

Of course, I really do not know the above re KSA for a fact. However, it would be much easier for them, or any other producer, to manage supply, at least in part, through the use of storage.

Please understand, I have no idea what is really going on with worldwide oil storage. But that is my point, unless someone can point me to some good data, no one does. For all we know, storage levels in non-OCED and OPEC could be low?

Urs, 02/24/2016 at 2:54 pm
Hi
Thanks for the weekly graph – always great to see your data presentation.

Careful with the increase in crude stocks, because, as you surely know gasoline, distillates (the low sulphur part) and the propane are all down the double,
so that total stocks (bottom line in top part of "data overview table 1" EIA) are DOWN 5 mb last week!

I think people are gonna start reacting, 4 week averages are down, yearly cumulative production is down, the tide is turning. And as Mr Brown writes, imports are up too. The show goes on…
Best,

[Feb 25, 2016] US refiners lose control of distillate stocks

Notable quotes:
"... Since the start of 2015, U.S. refineries have been processing record amounts of crude to meet strong demand for gasoline as continued growth, rising employment and cheap fuel prices have encouraged increased driving. ..."
"... U.S. gasoline stockpiles are currently 11 percent higher than normal for the time of year but if they are adjusted for strong gasoline demand then the surplus shrinks to 7 percent. ..."
"... Distillate stockpiles are currently 24 percent higher than the long-term average but once adjusted for weak consumption they are 43 percent higher than normal for the time of year. ..."
"... Modern U.S. refineries process up to 600,000 barrels per day, 300-1200 times as much as the first batch-based plants, though a more typical refinery has capacity of around 100,000 to 200,000 bpd. ..."
"... With the shift to continuous processing and the prodigious growth in demand for gasoline as a road fuel, the oil industrys need to hold stocks of unrefined crude and refined products surged. ..."
"... At the end of 2013, with the oil market more less balanced, more than 1.05 billion barrels of crude and refined products were being stored at refineries, distributors and oilfields as well as in pipelines and on tank farms. ..."
Reuters
According to the U.S. government, there are over 1.3 billion barrels of crude oil and refined products in commercial storage around the United States, an increase of more than 300 million barrels in the last two years.

There is a tendency to assume all these barrels of crude and products are "excess" inventories, the result of overproduction, but most of them are held for operational reasons.

The best way to distinguish excess inventories from normal operational stocks is to adjust reported inventories for time of year, consumption of crude by refineries, and consumption of products by end customers.

Other things being equal, the more crude refineries process every day, the more crude they need to hold on site, at tank farms or en route to the refinery in pipelines and on ships to keep their distillation towers supplied.

And the more fuel supplied to customers, the more refined stock refineries, blenders and distributors need to keep on hand to deal with seasonal swings, maintenance and unexpected disruptions in the supply system.

Since the start of 2015, U.S. refineries have been processing record amounts of crude to meet strong demand for gasoline as continued growth, rising employment and cheap fuel prices have encouraged increased driving.

U.S. crude stockpiles are currently 47 percent higher than the average over the last 10 years but if stocks are adjusted for the higher rate of processing the surplus falls to around 34 percent.

The reported surplus in crude stocks over the long-term average is around 162 million barrels but if stocks are adjusted for higher processing the surplus falls to around 128 million barrels (tmsnrt.rs/20WQt9F).

U.S. gasoline stockpiles are currently 11 percent higher than normal for the time of year but if they are adjusted for strong gasoline demand then the surplus shrinks to 7 percent.

The reported surplus in gasoline stocks over the long-term average is 26 million barrels but adjusted for higher demand falls to 17 million barrels (tmsnrt.rs/20WQzhl).

Crude and gasoline stocks are somewhat less excessive than the unadjusted data suggests because refinery processing and gasoline consumption have been so strong.

But distillate demand has been much weaker than normal thanks to sluggish demand from the freight sector and El Nino.

Distillate stocks are much higher than the raw numbers suggest, once they are adjusted for the current weakness in demand.

Distillate stockpiles are currently 24 percent higher than the long-term average but once adjusted for weak consumption they are 43 percent higher than normal for the time of year.

The reported surplus in distillate stocks over the long-term average is 31 million barrels but adjusted for weak demand the surplus surges to 48 million barrels (tmsnrt.rs/20WQE4M).

At this time of year, U.S. gasoline stocks are normally around 26 days worth of consumption, and they are currently a bit higher at 28 days.

Distillate stocks should be around 32 days worth of consumption but are currently at a massive 46 days worth of demand.

CONTINUOUS PROCESSING

Early U.S. oil refineries processed crude in batches, with each batch of oil loaded separately into a still, where it was heated until the distillates were boiled off, condensed and collected for sale.

Early refineries were really just simple distilleries: the equipment would be instantly recognisable to anyone who has been on a tour of a whisky distillery ("A practical treatise on coal, petroleum and other distilled oils", Gesner, 1865).

The first U.S. refineries established during the 1860s and 1870s processed up to 2,000 barrels per day, though most were much smaller and produced less than 1,000 barrels per day ("Early and later history of petroleum", Henry, 1873).

Refineries were geared to produce a middle distillate boiling around 300-600 degrees Fahrenheit which was sold as kerosene or paraffin oil and used for illumination.

Gasoline, with its lower boiling point, was too volatile to be used safely as lamp fuel and was mostly considered a nuisance and waste product.

U.S. oil refineries eventually switched from processing crude in discrete batches to feeding oil into distillation towers and drawing off the fractions in a continuous process.

Modern U.S. refineries process up to 600,000 barrels per day, 300-1200 times as much as the first batch-based plants, though a more typical refinery has capacity of around 100,000 to 200,000 bpd.

The objective has switched from producing kerosene for lighting to producing gasoline for use as a transportation fuel.

In the first decades of the 20th century, electric lighting began to reduce demand for kerosene while the massive expansion in car ownership stimulated consumption of gasoline.

From 1915-1920 onwards, refineries were increasingly geared to produce gasoline as the main product, while middle distillates became a by-product.

With the shift to continuous processing and the prodigious growth in demand for gasoline as a road fuel, the oil industry's need to hold stocks of unrefined crude and refined products surged.

To ensure an uninterrupted flow of oil from the wellhead to the refinery and the end customer, stocks of crude and refined fuels are held at every stage along the supply chain.

Refineries hold substantial stocks of crude to ensure a continuous flow of carefully prepared (de-watered and de-salted) as well as blended crude into their distillation towers.

The industry also needs substantial stocks of refined fuels, lubricants and petrochemicals to ensure a continuous supply to distributors and end users.

Refineries hold crude and refined products to meet routine operational requirements as well as to deal seasonal variations in demand, planned maintenance and unexpected disruptions.

The amount of oil involved is enormous.

At the end of 2013, with the oil market more less balanced, more than 1.05 billion barrels of crude and refined products were being stored at refineries, distributors and oilfields as well as in pipelines and on tank farms.

By February 2015, with the oil market clearly oversupplied, crude and refined products in storage had climbed to more than 1.33 million barrels, according to the U.S. Energy Information Administration ("Weekly Petroleum Status Report", EIA, Feb. 24).

OPERATIONAL PLANNING

In the last year, U.S. refiners have been fairly successful in matching gasoline production and stockpiles with demand. Gasoline production remains at the centre of their operational planning.

Crude stocks have continued to increase, reflecting worldwide oversupply, though stockpiles are rising somewhat more slowly than at the start of 2015.

But refiners lost control of distillate stocks in the second half of 2015 as freight demand slowed and El Nino ensured a warmer than normal winter across the United States and other parts of the northern hemisphere.

Winter heating demand across the United States has been around 17 percent below average, according to the National Oceanic and Atmospheric Administration.

And by the end of 2015, the volume of freight being moved across the United States by road, rail, pipeline, barge and air had fallen by more than 2 percent compared with the same period at year earlier.

Over the last four weeks, U.S. implied distillate consumption has averaged just 3.5 million barrels per day, which is 12 percent below the long-term average and 16 percent below the same period in 2015.

The fact that refiners have lost control of distillate stocks should come as no surprise because distillate is essentially a by-product of gasoline production.

Refineries have operated to maximise gasoline production but in the process created an enormous and growing oversupply of distillate.

There is some limited flexibility in the refining system to switch from distillate production to gasoline but it is typically only on the order of a few percentage points.

Massive overproduction of distillate has pushed gross refining margins for the fuel to the lowest level since 2010.

But refining margins for gasoline have been much healthier, at least until recently, which has encouraged refiners to continue maximising crude throughput.

As long as gasoline demand remains strong, refiners will continue to meet it, which is why the outlook for U.S. gasoline consumption is so critical for the oil market in 2016.

[Feb 24, 2016] A glut of condensate

peakoilbarrel.com

Jeffrey J. Brown, 02/24/2016 at 1:41 pm

A glut of condensate?

As US C+C inventories increased by 100 million barrels from late 2014 to late 2015, US net crude oil imports increased:

http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua

The most recent four week running average data (through Mid-February), show that US net crude oil imports increased year over year, from 6.8 million bpd in 2/15 to 7.4 million bpd in 2/16. And US net crude oil imports, as a percentage of C+C inputs into refineries, rose year over year from 44% last year to 47% this year (four week running average data).

And links to articles from last year and this year that discuss refiners' unhappiness with "Synthetic WTI" blends of heavy crude and condensate:

http://www.reuters.com/article/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

https://rbnenergy.com/just-my-imagination-how-full-is-cushing-crude-oil-storage-capacity-really

[Feb 24, 2016] There's no valid data on most of what's going on

Notable quotes:
"... WTI definition was changed to allow more shale output flow into Cushing. Inventory definition similarly changes and loses all valid comparison to history. There's no valid data on most of what's going on. ..."
peakoilbarrel.com

Watcher, 02/24/2016 at 6:39 pm

WTI definition was changed to allow more shale output flow into Cushing. Inventory definition similarly changes and loses all valid comparison to history. There's no valid data on most of what's going on.
clueless, 02/24/2016 at 10:17 pm
Watcher: "There's no valid data on most of what's going on."

One of your best observations.

[Feb 23, 2016] Oil Sands Growth Seen Slowing or Halting After Current Work

Bloomberg Business

The growth engine of Canada's energy industry is poised to shut off next decade, according to the International Energy Agency.

Production gains from the oil sands in northern Alberta will slow dramatically or come to a halt as crude prices remain low and costs too high for one of the world's most expensive sources of oil, the agency forecast Monday in a report on the global medium-term crude market. Environmental concerns, a lack of new oil pipelines and uncertainty about policy in Alberta are also causing companies to slow development work, the report said.

... ... ...

The outlook for slowing oil-sands growth next decade comes as Canadian energy companies report quarterly earnings results that display the full brunt of the market collapse. Narrowing refining margins are no longer shielding producers such as Cenovus Energy Inc. from losses in their upstream divisions. Companies are further lowering dividends, cutting jobs and setting aside drilling rigs to contend with what Cenovus Chief Executive Officer Brian Ferguson earlier this month called "hurricane-force" winds.

[Feb 23, 2016] EIA Overestimates US Production, Huge Production Drop in the Works #4 by Richard Grismer

Notable quotes:
"... The conclusion is US shale production is far less robust than the world of oil traders currently believes. ..."
"... My belief is US production is declining at a rate best described by Projection 2. This means the decline is trending in the lower channel and possibly the lower half of the upper channel. The less steep poly trend line also likely describes the situation well. ..."
February 10, 2016 | Griz's Trading Blog

It seems that EIA is doubling down on their faulty model for weekly US oil production estimates. EIA continues to drive monthly production estimates up, at least through February, and in turn this is supporting weekly overestimates of US production. In fact their latest monthly report estimates production in the major US shale basins will exceed their previous January production estimate by 68k bbl/day. This is in direct conflict with dropping rig counts and more importantly falling well completion rates reported by the states of Texas and North Dakota.

... ... ...

The conclusion is US shale production is far less robust than the world of oil traders currently believes. If we have now moved into a mode where Unaccounted for Oil tends to be negative, say -150k bbl/day every week, opposed to the normal +150k bbl/day every week, and this is just week 2 of a much longer streak of back to back negative values for Unaccounted for Oil, US production could already be well under 9MM bbl/day and very rapidly falling toward 8MM bbl/day.

Below I'm including my updated 2016 US production + Unaccounted for Oil projection. I've included a couple of my own linear projections as well as a couple polynomial trend lines. My belief is US production is declining at a rate best described by Projection 2. This means the decline is trending in the lower channel and possibly the lower half of the upper channel. The less steep poly trend line also likely describes the situation well.

Unknown, February 11, 2016 at 5:13 AM<

I think you are correct. When I look at how some of the upstream mlps have now entered panic mode even with good hedging this yr is telling
Kirt

[Feb 23, 2016] EIA shale production projections are extremely optimistic

Notable quotes:
"... So, if oil prices would fall below 20 USD per barrel for a long period I am pretty sure, oil production for Bakken and Eagle Ford would tend to zero within a short time and all above production scenarios would be irrelevant. ..."
peakoilbarrel.com
George Kaplan, 02/23/2016 at 3:14 am
In the discussions here and concerning Bakken LTO has either of these two articles been mentioned? They are by David Hughes and Jean Laherrere.

The David Hughes one in particular looks to have predictions close to what has been happening. They both question EIA estimates of the amount of oil recoverable. For example from Hughes:

"The U.S. Energy Information Administration's (EIA) forecasts regarding tight oil production-published in its Annual Energy Outlook (AEO)-are commonly viewed by industry and government as the best available assessment of what to expect in the longer-term, with the EIA's reference case typically viewed as the most likely scenario for future production. In my Drilling Deeper1 report published last October, I developed alternate production forecasts for two major tight oil plays, the Bakken and Eagle Ford, and reviewed the credibility of EIA AEO20142 forecasts for other major plays based on the fundamental geological characteristics of each play. In most plays the AEO2014 production projections were found to be highly to extremely optimistic when reviewed in the light of play fundamentals. For the Bakken and Eagle Ford plays, AEO2014 overestimated the likely recovery of oil by 2040 by 42% compared to my "Most Likely" drilling rate case found in Drilling Deeper."

http://www.postcarbon.org/wp-content/uploads/2015/09/Hughes_Tight-Oil-Reality-Check.pdf

This is from the Laherrere article (posted at POB) and looks, for something 18 months ago, as prescient as anything I've seen in the light of subsequent events:

"It seems that most oil companies are spending more than their revenues by increasing their debts. Countries can live for a long time with huge debt increase, not companies. They count on the stock market by delivering optimistic reports and keep drilling to avoid the production to decline. With shale oil or shale play, in contrary with conventional where wells are dry or producing, oil can be produced even for a while if not economical.
Such behavior explains why most peak forecasts are wrong. But the main question is about the slope of the decline after the peak. EIA forecast a LTO (light tight oil = shale oil) peak in 2017 it is not too far after my forecast, the big difference is the slow EIA LTO decline."

http://peakoilbarrel.com/bakken-oil-peak-jean-laherrere/

Heinrich Leopold, 02/23/2016 at 5:00 am
George Kaplan

Although these reports are very interesting, they ignore in my opinion financial conditions – mainly the bond market – and oil prices as major drivers for oil production. Jean Laherrere is fully aware of this fact, yet does not provide oil production scenarios at different oil price and bond market conditions.

So, if oil prices would fall below 20 USD per barrel for a long period I am pretty sure, oil production for Bakken and Eagle Ford would tend to zero within a short time and all above production scenarios would be irrelevant.

If oil prices would recover, production will start again.

Yet it is in my view not possible to sustain horrendous losses for a long time. Somebody has to pay the bill. It is already clear now that high US oil production supports the US dollar, yet brings the bond market to its knees. The bond – and equity holders are paying currently the bill, yet for how long?

This comes especially on the background of the US bond market facing a maturity wall of USD 4.1 trn over the next four years. http://www.highyieldbond.com/the-2020-maturity-wall-4-1t-of-bonds-to-mature-and-13-of-that-is-high-yield/.

Companies can roll over the debt, yet at much higher interest rates.

George Kaplan, 02/23/2016 at 5:48 am
Might be so. If the production continues to follow the Hughes predictions though, I'd say that will cast a lot of doubts over how much impact short term price swings have had. Possibly the availability of cheap money through most of 2015 overrode any price signals and they just kept on drilling no matter how much losses they incurred. You talking about a maturity wall now – how would that have impacted production in the past, especially when in the beginning of the price fall producers were expecting prices to recover at any time and later were concentrating solely in staying alive for the next month and couldn't afford to look much further ahead.

With data currently available the main message I've got from this is that there is probably a lot less oil in the Bakken and Eagle Ford than EIA are saying – at any price.

[Feb 23, 2016] The IEA has increased its medium-term global demand projections compared with the 2015 projections

peakoilbarrel.com
AlexS, 02/22/2016 at 12:04 pm
The IEA has actually increased its medium-term global demand projections compared with the previous year's report. This reflects a much higher 2015 base, but also slightly higher growth rates in 2016-2020.
As a result, projected demand in 2020 is now almost 1.5 mb/d higher than in MTOMR-2015 (100.5mb/d vs. 99.05mb/d).

From the new report:

"…our forecast for oil demand to 2021 is for annual average growth of 1.2 mb/d (1.2%) which represents a very solid outlook in historical terms. Oil demand breaks through the 100 mb/d barrier at some point in 2019 or 2020. A major change from the 2015 MTOMR is the higher base from which our forecast begins. In 2015 world oil demand increased by 1.6 mb/d (1.7%), one of the biggest increases in recent years stimulated to a large extent by the rapid fall in oil prices that began in the second half of 2014 and gained momentum in 2015. However, any expectations that the most recent fall in oil prices to USD 30/bbl oil will provide further stimulus to oil demand in the early years of our forecast and send annual rates of growth above 1.2 mb/d are likely to be dashed. In the first part of 2016 we have seen major turmoil in financial markets and clear signs that almost any economy you care to look at could see its GDP growth prospects downgraded.
Since 2014 the non-OECD countries have used more oil than OECD countries and the gap will widen in years to come. However, the rate of demand growth in the non-OECD countries is vulnerable to being pared back as the cost of energy subsidies becomes a major burden and governments take action. This will probably not have an immediate impact on demand in the early part of this forecast, but later on we might see that the reduction in expensive fuel subsidies in many countries, including the fast-growing Middle East, does have a significant effect on growth. Also, rising energy use has brought with it terrible environmental degradation, particularly in the fast-growing Asian economies, and oil's part in this is recognised by measures to limit vehicle registrations and use. Although reducing subsidies and tackling pollution will affect the rate of demand growth, it should be stressed that non-OECD Asia will still remain the major source of oil demand growth with volumes increasing from 23.7 mb/d in 2015 to 28.9 mb/d in 2021."

Global liquids demand (mb/d): IEA Medium-Term Market Reports 2016 vs. 2015

AlexS, 02/22/2016 at 12:44 pm
The IEA's non-OPEC C+C+NGLs production estimate for 2015 in last year's MTOMR proved too pessimistic. They have underestimated the resilience of high cost oil production, particularly that of the US LTO. As a result, actual non-OPEC production was 1.1 mb/d higher than in last year's report.

Still, the agency expects non-OPEC production to decline by 0.6mb/d in 2016 and 0.1mb/d in 2017 before a gradual recovery from 2018. Projected decline in 2016-17 should be mainly driven by LTO. Expected non-OPEC production in 2020 is 0.4mb/d lower than in the MTOMR-2015.

From the new report:

In the year since the 2015 MTOMR was published, the supply side has provided many surprises. By far the most significant has been the resilience of high cost oil production and in particular that of light, tight, oil (LTO) output in the US. As oil prices cascaded down from more than USD 100/bbl it was widely predicted at various milestones that the extraordinary growth in total US crude oil production from 5 mb/d in 2008 to 9.4 mb/d in 2015 would grind to a halt and move rapidly into reverse. Growth certainly ceased in mid-2015 but the intervening period has seen a relatively modest pull-back and total US crude oil production in early February 2016 was still close to 9.0 mb/d, aided by expanding production in the Gulf of Mexico.

In our base case outlook, there is an element of the "straw breaking the camel's back" and we expect US LTO production to fall back by 600 kb/d this year and by a further 200 kb/d in 2017 before a gradual recovery in oil prices, working in step with further improvements in operational efficiencies and cost cutting, allows a gradual recovery. Anybody who believes that we have seen the last of rising LTO production in the United States should think again; by the end of our forecast in 2021, total US liquids production will have increased by a net 1.3 mb/d compared to 2015. Such has been the element of surprise provided by the resilience of US oil production, and the wide divergence of views as to the future, that we have added a High and Low Case to our non-OPEC production analysis and plotted the impact on the global oil market balance of US LTO production falling by more than in our base case or, conversely, less. The eventual outturn is one of the most important factors – if not the most important – in assessing when the oil market will re-balance.

Non-OPEC liquids production (ex biofuels) (mb/d): IEA Medium-Term Market Reports 2016 vs. 2015
(Note: excludes Indonesia)

AlexS, 02/22/2016 at 1:07 pm
The IEA expects the oil market to re-balance in 2017, which is in line with the EIA's and many other forecasts. However the accumulated excess inventories will return to long-term normal levels only by 2021, which should dampen the recovery in oil prices.

From the report:

For some time now analysts have tried to understand when the oil market will return to balance. A year ago it was widely believed that this would happen by the end of 2015 but that view has proved to be very wide of the mark. In 2014 and again in 2015 supply exceeded demand by massive margins, 0.9 mb/d and 2 mb/d respectively, and for 2016 we expect a further build of 1.1 mb/d. Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks. Unless we see an even larger than expected fall in non-OPEC oil production in 2016 and/or a major demand growth spurt it is hard to see oil prices recovering significantly in the short term from the low levels prevailing at the time of publication of this report.

It is very tempting, but also very dangerous, to declare that we are in a new era of lower oil prices. But at the risk of tempting fate, we must say that today's oil market conditions do not suggest that prices can recover sharply in the immediate future – unless, of course, there is a major geopolitical event.

Global balance base case: IEA MTOMR-2016

[Feb 23, 2016] EIA Overestimates US Production, Huge Production Drop in the Works #5

February 18, 2016 | Griz's Trading Blog

The EIA weekly estimate of production is still too high as indicated by Unaccounted for Oil and production estimates based on well completion rates. However, the weekly estimate is starting to move down in a big way. Last week down 30k bbl/day, this week 50k bbl/day. 50k bbl/day is huge, that is 200k bbl/day/month The reality is US production has been falling 20k-30k bbl/day for weeks or even months already, now it is likely falling 30-37k bbl/day/week not 50k bbl/day/week. 50k bbl/day/week would imply almost zero well completions, when around half of each months shale decline is currently being replaced monthly. But EIA is so far behind, with likely production levels already below 9 MM bbl/day compared to the official estimate of 9.135 MM bbl/day, that they are being forced and will continue to be forced to show huge weekly declines for awhile to catch up. Won't be surprised to see 100k bbl/day cut reported next week and potentially the week after as well.

Unaccounted for oil has been running dramatically negative since Dec. 4. We have now just seen 3 back to back weeks with negative unaccounted for oil. This week it was -500k bbl/day or 3.5MM bbl for the week. Imagine what happens when -500k bbl/day in Unaccounted is zeroed out and put in production instead.

[Feb 22, 2016] IEA warns consumers of spike in oil prices

www.bbc.com

The International Energy Agency (IEA) is warning consumers not to let cheap oil lull them into a false sense of security amid forecasts of a price spike by 2021.

In a report, the IEA said it expects prices to start recovering in 2017. But it forecasts that will be followed by a sharp jump in price as supply shrinks following under-investment by struggling producers.

Brent crude touched a 13-year low of $28.88 a barrel in January. It has since recovered somewhat, but is still far below a high of $115 in June 2014.

On Monday the price was up around 4.9% at $34.62.

Fatih Birol, executive director of the IEA, said: "It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future."

... ... ...

The policy advisor expects global oil supply will grow by 4.1 million barrels of oil per day between 2015 and 2021, down from an increase of 11 million barrels of oil per day between 2009 and 2015.

It also expects investment in oil exploration and production to fall by 17% in 2016 following a 24% decline last year.

[Feb 22, 2016] EIA as a cheerleader of oil price slump

I especially like "The world of peak oil supply has been turned on its head, due to structural changes in the economies of key developing countries and major efforts to improve energy efficiency everywhere."
Notable quotes:
"... Further, it is becoming even more obvious that the prevailing wisdom of just a few years ago that "peak oil supply" would cause oil prices to rise relentlessly as output struggled to keep pace with ever-rising demand was wrong. Today we are seeing not just an abundance of resources in the ground but also tremendous technical innovation that enables companies to bring oil to the market. ..."
"... The world of peak oil supply has been turned on its head, due to structural changes in the economies of key developing countries and major efforts to improve energy efficiency everywhere. ..."
"... I estimate that Saudi Arabia may have already shipped in the vicinity of half of their post-2005 CNE. Note that annual Saudi net oil exports fell from 9.5 million bpd in 2005 to 8.4 million bpd in 2014 (probably remaining at about 8.7 mililon bpd in 2015, EIA + BP data). In other words, Saudi net exports, after increasing very rapidly from 2002 to 2005, have almost certainly been below their 2005 rate for 10 straight years. But the hidden danger, which almost no one is focused on, is the ongoing–and accelerating–rate of depletion in remaining volume of post-2005 Saudi and Global Cumulative Net Exports of oil. ..."
"... Increasing the extraction rate simply increases the depletion rate. I can't see how anything humans do can change that fact. In other words, nothing can turn peak oil on its head. ..."
"... I believe that high oil prices will be back, but have been convinced by AlexS that it will not be as soon as I have been predicting. Long term projects that will come on line and be ramping up in 2016 and 2017 may keep oil prices under $80/b through mid 2018, we may not see prices rise to $100/b or more (2015$) until 2019, when the current delays in long term oil investment will start to affect oil output in a big way (2 to 3 Mb/d less output than if the projects deferred had been completed). ..."
peakoilbarrel.com
Daniel, 02/22/2016 at 8:00 am
From IEA medium-term oil market report 2016:

Further, it is becoming even more obvious that the prevailing wisdom of just a few years ago that "peak oil supply" would cause oil prices to rise relentlessly as output struggled to keep pace with ever-rising demand was wrong. Today we are seeing not just an abundance of resources in the ground but also tremendous technical innovation that enables companies to bring oil to the market.

Added to this is a remorseless downward pressure on costs and, although we are currently seeing major cutbacks in oil investments, there is no doubt that many projects currently on hold will be re-evaluated and will see the light of day at lower costs than were thought possible just a few years ago. The world of peak oil supply has been turned on its head, due to structural changes in the economies of key developing countries and major efforts to improve energy efficiency everywhere.

I fear that there will be a rude awakening for some in the next few years.

Jeffrey J. Brown, 02/22/2016 at 8:46 am
The WSJ has an article on the IEA outlook, with an interesting chart (do Google Search for access):

WSJ: IEA Sees Global Oil Markets Rebalancing Next Year
IEA says 'supply and demand will gradually rebalance by 2017, with a corresponding recovery in oil prices from around $30 a barrel'

Jeffrey J. Brown, 02/22/2016 at 11:53 am
Copy of an email I sent to some Oil Patch folks:

Attached is an article in today's WSJ about the IEA's most recent outlook, for the balance between global total liquids supply & demand. There is a very interesting chart in the article. Apparently, oil prices were trading up today, because of the report.

However, the IEA outlook does not take into account two critical factors: (1) The composition of the global Crude + Condensate (C+C) inventory oversupply (mostly condensate, in my opinion) and (2) Even as production increases, net exports can fall, because of domestic consumption in net oil exporting countries.

Some of my comments on net oil exports:

Following is a link to a discussion, in three sequential comments, of the Export Land Model (ELM, a simple mathematical model which assumes a 5%/year rate of decline in production and a 2.5%/year rate of increase in consumption, in a net oil exporting country), the Six Country Case History (major net exporters that hit or approached zero net exports from 1980 to 2010, excluding China) and the (2005) Top 33 Net Exporters, with graphics for each item:

http://peakoilbarrel.com/opec-except-iran-has-peaked/#comment-556985

Note that what I define as the ECI Ratio (Export Capacity Index) is the ratio of production to consumption, and CNE = Cumulative Net Exports (for a defined time period).

Based on the mathematical model, which is confirmed by the empirical data (Six Country Case History), a declining ECI Ratio tends to correlate with an accelerating rate of depletion in remaining CNE.

For example, about the only metric that most analysts focus on is the top line production number in a net oil exporting country, and from 1995 to 1999, Six Country production rose by 2%, but in only four years they had already shipped 54% of their post-1995 CNE.

I estimate that Saudi Arabia may have already shipped in the vicinity of half of their post-2005 CNE. Note that annual Saudi net oil exports fell from 9.5 million bpd in 2005 to 8.4 million bpd in 2014 (probably remaining at about 8.7 mililon bpd in 2015, EIA + BP data). In other words, Saudi net exports, after increasing very rapidly from 2002 to 2005, have almost certainly been below their 2005 rate for 10 straight years. But the hidden danger, which almost no one is focused on, is the ongoing–and accelerating–rate of depletion in remaining volume of post-2005 Saudi and Global Cumulative Net Exports of oil.

Regards,

Jeffrey Brown

Frugal, 02/22/2016 at 8:52 am
The world of peak oil supply has been turned on its head, due to structural changes in the economies of key developing countries and major efforts to improve energy efficiency everywhere.

Increasing the extraction rate simply increases the depletion rate. I can't see how anything humans do can change that fact. In other words, nothing can turn peak oil on its head.

Jef, 02/22/2016 at 11:02 am
"… structural changes in the economies…"

Yea, its called tanking.

Dennis Coyne, 02/22/2016 at 11:50 am
Hi Frugal,

Correct. I think what has surprised many, including the IEA is that a few years ago they worried that high oil prices would be a problem as oil supply growth would struggle to keep up oil demand growth.

That has not proven to be the case from late 2014 until today as oil supply growth has outpaced oil demand growth. This is mostly due to a change in strategy by OPEC to focus on market share rather than oil revenue.

I believe that high oil prices will be back, but have been convinced by AlexS that it will not be as soon as I have been predicting. Long term projects that will come on line and be ramping up in 2016 and 2017 may keep oil prices under $80/b through mid 2018, we may not see prices rise to $100/b or more (2015$) until 2019, when the current delays in long term oil investment will start to affect oil output in a big way (2 to 3 Mb/d less output than if the projects deferred had been completed).

To me the undulating plateau scenario looks somewhat plausible, unless there is a financial crisis, in which case demand and price will fall along with output. I have no prediction for when such a crisis might occur, but the scenario below ignores that possibility.

[Feb 21, 2016] Why wouldn't we call the EIA liars in reporting far more Texas oil production than the RRC?

peakoilbarrel.com

Coolreit, 02/21/2016 at 11:23 am

Why wouldn't we call the EIA liars in reporting far more Texas oil production than the RRC?

Critics say they are not lying as their difference with the RRC is initial reporting vs. final estimated reporting. If that critique were valid, then why is the oil production drop by the RRC from peak triple the fall that the EIA reports for Texas?

[Feb 20, 2016] The Oil Drum Oil Watch - World Total Liquids Production

www.theoildrum.com

RockyMtnGuy on November 22, 2012 - 8:49pm Permalink

Well, apparently the EIA and IEA are counting only liquid fuels, but it's not a legitimate accounting technique. They should be doing a mass and/or energy balance. There is quite a lot of mass and energy in the coke a refinery produces, and they don't actually throw it away, they sell it as fuel. Looking at only liquid fuels is really a very simplistic approach which gives a misleading picture. [-] Black_Dog on November 22, 2012 - 10:09am Permalink | Subthread | Parent | Parent subthread | Comments top As you note, "processing gains" aren't something which one can measure directly. The markets deal in volumes and as a result, governmental reports (such as those from the EIA and the IEA) present data in volumes, not energy content or mass. Processing gain only serves to keep the "green eye shade" crowd of corporate and financial types happy, since they are trained to look at various balance sheets in which every thing neatly adds up. In reality, "processing gain" is simply the calculated difference between the volume of product and the volume of input liquids.

The volumes reported on both sides of the calculation have numerous sources of error, not to forget the non-technical situations, such as the Saudis, where production is a state secret and various unauthorized diversions, such often reported in Nigeria. For countries (and companies) with a larger fraction of such gains, the cause might be more efficient refining or differences in the output fraction of each product type. Refiners which have access to natural gas may use that instead of crude to provide the thermal or electrical energy to run the refinery, resulting in more product output. The results might also reflect differences in emissions where a country which has strict standards and enforcement might end up with more product actually making it to market. Then too, it's always going to be difficult to contain these liquid and gaseous materials, especially in countries with warmer climates. There's also the possibility that "processing gains" might turn out to be negative, if losses are extreme.

Ideally, from a scientific or thermodynamic point of view, the accounting should be carried out in energy terms, presenting the information rather like that found in the various markets for natural gas or electricity. With such accounting, there would not be any "processing gain", only the losses during extraction, refining and distribution. The efficiency of each link in the processing and delivery chain would be clearly apparent and the market(s) would be able to include this information in various corporate valuations. Sad to say, our markets don't work that way...

E. Swanson [-] jjhman on November 22, 2012 - 3:30pm Permalink | Subthread | Parent | Parent subthread | Comments top That's a nice summary of why the 2.5-ish% processing gain should be considered within the noise level of all of this data, and probably best ignored completely. Patrick R on November 21, 2012 - 6:19pm Permalink | Subthread | Parent | Parent subthread | Comments top So the killer for 'American oil independence' is the combination of Dr Patzek's US production chart from yesterday with Westexs' last chart above:

The former tells us that after the Shale bump 'native' production will go back to decline, and the later shows us that replacing it with imported oil is going to get harder, or at least more expensive.

So. Be nice to Canada now, and/or probably better sabotage any attempts by those pesky northerners to build infrastructure that liberates the Alberta resource either east or west and onto the global market.

Related: Is the Alberta product dependent on US inputs to lighten it? If so that is a way that that Bitumen, once it hits the station forecourt, could at least in part accurately be described as a 'North American' product?

[Feb 16, 2016] We are always dealing with rough estimates of oil production

Notable quotes:
"... Lets suppose that one accepts the premise that obtaining accurate figures for total world crude production is going to be problematic at best, and that we are dealing with ballpark figures, to use that term lightly. And this premise is based on the idea that statistics on oil production are undoubtedly politically motivated, and that even if transparency was as good as former American standards, we would still be dealing with rough estimates. ..."
"... Alright, if one accepts this premise, then one must conclude that dealing now with world total liquids will be even more problematic, especially in an era of permanent economic contraction and what will inevitably be defunding of areas thought to be secondary or academic. ..."
"... we should admit is that only country by country production and import/export stats have any meaning now, and even those may be largely tampered with. ..."
www.theoildrum.com
energyblues on November 22, 2012 - 5:44am Permalink
Let's suppose that one accepts the premise that obtaining accurate figures for total world crude production is going to be problematic at best, and that we are dealing with ballpark figures, to use that term lightly. And this premise is based on the idea that statistics on oil production are undoubtedly politically motivated, and that even if transparency was as good as former American standards, we would still be dealing with rough estimates.

Alright, if one accepts this premise, then one must conclude that dealing now with "world total liquids" will be even more problematic, especially in an era of permanent economic contraction and what will inevitably be defunding of areas thought to be secondary or academic.

I suspect this is largely true now. I do enjoy these posts, but what we should admit is that only country by country production and import/export stats have any meaning now, and even those may be largely tampered with.

It is possible and in fact likely that world production could soar while entire countries find themselves out of the market, or that world production could plummet even while a select few are always able to fill their cars and jets.

This was always the danger of peak oil, wasn't it? That the forces it would unleash would in fact undermine any attempts to properly categorize, understand, and deal with it.

[Feb 16, 2016] I estimate that actual global crude oil production, as a percentage of total liquids, fell from about 81% in 2005 to about 72% in 2015.

peakoilbarrel.com

Jeffrey J. Brown , 02/13/2016 at 3:54 pm

I'm estimating that global crude oil production* was about 69 million bpd in 2005 and 68 million bpd in 2014. I would assume around 69 million bpd for 2015. Global total liquids production was 85 million bpd in 2005 and apparently about 96 million bpd in 2015.

So, I estimate that actual global crude oil production, as a percentage of total liquids, fell from about 81% in 2005 to about 72% in 2015.

In regard to the US, I estimate that actual crude oil as a percentage of total liquids fell from about 57% in 2005 (4.7/8.3) to about 49% in 2015 (7.3/14.8).

*45 API Gravity & Lower Crude Oil

Oldfarmermac , 02/13/2016 at 6:49 pm
If the collective or average energy content of "other liquids" IS only seventy percent of the energy content per barrel of conventional crude oil, then ten million barrels of conventional are worth about twelve and a half barrels of "other liquids".

If it turns out that conventional crude HAS hit it's ultimate upper limit, as indicated by the plateau in production of it, for the last decade, even with the price skyrocketing, then each MILLION new barrels of "other liquids" are will be worth be worth only seven tenths of a million barrels of actual OIL.

Of course the impact will not be quite so bad , in terms of the energy of the total liquid fuel supply, because the total supply already consists of about twenty eight percent "other " according to JBB's estimate.

Something tells me net energy per capita per barrel of liquid fuel is in the rear view mirror and receding from view at a steady clip, given the growth of population.

That might not matter as much, except at a moral and humanitarian level, as we think however, because most of the poor people of the world are never going to own and drive automobiles.

But it is reasonable to assume that even the poorest parts of the world will see substantial percentage point increases in oil consumption, so long as oil can be bought at any price, because the less oil you use, the greater the utility of each barrel.

A gallon burnt in a heavy truck delivering food from country side to city is worth twenty or thirty or even forty or fifty bucks, once the truck and the road are in existence, in comparison to the alternative of hauling it with draft animals or human muscle power.

It could turn out that the world wide economy will go downhill FASTER than the available supply of oil, even as high cost producers drop out. If NO new oil is brought into production, the supply will decline at somewhere between four and eight percent annually, according to all the estimates I have seen.

Personally I find it hard to imagine the world wide economy WILL go downhill FASTER than oil supply,barring global level Black Swan events, so I am convinced the price of oil will go up.

This is not to say the economy can't go downhill faster than oil production in the SHORT term . It might, and so the price of oil might stay low for some time yet, until depletion takes it's toll.

Oil producers are stubborn bastards, and will give up no faster than they go broke. Some of them can generate some cash for decades yet to come, even at thirty or forty bucks per barrel. If they go broke,due to not being able to pay off loans, whoever buys their wells will buy them cheap enough to continue to produce them.

I will personally gladly pay twenty bucks per gallon, so long as I can get diesel fuel, before I even CONSIDER going back to horses and mules.

Ya feed a car or truck PER MILE you drive it, and a farm tractor PER HOUR you run it. Ya feed draft animals three hundred sixty five days per year. NO CONTEST, unless you CANNOT buy diesel and gasoline at any price.

[Feb 16, 2016] Some questions about accuracy of EIA statistics

peakoilbarrel.com

likbez, 02/15/2016 at 1:36 pm

Some questions about accuracy of EIA statistics. My impression is that in certain areas they has been playing fast and loose. I might be wrong. Among areas of some concern:

1. Is not the net effect of usage of volume instead of weight result in approximately 6% inflation of gross totals (which include all types f fuels) and thus EIA is distorting the "peak oil" situation? ("Great Condensate Con")

2. Is not the same concern true about accounting of gasoline in those EIA totals which include both oil and refined products ?

3. Is not (1) and (2) make EIA "mixed totals" statistics completely bogus (inflating the data by up to 12%) ?

4. Is EIA accounting of refiner gains just an artifact of usage of volume as the metric?
a. The whole concept might be viewed as a mirage created by usage of volume as a metric (the first law of thermodynamics).
b. How refiner gains on imported oil should be accounted? Should they be classified as domestic production like EIA does?

5. Is EIA usage of volume acceptable in case of ethanol production? A unit of volume of ethanol contains approximately 55% of energy in BTUs in comparison with WTI. Huge difference: 76,000 Btu/gal vs. 138,000 BTU/gal. That affects mileage and all other usage metrics.

6. How dilutants for Canadian tar sands imported to Canada from the USA are accounted by EIA. They are first exported to Canada and then imported as a part of Canadian oil import? So part of the volume of Canada production was already "produced" in the USA.

7. The same question about Venezuela heavy crude.

IMHO Ron's graphs would be definitely twice more convincing if they were constructed in weight metric instead of volume.

Ron Patterson, 02/15/2016 at 2:26 pm
Well, volume is all that I have so my charts are in volume. But I am not really concerned with NGLs, process gain or biofuels. In fact I would never post "total liquids" if I had crude, or C+C for that data.

But all that being said, C+C is a pretty good indicator, even though it is not perfect. It will tell us when the peak occurs, or more correctly, it will tell us when the peak occurred in the past.

[Feb 16, 2016] On the way up EIA greatly underestimate production and on the way down, they are going to greatly overestimate production

peakoilbarrel.com
Javier, 02/13/2016 at 8:11 pm
Hi Ron,

On the issue of EIA's predictions accuracy, I updated this graph from Mason Inman and added actual oil US production.

What this graph shows is a typical very conservative estimate system. This means that on the way up, they greatly underestimate production and on the way down, they are going to greatly overestimate production.

This clearly shows how credible their predictions are. Although the graph is only for the US, clearly they are going to be equally conservative (and thus equally wrong) about world oil production.

AlexS, 02/13/2016 at 9:22 pm
Javier,

The long-term projections of U.S. LTO production are from various issues of the EIA Annual Energy Outlook. They indeed were very conservative, even though none of them (even the AEO-2015) did not assume such a big drop in oil prices.

As regards the actual production data (the black line), it is from the Drilling Productivity Report and include almost 1 mb/d of conventional output, primarily from the Permian basin.
U.S. LTO production had never reached 5.5 mb/d, as the black line shows. According to the most recent EIA presentation, the local peak (In March 2015) was around 4.6 mb/d

Javier, 02/13/2016 at 9:56 pm
OK, thanks. The black curve needs correction.

But the issue continues being that EIA underestimated production so much that it had to raise its predictions by about 100% each year.

Look at the prediction for 2020:
AEO 2012: 1.3 mbpd
AEO 2013: 2.8 mbpd
AEO 2014: 4.7 mbpd
And all this without any significant change in oil price.

So if the question is, as Ron is posting, how much value have EIA predictions? The answer clearly is none. EIA predictions are useless. Evidence indicates that they are going to overestimate production by a large amount for as long as production goes down.

[Feb 16, 2016] It is clear that neither EIA nor IEA are really putting much effort into real data accumulation.

Notable quotes:
"... The big deals against oil prices are, now, the drop in (the increase) in future demand from 1.6 to 1.2%, per IEA, and the massive amount of oil that Iran is getting to lay out with unknown capital input. Supposedly glutting the market with 1.5 million more barrels with magic, I presume. However, I figure it, the drop in demand seems to indicate only about a 300k to 350k difference. ..."
"... I read where Chinas production is expected to drop from 100k to 200k in 2016, base upon the current prices and capex. A recent post by the author indicates that up to 1.5 million barrels may be lost from in field drilling of offshore wells in 2016. All of South America, Africa, and Asia, including Russia, expect drops in 2016, and 2016 is just the tip of the iceberg. ..."
"... Where are all of these figures in the garbage the EIA and IEA put out? Far as I can tell, the magical numbers put out for Iran, roughly match the drop in infield drilling offshore. ..."
"... While what is called a prediction of non-OPEC production seems to meet the definition of the word prediction it seems that the OPEC production prediction is more of what Id call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. Thats some pretty weak tea! ..."
"... It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite the glut, Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I dont know exactly how its gonna play out but whatever it is the word train wreck is likely an apt description. ..."
"... It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite the glut, Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I dont know exactly how its gonna play out but whatever it is the word train wreck is likely an apt description. ..."
"... As well this total liquids thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when its on the 1/4 of beef and once again when its cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy. ..."
"... Try listening to what is said by KSA. We are not going to produce oil out of the ground for which we have no orders. ..."
"... Tanks arent filling. No one is placing orders for oil they would put in a tank. That makes no sense. And note, btw, that filling a tank is demand itself and thus would not justify a price decline if youre a supply/demand disciple. ..."
"... The price is low because sellers are willing to sell for that lower price. Period. Even if buyers would pay more, the seller insists on less. ..."
"... In my view the past surge in shale production was based on the favorable conditions of the bond market (search for yield). As long as the bond market has been liquid, production could surge. However, as the recent collapse of the bond market starts affecting production (see below chart) we could see another black swan event on the downside of production. ..."
"... The lesson for investors is to recognize and understand the thinking behind Wall Streets motivation and adjust the investment strategy accordingly. As the bond collapse is far from over, we have not yet seen the bottom of the production decline. The bond market is the major driver of oil and gas production. Any forecast which ignores changes of capital markets is very likely irrelevant. ..."
"... With LTO the production was accelerating y-o-y at a high rate, more in percentage terms than has been seen in fields before, at least since the very early days of the industry. The cut has been from that high rate to a slow decline. If the LTO production had been steady or a growth rate that was more representative of previous new fields then the decline would have been pretty steep by now. That and the different impact, and decoupled timing, of drilling and completions compared to conventional fields is what through off a lot of the predictions in my opinion. ..."
"... Note that the EIA STEO predicts Brent at $46/b in the fourth quarter of 2016. This is the reason that I believe the EIAs oil supply forecast is too high (assuming their price forecast is correct). I would expect at least a 1 Mb/d drop in 2016 average annual World C+C output compared to 2015 average output levels if the EIAs most recent oil price forecast for Brent crude is correct. ..."
"... I didnt say that $45/b is high enough to keep output flat . I said that $40-45/b is enough to cover operating costs and maintenance capex in a vast majority of the worlds currently producing conventional fields (as well as oil sands operations). ..."
peakoilbarrel.com
Guy Minton, 02/13/2016 at 5:47 pm
The big deals against oil prices are, now, the drop in (the increase) in future demand from 1.6 to 1.2%, per IEA, and the massive amount of oil that Iran is getting to lay out with unknown capital input. Supposedly glutting the market with 1.5 million more barrels with magic, I presume. However, I figure it, the drop in demand seems to indicate only about a 300k to 350k difference.

Ah, the magic of OPEC will prevail, then. Even though to fully ramp up more, Saudi has to drill in the offshore area, which I am sure is NOT $10 barrel cost of production. Iraq has to end their internal strife to gain some traction. Venezuela is sucking wind, badly. Ecuador, while not the massive producer of other OPEC members, currently has only one well drilling from 50 something rigs. It is hard to keep up with the news from every country, and it is clear that neither EIA nor IEA are really putting much effort into real data accumulation. I think OPEC is strapped for production for the next two years, with the exception of the magical production from Iran.

On the other hand, I read Canada has some smaller oil sands shut in, while larger ones are scheduling to cut back, or have extended periods of overhaul on production equipment. As rigs for conventional oil have dropped significantly, I fail to see were Canada will not have a decrease in production in 2016. Over a year ago, I said the shale production could drop by over one million, but didn't anticipate the increase before the drop. Still from the high in March of last year, it is still projected to drop by 1.2 million by 2017 by EIA. I still thing they are low in their estimate of the drop, but not as much as they used to be.

I read where China's production is expected to drop from 100k to 200k in 2016, base upon the current prices and capex. A recent post by the author indicates that up to 1.5 million barrels may be lost from in field drilling of offshore wells in 2016. All of South America, Africa, and Asia, including Russia, expect drops in 2016, and 2016 is just the tip of the iceberg.

Where are all of these figures in the garbage the EIA and IEA put out? Far as I can tell, the magical numbers put out for Iran, roughly match the drop in infield drilling offshore. But then I am not an expert, because I am not paid by a highly efficient and omniscient government entity.

Jimmy, 02/13/2016 at 6:37 pm
While what is called a prediction of non-OPEC production seems to meet the definition of the word 'prediction' it seems that the OPEC production prediction is more of what I'd call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. That's some pretty weak tea!

It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite 'the glut', Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I don't know exactly how it's gonna play out but whatever it is the word 'train wreck' is likely an apt description.

As well this 'total liquids' thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when it's on the 1/4 of beef and once again when it's cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy.

I figure in a few short years it'll be pretty clear where all this is going and it'll be a whole new paradigm aka Hobbesian scramble.

Jimmy, 02/13/2016 at 7:49 pm
Intro sentence should have read: "While what is called a prediction of non-OPEC production seems to meet the definition of the word 'prediction' it seems that the OPEC production prediction is more of what I'd call an assumption. "
Jimmy, 02/13/2016 at 6:37 pm
While what is called a prediction of non-OPEC production seems to meet the definition of the word 'prediction' it seems that the non-OPEC production prediction is more of what I'd call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. That's some pretty weak tea!

It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite 'the glut', Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I don't know exactly how it's gonna play out but whatever it is the word 'train wreck' is likely an apt description.

As well this 'total liquids' thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when it's on the 1/4 of beef and once again when it's cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy.

I figure in a few short years it'll be pretty clear where all this is going and it'll be a whole new paradigm aka Hobbesian scramble.

Adam Ash, 02/13/2016 at 6:51 pm
With tank farms, strategic storage, rows of rail tankers and flotillas of super tankers filling up all over the planet, producers will now have to match production to demand much more closely, else they will have to 'spill their seed upon the ground'. And there is not much money to be made doing that.

Some producers with no where to deliver their oil to must be in very difficult positions; going from normal production to zero in a day. From cashflow positive yesterday to being the proud owner of a pile of useless junk and pipes wth zero income today.

Interesting times.

Watcher, 02/14/2016 at 3:29 am
Try this.

Try listening to what is said by KSA. "We are not going to produce oil out of the ground for which we have no orders."

This has been policy all along. Now think about what you just said, and about where you heard it.

Adam Ash, 02/14/2016 at 5:38 am
Yes Watcher. The interesting moment arriving herewith is that we will now discover actual global consumption without the smoke n mirrors of production filling tanks somewhere.

I would imagine that the impacts will be neither selective or nice. Some good paying fields may have to be shut in if the tanks at the end of the pipe are full. Or it could be the final straw that pricks the light tight oil bubble. We shall see.

Watcher, 02/14/2016 at 12:31 pm
Tanks aren't filling. No one is placing orders for oil they would put in a tank. That makes no sense. And note, btw, that filling a tank is demand itself and thus would not justify a price decline if you're a supply/demand disciple.

The price is low because sellers are willing to sell for that lower price. Period. Even if buyers would pay more, the seller insists on less.

Wrap your mind around that and you understand pursuit of victory.

Adam Ash, 02/15/2016 at 1:49 am
Oh! Silly me. A helpful piece re Cushing storage:-

https://rbnenergy.com/just-my-imagination-how-full-is-cushing-crude-oil-storage-capacity-really


'… many storage operators [at Cushing] may be turning prospective customers away. Not because they don't have available capacity but because they don't have enough heavier crude to make WTI lookalike blends with incoming light shale grades.'

Do those full-to-the-brim mega-tankers slow-steaming in circles in the Sargasso Sea and swinging at anchor off Singapore and Malaysia with no where to go waiting for a better time to sell into the market in the face of rising production and exports from Iran make sense?

http://www.bloomberg.com/news/articles/2016-02-10/oil-traders-look-again-at-floating-storage-as-onshore-tanks-fill

http://abcnews.go.com/International/wireStory/iran-exports-oil-shipment-europe-nuclear-deal-36929921

Not to me…

Producer-sellers are desperate for cashflow at any price, and the glut in supply means the competition to be the one who gets the sale is intense. Yet at the same time the near capacity storage available to some producers makes the potential for an individual field to be locked in because it has nowhere to send its product to much higher, no matter how hysterical the bean counters get.

The low price of crude is cutting the throat of many producers, who will not easily come back on line even if the price recovers. Its going to be an interesting year

Jeffrey J. Brown, 02/15/2016 at 8:22 am
Interesting article on the RBN Energy website, about Cushing. Note that the author touches on two key issues: (1) Insufficient heavy crude to offset the flood of condensate, thus making it more difficult to create their "Synthetic WTI" blend and (2) Weak demand for the Synthetic WTI blend itself.

The Reuters article from last year discusses the second point:

U.S. refiners turn to tanker trucks to avoid 'dumbbell' crudes (March, 2015)
http://www.reuters.com/article/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

Many executives say that the crude oil blends being created in Cushing are often substandard approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to, and favored by, many refiners in the region.

Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian Select, itself a blend, is about 20.

While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.

Link to my Oilpro.com article on crude versus condensate: http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua

As I have previously stated, IMO the global total liquids oversupply is a house of cards, built on an unstable foundation of actual global crude oil production* that requires vast amount of capital every year, in order to keep global crude oil production from crashing.

Up the thread, I noted that a plausible estimate is that it may have taken about a trillion dollars in 2014 and 2015 combined to keep global crude oil production around 68 to 69 million bpd, versus my estimate of 69 million bpd in 2005.

*45 API Gravity and lower crude oil

Jimmy, 02/14/2016 at 10:09 pm
Maybe KSA is FOS? Maybe that statement is not true.
Heinrich Leopold, 02/14/2016 at 10:25 am
AlexS,

In my view the past surge in shale production was based on the favorable conditions of the bond market ('search for yield'). As long as the bond market has been liquid, production could surge. However, as the recent collapse of the bond market starts affecting production (see below chart) we could see another 'black swan' event on the downside of production.

Jeffrey J. Brown, 02/14/2016 at 10:31 am
An analyst on CNBC had an interesting quote, which he attributed to John D. Rockefeller, to-wit, there has been more money lost to the ill advised search for yield, than in all of the bank robberies in recorded history.
Heinrich Leopold, 02/15/2016 at 12:56 am
Jeffrey,

All the three bubbles of the last decade – internet bubble, housing bubble and now the shale bubble – reflect deeply the American approach how to respond to challenges in the economy and society: It is better to ask for forgiveness than to ask for permission. Greenspan famously said when the internet bubble burst: You can only recognize a bubble when the bubble has burst. This approach has probably avoided also some damage ( for instance an escalating oil price surge), yet has also done some huge damage to investors.

The lesson for investors is to recognize and understand the thinking behind Wall Street's motivation and adjust the investment strategy accordingly. As the bond collapse is far from over, we have not yet seen the bottom of the production decline. The bond market is the major driver of oil and gas production. Any forecast which ignores changes of capital markets is very likely irrelevant.

AlexS, 02/14/2016 at 11:26 am
Heinrich,

Yes, access to cheap money (not only bonds, but also bank loans) was one of the key factors that contributed to the shale boom.

As regards the 'black swan' event on the downside of production, we will see which financial tricks the shale guys, their bankers and investors will invent to keep shale production afloat.

Ron Patterson, 02/14/2016 at 12:14 pm
we will see which financial tricks the shale guys, their bankers and investors will invent to keep shale production afloat.

I agree if you are talking about the money the bankers and investors already have invested in shale. But the bankers and investors will not likely be looking for ways to lose more money. New investment in shale will be difficult to come by.

TechGuy, 02/15/2016 at 3:27 am
"Nationalize it and this annoying little issue of profit pursuit disappears."

US banks were not "nationalized" during the 2008-2009 crisis. I very much doubt the gov't will nationalize the Oil industry, unless there is a very drastic event that cause the price to skyrocket suddenly (ie above $200). A KSA/Iran hot war would probably do that.

Collapsing Oil prices is just a symptom of a mounting global economic crisis. Even if the US nationalized its Oil industry it still not going to fix problems overseas: The Middle East, China and Europe.

The period of kicking the can with ease has reached its end. Now the World's gov't will need to resort to ever increasing drastic actions to avoid a global depression.

Ves, 02/14/2016 at 12:23 pm
"we will see which financial tricks the shale guys, their bankers and investors will invent to keep shale production afloat."

Maybe they start investor focused campaign "World is running out of oil" meme :-) LOL … similar to "We are running out of land" meme during Housing bubble :-) Just kidding. :-)

likbez, 02/14/2016 at 1:03 pm
Heinrich,

I think we should view "surge in shale production" not as something "based on the favorable conditions of the bond market" but as yet another "boom and bust" cycle which is the hallmark of neoliberal economy. Third in the sequence dot.com-real estate-shale oil, if you wish.

In all three cases it was reckless financing using new instruments which became available after deregulation which initiated the bubble. In this case covenant-light loans -- the crappiest kind of junk.

Like in all previous bubbles the deflation of the shale bubble might take some banks (this time regional) with it and result in a real extinction of shale companies. Technological progress achieved will remain intact and will be picked up by survivors.

The wave of bankruptcies will depress new drilling and might serve as another catalyst of the decline of shale oil production in 2016 and 2017 (despite takeover of properties). The decline that was not accounted for in the current forecasts.

Unlike two previous bubbles, this is a more localized disturbance and the size of CCC and lower junk bond market is just around one and a half trillion, but it will likely spread to the broader economy at least in six affected states due to links to mortgages, commercial real estate, municipal bonds, etc.

And it coincides with the weakening of the US economy.

Heinrich Leopold, 02/15/2016 at 2:56 am
likbez,

CCC and lower is just the canary in the mine. It is a sign of strength or weakness in the sector. It affects also private equity, loans….

The big question now is: How far will this go? Can it escalate? As this is impossible to predict, it is also impossible to make an accurate production forecast – even for the next two years.

It is ironic that even the FED -- having thousands of economists on its payroll -- has been a very bad forecaster. Greenspan did not recognize the internet bubble, Bernanke had to deal with the housing bubble ( the housing crisis is contained) and now Yellen has to face the shale bubble, which she did not foresee (in December there was still talk about escape velocity and inflation).

It is still open how deeply the burst of the shale bubble will affect the US economy. There could be some political events which brings out some oil production worldwide and the shale industry will be saved for a while. However, my gut feeling tells me that this will go very deeply. It looks like the FED has painted itself into a corner again.

Dennis Coyne, 02/14/2016 at 10:39 am
Hi AlexS,

I agree. Also your point about oil prices is important, oil prices are very difficult to predict and eventually they will affect output, though there is a significant time lag (maybe 18 to 36 months) between a change in oil prices and a change in the oil supply. I have not yet figured out what this time lag is, but my current guess is about 24 months on average.

This will vary depending on the oil field (deep water projects have a longer lag and onshore conventional and LTO may be somewhat shorter than the global average).

R Walter, 02/14/2016 at 10:51 am
http://www.theoildrum.com/files/PeakOil1.png

Another forecast that was incorrect.

AlexS, 02/14/2016 at 11:28 am
Who were the authors of those forecasts?
R Walter, 02/14/2016 at 1:44 pm

Edit

Ron Patterson, 02/14/2016 at 2:12 pm
So Ace got it wrong. We have been knowing that for a long time. That's history. What's your point?

Oil production will definitely, one day, peak. The fact that past predictions of peak oil were wrong only means they were too early. People who are predicting peak oil now, or at any time in the future, will be 8 years closer to hitting the date than Ace did.

I am reminded of insider traders in the stock market. That is company executives buying or selling stock in their own companies. The saying is, They are almost always right. But… They are almost always too early.

That is, they see that something is definitely happening so they act. But they just expect it to happen way before it really does. The same can be said about peak oil prognosticators. We saw that peak oil was definitely going to happen. But most of us were way too early with our prognostications, about 8 years too early. :-)

likbez, 02/14/2016 at 7:02 pm
Ron,

I am reminded of insider traders in the stock market. That is company executives buying or selling stock in their own companies. The saying is, They are almost always right. But… They are almost always too early.

An excellent point --

AlexS, 02/14/2016 at 11:44 am
Dennis,

Yes the time lag is different for different type of resource, different type of projects, different producing fields, different countries and different companies.
A big question is how to calculate this time lag.

LTO was expected to be the first to react, and it indeed reacted the most. But I was expecting much bigger declines last year.

Conventional output was almost unaffected last year (low short-term price elasticity). There will be some negative supply-side impact this year, but the biggest cumulative impact from low prices should be felt by 2020.

George Kaplan, 02/14/2016 at 4:26 pm
With LTO the production was accelerating y-o-y at a high rate, more in percentage terms than has been seen in fields before, at least since the very early days of the industry. The cut has been from that high rate to a slow decline. If the LTO production had been steady or a growth rate that was more representative of previous new fields then the decline would have been pretty steep by now. That and the different impact, and decoupled timing, of drilling and completions compared to conventional fields is what through off a lot of the predictions in my opinion.
Dennis Coyne , 02/14/2016 at 7:11 pm
Hi AlexS,

I read your reply on the previous thread and I appreciate your insight. I think I mostly agree with your take.

One place that I may not agree is that you think $45/b is high enough to keep output flat. I think that in the LTO plays $45/b is not enough to make the completion of drilled uncompleted (DUC) wells financially viable so we will see a fairly steep decline in LTO output if the EIA oil price forecast is correct.

In addition there are no doubt fields throughout the World where there are few long term projects in the works, but have continual infill drilling that either maintains a plateau or reduces the overall field decline rate. I would expect that even $45/b may not be enough to justify the continued drilling of new wells in many fields.

Note that the EIA STEO predicts Brent at $46/b in the fourth quarter of 2016. This is the reason that I believe the EIA's oil supply forecast is too high (assuming their price forecast is correct). I would expect at least a 1 Mb/d drop in 2016 average annual World C+C output compared to 2015 average output levels if the EIA's most recent oil price forecast for Brent crude is correct.

AlexS, 02/14/2016 at 8:00 pm
Dennis,

I didn't say that "$45/b is high enough to keep output flat". I said that $40-45/b is enough to cover operating costs and maintenance capex in a vast majority of the world's currently producing conventional fields (as well as oil sands operations).

That doesn't mean keeping production flat. Where production was falling due to natural declines at $90-100, it will continue to decline (probably, at higher rates) at $40-45.

Project delays and lower upstream capex will also have a negative impact on new conventional production. But as project start-ups scheduled for 2015-17 are generally not postponed, the overall impact on global conventional production will be relatively modest this year. However the effects of low prices will gradually increase in the next few years and peak by 2020, even if oil prices recover by that time.

As regards LTO, I agree that $45 is not enough to keep production flat. I guess the required price is closer to $60.

Finally, I certainly do not expect global C+C production to drop by 1 mb/d y-o-y in 2016. Barring unlikely OPEC cuts and unexpected large-scale supply outages, the increase in OPEC output (Iran) should partially offset declines in non-OPEC production.

Dennis Coyne , 02/14/2016 at 8:20 pm
Hi AlexS,

Sorry I misunderstood. Let's assume the EIA STEO oil price predictions are correct.

What would you expect for the average annual C+C output level in 2016, if that assumption were correct?

Note that I also do not expect C+C output will fall by 1 Mb/d, but the reason will be that the EIA's oil price prediction will be too low. I expect an average annual Brent price level for 2016 of about $55/b+/-$5/b and at that price level average annual C+C output will decline by about 500 kb/d in 2016 (about 79 Mb/d for an average output level) relative to the average 2015 output level (about 79.5 Mb/d).

Ron Patterson, 02/14/2016 at 10:27 pm
average annual C+C output will decline by about 500 kb/d in 2016 (about 79 Mb/d for an average output level) relative to the average 2015 output level (about 79.5 Mb/d).

Through the first ten months f 2015, world C+C production has averaged 79.94 Mb/d. If we have the decline that I expect in November and December, I believe the average for 2015 will be around 79.85 to 79.9 Mb/d.

I expect 2016 C+C production to be about 78.9 Mb/d or a decline of about 1 million barrels per day.

Below is the 2015 C+C production, through October, according to the the EIA. The Peak so far, was in July 2015 at 80,525,000 million barrels per day.

Jan-15 Feb-15 Mar-15 Apr-15 May-15 79,379 79,371 80,175 79,988 79,369 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 80,038 80,525 80,439 80,038 80,071

likbez, 02/14/2016 at 1:07 pm
The time lag probably also depends on when financial spigot that inflates the bubble is shut down.
clueless, 02/14/2016 at 6:44 am
Future accounting problems – There have been many posts here over the past 2 years analyzing the cost incurred by the O & G companies to produce LTO. In my opinion, some of the ability to do that may go away.

Most companies have had to write down the balance sheet value of their LTO reserves (costs incurred) in 2014, 2015 and probably will again in 2016. If the price of oil increases, write ups to reinstate the value back to where it was are not permitted. So the true costs become invisible. So, if in 2017, if the price of oil is back to $50, companies could produce income statements that show a profit. But, some of that will be because much of the cost was written off in previous years due to "one time, extraordinary valuation write offs."

The companies offset the oil being sold with a DD&A [depletion, depreciation and amortization] cost. In general, that means that they ratably deduct their capitalized costs over each barrel of oil produced. But, if they have already written off half of their capitalized cost due to a valuation write off, then future DD&A will be one half of what it would have been without the write off.

And, it will likely be very difficult in 2017 to separate out their 2017 operations.

Enno, 02/14/2016 at 8:18 am
Clueless,

Excellent point. That is why careful investors, like e.g. Warren Buffett, don't accept accounting profit.
They calculate something like "owner earnings", in which you ignore accounting DDA and include your own conservative estimate of the depletion/depreciation of assets.

In my opinion, there is a seriously flaw in the calculation of the accounting profit for LTO companies. The depletion/depreciation amount doesn't fully reflect the actual reduction of the NPV of the assets over a year. In other words, the very fast decline in production of shale wells, and the larger variable costs later in the life of a well, are not fully accounted for. LTO companies are in general getting away with a much smaller DDA amount, and therefore front loading profits. Normally lowering DDA is a bad corporate strategy, because it leads to more corporate taxes, but these companies in general also benefit from major tax deductions to compensate for this. I think this accounting flaw has played a big role in the shale boom.

Most retail investors unfortunately take book profits and book value too seriously. Like Shallow sand, you, and others have shown, there are much better ways to make value estimates.

shallow sand, 02/14/2016 at 11:15 am
Good points, as we have discussed previously. If oil prices don't return to 2011-14 levels, tough to see how loan principal gets paid.

Asset sales to pay principal are self defeating. Due to IDC elections, depletion and depreciation, would seem that shale asset sales would generate a lot of tax liability. A $1 billion sale may generate only $600 million after tax?

Also, assets sales cause company wide production to fall.

Interesting how all of the companies in 2015 are reporting year over year production growth AFTER excluding the effects of asset divestures. So we are selling production to drill more wells to grow production. Our production is falling, but by gosh we have more new wells with 1 million EUR.

The production they are selling tends to have higher OPEX, but lower decline, and therefore, despite the higher OPEX, more PV per BOE.

A prime example would be Whiting, who last summer tried to sell its North Ward Estes CO2 flood.

As I recall, NWE accounted for less than 10% of company wide BOE in 2014, yet almost 20% of PDP PV10. This despite having much higher current OPEX than the Bakken and Nirobrara assets.

I have never understood how long term value is being created by these companies. One thousand 200 BOE average wells will be 40 BOE average in 5 years, for example, yet little to no ability to pay down debt principal.

PV10, 9, 8, or whatever discount value is appropriate does matter. Now that PDP PV10 is greatly less than long term debt, I hope some investors pay attention to it.

clueless, 02/14/2016 at 1:18 pm
SS – I believe that current asset sales generally are unlikely to result in any cash taxes being paid. Especially since prices have fallen so much in the last year and a half. Further information below, for those who might want to delve a little deeper, but not fully into the complexities.

As you know, the companies deduct most of their drilling/fracking costs on their tax returns in the year that the money is spent. But, for their financial presentation books, following the GAAP principle to match expenses with revenue, these expenses are capitalized and included in their Oil & Gas Assets. For the financial statements these costs are rateably amortized as production occurs as DD&A expense.

Generally speaking, the companies create significant net operating losses on their tax returns because of those deductions. However, because in the future they will eventually deduct the costs [DD&A], but they cannot again deduct them for tax purposes, they are required to book deferred taxes payable as a liability.

Looking at PXD. At year end they have a $1.776 billion long term deferred tax liability. Using a 32% tax rate, this can imply a tax net operating loss of up to $5.55 billion. Assume that they have a producing field on the books at $500 million [GAAP using $49/bbl], with future drilling prospects, and a zero tax basis. They sell it for $1 billion, a $500 million book profit. A 32% tax on the book profit is $160 million, which is recorded in the income statement, but, which does not have to be paid. It offsets some of the net operating losses. The tax return shows a gain of $1 billion, an extra $500 million. The 32% tax on that extra $500 million offsets their deferred tax liability of $1.776 billion, reducing their deferred tax liability to $1.616 billion.

shallow sand, 02/14/2016 at 2:44 pm
Clueless. Yes, have to work it through to get a clear picture.
simon oaten, 02/15/2016 at 7:23 am
Enno

one of the "things" that the shale industry has given the oil industry is lower "finding costs" ……at the "expense" of greater variability in outcomes (EUR / IP / PV10). Again – thankyou for your site – outstanding work
rgds
simon

R Walter, 02/14/2016 at 7:59 am
More accurate than this one:

http://www.theoildrum.com/files/ksa1r.gif

Matt Mushalik, 02/14/2016 at 8:08 am
My latest graphs using EIA update to October 2015

15/2/2016
World outside US and Canada doesn't produce more oil than in 2005
http://crudeoilpeak.info/world-outside-us-and-canada-doesnt-produce-more-crude-oil-than-in-2005

clueless, 02/14/2016 at 12:26 pm
Thanks! Much more than an excellent presentation!
Jimmy, 02/14/2016 at 4:34 pm
Awesome article Matt! Thanks for fleshing out the EIA report data!!
Hickory, 02/14/2016 at 5:37 pm
Excellent site Matt!
http://crudeoilpeak.info/

One question- I see that you have US crude imports at about 7Mbpd, where as Jan data from iea have US net liquids import at about 5 Mbpd.
Is this difference because we export things like refined product and condensate?

clueless, 02/14/2016 at 12:12 pm
A big 2 page story in the business section of today's Daily Oklahoman. Oklahoma's oil production is up over 100,000 bbl/day starting in December – over 25%. Well, actual production is not up, but the EIA started doing their surveys last year to get more accurate production numbers. After months of consultation with the Oklahoma Tax Commission, they agreed that the EIA #'s are the correct ones. The OK Tax Comm claims that they have been collecting the right amount of tax.

Apparently, the data is loaded into a 30 year old mainframe system and computer program. Any data that does not match is kicked out of the system. That data is then processed manually but, has never been able to be loaded back into the existing computer system. So, numbers from Oklahoma have been understated for a long time. The Tax Comm says that they have one year left [estimate] on a four year project to put in a new computer system that will fix their problem. Meanwhile, the EIA is going with their survey.

Is this really the 21st century?

Ron Patterson, 02/14/2016 at 12:30 pm
The EIA explains their new methodology here:

Updating Monthly EIA Crude Oil Production Estimates for Oklahoma to Use Survey Data

StuckinWalkerWorld, 02/14/2016 at 2:09 pm
Good afternoon–

At the risk of hijacking of this thread, I have several questions to pose to this group, starting with why are petroleum imports from Canada continuing to increase? (See link to EIA below). Is it caused in part by the anemic Canadian dollar, the need to keep pumping because cash flow generation trumps all other considerations, or something else? Which leads to another question How much further must the price of petroleum decline before petroleum imports from Canada start to dwindle? Until it does–and who knows when that will happen -- I have a hard time believing that oil prices will move higher in the current cycle.

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPC0_IM0_NUS-NCA_MBBLD&f=W

J

George Kaplan, 02/14/2016 at 3:54 pm

I haven't seen this discussed, but my apologies if it is a duplicate. Paragon Offshore to file Chapter 11 – is this the largest bankruptcy for offshore drillers so far?

http://splash247.com/paragon-offshore-set-declare-chapter-11-bankruptcy/

http://www.paragonoffshore.com/investors-relations/investor-news/investor-news-details/2016/Paragon-Offshore-Announces-Agreement-With-Bondholders-And-Revolver-Banks-To-Restructure-Its-Balance-Sheet/default.aspx

Frugal, 02/14/2016 at 7:12 pm
Oil crisis leaves the East barrelling out of control

"It's sad. These people never thought the day would come where a barrel of oil would be below $30 (U.S.)," he said. "They were just living for the moment and they were making a huge amount of money and just thought it would continue on."

The oil price collapse is also hitting the opposite side of Canada.

likbez, 02/14/2016 at 9:11 pm
A very good article. Thank you!

The fallout from the oil crisis - compounded by potential government job cuts - could hit the province worse than the infamous cod moratorium of the 1990s, said Wade Locke, an economics professor at Memorial University.

"A 30 per cent cut in government expenditures over three years at a time when the economy is weak because of oil prices and less remittance income from people working in the oilfields in Alberta?

"Yes, it's fair to say it could be harder than the moratorium," he said.

Those affects are being felt now. Fewer blue and orange ice-class cargo ships leave the narrow entry to the St. John's harbour, loaded with supplies for the rigs 350-kilometres offshore.

And with declining output from the three producing rigs and two of four exploration rigs temporarily shut down - two more are scheduled for shutdown in July - helicopters are bringing fewer workers back and forth right now.

Still, resilient Newfoundlanders are quick to list off the reasons they believe the downturn could be relatively short-term; that this is the bottom of a typical, albeit particularly painful, commodity cycle.

After all, there's still a great deal of interest in Newfoundland's offshore oil, which is cheaper and cleaner to extract than oilsands crude. A government land sale in the Flemish Pass basin took in a record $1.2 billion of new oil company spending commitments. There are an estimated 12 billion barrels of oil reserves in that area alone. The province believes the number of job openings will increase beginning in 2019, when it anticipates major project expansion will resume.
… … …
….new home construction has dropped by 20 per cent.
…Insolvency filings are up 22 per cent over the last year at accounting and insolvency firm Noseworthy Chapman.
…Two of the seven offshore rigs that the base supplied in 2014 have shut down temporarily. The marine base is taking a revenue hit, but so far there have only been a few layoffs, he said.
…Food banks in the province provide food to nearly five per cent of people in the province, the second highest level in the country.
…8.2% - Percentage of Newfoundland workers projected to lose their jobs in next three years, amounting to 24,000 job losses
… $1.9B - Deficit projection in 2015-2016 fiscal update, nearly twice what was expected in the budget
… $12.4B - Newfoundland's net debt

Looks like everything is connected those days. Or "over connected". A lot of common people suffer consequences of those big boys games. Business bankruptcies lead to personal bankruptcies.

Frugal, 02/14/2016 at 10:27 pm
I wonder where they got the 12 billion barrels of reserves from. Wikipedia gives the following numbers for the estimated oil in place:
Hibernia = 2.1 billion barrels with 700 million already produced by 2010
Terra Nova = 400 million barrels
White Rose = 440 million barrels

As far as I can tell, these are the only major oil fields off Canada's east coast.

Doug Leighton, 02/14/2016 at 11:36 pm
Dead on Frugal,

"A government land sale in the Flemish Pass basin took in a record $1.2 billion of new oil company spending commitments. There are an estimated 12 billion barrels of oil reserves in that area alone."

So what is it, 12 billion barrels or 300 to 600 million barrels? Total production 1977-2005 at Prudhoe Bay = 11 billion barrels with perhaps two billion barrels of recoverable oil remaining. Let's be generous and say 0.5 billion barrels total in the Flemish Pass Basin; 12 billion, no bloody way.

"In late September 2013, Statoil ASA and its 35 per cent joint-venture partner, Husky Energy Inc., announced two back-to-back light crude discoveries in the deepwater Flemish Pass Basin, offshore Newfoundland. The larger of the two discoveries, the Bay du Nord exploration well, confirmed the existence of 300 to 600 million barrels of 34 degree API oil recoverable."

http://www.albertaoilmagazine.com/2014/01/light-crude-discovery-newfoundland/

George Kaplan, 02/15/2016 at 8:42 am
Hebron – comes on line 2017, maybe 700 million barrels or more of heavy oil. BP and Shell each paid about $1 billion for exploration rights offshore Nova Scotia. Shell is drilling at the moment The author might also be considering 'equivalent' oil offshore Labrador which might have a lot of gas (but very difficult to develop). There are a couple of areas on the border with USA which are off limits at the moment. Against this Terra Nova and WhiteRose are well into their run down phases and don't have much left.

http://www.cnlopb.ca/pdfs/off_prod.pdf

Green People's Media , 02/14/2016 at 11:30 pm
Say, Ron, have you looked at the most recent Drilling Productivity Reports? A couple days ago, they showed the major frack-oil fields having a reversal of legacy well declines. Bakken, Eagle Ford, etc. all show an UPWARD move in the legacy graphs (in other words, they're losing less production monthly than they were previous few months).

I thought that looked really odd.

What is your thinking on this?

Bobby G,
at the GPM

Econ, 02/15/2016 at 2:47 am
I think that is due to the decline rate being very high initially for new wells followed by a long period of slower decline and more steady production over the course of a well's life. As new producing wells were only enough in quantity to keep production flat (rather than increase it like previous years), there was less proportionally of this initial production spike and steep decline, and more proportionally of the slower more gradual declining production due – the composition of the wells now being mostly older rather than many new wells.

Also as production had fallen a bit, the decline should naturally be smaller even at the same decline rates. For instance a 10% decline on 1,000,000 mbpd will be higher than the decline at 10% on 900,000 mbpd

AlexS, 02/15/2016 at 3:33 am
New shale wells have much higher decline rates than the old ones.
The less the number of new producing wells, the lower is the average decline rate
Ron Patterson, 02/15/2016 at 8:32 am
It does not look odd at all. That is exactly what you would expect, as Alex and Econ pointed out. Production is declining and therefore you have less oil to decline. And fewer wells are coming on line and older wells have a slower decline rate than new wells.
Oldfarmermac, 02/15/2016 at 9:37 am
I didn't get back to say thanks for the answers to my question about condensate energy content yesterday, or day before but thanks everybody.

Maybe somebody who can still remember their math will calculate the loss of energy per average barrel of so called total liquids as the percentage of condensates increases, with the quantity of conventional crude decreasing.

At first glance it looks as if the rising percentage of condensate is cutting significantly into the energy of an "average" total liquid barrel.

I have not run across any research yet performed with the intent of designing internal combustion engines to run mostly or entirely on condensates, but it would appear at first glance that using straight condensate, or a very high percentage of condensate as ice fuel would be practical and economic, so long as it continues to sell for substantially less than ordinary crude- at least in the case of large stationary engines, or engines powering equipment that mostly stays very close to a home base, such as farm machinery and heavy construction equipment. The condensate could probably be hauled to a big construction job or large farm at no more trouble and expense than LP .

Ron Patterson, 02/15/2016 at 9:49 am
Why blocking Obama's pick to replace Scalia could cost Republicans their Senate majority

Assuming the president picks a Hispanic, African American or Asian American – bonus points if she's a woman – this could be exactly what Democrats need to re-activate the Obama coalition that fueled his victories in 2008 and 2012. Even if he does not go with a minority candidate, the cases on the docket will galvanize voters who are traditionally less likely to turn out.

That is exactly what I have been saying.

Keep in mind that a quarter of Nevada's population is Hispanic. Beyond being a battleground in the presidential race, there is also an open Senate race to succeed Harry Reid. Democrats will nominate a Latina and Republicans will nominate a white guy who is already in Congress.

This will absolutely assure that Harry Reid's seat will stay in Democratic hands.

More broadly, this could also undermine efforts by Senate Republicans to show that they are capable of governing and not just "the party of no."

shallow sand, 02/15/2016 at 11:21 am
Ron, looks like a leading choice is Sri Srinivasan. I know nothing about him, other than what I have just read. 48. Born in India, raised in Kansas, Stanford graduate. Was appointed to DC circuit and confirmed by senate 97-0, in 2012.
Ron Patterson, 02/15/2016 at 11:27 am
Good question shallow. But I don't think he will be shot down. Even if he is the nominee McConnell will not allow it to come up for a vote. He will just sit on it until the next president is elected. And sit on it longer if a Republican is elected. Which is not likely.

That is just what they do. They are the party of NO!

clueless, 02/15/2016 at 4:59 pm
I know that this is useless to point out, but Harry Reid said "no vote" to almost every single proposal passed out of the Republican controlled House.
Fernando Leanme , 02/15/2016 at 1:55 pm
The question is how many of those Hispanic "Nevadans" have the right to vote. I bet less than less than half of that quarter.

And my guess is you'll see republicans very motivated to avoid an imperial presidency ruling by decree backed by an activist court. That reminds me of Venezuela.

shallow sand, 02/15/2016 at 11:32 am
I think a post of mine might have been lost.

In summary, I was comparing PXD (Pioneer) with CLR (Continental).

PXD produced 204K BOEPD in 2015, 53% oil. PV 10 12/31/15 $3.2 billion at $50 WTI, 89% PDP.

CLR produced 222K BOEPD in 2015, 63% oil, PV10 12/31/15 $8 billion at $50 WTI, 43% of proved reserves are PDP.

PXD enterprise value much greater, plans to grow BOEPD in 2016.

CLR enterprise value less, plans to shrink BOEPD in 2016.

Big difference, PXD well hedged, CLR is not.

Why the great disparity in PUD PV10? PXD supposedly has the most core acreage in Permian?

I really would like to see these reserves reports. I don't see how CLR has much in the way of PUD PV10.

shallow sand, 02/15/2016 at 12:40 pm
Note, proved reserves % PDP doesn't necessarily equal % of PV10 that is PDP.

I will wait for 10K. I think we will find at $50 WTI, almost all have less PDP PV10 than long term debt.

Further, I hope we get indication in 10K what PV10 is at $30 WTI.

dclonghorn, 02/15/2016 at 2:57 pm
Something has looked fishy to me with CLR reserves and production every time I looked at it. I just stay away from that one.
shallow sand, 02/15/2016 at 5:58 pm
dclonghorn.

Ironically I used the "fishy" word too discussing CLR today.

Don't know anything they report is not correct, just seems OPEX is always very low compared to peers operating in the same areas.

Seems odd that PUD BOE would be 57% given terrible economics for new wells.

Again, BOE reserve category percentages do not equal PV10 value percentages, but 2/3 of OAS BOE reserves are PDP. Assume PXD is high % PDP reserves, given almost 90% of PV10 is PDP.

Also, never have figured out why all the $10+ million non core wells in places like Divide, Stark, Elm Coulee, etc, haven't caught up with CLR. EOG, WLL, QEP and others seem to have better wells/ locations companywide in Bakken.

Oh well, it's just speculation. Maybe the 10K's will give us more clues.

dclonghorn, 02/15/2016 at 7:16 pm
If you look at Enno's shaleprofile.com, you can get actual production curves for them and compare them with their presentation production. I made that comparison when Enno's site first came up. It is a remarkable difference. I don't know how much NPV they assign to any of their reserves, but I've seen enough to know that I don't trust their reserves for volumes or dollars.
dclonghorn, 02/15/2016 at 3:27 pm
North Dakota should be releasing their December production numbers soon. A lot of people consider North Dakota's reporting as an indicator of the trends for all shale oil. Their reporting is much more timely than waiting 8 months to see what Texas looks like after revisions.

North Dakota surprised with small production gains for October and November. The EIA's November Drilling Productivity Report forecast a 27 kbopd decline from November's estimated 1137 kbopd to December's estimate of 1110 kbopd. North Dakota's report for November was 1119 kbopd. It may be that they trade some accuracy for timeliness as their monthly numbers seem to be very erratic. That said, I think they are due for a decline of over the forecast 27 kbopd.

Oskar DiSilvo, 02/15/2016 at 6:28 pm
Is KSA's strategy succeeding?

http://fivethirtyeight.com/features/saudi-arabia-is-winning-its-war-against-the-u-s-oil-industry/

This article from Quartz is much more in-depth:

http://qz.com/604756/the-us-bet-big-on-american-oil-and-now-the-whole-global-economy-is-paying-the-price/

I have given up any pretense of trying to understand what will happen next, then further down the road. Except to understand, that at some point, depletion becomes unequivocally evident to all…then it will get 'interesting'.

[Feb 15, 2016] EIA greatly underestimates production on the way up and greatly overestimate production on the way down

peakoilbarrel.com
Javier, 02/13/2016 at 8:11 pm
Hi Ron,

On the issue of EIA's predictions accuracy, I updated this graph from Mason Inman and added actual oil US production.

What this graph shows is a typical very conservative estimate system. This means that on the way up, they greatly underestimate production and on the way down, they are going to greatly overestimate production.

This clearly shows how credible their predictions are. Although the graph is only for the US, clearly they are going to be equally conservative (and thus equally wrong) about world oil production.

AlexS, 02/13/2016 at 9:22 pm
Javier,

The long-term projections of U.S. LTO production are from various issues of the EIA Annual Energy Outlook. They indeed were very conservative, even though none of them (even the AEO-2015) did not assume such a big drop in oil prices.

As regards the actual production data (the black line), it is from the Drilling Productivity Report and include almost 1 mb/d of conventional output, primarily from the Permian basin.

U.S. LTO production had never reached 5.5 mb/d, as the black line shows. According to the most recent EIA presentation, the local peak (In March 2015) was around 4.6 mb/d

Javier, 02/13/2016 at 9:56 pm
OK, thanks. The black curve needs correction.

But the issue continues being that EIA underestimated production so much that it had to raise its predictions by about 100% each year.

Look at the prediction for 2020:

AEO 2012: 1.3 mbpd  
AEO 2013: 2.8 mbpd
AEO 2014: 4.7 mbpd

And all this without any significant change in oil price.

So if the question is, as Ron is posting, how much value have EIA predictions? The answer clearly is none. EIA predictions are useless. Evidence indicates that they are going to overestimate production by a large amount for as long as production goes down.

AlexS, 02/13/2016 at 10:27 pm
These are projections for LTO, a new resource type. Its emergence as a new important source of global supply and its rapid growth was a "black swan" event, which nobody could predict.

This is a good example why all such projections are just a snapshot that reflects our current knowledge of geology, technology and other factors affecting energy supply

[Feb 15, 2016] Insufficient heavy crude to offset the flood of condensate making it more difficult to create their "Synthetic WTI" blend and weak demand for the Synthetic WTI blend itself

peakoilbarrel.com

Jeffrey J. Brown, 02/15/2016 at 8:22 am

Interesting article on the RBN Energy website, about Cushing. Note that the author touches on two key issues: (1) Insufficient heavy crude to offset the flood of condensate, thus making it more difficult to create their "Synthetic WTI" blend and (2) Weak demand for the Synthetic WTI blend itself.

The Reuters article from last year discusses the second point:

U.S. refiners turn to tanker trucks to avoid 'dumbbell' crudes (March, 2015)
http://www.reuters.com/article/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

Many executives say that the crude oil blends being created in Cushing are often substandard approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to, and favored by, many refiners in the region.

Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian Select, itself a blend, is about 20.

While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.

Link to my Oilpro.com article on crude versus condensate:

http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua

As I have previously stated, IMO the global total liquids oversupply is a house of cards, built on an unstable foundation of actual global crude oil production* that requires vast amount of capital every year, in order to keep global crude oil production from crashing.

Up the thread, I noted that a plausible estimate is that it may have taken about a trillion dollars in 2014 and 2015 combined to keep global crude oil production around 68 to 69 million bpd, versus my estimate of 69 million bpd in 2005.

*45 API Gravity and lower crude oil

[Feb 14, 2016] Has EIA been playing fast and loose with the petroleum statistics

Consistent use of energy units such as Barrel of oil equivalent (1 BOE = 1.7 MWh) would be a step in that direction. Using volume is clearly a ploy to improve the numbers, as is the double counting of barrels that are used for production (e.g. a BBL used to extract 2:1 shale oil counts as 3 BBL, to make 1:1 ethanol counts as 2 BBL). This won't fool Mother Nature.
Oil produces 5,800,000 BTUs per 42-gallon barrel or around 138000 per gallon. For comparison ethonol produces only 79000 opf just 55%. Condensate produces around 12% less. That's why it is important to have statistics in metric tons not barrels...
Notable quotes:
"... I think the EIA has been playing fast and loose with the petroleum statistics. ..."
"... Ive previously suggested that assigning all the processing gains to US production is factually incorrect, instead the processing gains resulting from refining imported crude should be added to the total for imports. For a rough guess, using the fraction of crude imported given above, 664 mbbls/d should be subtracted from the US production and added to the import side of the accounting. ..."
"... Of course, the EIA misses the whole discussion about biofuels, especially ethanol, which require a large input of fossil fuels to produce the final product. The EIA ignores this fuel input, showing biofuels as an input to the front end of the refining process. With ethanol production now using about 40% of the US corn crop, it would be more accurate to consider this portion of the US agricultural system to have been added to the energy supply system and the energy used would thus become an internal consumption which would be subtracted from the petroleum energy available to the rest of society. Doing this calculation would increase the fraction of energy imported, which would give a more realistic picture of our situation... ..."
"... And the IEA bought into the EIAs misinformation (call it a lie) with their latest report, which means either that they dont understand the EIAs reporting or they are complicit in the act of overstating US production. Your choice... ..."
November 19, 2012 | The Oil Drum

Black_Dog on November 19, 2012

I think the EIA has been playing fast and loose with the petroleum statistics. As noted last week, the EIA Annual Review for 2010 states that the US produced a total of 9,443 mbbls/d, of which US crude production at 5,512 mbbls/day (which includes lease condensate), NGPL's at 2,001 mbbls/d and processing gain of 1,064 mbbls/d. The difference of 866 mbbls/d appears to be made up by biofuels.

Total product supplied is said to have been 19,148 mbbls/d, with imports minus exports totaling 9,434 mbbls/d of that. The amount of crude imported was 9,163 mbbls/d. From these data, the total crude supplied to the refineries was 14,675 mbbls/d, of which 62% is imported.

I've previously suggested that assigning all the processing gains to US production is factually incorrect, instead the processing gains resulting from refining imported crude should be added to the total for imports. For a rough guess, using the fraction of crude imported given above, 664 mbbls/d should be subtracted from the US production and added to the import side of the accounting. This revision reduces US production to 8,779 mbbls/d and increases imports to 10,098 mbbls/d, increasing the fraction imported from 49% to 53%.

Of course, the EIA misses the whole discussion about biofuels, especially ethanol, which require a large input of fossil fuels to produce the final product. The EIA ignores this fuel input, showing biofuels as an input to the front end of the refining process. With ethanol production now using about 40% of the US corn crop, it would be more accurate to consider this portion of the US agricultural system to have been added to the energy supply system and the energy used would thus become an internal consumption which would be subtracted from the petroleum energy available to the rest of society. Doing this calculation would increase the fraction of energy imported, which would give a more realistic picture of our situation...

E. Swanson

carnot on November 22, 2012

Sorry Guys but you have missed the point on refinery gains. It is a mirage. Remember the 1st law of thermodynamics.

Energy cannot be created or destroyed. US refiners continue to quote their refining capacities and products in barrels - a unit of volume which is meaningless unless a density unit is also quoted. What you should consider is the mass unit. In ALL refineries if you measure in units of mass it should add up to 100% plus the mass of hydrogen and other inputs added which increase the mass. ( methanol for an MTBE unit for instance).

When the crude is distiller in the crude unit it will produce a number of products with different densities and therefore different mass per barrel. Measure the products in barrels and you will have the following barrels per tonne.

Butane. 11
Naphtha 9
Gasoline 8.7
Jet 8
Diesel 7.5
Vacuum gas oil 6.8
Fuel oil 6.5

In a cat cracker, with no hydrogen addition the mass of products is constant but because the volume of LESS dense light products exceed the total volume of HEAVY dense products , hey presto there is a refinery gain - in volume but not in mass.

Some refinery gain is due to the addition of hydrogen but typically this is 2-3% of the overall mass flow. Refiners love to sell in units of volume as they can benefit form the sleight of hand of selling a less dense and lower energy product to unsuspecting drivers. When energy density is compared in mass units there is NO significant difference between gasoline, jet or diesel. It is about 42-44 MJ per Kg but very different in volume units.

That is why diesels appear 30% more fuel efficient on volumetric terms but in reality the difference is much less.

xoddam on November 20, 2012 - 7:21am
A number of people have posted the same argument each time "refinery gains" are mentioned, but it does not universally hold true.

Cracking can be done without addition of hydrogen, either by separately coking the heavier fractions of the crude before cracking (producing large volumes of solid carbon-rich petroleum coke, frequently a desirable byproduct which is further improved for use in metallurgy), or coking by deposition on the catalytic cracker unit itself (usually simply burned off in batches).

In neither case does any non-crude-oil energy input contribute to the increased volume of the light hydrocarbon products. Indeed the liquid products are of considerably less mass and energy than the input crude petroleum.

Indeed to the best of my knowledge hydrogenation in cracking units is not the norm. The main use of hydrogen in petroleum processing is in fact to remove sulfur and nitrogen from the fuel -- in which process it does not add energy to the desulfurised fuel product, but rather to the sulfuric and nitric acid byproducts.

http://en.wikipedia.org/wiki/Hydrodesulfurization

The hydrogen may be generated by steam reformation of natural gas, but coke from crude oil is also used as feedstock for steam reformation.

[-] RockyMtnGuy on November 20, 2012 - 10:22am Permalink

Yes, thank you for clarifying that. I've tried to clarify it for people before, but your explanation is much better. People tend to assume that "refinery gain" comes from adding hydrogen, but that's not generally true - in most cases it comes from removing carbon, ie "coking". Refineries prefer to do it that way because hydrogen is very expensive, and petroleum coke is a valuable product. In either case, the EROEI is much less than unity - in the case of coking, it is less than zero.

mbnewtrain on November 20, 2012 - 10:42am Permalink

From a chemistry standpoint:

If the refinery is breaking H-C bonds in the hydrocarbon chain molecule and producing free C (which you call coke), then the liquids produced have shorter chain molecules (total number of carbons reduced). Fewer H-C bonds mean lower energy. So using catalytic cracker that produces coke removes energy from the resulting liquid.

My claim of lower net energy in the oil product still stands regardless of refining method. In either case refinery gains should not be counted as energy production.

Darwinian on November 20, 2012 - 9:18am Permalink

The US has refinery process gains of over one million barrels per day. That is almost as much as the rest of the world combined. They have to be counting refinery process gains on imported oil.

[-] RockyMtnGuy on November 20, 2012 - 10:32am Permalink

That is correct. The EIA is counting "refinery gain" on imported oil as "US oil production". It is a totally bogus product by any standard, and the only reason I can imagine them doing it is to artificially inflate US oil production statistics. This has to be politically motivated.

Black_Dog on November 20, 2012 - 10:59am Permalink

And the IEA bought into the EIA's misinformation (call it a lie) with their latest report, which means either that they don't understand the EIA's reporting or they are complicit in the act of overstating US production. Your choice...

E. Swanson

RockyMtnGuy on November 20, 2012 - 12:18pm Permalink

There is an addition factor which the EIA is not going to want to make clear. US oil imports are increasingly coming from Canada, and most Canadian oil production is now from the oil sands as Canadian conventional oil production declines and oil sands production increases. Canada now exports more oil to the US than it consumes itself.

The product which is exported is mostly bitumen, which is not "tar" as some people would have you believe, but it is about the heaviest grade of oil you can buy. Midwest oil refineries no longer have sufficient domestic oil to keep running, but there is lots of Canadian bitumen and it is very cheap to buy (although not to produce). They upgrade it using coking, and make a ton of money turning it into gasoline.

Despite the fact that the EROEI of coking is negative (there is an energy loss), there is a huge refinery gain in going from very heavy bitumen to much lighter gasoline. The EIA counts this as "US oil production" despite the fact it comes from the Canadian oil sands and involves a net loss of energy.

That's another factor in the huge "refinery gain" the EIA and therefore the IEA is counting in predicting the US will exceed Saudi oil production. It's not really oil, in physical terms it's some kind of an extreme vacuum, or a form of negative energy.

Black_Dog on November 20, 2012 - 1:08pm Permalink

Furthermore, importing extra heavy oil from Canadian bitumen (aka, tar for those who don't understand that tar is derived from coal) sands requires the addition of some dilutant to the mix to reduce the viscosity enough to allow the mix to flow thru pipelines. Looking quickly at the EIS for the Keystone XL pipeline from the US State Department, one learns that the chemical makeup of those dilutants are company proprietary information. It's likely that these are made up of lighter fractions of crude oil, such as naphtha or even some NGPLs. The fractions with the lowest boiling point temperature would most likely be mixed in during the coldest months of the year when the oil would be most viscous.

The source of those dilutants is unknown, but there have been comments about building a pipeline from the US to Alberta to provide those chemicals. If this is done, the dilutants would be (are?) added to the export column of the EIA data, but would then be returned to the US along with the heavy oil and then recovered at some point during the refining process. The result could be like a loop within which (almost) no change in the total quantity of material occurs, but which appears as a reduction in total imports due to double counting in the EIA volume based data...

E. Swanson

[-] RockyMtnGuy on November 20, 2012 - 2:16pm Permalink

Looking quickly at the EIS for the Keystone XL pipeline from the US State Department, one learns that the chemical makeup of those dilutants are company proprietary information.

Proprietary, shmoprietary, it's only the State Deparment that doesn't know what's in it. If you Google, "Western Canadian Select", you'll find out more than you ever wanted to know about it. They're trying to sell it, after all.

Western Canadian Select

What is Western Canadian Select crude?

Western Canadian Select is a Hardisty based blend of conventional and oilsands production managed by Canadian Natural Resources, Cenovus Energy, Suncor Energy, and Talisman Energy. Argus has launched daily volume-weighted average price indexes for Western Canadian Select (WCS) and will publish this index in the daily Argus Crude and Argus Americas Crude publications.

...followed by a chemical analysis of the most recent sample of it.

What is going down the pipelines is a mixture of oil sands bitumen, conventional heavy oil, synthetic crude oil, condensate, and pentanes plus. The mixture varies from day to day. The buyers don't really care where it came from or how it was mixed, they only care that it meets specs, i.e. the chemical analysis is right.

There are pipelines carrying diluent from the US to Canada, and it is getting to be a big business with the increase in Canadian bitumen and heavy oil production. There are also rail cars full of bitumen going south, and carrying condensate and pentanes plus on the backhaul.

Canada's tar sands unexpected winner from fracking: Kemp

speculawyer on November 20, 2012 - 10:08pm Permalink

"Refinery gain" is definitely a misleading statistic but there is a point there. It is good to do your own refining. Jobs, value-add, refinery gain, etc.

[Feb 14, 2016] The OPEC prediction is more of what I'd call an assumption

peakoilbarrel.com

Guy Minton, 02/13/2016 at 5:47 pm

The big deals against oil prices are, now, the drop in (the increase) in future demand from 1.6 to 1.2%, per IEA, and the massive amount of oil that Iran is getting to lay out with unknown capital input. Supposedly glutting the market with 1.5 million more barrels with magic, I presume. However, I figure it, the drop in demand seems to indicate only about a 300k to 350k difference.
Ah, the magic of OPEC will prevail, then. Even though to fully ramp up more, Saudi has to drill in the offshore area, which I am sure is NOT $10 barrel cost of production. Iraq has to end their internal strife to gain some traction. Venezuela is sucking wind, badly. Ecuador, while not the massive producer of other OPEC members, currently has only one well drilling from 50 something rigs. It is hard to keep up with the news from every country, and it is clear that neither EIA nor IEA are really putting much effort into real data accumulation. I think OPEC is strapped for production for the next two years, with the exception of the magical production from Iran.
On the other hand, I read Canada has some smaller oil sands shut in, while larger ones are scheduling to cut back, or have extended periods of overhaul on production equipment. As rigs for conventional oil have dropped significantly, I fail to see were Canada will not have a decrease in production in 2016. Over a year ago, I said the shale production could drop by over one million, but didn't anticipate the increase before the drop. Still from the high in March of last year, it is still projected to drop by 1.2 million by 2017 by EIA. I still thing they are low in their estimate of the drop, but not as much as they used to be.
I read where China's production is expected to drop from 100k to 200k in 2016, base upon the current prices and capex. A recent post by the author indicates that up to 1.5 million barrels may be lost from in field drilling of offshore wells in 2016. All of South America, Africa, and Asia, including Russia, expect drops in 2016, and 2016 is just the tip of the iceberg.
Where are all of these figures in the garbage the EIA and IEA put out? Far as I can tell, the magical numbers put out for Iran, roughly match the drop in infield drilling offshore. But then I am not an expert, because I am not paid by a highly efficient and omniscient government entity.
Jimmy, 02/13/2016 at 6:37 pm
While what is called a prediction of non-OPEC production seems to meet the definition of the word 'prediction' it seems that the OPEC production prediction is more of what I'd call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. That's some pretty weak tea!

It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite 'the glut', Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I don't know exactly how it's gonna play out but whatever it is the word 'train wreck' is likely an apt description.

As well this 'total liquids' thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when it's on the 1/4 of beef and once again when it's cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy.

I figure in a few short years it'll be pretty clear where all this is going and it'll be a whole new paradigm aka Hobbesian scramble.

Jimmy, 02/13/2016 at 7:49 pm
Intro sentence should have read:

While what is called a prediction of non-OPEC production seems to meet the definition of the word 'prediction' it seems that the OPEC production prediction is more of what I'd call an assumption.

Reply
  • Jimmy says: 02/13/2016 at 6:37 pm While what is called a prediction of non-OPEC production seems to meet the definition of the word 'prediction' it seems that the non-OPEC production prediction is more of what I'd call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. That's some pretty weak tea!

    It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite 'the glut', Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I don't know exactly how it's gonna play out but whatever it is the word 'train wreck' is likely an apt description.

    As well this 'total liquids' thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when it's on the 1/4 of beef and once again when it's cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy.

    I figure in a few short years it'll be pretty clear where all this is going and it'll be a whole new paradigm aka Hobbesian scramble.

    [Feb 13, 2016] Share of oil in total petroleum liquids production is dropping and in the USA reached 49 percent

    That means that most of produced petroleum liquids produced in the USA are condensate.
    Notable quotes:
    "... Im estimating that global crude oil production* was about 69 million bpd in 2005 and 68 million bpd in 2014. I would assume around 69 million bpd for 2015. Global total liquids production was 85 million bpd in 2005 and apparently about 96 million bpd in 2015. ..."
    "... I estimate that actual global crude oil production, as a percentage of total liquids, fell from about 81% in 2005 to about 72% in 2015. ..."
    "... In regard to the US, I estimate that actual crude oil as a percentage of total liquids fell from about 57% in 2005 (4.7/8.3) to about 49% in 2015 (7.3/14.8). ..."
    "... since most hydrocarbon liquids are close to the (CH2)n formula, the energy content/pound is fairly constant (roughly 17,000 BTU/lb). ..."
    "... Please note that while the number of BTUs per unit of weight is equal for condensate and oil, the energy content per unit of volume (barrel) is not. It is approximately 12% lower for condensate (on average). So when you measure total production in volume units not weight units, and most of your production is condensate you inflate the amount of energy extracted. With 50/50 mix of oil and condensate the inflation is around 6%. That means that to get proper comparison with, for example, Europeans data where most production is Brent crude or heavier, you need to multiply US data with factor 0.96 or so to equalize the energy content. That also imply that any claim of world petroleum liquids production glut using volume comparison is unscientific. And any claim about oil glut which is less then 1% of total volume of petroleum liquids produced (around 1 Mb/d) is pure propaganda. ..."
    "... What Jeffrey Brown points out over and over is the so-called glut is simply another finance industry -slash- media narrative, a pleasant lie that glosses over the fact that fuel supply is declining, that purchasing power is declining along with it and that no easy solutions to these declines exist. The only solution is stringent conservation… ..."
    "... Repeating after Steve: so-called glut is simply another finance industry/media narrative . Or, if you wish, another noble lie in Leo Strauss style. See http://peakoilbarrel.com/collapse-of-shale-gas-production-has-begun/#comment-558479 ..."
    "... Looks like the US elite is afraid to go full force into oil conservation mode and was unhappy with secular stagnation of the economy. It preferred to drop oil price to solve the problem of secular stagnation or at least to postpone the day of reckoning: yet another financial crash which is immanent under neoliberalism, but which might undermine their political power. ..."
    "... Instead, Obama administration adopted Madame de Pompadour Après nous le deluge ( after us deluge ) mentality… ..."
    "... Also the mix of refined products you get from the unit of weight of each type of oil is different and you can never get even close in the amount of aviation kerosene and diesel from condensate as from WTI or Brent. ..."
    "... Diesel became used for a reason. Ditto jet fuel. Problems arose that were only solvable by changing to that fuel. There's a sort of overly glib presumption that energy content for condensate is only down and not zero, applied to . . . not a diesel engine but to the problem addressed by the diesel engine. ..."
    "... Oil is found as a liquid phase fluid in the reservoir, while condensate is found in the gas phase in the reservoir under static conditions. "Some oil people" isn't the right description. Petroleum engineers consider the initial conditions and composition of the hydrocarbon system to define how it would behave under different development and operating schemes. These groupings you listed are a very sensible and technically sound system to describe system behavior as the reservoir is produced. ..."
    "... For the non specialist the separation of the crudes by API will do. Use 45 degrees, it seems to do the job. And don't worry too much about the other details. As we can see, even petroleum engineers can get s bit lost in this area, which is mostly the purview of hard core reservoir engineers and process equipment designers. ..."
    "... The important point was energy per unit mass is the same. In Nicolas view if we are concerned about energy just look at mass produced. I agree. ..."
    "... At high pressures, as found in gas reservoirs, things don't work the same as at atmospheric pressure on the earth's surface. There is a phenomena known as retrograde condensation where as the pressure is reduced at constant temperature, liquid condenses out of the gas (.e. condensate). If the pressure is further reduced then it will start evaporating again (which is what we are used to seeing). ..."
    "... If the gas is cooled at the same time (which happens naturally when gas is let down in pressure with no heat source present, or if it cools from the hotter reservoir to ambient conditions, say in a pipeline) then there is relatively more liquid formed. In the past condensate was sometimes called drip gas as it dripped out of pipelines from a combination of these effects. ..."
    peakoilbarrel.com
    Oldfarmermac, 02/13/2016 at 3:46 pm
    Hopefully somebody handy with a calculator will try to figure out roughly how much of total world production consists of condensates, natural gas liquids biofuels, etc.

    ... ... ...

    Jeffrey J. Brown, 02/13/2016 at 3:54 pm

    I'm estimating that global crude oil production* was about 69 million bpd in 2005 and 68 million bpd in 2014. I would assume around 69 million bpd for 2015. Global total liquids production was 85 million bpd in 2005 and apparently about 96 million bpd in 2015.

    So, I estimate that actual global crude oil production, as a percentage of total liquids, fell from about 81% in 2005 to about 72% in 2015.

    In regard to the US, I estimate that actual crude oil as a percentage of total liquids fell from about 57% in 2005 (4.7/8.3) to about 49% in 2015 (7.3/14.8).

    *45 API Gravity & Lower Crude Oil

    Doug Leighton, 02/13/2016 at 7:27 pm
    Mac,

    I was chatting with my Norway niece (Nicole/Nikki) this morning and, I recalled, you were asking about the distinction between "oils" and their relative energy value. Remember, I'm 75 now and the grey cells are evaporating rapidly but we had a decent connection so this is (basically) her comment: all errors mine.

    She said that any distinction between oil and condensate is artificial and arbitrary. They're both crude in that compositions are whatever came from the well with no processing other than simple separation. Apparently some oil people simply use five classifications for reservoir fluids: black oil, volatile oil, retrograde gas-condensate, wet gas, and dry gas. And, since most hydrocarbon liquids are close to the (CH2)n formula, the energy content/pound is fairly constant (roughly 17,000 BTU/lb).

    Really heavy crudes can be difficult to refine because they're more likely to be contaminated with sulfur and heavy metals that can poison refinery catalysts, they're hard to pump, they can leave fouling on the process equipment, and they need more processing (cracking, reforming, alkylation) to produce light fuels (gasoline, diesel, jet fuel). According to her, the bigger concern would be the percentage of heavy industrial gunk which is useful only for big power plants, ships, and industrial furnaces or even road asphalt.

    When she got into C12+ hydrocarbons, aromatics, benzene rings, alkenes and branched isomers I got bored and asked about her new boyfriend. Is that any use?

    likbez , 02/13/2016 at 8:34 pm
    Doug,

    This actually is a pretty complex topic.

    Please note that while the number of BTUs per unit of weight is equal for condensate and oil, the energy content per unit of volume (barrel) is not. It is approximately 12% lower for condensate (on average). So when you measure total production in volume units not weight units, and most of your production is condensate you inflate the amount of energy extracted. With 50/50 mix of oil and condensate the inflation is around 6%. That means that to get proper comparison with, for example, Europeans data where most production is Brent crude or heavier, you need to multiply US data with factor 0.96 or so to equalize the energy content. That also imply that any claim of world petroleum liquids production glut using volume comparison is unscientific. And any claim about "oil glut" which is less then 1% of total volume of petroleum liquids produced (around 1 Mb/d) is pure propaganda.

    As Steve from Virginia aptly noted
    http://peakoilbarrel.com/opec-january-production/#comment-559218

    What Jeffrey Brown points out over and over is the so-called 'glut' is simply another finance industry -slash- media narrative, a pleasant lie that glosses over the fact that fuel supply is declining, that purchasing power is declining along with it and that no easy solutions to these declines exist. The only solution is stringent conservation…

    Repeating after Steve: "so-called 'glut' is simply another finance industry/media narrative". Or, if you wish, another noble lie in Leo Strauss style. See http://peakoilbarrel.com/collapse-of-shale-gas-production-has-begun/#comment-558479

    Looks like the US elite is afraid to go full force into oil conservation mode and was unhappy with "secular stagnation" of the economy. It preferred to drop oil price to solve the problem of "secular stagnation" or at least to postpone the day of reckoning: yet another financial crash which is immanent under neoliberalism, but which might undermine their political power.

    Instead, Obama administration adopted Madame de Pompadour "Après nous le deluge" ("after us deluge") mentality…

    Also the mix of refined products you get from the unit of weight of each type of oil is different and you can never get even close in the amount of aviation kerosene and diesel from condensate as from WTI or Brent.

    See Jeffrey Brown's post about rejection of some blends by US refineries for details.

    Dennis Coyne, 02/13/2016 at 8:35 pm
    Hi Doug,

    Thanks that is very useful.

    Below I show World liquids consumption in Mb/d and Mboe/d using BP data from the Statistical Review of World Energy.

    To find Mboe/d I took world consumption in metric tonnes and assumed 7.33 b per metric tonne. Sorry about the typo on the chart, too late to correct.

    We hit the peak in World output per capita in 1979.

    Fred Magyar, 02/13/2016 at 8:42 pm
    When she got into C12+ hydrocarbons, aromatics, benzene rings, alkenes and branched isomers I got bored and asked about her new boyfriend. Is that any use?

    Well, compared to colliding black holes and gravitational waves, and E=MC^2, organic chemistry is pretty cut and dried… :-)

    Watcher, 02/14/2016 at 1:25 am
    Got a small problem with this.

    Diesel became used for a reason. Ditto jet fuel. Problems arose that were only solvable by changing to that fuel. There's a sort of overly glib presumption that energy content for condensate is only down and not zero, applied to . . . not a diesel engine but to the problem addressed by the diesel engine.

    The volume/weight thing is a pretty big deal, too. Fuel tank capacity is not defined by weight.

    Fernando Leanme, 02/14/2016 at 6:26 am
    Sorry, but Nicole is wrong. Oil is found as a liquid phase fluid in the reservoir, while condensate is found in the gas phase in the reservoir under static conditions. "Some oil people" isn't the right description. Petroleum engineers consider the initial conditions and composition of the hydrocarbon system to define how it would behave under different development and operating schemes. These groupings you listed are a very sensible and technically sound system to describe system behavior as the reservoir is produced.

    For the non specialist the separation of the crudes by API will do. Use 45 degrees, it seems to do the job. And don't worry too much about the other details. As we can see, even petroleum engineers can get s bit lost in this area, which is mostly the purview of hard core reservoir engineers and process equipment designers.

    Doug Leighton, 02/14/2016 at 10:14 am
    Nicole responds: "With respect, the term black oil is particularly imprecise and context-dependent; to a reservoir simulation engineer like me, that means the simplifying assumption that the fluid can be characterized by only two components, one of which can exist in only one phase whose properties we can characterize the other component dissolves in that phase; that phase is black as in "black box", not color. Usually the non-partitioning phase is the heavy component (separator oil may contain dissolved gas, but the gas phase contains no oil), but it works the other way, too (separator gas can contain condensate vapor, but condensate can dissolve no gas). When it's applicable, the black-oil assumption saves "lots" of computational effort."
    Dennis Coyne, 02/14/2016 at 11:09 am
    Thank you Nicole and Doug for the information.

    It seems if we are interested in the amount of liquid energy produced in terms of exajoules we would pay attention to the tonnes of liquids produced and just convert to Exajoules.

    So for oil consumption data in BP's Statistical Review of World energy we would focus on the data by weight and use a conversion to Joules (or Exajoules).

    One billion metric tonnes of oil equivalent are about 41.87 EJ.

    Chart below with World Liquids consumption in Exajoules per year using BP Statistical Review of World Energy 2015.

    Doug Leighton , 02/14/2016 at 12:16 pm
    Nicole left for her bi-monthly platform tour so I'll say if you stick to weight when doing your rough oil/condensate energy conversions your numbers will be OK. My Proviso: I'm NOT an oil guy. Don't include NG though, which is mostly methane (22,000 BTU/lb) ????
    Dennis Coyne, 02/14/2016 at 6:42 pm
    Thanks Doug,

    You know far more than me, just from your conversations with Nicole, and I believe you are also a geophysicist, and have worked in the industry. You may not be up to date on the latest oilfield tech, but you are very knowledgeable nonetheless.

    The "liquids" are biofuels, NGL, and C+C in my chart. Methane is not included.

    Longtimber, 02/14/2016 at 12:59 pm
    Barrels, BTU's, mcf, CMO, enough dungpiles -- Save us. Remember http://www.theoildrum.com/node/2320.
    Real Energy, as in MT, Calories, EJ would be so clear.
    Fernando Leanm, 02/15/2016 at 10:22 am
    Nicole is still wrong. She answered the point I made with a rather pedantic point which failed to address my comment: the distinction between oil and condensate is whether they are found in the liquid or gas phase in the reservoir. Condensate is found as a gas in the reservoir. The distinction isn't artificial nor is it arbitrary. She has a bit to learn, probably because she's too much into her specific experience. Comments in a blog have to teach the audience whenever possible. Hers didn't.
    Doug Leighton , 02/15/2016 at 10:59 am
    Right, I'll suggest she forgo future comments. Nicole lacks confidence in her English anyway so it won't be difficult to muzzle her.
    Dennis Coyne, 02/15/2016 at 12:06 pm
    I disagree.

    The important point was energy per unit mass is the same. In Nicolas view if we are concerned about energy just look at mass produced. I agree.

    Please keep the comments coming Douglas

    Fernando knows more than me but not more than your niece.

    notanoilman, 02/15/2016 at 3:06 am
    I am a little puzzled over condensate. If it exists in the gas phase, in the reservoir with, presumably, high pressure, how does it condense to liquid when extracted and the pressure is reduced? I would have expected the reverse. Am I mis-understanding something, confused or just lost the thread?

    NAOM

    George Kaplan, 02/15/2016 at 4:04 am
    At high pressures, as found in gas reservoirs, things don't work the same as at atmospheric pressure on the earth's surface. There is a phenomena known as retrograde condensation where as the pressure is reduced at constant temperature, liquid condenses out of the gas (.e. condensate). If the pressure is further reduced then it will start evaporating again (which is what we are used to seeing).

    If the gas is cooled at the same time (which happens naturally when gas is let down in pressure with no heat source present, or if it cools from the hotter reservoir to ambient conditions, say in a pipeline) then there is relatively more liquid formed. In the past condensate was sometimes called drip gas as it dripped out of pipelines from a combination of these effects.

    http://www.jmcampbell.com/tip-of-the-month/2007/06/why-do-i-care-about-phase-diagrams/

    Fernando Leanme, 02/15/2016 at 10:27 am
    That was a pretty good explanation. Several years ago I had to explain the way this works to my boss, and I resorted to explaining that a multi component system had molecules bouncing around, and that at high pressure we saw the lighter molecules kicking the heavier ones into the gas phase if they ever decided to settle down into a liquid. It worked.
    George Kaplan , 02/15/2016 at 4:09 am
    I posted a long explanation that seems to have got lost, so try this:

    http://www.jmcampbell.com/tip-of-the-month/2007/06/why-do-i-care-about-phase-diagrams/

    Forbin, 02/15/2016 at 5:36 am
    because it also hot and will exist as liquid at ambient temperatures.

    http://www.naturalhub.com/slweb/defin_oil_and_natural_gas.html

    forbin

    [Feb 13, 2016] Estimates Of Post-2005 US, OPEC Global Condensate Production Vs. Actual Crude Oil Production by Jeffrey Brown

    Notable quotes:
    "... Note that the global oil and gas industry spent trillions of dollars on global upstream capex after 2005, for 2006 to 2014 inclusive (on both oil and gas projects). But if it took trillions of dollars to keep us on a post-2005 "Undulating plateau" in actual global crude oil production, what happens to global crude oil production given the large and ongoing cutbacks in global upstream capex? ..."
    "... My premise is that US (and perhaps global) refiners hit - late in 2014 - the upper limit of the volume of condensate that they could process if they wanted to maintain their distillate and heavier output. This resulted in a build in condensate inventories, reflected as a year over year build of 100 million barrels in US C+C inventories. ..."
    "... Therefore, in my opinion the US and (and perhaps global) C+C inventory data are fundamentally flawed when it comes to actual crude oil inventory data. Note that according to Iranian sources, the bulk of their floating offshore storage consists of condensate, which they were permitted to export under the sanctions. In my opinion, this suggests that we may be seeing both a US and a global glut of condensate in storage. ..."
    Feb 12, 2016 | Oilpro
    Global Condensate Versus Crude Oil Production Estimates

    Global dry natural gas production rose from 270 BCF/day in 2005 to 335 BCF/day in 2014. In 2014, combined US + OPEC gas production accounted for 41% of global gas production in 2014.

    If the US + OPEC condensate production estimates per BCF of dry gas production are similar to global values, it implies that global condensate production rose from about about 5 million bpd in 2005 to about 10 million bpd in 2014, an increase of about 5 million bpd. Note that global C+C production increased from 74 million bpd in 2005 to 78 million bpd in 2014, an increase of 4 million bpd.

    Of course, the foregoing implies that actual global crude oil production (45 API Gravity and lower crude oil) declined from about 69 million bpd in 2005 to about 68 million bpd in 2014, as annual Brent crude oil prices doubled from $55 in 2005 to $110 for 2011 to 2013 inclusive (remaining at $99 in 2014).

    Note that the global oil and gas industry spent trillions of dollars on global upstream capex after 2005, for 2006 to 2014 inclusive (on both oil and gas projects). But if it took trillions of dollars to keep us on a post-2005 "Undulating plateau" in actual global crude oil production, what happens to global crude oil production given the large and ongoing cutbacks in global upstream capex?

    What's Actually in Those Storage Tanks?

    We have seen a large year over year increase in US and global Crude + Condensate (C+C) inventories. For example, EIA data show that US C+C inventories increased by 100 million barrels from late 2014 to late 2015, and this inventory build has contributed significantly to the sharp decline in oil prices.

    The question is, what percentage of the increase in US and global C+C inventories consists of condensate?

    Four week running average data showed that US net crude oil imports for the last four weeks of December increased from 6.9 million bpd in 2014 to 7.3 million bpd in 2015. Why would US refiners continue to import large–and increasing–volumes of actual crude oil, if they didn't have to, even as we saw a huge build in US C+C inventories? And again, what the EIA calls "Crude oil" is actually C+C. And as noted above, based on the EIA analysis it appears that about 40% of US Lower 48 C+C production in 2015 exceeded the maximum API Gravity for WTI crude oil, 42 API Gravity.

    The most recent four week running average EIA data shows US net crude oil imports remained at 7.3 million bpd, with net total liquids imports at 5.5 million bpd, up 17% from the 2015 average annual value of 4.7 million bpd.

    I frequently cite a 2015 Reuters article that discussed case histories of refiners increasingly rejecting blends of heavy crude and condensate that technically meet the upper limit for WTI crude (42 API gravity), but that are deficient in distillates. Of course, what the refiners are rejecting is the condensate component, i.e., they are in effect saying that "We don't want any more stinkin' condensate." Following is an excerpt from the article:

    U.S. refiners turn to tanker trucks to avoid 'dumbbell' crudes (March, 2015)

    In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source.

    Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. . . .

    Many executives say that the crude oil blends being created in Cushing are often substandard approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to, and favored by, many refiners in the region.

    Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian Select, itself a blend, is about 20.

    While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.

    My premise is that US (and perhaps global) refiners hit - late in 2014 - the upper limit of the volume of condensate that they could process if they wanted to maintain their distillate and heavier output. This resulted in a build in condensate inventories, reflected as a year over year build of 100 million barrels in US C+C inventories.

    Therefore, in my opinion the US and (and perhaps global) C+C inventory data are fundamentally flawed when it comes to actual crude oil inventory data. Note that according to Iranian sources, the bulk of their floating offshore storage consists of condensate, which they were permitted to export under the sanctions. In my opinion, this suggests that we may be seeing both a US and a global glut of condensate in storage.

    In any case, here is the critical point: If it took trillions of dollars to keep us on a post-2005 "Undulating plateau" in actual global crude oil production, what happens to global crude oil production given the large and ongoing cutbacks in global upstream capex?

    [Feb 12, 2016] Global oversupply is a house of cards which requires massive capital investments to keep crude oil production from crashing

    Notable quotes:
    "... I think there should be is a special place in hell for Goldman commodity traders. ..."
    "... IMO, the global oversupply is a house of cards built on an unstable foundation of actual global crude oil production* that requires massive capital investments to keep crude oil production from crashing. ..."
    "... my buddy (petroleum engineer) who works in Kuwait from time-to-time insists their production rate is maintained by massive infill drilling BUT how long will the party last: a decade? Longer? Shorter? ..."
    "... I would think the second half of 2016 for a price recovery, but I thought we were in a price recovery phase this time last year. As for the duration of a price recovery, I dont have the foggiest. ..."
    "... Incidentally as noted up the thread, an interesting difference between the last oil price decline and the current (much more protracted) decline: Global liquids consumption fell by 2 million bpd from 2007 to 2009, whereas global liquids production reportedly rose by 3 million bpd from 2013 to 2015. ..."
    "... That is what is keeping two thirds of the worlds oil fields from a 5 to 6 percent decline rate. Massive infill drilling is happening in Kuwait, Saudi, the UAE, Russia, the Gulf of Mexico and just about everywhere else in the world. ..."
    "... Normally the production profile of a field would resemble a bell curve with the top of the curve being the 50% depletion point. But with massive infill drilling, the top of the bell just levels out with only a slight decline, if any. But the depletion curve, if you could see it, would be dropping like a rock. ..."
    "... What infill drilling does is delay the decline curve until it too starts dropping like a rock. ..."
    "... My guess is about a decade. Saudi began their infill drilling projects over a decade ago and I believe the fields where this began is already dropping fast. But they have managed to keep production up by bringing on three giant fields, Khurais, Manifa and Shaybah. ..."
    "... But it depends entirely on the size of the field. Giant and super giant fields can maintain infill drilling and keep production up much longer than smaller fields, like those in the GOM. ..."
    "... But Kuwaits production has already started to drop and UAE production is just on the cusp. Russia also has, for almost a decade, had a program of massive infill drilling in their Western Siberia fields where about 60% of their oil is produced. ..."
    peakoilbarrel.com

    Daniel , 02/12/2016 at 7:44 am

    Not sure how reliable this is, but drillinginfo index has the "new US production capacity" (oil and gas) dropping by 24% from January to February; which would be biggest drop since the collapse of the oilprice
    Ron Patterson . 02/12/2016 at 8:44 am
    This headline shocked me: The Oil Industry Got Together and Agreed Things May Never Get Better

    Thousands of industry participants gathered in London for their annual get-together, only to find a world awash in crude and hardly a life jacket in sight.

    The thousands of attendees seeking reasons for optimism didn't find them at the annual International Petroleum Week . Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message:

    There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.

    No Hope

    Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group, the world's largest independent oil trader. Even refiners, whose profits have held up better than expected, are seeing a worsening outlook.

    SW , 02/12/2016 at 9:10 am
    Perhaps their only hope is depletion?
    likbez , 02/12/2016 at 1:51 pm
    Is not Bloomberg simply a GS propaganda arm ?

    I especially enjoyed the following statement

    "As the world runs out of places to store oil, "I wouldn't be surprised if this market goes into the teens," said Jeff Currie, head of commodities research at Goldman Sachs Group Inc."

    I think there should be is a special place in hell for Goldman commodity traders.

    Jeffrey J. Brown , 02/12/2016 at 9:41 am
    IMO, the global oversupply is a house of cards built on an unstable foundation of actual global crude oil production* that requires massive capital investments to keep crude oil production from crashing.

    Qatar is basically the poster child for post-2005 production. OPEC 12 data show that Qatar's reported crude oil production, despite billions of dollars spent on enhanced oil recovery, fell from 0.8 million bpd in 2005 to 0.7 million bpd in 2014 (OPEC crude only data), while EIA data show that Qatar's C+C production increased from 1.0 million bpd in 2005 to 1.5 million bpd in 2014.

    Production of condensates rising in Qatar http://www.oxfordbusinessgroup.com/analysis/production-condensates-rising-qatar

    *45 API Gravity and lower crude oil

    Doug Leighton , 02/12/2016 at 10:00 am
    "IMO, the global oversupply is a house of cards built on an unstable foundation of actual global crude oil production* that requires massive levels of investments to keep crude oil production from crashing."

    Please provide a scale Jeff. Not that I don't agree with you; my buddy (petroleum engineer) who works in Kuwait from time-to-time insists their production rate is maintained by massive infill drilling BUT how long will the party last: a decade? Longer? Shorter?

    Jeffrey J. Brown , 02/12/2016 at 10:32 am
    I would think the second half of 2016 for a price recovery, but I thought we were in a price recovery phase this time last year. As for the duration of a price recovery, I don't have the foggiest.

    As an example of low probability events, two years ago if someone had asked us what we thought the chances were that Donald Trump, in early 2016, would be the most likely GOP nominee, and that oil prices would be in the 20's to low 30's, I wonder what we would have said.

    Incidentally as noted up the thread, an interesting difference between the last oil price decline and the current (much more protracted) decline: Global liquids consumption fell by 2 million bpd from 2007 to 2009, whereas global liquids production reportedly rose by 3 million bpd from 2013 to 2015.

    Ron Patterson , 02/12/2016 at 11:16 am
    my buddy (petroleum engineer) who works in Kuwait from time-to-time insists their production rate is maintained by massive infill drilling…

    That is what is keeping two thirds of the world's oil fields from a 5 to 6 percent decline rate. Massive infill drilling is happening in Kuwait, Saudi, the UAE, Russia, the Gulf of Mexico and just about everywhere else in the world.

    Normally the production profile of a field would resemble a bell curve with the top of the curve being the 50% depletion point. But with massive infill drilling, the top of the bell just levels out with only a slight decline, if any. But the depletion curve, if you could see it, would be dropping like a rock.

    What infill drilling does is delay the decline curve until it too starts dropping like a rock.

    BUT how long will the party last: a decade? Longer? Shorter?

    My guess is about a decade. Saudi began their infill drilling projects over a decade ago and I believe the fields where this began is already dropping fast. But they have managed to keep production up by bringing on three giant fields, Khurais, Manifa and Shaybah.

    But it depends entirely on the size of the field. Giant and super giant fields can maintain infill drilling and keep production up much longer than smaller fields, like those in the GOM.

    But Kuwait's production has already started to drop and UAE production is just on the cusp. Russia also has, for almost a decade, had a program of massive infill drilling in their Western Siberia fields where about 60% of their oil is produced.

    And folks wonder why I think peak oil is at hand. Geeze, isn't it obvious?

    [Feb 10, 2016] Canadian energy companies sell 'jewels' to keep oil sands afloat

    Notable quotes:
    "... Producers are also betting that oil prices will eventually recover. The latest Reuters poll of oil analysts forecasts the U.S. benchmark CLc1 will average $41 a barrel in 2016, a level where most Canadian oil sands projects can break even. [OILPOLL] ..."
    "... Bankers say the need to bolster balance sheets and cover oil sands losses will boost the number of Canadian energy deals this year, particularly sales of pipelines, and storage and processing facilities. ..."
    Reuters


    Faced with record low prices for heavy crude, Canadian energy companies are sacrificing other parts of their business to keep higher-cost oil sands production going and safeguard the billions already invested in these multi-decade projects.

    Companies including Husky Energy Inc HSE.TO, MEG Energy Corp MEG.TO and Pengrowth Energy Corp PGF.TO are selling assets or slowing light and conventional oil exploration and production, even as they forge ahead with oil sands projects that are in many cases bleeding money on every barrel.

    ... ... ...

    Producers are also betting that oil prices will eventually recover. The latest Reuters poll of oil analysts forecasts the U.S. benchmark CLc1 will average $41 a barrel in 2016, a level where most Canadian oil sands projects can break even. [OILPOLL]

    Bankers say the need to bolster balance sheets and cover oil sands losses will boost the number of Canadian energy deals this year, particularly sales of pipelines, and storage and processing facilities.


    According to a recent TD Securities report, virtually no oil sands projects can cover overall costs, including production, transportation, royalties, and sustaining capital, with U.S. benchmark crude below $30 a barrel CLc1.

    The benchmark heavy Canadian blend, Western Canada Select (WCS), now trades around $16.30 a barrel, just a few dollars above record lows hit in January.

    ... ... ...


    Bankers say that midstream assets - pipelines, storage and processing facilities - prove popular with buyers such as pension funds and private equity firms, which favor investments with stable cash flows that are relatively easy to value.

    "They're to a certain extent the jewels in the crown. These companies would not be looking to sell them if they could get away with not doing it," said Citi's Kernaghan.


    [Feb 09, 2016] EIA has been underestimating the resilience of the LTO production

    Somewhat strange. On the way down EIA typically overestimating resilience not underestimating it.
    Notable quotes:
    "... By contrast, in the DPR released Monday the EIA predicts the seven major shale plays to produce 5.02 mb/d in February, 185 kb/d higher than in last month's forecast of 4.83 mb/d. The anticipated decline between the March 2015 peak levels and February 2016 is now 453 k/d compared with 638 k/d in January DPR. In general, the comparison between the EIA's DPRs of the past several months shows that the agency has been constantly underestimating the resilience of the LTO production. ..."
    "... The biggest upward revisions were for the Eagle Ford (+77 kb/d for December, +100 kb/d for January, and +127 k/d for February). The EIA's estimates for the Eagle Ford remain lower than those from other sources, in particular, from Bentek Energy. ..."
    peakoilbarrel.com

    AlexS , 02/09/2016 at 6:32 pm

    It is interesting to compare the numbers from the recently released EIA Short-Term Energy Outlook (STEO) and Drilling Productivity Report (DPR).

    In today's STEO, the EIA did not change its forecast of C+C production in the Lower 48 states (excl. GoM) for 2016-17, although projected output in the Gulf of Mexico was slightly revised down.

    By contrast, in the DPR released Monday the EIA predicts the seven major shale plays to produce 5.02 mb/d in February, 185 kb/d higher than in last month's forecast of 4.83 mb/d. The anticipated decline between the March 2015 peak levels and February 2016 is now 453 k/d compared with 638 k/d in January DPR. In general, the comparison between the EIA's DPRs of the past several months shows that the agency has been constantly underestimating the resilience of the LTO production.

    The EIA still projects the monthly decline in 7 key shales oil production to accelerate from 73 kb/d in February to 93 kb/d in March.

    Oil production in 7 major U.S. shales: EIA DPR Feb 2016 vs. Jan 2016 vs. Dec 2015

    AlexS , 02/09/2016 at 6:44 pm
    The biggest upward revisions were for the Eagle Ford (+77 kb/d for December, +100 kb/d for January, and +127 k/d for February). The EIA's estimates for the Eagle Ford remain lower than those from other sources, in particular, from Bentek Energy.

    Oil production in the Eagle Ford shale: EIA DPR Feb 2016 vs. Jan 2016 vs. Dec 2015

    Reply

    [Feb 09, 2016] IEA in Davos 2016 warns of higher oil prices in a few years' time

    Notable quotes:
    "... Daniel Yergin: "Just to put a number on that. Our numbers at IHS, 2015-2020 we see a 1.8 trillion dollar decline in upstream oil and gas investment" ..."
    "... To the extent that oversupply of US shale oil (including condensate filling up US inventories) has contributed to currently low oil prices, the drama evolving now is that unconventional oil – which was originally intended to be added to stagnating conventional supplies in the 1 st phase of peaking oil production (2005-2008) – is now endangering this much larger conventional base production, including higher cost offshore fields. ..."
    "... And for those who hope that oil markets will "rebalance" at $60-$70 there is no statistical evidence in the last 10 years that oil prices stayed for very long at these levels. ..."
    crudeoilpeak.info

    This recent forum was about how to transition away from fossil fuels, after the UN conference on climate change in Paris in November 2015. Moderator Yergin – who is a known peak oil denier – started by asking Fatih Birol what low oil and gas prices mean for the development of renewable energies. Fatih responded by first warning about the impact of lower oil prices on investments in the oil and gas sector:

    (video 3:24)
    Fatih Birol: "For the oil markets what worries me the most is that: last year we have seen oil investments in 2015 decline more than 20%, compared to 2014, for the new projects. And this was the largest drop we have ever seen in the history of oil. And, moreover, in 2016, this year, with the $30 price environment, we expect an additional 16% decline in the oil projects, investments. So, we have never seen 2 years in a row oil investments declining. If there was a decline 1 year, which was very rare, the next year there was a rebound"

    Daniel Yergin: "What does that lead you to?"

    Fatih Birol: "this leads me to the very fact that in a few years of time, when the global demand gets a bit stronger, when we see that the high cost areas such as the United States start to decline, we may well see and upward pressure on the prices as a result of market tightness. So my message, my 1st message is: don't be misled that the low oil prices will have an impact on the oil prices in the market in a few years' time"

    Daniel Yergin: "Just to put a number on that. Our numbers at IHS, 2015-2020 we see a 1.8 trillion dollar decline in upstream oil and gas investment"

    ... ... ...

    The graph shows that conventional crude oil production is supposed to be basically flat. This is designed by adjusting the yet-to-be-found wedge. Unconventional tight (shale) oil and heavy oil/bitumen increase only slightly up to 2020. NGLs go up but these don't play a big role for transport fuels (except LPG).

    If 80% of investments are needed just to offset decline, then the additional 2016 drop leads to such a low investment level that yet-to-be-developed projects are in danger, not to mention the assumed production from yet-to-be-found fields. An example of the latter is Shell ending its exploration in the Chukchi sea.

    Conclusion

    Changes in investment projections were already underway before the 2014 oil price drop. To the extent that oversupply of US shale oil (including condensate filling up US inventories) has contributed to currently low oil prices, the drama evolving now is that unconventional oil – which was originally intended to be added to stagnating conventional supplies in the 1st phase of peaking oil production (2005-2008) – is now endangering this much larger conventional base production, including higher cost offshore fields.

    Even if oil prices go up again US shale oil has already destabilized global oil markets by increasing volatility. Is that what we call a swing producer? Yes, swinging oil prices and investments. And for those who hope that oil markets will "rebalance" at $60-$70 there is no statistical evidence in the last 10 years that oil prices stayed for very long at these levels.

    [Feb 09, 2016] Those idiots from BBC predict oil stock building at the rate 300 mm bbp per day

    Total world consumption is around 96 mm bbp per day
    Notable quotes:
    "... The IEA forecast that stock building could continue in the second half of 2016 at a rate of 300 million barrels a day. It said: If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. ..."
    "... find how much storage capacity there is, and essentially manufacture that number too, and then derive backwards how much is required to fill it, and then subtract another essentially imaginary number as to how much of the capacity was already filled on some arbitrary date - and you can declare how much oversupply "there must be". ..."
    peakoilbarrel.com

    Doug Leighton , 02/09/2016 at 12:03 pm

    OIL PRICE RECOVERY WILL BE SHORT-LIVED, SAYS IEA

    "A recent rise in oil prices is a "false dawn" and the oversupply of crude is set to worsen, according to the International Energy Agency (IEA)….

    The IEA forecast that stock building could continue in the second half of 2016 at a rate of 300 million barrels a day. It said: If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term."

    http://www.bbc.com/news/business-35530123

    daniel , 02/09/2016 at 12:41 pm
    300 mm bbp per day – wow :-)
    Watcher, 02/09/2016 at 1:04 pm
    This is what happens when a theory is accepted as fact.

    If there's too much oversupply for storage to exist, well then, the oversupply must have been less than thought. In fact, find how much storage capacity there is, and essentially manufacture that number too, and then derive backwards how much is required to fill it, and then subtract another essentially imaginary number as to how much of the capacity was already filled on some arbitrary date - and you can declare how much oversupply "there must be".

    They would be laughed out of the room at any physics seminar.

    [Feb 09, 2016] February 2016 Short-Term Energy Outlook

    U.S. Energy Information Administration

    [Feb 09, 2016] IEA releases Oil Market Report for February

    Notable quotes:
    "... global oil demand growth is forecast to ease back considerably in 2016, to 1.2 mb/d ..."
    "... Oil Market Report ..."
    "... Global oil supply dropped 0.2 mb/d to 96.5 mb/d in January, ..."
    "... Non-OPEC supplies slipped 0.5 mb/d from a month earlier to stand close to levels of a year ago. For 2016 as a whole, non-OPEC output is expected to decline by 0.6 mb/d, to 57.1 mb/d. ..."
    "... Global refinery runs fell by 1.3 mb/d in January to 79.8 mb/d, as the onset of seasonal maintenance in the United States and weakening refinery margins curbed runs. Global throughputs nevertheless stood more than 1.7 mb/d above a year earlier, with gains particularly strong in the United States and the Middle East. ..."
    "... After growing by an estimated 1.8 million b/d in 2015, global oil inventories are forecast to grow by 1.4 million b/d in the first quarter of 2016. ..."
    "... With global oil inventory builds expected to continue in 2016, upward pressure on crude oil prices will be limited. Forecast Brent prices will average $38/b in 2016, $3/b lower than forecast in last months STEO. The largest inventory builds occur in the first half of 2016, helping keep Brent prices below $40/b through August. ..."
    "... Forecast West Texas Intermediate (WTI) crude oil prices average the same as Brent crude oil prices through the forecast period, compared with $2/b lower than Brent in 2016 and $3/b lower in 2017 in the prior STEO. The price parity of WTI with Brent in the forecast period is based on the assumption of competition between the two crudes in the U.S. Gulf Coast refinery market, as transportation differentials are similar to move the crudes from their respective pricing points to that market. ..."
    www.iea.org

    Price forecast:


    2014 2015 2016 projected 2017 projected
    WTI Crude Oila (dollars per barrel) 93.17 48.67 37.59 50.00

    Having peaked, at a five-year high of 1.6 million barrels per day (mb/d) in 2015, global oil demand growth is forecast to ease back considerably in 2016, to 1.2 mb/d, pulled down by notable slowdowns in Europe, China and the United States, the newly released IEA Oil Market Report (OMR) for February informs subscribers. Early elements of the projected slowdown surfaced in the last quarter of 2015.

    Global oil supply dropped 0.2 mb/d to 96.5 mb/d in January, as higher OPEC output only partly offset lower non-OPEC production. Non-OPEC supplies slipped 0.5 mb/d from a month earlier to stand close to levels of a year ago. For 2016 as a whole, non-OPEC output is expected to decline by 0.6 mb/d, to 57.1 mb/d.

    OPEC crude oil output rose by 280 000 barrels per day in January to 32.63 mb/d as Saudi Arabia, Iraq and a sanctions-free Iran all turned up the taps. Supplies from the group during January stood nearly 1.7 mb/d higher year-on-year.

    OECD commercial stocks built counterseasonally by 7.6 mb in December to stand at 3 012 mb at month end, 350 mb above average. Refined products covered 32.3 days of forward demand, 0.1 day above the level at end-November. Preliminary information indicates that inventories have continued building into January.

    Global refinery runs fell by 1.3 mb/d in January to 79.8 mb/d, as the onset of seasonal maintenance in the United States and weakening refinery margins curbed runs. Global throughputs nevertheless stood more than 1.7 mb/d above a year earlier, with gains particularly strong in the United States and the Middle East.

    Global Crude Oil Prices

    Brent crude oil spot prices decreased by $7/b in January to a monthly average of $31/b, the lowest monthly average price since December 2003. Ongoing growth in global oil inventories and uncertainty over future global demand growth continued to put downward pressure on oil prices during January. After growing by an estimated 1.8 million b/d in 2015, global oil inventories are forecast to grow by 1.4 million b/d in the first quarter of 2016.

    During January, daily changes in crude oil prices were highly correlated with daily changes in global equity indexes. The increased co-movement and higher volatility likely reflect increased uncertainty about future global economic growth. Changes in overall demand for risk assets, such as commodities and equities, by investors and market participants may also be playing a larger role in price discovery across global asset markets compared with previous months.

    With global oil inventory builds expected to continue in 2016, upward pressure on crude oil prices will be limited. Forecast Brent prices will average $38/b in 2016, $3/b lower than forecast in last month's STEO. The largest inventory builds occur in the first half of 2016, helping keep Brent prices below $40/b through August.

    Brent prices are forecast to average $50/b in 2017, with upward price pressure concentrated later in that year. At that point, the market is expected to experience small inventory draws, with the possibility of further draws beyond the forecast period. Brent prices are forecast to average $56/b in the fourth quarter of 2017.

    Forecast West Texas Intermediate (WTI) crude oil prices average the same as Brent crude oil prices through the forecast period, compared with $2/b lower than Brent in 2016 and $3/b lower in 2017 in the prior STEO. The price parity of WTI with Brent in the forecast period is based on the assumption of competition between the two crudes in the U.S. Gulf Coast refinery market, as transportation differentials are similar to move the crudes from their respective pricing points to that market.

    The current values of futures and options contracts continue to suggest both heightened volatility and high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for May 2016 delivery, traded during the five-day period ending February 4, averaged $35/b, while implied volatility averaged 57%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in May 2016 at $21/b and $58/b, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $19/b and $85/b for prices in December 2016. At this time last year, WTI for May 2015 delivery averaged $52/b, and implied volatility averaged 52%. The corresponding lower and upper limits of the 95% confidence interval were $33/b and $81/b.

    [Feb 08, 2016] Oil traders are acting on fundamentally flawed data when it comes to the inventories of the product that actually corresponds to the price indexes, i.e., WTI and Brent crude oil

    peakoilbarrel.com
    Jeffrey J. Brown, 02/08/2016 at 9:27 am
    Here's the link to the EIA's Annual (US) Energy Review data, through 12/15:

    http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf

    Note that total product supplied for 2015, 19.5 million bpd, was up by a million bpd from 2012 and it was the highest since 2008 (also 19.5 million bpd).

    Annual total liquids net imports were down year over year, from 2014 to 2015, but monthly total liquids net imports were up from 4.5 million bpd in 12/14 to 5.1 million bpd in 12/15 (as we saw a 100 million barrel increase in US C+C inventories).

    US net crude oil imports rose from 6.9 million bpd at the end of 2014 (four week running average data) to 7.3 million bpd at the end of 12/15.

    Here's a link to the most recent four week running average Weekly Supply Data (ending 1/29/16):

    http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm

    Based on the four week running average weekly data (through end of January, 2016), total product supplied was up to 19.7 million bpd, and the pattern of increasing net imports continued. Net crude oil imports were up to 7.5 million bpd, and total liquids net imports were up to 5.7 million bpd.

    In other words, it would appear that the US is becoming increasingly dependent on imported oil, especially imports of actual crude oil, as total product supplied last year was at a seven year high.

    As I have occasionally opined, I suspect that US refiners (and perhaps global refiners too) in late 2014 hit the upper limit of how much additional condensate that they could process, if they wanted to maintain their output of distillates and of heavier products.

    And I suspect that much, if not all, of the build in US and global C+C inventories in 2015 consisted of condensate. Therefore, IMO, oil traders are acting on fundamentally flawed data when it comes to the inventories of the product that actually corresponds to the price indexes, i.e., WTI and Brent crude oil.

    [Feb 05, 2016] Perpetually Low Oil Prices Versus The Laws of Physics

    Notable quotes:
    "... Some of you may recall the Economist Magazine cover story, published in early 1999, which predicted–because of advances in technology and productivity gains (sound familiar?)–that we were looking at an extended long term period with oil prices in the $5 to $10 range. ..."
    "... In any case, here is an excerpt from the March, 1999 Economist Magazine cover story on oil prices: ..."
    "... Here is a thought: $10 might actually be too optimistic. We may be heading for $5. Thanks to new technology and productivity gains, you might expect the price of oil, like that of most other commodities, to fall slowly over the years. Judging by the oil market in the pre-OPEC era, a "normal" market price might now be in the $5-10 range. Factor in the current slow growth of the world economy and the normal price drops to the bottom of that range. ..."
    "... I think that I have made a strong case that the trillions of dollars spent on upstream global oil & gas capex since 2005 have only been sufficient to keep us on an undulating plateau in actual global crude oil production (45 API Gravity and lower crude oil), and because of the large and ongoing declines in global upstream capex, even the Wall Street Journal is expressing concerns about a future oil price spike, as supply falls. ..."
    "... The Cornucopian Crowd, which is basically making the same argument as the Economist Magazine writer in 1999, is arguing that advances in technology have indefinitely postponed any kind of production peak to the distant future. ..."
    "... In my opinion, the reality is that global crude oil production has probably effectively peaked, while global natural gas production and associated liquids (condensate and natural gas liquids) have so far continued to increase. ..."
    "... Furthermore, I suspect that all, or virtually all, of the large build in US (and probably global) Crude + Condensate (C+C) inventories in 2015 consists of condensate, and therefore oil traders are trading on fundamentally flawed data when it comes to the inventories of the product that actually correspond to the index prices. ..."
    "... In the case of WTI (light/sweet) crude oil contracts, the maximum API gravity is 42, and recent EIA data suggest that about 40% of US Lower 48 C+C production in 2015 exceeded the maximum API limit for WTI crude oil, i.e., 42 API Gravity. ..."
    "... Last year, Reuters ran a story about US refiners increasingly rejecting "foul" blends of heavy crude and condensate that technically fell below the upper API limit for WTI crude oil, but that were deficient in distillate content. ..."
    "... In my opinion, these two items, i.e., the estimate that about 40% of US Lower 48 C+C production exceeded the maximum API Gravity limit for WTI crude oil in 2015 and case histories of US refiners increasingly rejecting blends of heavy crude and condensate, go a long way toward explaining why US refiners increased their net oil imports (from 12/14 to 12/15) as we saw 100 million barrel build in US C+C inventories from late 2014 to late 2015. ..."
    "... Furthermore, Iranian sources claim that the majority of their floating storage consists of condensate, which they were permitted to export under the sanctions. This of course suggests that we might be seeing both a US and a global oversupply of condensate–but not necessarily of actual crude oil (less than 45 API gravity crude oil). ..."
    peakoilbarrel.com
    Jeffrey J. Brown, 02/05/2016 at 10:16 am
    Of course, the big production decline will come from investments not made. However, as I have once, or twice, or thrice noted, it seems very likely that despite trillions of dollars in upstream (oil & gas) global capex since 2005, we have seen little or no increase in actual global crude oil production (45 API and lower crude).

    An except from a memo I'm preparing for some industry guys:

    Perpetually Low Oil Prices Versus The Laws of Physics

    Some of you may recall the Economist Magazine cover story, published in early 1999, which predicted–because of advances in technology and productivity gains (sound familiar?)–that we were looking at an extended long term period with oil prices in the $5 to $10 range.

    While I suppose it's possible that this time the conventional wisdom is right, i.e., that we are looking at perpetually low oil prices, my bet is that the laws of physics will prevail, especially in regard to the high, and rising, rates of decline in existing US oil & gas production.

    In any case, here is an excerpt from the March, 1999 Economist Magazine cover story on oil prices:

    Here is a thought: $10 might actually be too optimistic. We may be heading for $5. Thanks to new technology and productivity gains, you might expect the price of oil, like that of most other commodities, to fall slowly over the years. Judging by the oil market in the pre-OPEC era, a "normal" market price might now be in the $5-10 range. Factor in the current slow growth of the world economy and the normal price drops to the bottom of that range.

    Enclosed is a chart* showing constant dollar monthly WTI Crude oil prices, in 2016 dollars. Note that the March, 1999 Economist Magazine article corresponded pretty much to the all time record low constant dollar oil price for the past 40 years.

    I think that I have made a strong case that the trillions of dollars spent on upstream global oil & gas capex since 2005 have only been sufficient to keep us on an undulating plateau in actual global crude oil production (45 API Gravity and lower crude oil), and because of the large and ongoing declines in global upstream capex, even the Wall Street Journal is expressing concerns about a future oil price spike, as supply falls.

    The Cornucopian Crowd, which is basically making the same argument as the Economist Magazine writer in 1999, is arguing that advances in technology have indefinitely postponed any kind of production peak to the distant future.

    I think that the reality is much more prosaic.

    In my opinion, the reality is that global crude oil production has probably effectively peaked, while global natural gas production and associated liquids (condensate and natural gas liquids) have so far continued to increase.

    Furthermore, I suspect that all, or virtually all, of the large build in US (and probably global) Crude + Condensate (C+C) inventories in 2015 consists of condensate, and therefore oil traders are trading on fundamentally flawed data when it comes to the inventories of the product that actually correspond to the index prices.

    In the case of WTI (light/sweet) crude oil contracts, the maximum API gravity is 42, and recent EIA data suggest that about 40% of US Lower 48 C+C production in 2015 exceeded the maximum API limit for WTI crude oil, i.e., 42 API Gravity.

    Last year, Reuters ran a story about US refiners increasingly rejecting "foul" blends of heavy crude and condensate that technically fell below the upper API limit for WTI crude oil, but that were deficient in distillate content.

    In my opinion, these two items, i.e., the estimate that about 40% of US Lower 48 C+C production exceeded the maximum API Gravity limit for WTI crude oil in 2015 and case histories of US refiners increasingly rejecting blends of heavy crude and condensate, go a long way toward explaining why US refiners increased their net oil imports (from 12/14 to 12/15) as we saw 100 million barrel build in US C+C inventories from late 2014 to late 2015.

    Furthermore, Iranian sources claim that the majority of their floating storage consists of condensate, which they were permitted to export under the sanctions. This of course suggests that we might be seeing both a US and a global oversupply of condensate–but not necessarily of actual crude oil (less than 45 API gravity crude oil).

    *Prepared by AlexS

    [Feb 05, 2016] The rule of the game for EIA and friends

    peakoilbarrel.com
    Watcher, 02/05/2016 at 2:03 pm
    Useful to remember that accuracy is not the goal of reports reported by . . . almost anyone. If a study says something that suggests a client company is going to be destroyed, do you really think such a study is going to see the light of day? That's like expecting a management consultant to come in and tell management they are incompetent.

    No more contracts for that consultant.

    [Feb 04, 2016] The drop of US production in 2016 is significant, but it will be more limited outside US

    peakoilbarrel.com
    AlexS, 02/03/2016 at 8:05 pm
    Likbez,

    While in 2016 the supply-side response to low oil prices should be quite significant in the U.S. LTO sector, it will be more limited outside U.S.

    2. "All deep water developments will also lose money this year and the exploration activity might grind to a halt as discrepancy between the current price and the price of production is too extreme. That spells troubles for future GOM production. "

    A large number of new deep water projects were delayed in 2014-15, but this will impact production levels several years from now. Existing deep water production will continue as opex does not exceed $30-35. Most of the projects at final stages of development will not be postponed and will start production in time, like they did in 2015. One important exception may be Brazil, where some project start-ups could be postponed by 1 or 2 years. Also note, that outside Brazil, deepwater projects are operated by the oil majors, which have much stronger balance sheets than the US E&Ps or Petrobras.

    3."Carnage in Canadian oil sands."

    Some projects were delayed, but oil sands production will slightly increase this year, according to all forecasts.

    5. "Several oil producing countries with higher costs or large budget deficit in 2015 will be on the wedge of bankruptcy at the end of the year. "

    That does not mean that they will decrease oil production, the key source of fiscal revenues.

    6. "KSA will lose another hundred billions and might lose its current credit rating."

    KSA's foreign reserves decreased by some $100 bn last year, they might lose another $100 billion in 2016, but they will still have more than $500 billion. And how declining FX reserves should impact oil production?
    Russia's credit rating was lowered in 2014, but production continued to increase in 2014 and 2015.

    8. "Losses of investors might well black mark this area of investment for the next three years. Energy funds and ETFs shrink as "naïve" investors simply flee."

    Again, you mention what might happen in the future. How this can impact oil production volumes this year? And as soon as oil prices start to recover, investors will return. We have seen this many times in the past.

    In general, those who expect a quick supply-side response to lower oil prices ignore the fact that lower prices and lower investments tend to have a much delayed impact on production levels.

    [Feb 04, 2016] A Saudi-Russian Oil Détente Not Likely

    Notable quotes:
    "... The media puts forth a continuous stream of completely unadulterated crap to its readership. Saudi Arabia is not going to spend $175 billion per year to put out of business producers that produce an entirely different product, and which sells to an entirely different market. LTO is as much like Saudi crude as Shetland Ponies are to an Arabian race horses. The similarities stop at horse. ..."
    "... LTO is a very light hydrocarbon that is used as a diluent, and feed stock. Its API is 45. It is used to thin heavier hydrocarbons like Canadian bitumen to allow it to be transported by pipe. It is used as a feedstock to make hundreds of different products from paint to plastic pipe. ..."
    "... Saudis light sweet crude has an API 45, and the heavier ones, API 40, deliver entirely different products as show in the graph below: ..."
    "... Goldman Sachs is an unscrupulous pack of thieves who have no qualms about lying to their clients, or the public if it serves their purposes. They, and others in the shale financing business will continue to push the Saudi/ US LTO myth for as long as they can find investors that are credulous enough to believe them. ..."
    "... Some see only what they want to see. Others see the whole forest. Bloomberg and Goldman are both habitual liars and thieves. Goldman says it and Bloomberg backs it up, as if either have any credibility left. ..."
    "... Short has it correct. All you see in the US MSM is bullshit in ever higher and smellier piles. As we approach the end, the cries will be louder, shriller and continuous. Wait and see. ..."
    Peak Oil News and Message Boards
    shortonoil on Thu, 4th Feb 2016 4:18 pm

    "A deal is not only "highly unlikely," in the estimation of Goldman Sachs, but "self-defeating" for the Saudis. By cutting production now and boosting prices, Saudi Arabia would effectively bail out U.S. shale producers just as the Saudi strategy of keeping prices low to squeeze them out of the market is beginning to work, Goldman's Jeff Currie argues."

    The media puts forth a continuous stream of completely unadulterated crap to its readership. Saudi Arabia is not going to spend $175 billion per year to put out of business producers that produce an entirely different product, and which sells to an entirely different market. LTO is as much like Saudi crude as Shetland Ponies are to an Arabian race horses. The similarities stop at horse.

    LTO is a very light hydrocarbon that is used as a diluent, and feed stock. Its API is > 45. It is used to thin heavier hydrocarbons like Canadian bitumen to allow it to be transported by pipe. It is used as a feedstock to make hundreds of different products from paint to plastic pipe.

    Saudi's light sweet crude has an API 45, and the heavier ones, API < 40, deliver entirely different products as show in the graph below:

    http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/images/eneene/sources/petpet/images/refraf1-lrgr-eng.png

    Saudi's light sweet crude, and LTO are entirely different products that sell to entirely different markets. Saudi's crude is no competition to LTO and LTO is no competition for Saudi's crude.

    Goldman Sachs is an unscrupulous pack of thieves who have no qualms about lying to their clients, or the public if it serves their purposes. They, and others in the shale financing business will continue to push the Saudi/ US LTO myth for as long as they can find investors that are credulous enough to believe them.

    makati1 on Thu, 4th Feb 2016 7:59 pm

    Some see only what they want to see. Others see the whole forest. Bloomberg and Goldman are both habitual liars and thieves. Goldman says it and Bloomberg backs it up, as if either have any credibility left.

    Short has it correct. All you see in the US MSM is bullshit in ever higher and smellier piles. As we approach the end, the cries will be louder, shriller and continuous. Wait and see.

    [Feb 04, 2016] The IEAs Oil Production Predictions for 2016

    peakoilbarrel.com

    Peak Oil Barrel

    The IEA Oil Market Report, full issue, is now available to the public. Some interesting observations:
    Non-OPEC oil supplies are nevertheless seen sharply lower in December. Overall supplies are estimated to have slipped by more than 0.6 mb/d from the month prior, to 57.4 mb/d. A seasonal decline in biofuel production, largely due to the Brazilian sugar cane harvest, of nearly 0.4 mb/d was the largest contributor to December's drop. Production in Vietnam, Kazakhstan, Azerbaijan and the US was also seen easing from both November's level and compared with a year earlier. Persistently low production in Mexico and Yemen were other contributors to the year-on-year decline.

    As such, total non-OPEC liquids output slipped below the year earlier level for the first time since September 2012. A production surge in December 2014 inflates the annual decline rate, but the drop is nevertheless significant should these estimates be confirmed by firm data. Already in November, growth in non-OPEC supply had slipped to 640 kb/d, from as much as 2.9 mb/d at the end of 2014, and 2.4 mb/d for 2014 as a whole. For 2015, supplies look likely to post an increase of 1.4 mb/d for the year, before contracting by nearly 0.6 mb/d in 2016. A prolonged period of oil at sub-$30/bbl puts additional volumes at risk of shut in as realised prices fall close to operating costs for some producers.

    [Feb 04, 2016] EIA as Energy Disinformation Agency

    Notable quotes:
    "... They insist on lumping biofuels with crude oil etc. I would call them the Energy Disinformation Agency. ..."
    "... Alex, they lump everything in the discussions and most tables intended for public distribution. I spend a lot of time explaining to people their graphs and most data tables are covering up what happens to crude oil and condensate. I consider their practices to be deceitful. ..."
    peakoilbarrel.com
    Fernando Leanm, 02/04/2016 at 9:34 am
    They insist on lumping biofuels with crude oil etc. I would call them the Energy Disinformation Agency.
    AlexS, 02/04/2016 at 4:22 pm
    Fernando,

    They include separate numbers for biofuels production and refinery processing gains

    Fernando Leanm, 02/05/2016 at 6:47 am
    Alex, they lump everything in the discussions and most tables intended for public distribution. I spend a lot of time explaining to people their graphs and most data tables are covering up what happens to crude oil and condensate. I consider their practices to be deceitful.

    shortonoil on Thu, 4th Feb 2016 2:27 pm

    Some of this data looks very anomalous. For instance, if one looks at the US rig count vs Us C+C production between June '09 and Sept '11, rig count increased by 800 or 500%.

    During that same period US C+C production stayed flat.

    What were these guys doing, playing poker for 26 months? From spud to IP was no more than 8 months even back in the dark ages (2009) of shale production.

    Assuming 4 wells per year per rig that would have been about 1500 new wells.

    The decline rate of conventional US wells was probably about 5% or 250,000 b/d per year. Without some kind of explanation it is hard to take this data seriously.

    [Feb 03, 2016] Revising the Past - US Oil Production Data

    Notable quotes:
    "... The changes can be very big. Look at the line that comes to a halt in April 2015, these are the numbers from the May 2015 Short Term Energy Outlook, those estimates were about 340,000 bbls per day less than what the EIA now think. About as much as people are estimating Iran might be able to add to the market and which is now causing fear and trepidation amongst oil bulls. On that point I am a tad sceptical , not having been born under a gooseberry tree. ..."
    "... But on the 27th January the EIA published a revision to the numbers (which will be used in the February 2016 STEO) which bucked that trend and started to revise the past downwards. That is the dark blue line on the chart, which tracks the pale blue line for most of the year but includes a 140,000 bbls per day reduction in the estimate of November 2015 production. ..."
    "... We can be confident of one thing the revisions to the past aren't finished, and given the dramatic fall in the oil price from November to January, and the drastic cuts in US operators budgets for 2016 it seems to me that US production will soon decline below 9 million barrels per day, my estimate is that that threshold will be crossed in February and that the US will exit 2016 producing about 8.4 mmbbls/day. ..."
    OilVoice

    The changes can be very big. Look at the line that comes to a halt in April 2015, these are the numbers from the May 2015 Short Term Energy Outlook, those estimates were about 340,000 bbls per day less than what the EIA now think. About as much as people are estimating Iran might be able to add to the market and which is now causing fear and trepidation amongst oil bulls. On that point I am a tad sceptical, not having been born under a gooseberry tree.

    The same then happened on the way down. As the oil price collapsed and rigs were stacked, it seemed in September that the decline was well established and that the US would soon be producing less than 9 million barrels per day. I confidently tweeted that projection, but I was dead wrong. Month after month the previous estimates were raised and the impending collapse was deferred. This continued right up to the last estimate of historic monthly production, published at the end of December, and used in the January 2016 Short Term Energy Outlook, the pale blue line on the graph. At that time, virtually the whole of 2015 was revised upwards by nearly 100,000 bbls per day.

    But on the 27th January the EIA published a revision to the numbers (which will be used in the February 2016 STEO) which bucked that trend and started to revise the past downwards. That is the dark blue line on the chart, which tracks the pale blue line for most of the year but includes a 140,000 bbls per day reduction in the estimate of November 2015 production.

    We can be confident of one thing the revisions to the past aren't finished, and given the dramatic fall in the oil price from November to January, and the drastic cuts in US operators budgets for 2016 it seems to me that US production will soon decline below 9 million barrels per day, my estimate is that that threshold will be crossed in February and that the US will exit 2016 producing about 8.4 mmbbls/day.

    But take that all with a pinch of salt. It is hard enough estimating the past let alone, predicting the future.

    [Feb 02, 2016] Great condensate con revisited

    Notable quotes:
    "... ExxonMobil asserts Growth comes mostly from non-conventional supply but actually shows declining conventional supply – even after including Deepwater production. ..."
    "... Only increasing use of higher priced Nonconventional hydrocarbons shows some global growth – but much lower than historical growth. ..."
    "... In terms of gallons of condensate per MCF of dry gas, it would be 0.8 gallons/MCF in 2005, rising to 1.2 gallons per MCF in 2014, if my math is correct. ..."
    "... Condensate, like natural gas liquids, is a byproduct of natural gas production. The US and OPEC 12 countries accounted for 41% of global dry gas production in 2014. ..."
    "... If US + OPEC 12 estimated condensate production numbers per BCF of dry gas production from 2005 to 2014 are approximately indicative of world trends, estimated global condensate production in 2005 would be 4.9 million bpd (rounded off to 5 million bpd), and estimated global condensate production in 2014 would be 9.7 million bpd (rounded off to 10 million bpd), an estimated increase of about 5 million bpd in global condensate production from 2005 to 2014. ..."
    "... Note that the increase in global C+C production from 2005 to 2014 was 4 million bpd (74 to 78 million bpd, rounded off to the nearest one million bpd). ..."
    "... The foregoing analysis would of course suggest that actual global crude oil production (45 API and lower gravity crude oil) was down slightly from 2005 to 2014, down from about 69 million bpd in 2005 to about 68 million bpd in 2014–as annual Brent crude oil prices doubled from $55 in 2005 to $110 for 2011 to 2013 inclusive, remaining at $99 in 2014. ..."
    "... Based on the foregoing scenario, total global condensate production would have increased from about 4.9 million bpd in 2005 (call it 5 million bpd) to about 8.8 million bpd in 2014 (call it 9 million bpd), in implied increase of 4 million bpd, which would of course mean that rising condensate production accounted for virtually all of the 2005 to 2014 increase in global C+C production. ..."
    "... As the amount of BTUs per unit of weight is probably close to constant that means that energy-wise condensate with API 60 contains approximately 12% less of energy then oil with API 40. ..."
    "... In other words, mixing them in statistics inflates the total amount of energy produced. If uniform statistics is desirable they should be counted using factor 0.9. This recalculation will make peak oil phenomenon more visible in all graphs of world and countries production. ..."
    "... That also mean that countries and agencies reporting production in metric tons are doing better job then countries reporting production in volume measures such as barrels. In other words EIA sucks :-) ..."
    "... My principal point is that the available data strongly suggest that actual global crude oil production has been on an Undulating Plateau since 2005, while global natural gas production and associated liquids, condensate and NGL, have so far continued to increase. ..."
    "... The second factor affecting the condensates/crude balance is the huge North Field, and the consequent expansion of natural gas output in the country. This has led to a surge in the production of condensates on the back of new wells and projects aimed at feeding Qatars liquefied natural gas and gas-to-liquids sectors. Indeed, if the QNB figure of 724,000 bpd of crude is compared with the BP figure of 1.995m bpd of total oil production – which includes crude oil, light oil (from condensates), oil sands and natural gas liquids – then condensates are likely responsible for over 1m bpd of Qatars oil production. ..."
    "... with condensate production exceeding crude oil production in 2012, when it hit 900,000 bpd. . . . ..."
    peakoilbarrel.com

    Ron Patterson , 02/02/2016 at 8:34 am

    Crude oil peaked ~2005: ExxonMobil

    David Hagen has posted a great commentary on ExxonMobil's The Outlook for Energy: A View to 2040

    ExxonMobil released its 2016 Outlook for Energy: A View to 2040. Buried on page 62, its Liquids Outlook by Type clearly shows conventional crude oil ("Crude + Condensate") peaked about 2005. Global conventional oil ("Crude + Condensate") declines through 2040. ExxonMobil asserts "Growth comes mostly from non-conventional supply" but actually shows declining conventional supply – even after including "Deepwater" production.

    Only increasing use of higher priced Nonconventional hydrocarbons shows some global growth – but much lower than historical growth. Only by adding Bitumen (aka "Oil Sands"),"tight oil", natural gas liquids (NGL), "other" and biofuels does ExxonMobil project about 20% total growth over 25 years (from the current 93 million bbl/day to about 112 million bbl/day.)

     photo Peak 2005_zpsiacglezx.jpg

    I think ExxonMobil's estimate of future tight oil production is way overly optimistic. But not nearly as overly optimistic as their estimate of "new conventional crude and condensate development".

    Jeffrey J. Brown , 02/02/2016 at 8:59 am
    Here's a somewhat different approach to my attempts, using available data, to differentiate between actual crude oil, generally defined as 45 API Gravity and lower crude oil, from condensate, generally defined as Crude + Condensate (C+C) with an API Gravity greater than 45.

    Since condensate, like Natural Gas Liquids (NGL), is a byproduct of natural gas production, it occurred to me that what is important is the estimated condensate yield per BCF of global dry natural gas production.

    US & OPEC 12 Condensate Production Estimates as Indicators of Global Condensate Production, 2005 to 2014

    Natural Gas Data

    US Natural Gas Production (BP):
    2005: 50 BCF/day
    2012: 71 BCF/day

    OPEC 12 Natural Gas Production (BP):
    2005: 42 BCF/day
    2014: 68 BCF/day

    US + OPEC 12 Natural Gas Production (BP):
    2005: 92 BCF/day
    2014: 139 BCFday

    Global Natural Gas Production (BP):
    2005: 270 BCF/day
    2014: 335 BCF/day

    Condensate Data & Estimates

    Implied OPEC 12 Condensate Production
    (EIA OPEC 12 C+C less OPEC Crude Only)
    2005: 1.2 million bpd
    2014: 2.4 million bpd

    Estimated US Condensate Production (45+ API Gravity C+C Production)
    2005: 0.5 million bpd
    2014: 1.7 million bpd
    (EIA puts US Lower 48 45+ API C+C production at 2 million bpd in 2015, and they estimated that US 45+ API Gravity C+C production increased by about one million bpd from 2011 to 2014)

    Implied OPEC 12 Condensate + Estimated US Condensate Production
    2005: 1.7 million bpd
    2014: 4.1 million bpd

    OPEC 12 + US Condensate Estimates Per BCF of Dry Gas Production
    2005: 18,000 barrels/BCF
    2014: 29,000 barrels/BCF
    (In terms of gallons of condensate per MCF of dry gas, it would be 0.8 gallons/MCF in 2005, rising to 1.2 gallons per MCF in 2014, if my math is correct.)

    Condensate, like natural gas liquids, is a byproduct of natural gas production. The US and OPEC 12 countries accounted for 41% of global dry gas production in 2014.

    If US + OPEC 12 estimated condensate production numbers per BCF of dry gas production from 2005 to 2014 are approximately indicative of world trends, estimated global condensate production in 2005 would be 4.9 million bpd (rounded off to 5 million bpd), and estimated global condensate production in 2014 would be 9.7 million bpd (rounded off to 10 million bpd), an estimated increase of about 5 million bpd in global condensate production from 2005 to 2014.

    Note that the increase in global C+C production from 2005 to 2014 was 4 million bpd (74 to 78 million bpd, rounded off to the nearest one million bpd).

    The foregoing analysis would of course suggest that actual global crude oil production (45 API and lower gravity crude oil) was down slightly from 2005 to 2014, down from about 69 million bpd in 2005 to about 68 million bpd in 2014–as annual Brent crude oil prices doubled from $55 in 2005 to $110 for 2011 to 2013 inclusive, remaining at $99 in 2014.

    Jeffrey J. Brown , 02/02/2016 at 10:12 am
    Note that I am estimating that US + OPEC 12 condensate production increased by about 2.4 million bpd from 2005 to 2014 (from 1.7 to 4.1 million bpd), with an estimated condensate yield of about 18,000 barrels per BCF of dry gas in 2005 and 29,000 barrels per BCF of dry gas in 2014 (note that the condensate yield per BCF of wet gas would of course be lower).

    In any case, if the condensate yield for non-US + non-OPEC gas was the 18,000 barrels per BCF in 2005, but only rose to 24,000 barrels per BCF in 2014 (versus 29,000 barrels per BCF for US + OPEC), non-US + non-OPEC condensate production would have increased from about 3.2 million bpd in 2005 to about 4.7 million bpd in 2014 (again, if my math is correct).

    Based on the foregoing scenario, total global condensate production would have increased from about 4.9 million bpd in 2005 (call it 5 million bpd) to about 8.8 million bpd in 2014 (call it 9 million bpd), in implied increase of 4 million bpd, which would of course mean that rising condensate production accounted for virtually all of the 2005 to 2014 increase in global C+C production.

    In any case, note that the doubling in annual Brent crude oil prices from $55 in 2005 to $110 for 2011 to 2013 inclusive (remaining at $99 in 2014) provided an enormous incentive for global oil and gas producers to increase their liquids production, wherever and however they could. My principal point is that the available data strongly suggest that they weren't able to show a material increase in actual global crude oil production (45 API and lower gravity crude oil)–despite trillions of dollars spent post-2005 on global upstream oil and gas projects, Qater being a perfect example.

    likbez , 02/02/2016 at 1:19 pm
    Jeffrey,

    Here is another argument supporting your position about distinguishing crude and condensate. They really should be reported separately in oil production statistics.

    Condensate energy content per unit of volume is less that oil as API gravity is an inverse measure of a petroleum liquid's density relative to that of water.

    In other words a barrel of, say, 60 API condensate (average of a typical 45-75 range) has less energy (in BTU) than a barrel of 39.6 API oil (WTI). Using standard formula for number of barrels in metric ton (API+131.5)/(141.5*0.159) we will get 8.5 barrels and 7.6 barrels per metric ton, respectively.

    As the amount of BTUs per unit of weight is probably close to constant that means that energy-wise condensate with API 60 contains approximately 12% less of energy then oil with API 40.

    In other words, mixing them in statistics inflates the total amount of energy produced. If uniform statistics is desirable they should be counted using factor 0.9. This recalculation will make peak oil phenomenon more visible in all graphs of world and countries production.

    That also mean that countries and agencies reporting production in metric tons are doing better job then countries reporting production in volume measures such as barrels. In other words EIA sucks :-)

    Jeffrey J. Brown , 02/02/2016 at 9:17 am

    Here is an interesting article, I think that was published in 2015, on crude oil versus condensate production in Qatar (of course, Qater is a member of OPEC). As I have previously discussed, the crude oil versus condensate quality issue is not my principal point.

    My principal point is that the available data strongly suggest that actual global crude oil production has been on an "Undulating Plateau" since 2005, while global natural gas production and associated liquids, condensate and NGL, have so far continued to increase.

    Note that the OPEC 12 data that Ron compiled for me show that Qatar's reported crude oil production fell from 0.8 million bpd in 2005 to 0.7 million bpd in 2014 (OPEC crude only data), while EIA data show that Qatar's C+C production increased from 1.0 million bpd in 2005 to 1.5 million bpd in 2014.

    Production of condensates rising in Qatar
    http://www.oxfordbusinessgroup.com/analysis/production-condensates-rising-qatar

    The global market is far more competitive these days, and 2014 saw a dramatic decline in oil prices, which continued into 2015. In March 2015 Brent Crude was retailing at $57 per barrel. Behind this is a global oversupply – Bloomberg reported that the UAE and Qatar estimated this to be in the region of 2m barrels per day (bpd) in mid-January 2015. This is primarily the result of surging US output, which was at a three-decade high. However, this output seems likely to taper off, as falling prices make some of the fracking on which US production is based no longer economically feasible. Furthermore, in 2014 Washington decided to allow exports of condensates for the first time – oil exports having been banned since the 1970s oil crisis. Thus, the global condensates market is also seeing a major supply surge, with press reports suggesting that the US could add up to 1m bpd of these light oils to the export market during the next 10 years. This is particularly relevant to Qatar, as condensates have come to represent a larger proportion of the state's output than crude.

    DEPLETION OF RESERVES: This has been for two main reasons. First, there is the depletion of existing oilfields. Qatar Petroleum's (QP's) Dukhan field, the oldest, sent out its first export cargo in 1939, although it remains one of the two largest fields in the country, along with Maersk Oil's Al Shaheen. Qatar National Bank (QNB) figures show that total output has declined continuously in recent years, from a peak of 845,000 bpd in 2007 to 733,000 bpd in 2010, 724,000 bpd in 2013 and 681,000 bpd in November 2014.

    This is despite major investment in enhanced oil recovery (EOR). Some $6.6bn has been invested in crude oil projects under Qatar's 2010-14 development plan, with much of this going into EOR. At the same time, reports in local media state that Occidental is investing $3bn in water injection to sustain production at the Idd Al Sharqi field, while ExxonMobil has made further investments in Dukhan. Indeed, most of the investments currently ongoing in the oilfields are of this kind, with the aim of maintaining and stabilising production.

    "Our overall objective for the field is more to minimise production decline," Guillaume Chalmin, the managing director and group representative of Total E&P Qatar, told OBG, referring to his group's Al Khalij field. "This takes priority over increasing production."

    . . . . CONDENSATES: The second factor affecting the condensates/crude balance is the huge North Field, and the consequent expansion of natural gas output in the country. This has led to a surge in the production of condensates on the back of new wells and projects aimed at feeding Qatar's liquefied natural gas and gas-to-liquids sectors. Indeed, if the QNB figure of 724,000 bpd of crude is compared with the BP figure of 1.995m bpd of total oil production – which includes crude oil, light oil (from condensates), oil sands and natural gas liquids – then condensates are likely responsible for over 1m bpd of Qatar's oil production. QNB figures quoted by Business Quartermagazine in 2013 stated that while crude oil reserves were an estimated 2.3bn barrels in 2011, condensate reserves were an estimated 22.3bn barrels, with condensate production exceeding crude oil production in 2012, when it hit 900,000 bpd. . . .

    HIGH-VALUE PRODUCTS: Condensates are hydrocarbons that exist in a gaseous state underground, but which liquefy during the production process. They are thus a low-density mixture of hydrocarbons and come from both oil wells, as associated gas, and from natural gas wells, where they exist alongside raw natural gas and are known as non-associated or wet gas. Condensates can also be produced from dry gas – natural gas that has no associated component – in gas processing plants; this variety is known as plant condensate.

    [Feb 01, 2016] On systemic difficulties to estimate actual USA oil production

    Notable quotes:
    "... Bentek: The average oil production from the Eagle Ford in December was 1.5 million barrels per day. On a year-over-year basis, that is down about 7%, or about 110,000 barrels per day, from December 2014. ..."
    "... EIA DPR: The average oil production from the Eagle Ford in December was 1.29 mb/d. That is down 22,4%, or 374 kb/d, from December 2014. ..."
    "... According to Bentek, crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin dipped by less than 1% month over month in December, or about 9,000 b/d ..."
    "... According to the EIA DPR, the decline in the Bakken was 19 kb/d . ..."
    peakoilbarrel.com
    AlexS , 02/01/2016 at 3:52 pm

    Shale Oil Production in Bakken, Eagle Ford Little Changed in December: Platts Bentek

    Year Over Year, Output from These Two Prolific Shale Plays Fell More Than 6% from December 2014

    Thursday, January 28, 2016
    http://www.oilvoice.com/n/Shale-Oil-Production-in-Bakken-Eagle-Ford-Little-Changed-in-December-Platts-Bentek/459c3fe97203.aspx

    Oil production from key shale formations in North Dakota and Texas dropped slightly in December versus November, according to Platts Bentek, an analytics and forecasting unit of Platts, a leading global provider of energy, petrochemicals, metals and agriculture information.

    Oil production from the Eagle Ford was relatively unchanged in December, increasing about 11,000 barrels per day (b/d), or less than 1%, versus the previous month, the latest analysis showed. This marks the first time since March 2015 that the Eagle Ford shale did not decline. Conversely, crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin dipped by less than 1% month over month in December, or about 9,000 b/d, continuing the trend of marginal decline that began in the summer.

    The average oil production from the Eagle Ford basin in December was 1.5 million barrels per day. On a year-over-year basis, that is down about 7%, or about 110,000 barrels per day, from December 2014, according to Sami Yahya, Platts Bentek energy analyst. The average crude oil production from the North Dakota section of the Bakken in November was 1.2 million b/d, about 6% lower than year ago levels.

    'The small increase in crude production in the Eagle Ford shale is attributed to a slight resurgence in drilling activity in the region,' said Yahya. 'In December, the number of active rigs in the Eagle Ford reached 80, an increase of five rigs over the previous month. The brief rebound of active rigs is likely due to producers balancing their drilling programs and budgets for the fourth quarter and meeting their goals for wells drilled for the year.'

    Recapping the year-on-year production drop in the Eagle Ford shale, Yahya emphasized the importance of efficiency gains realized in 2015. Back in January of 2015, the Eagle Ford shale utilized over 200 rigs, while now, in January of 2016, the number of active rigs shrunk to under 70 rigs, a drop of over 65%. And yet, production did not meet a similar fate. Producers back in January of 2015 could drill less than two wells per rig per month, compared to nearly three wells per month currently.

    'It is survival of the fittest: the best and most efficient rigs and crews remain standing on the field,' Yahya noted. 'The number of active rigs in the Bakken shale formation of the Williston Basin went from nearly 150 rigs in early 2015 to around 50 rigs currently. At the same time, producers were able to increase their drilling rates from about 1.5 wells per rig per month to about 2.2 wells per rig per month.'

    However, Yahya explained that going forward, crude production would need more than just efficiency gains to grow.

    'Last year, optimization and hedging programs helped production stay largely afloat. But unless the pricing of the oil barrel improve, producers are in for a difficult year ahead. Based on latest Platts Bentek forecast data, both the Eagle Ford and the Bakken shales are expected to continue declining throughout most of the year. Certainly, the availability of wells in backlog inventory where drilling cost is already sunk would be a helpful factor in partially sustaining production volumes in both shales.'

    'If prices remain sub-$40/barrel and producers are unable to further bring down completion costs, then they might defer completions until the pricing market makes a comeback,' said Yahya.

    Platts Bentek analysis shows that from November 2014 to November 2015, total U.S. crude oil production has increased by about 265,000 b/d.
    --------------
    It is interesting to compare Bentek data with the latest EIA Drilling productivity report.
    According to Bentek, oil production from the Eagle Ford increased 11kb/d versus the previous month.
    According to the DPR, it declined 71 kb/d.

    Bentek: "The average oil production from the Eagle Ford in December was 1.5 million barrels per day. On a year-over-year basis, that is down about 7%, or about 110,000 barrels per day, from December 2014.

    EIA DPR: The average oil production from the Eagle Ford in December was 1.29 mb/d. That is down 22,4%, or 374 kb/d, from December 2014.

    According to Bentek, "crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin dipped by less than 1% month over month in December, or about 9,000 b/d"

    According to the EIA DPR, the decline in the Bakken was 19 kb/d .

    The y-o-y decline, according to bentek was 6% vs. 9.6% in the EIA DPR statistics.

    [Feb 01, 2016] EIA provides two confiting estimates for November 2015 USA production 9.181 or 9,318,000 million bbls per day

    peakoilbarrel.com
    Ron Patterson, 02/01/2016 at 2:30 pm
    Hey, great article on the EIA. Revising the Past – US Oil Production Data

    This article is based on the EIA's Monthly Energy Review which was released on 27th January and which states November 2015 production was 9,181,000 bbls/day. Oddly, the Petroleum & Other Liquids monthly data which was released on 29th January says November 2015 production was 9,318,000 bbls/day. Which one is the one the EIA intend us to use?

    As I have said before the US Energy Information Agency (the EIA) has a thankless task, compiling data from thousands of oilfields and operators to come up with an estimate of how much oil the USA actually produces. Some data is timely and accurate, Alaska is a case in point, some, not so much.

    So every month as well as giving us a new estimate for the month just passed, we get revisions of the historic data. It is instructive to take a look at that data to see how far off the early estimates were. Big revisions are a sign of a dislocation in the system, a sign that the old rules of thumb aren't working any more. The EIA has suffered from this phenomenon on the way up, as US shale output outstripped any reasonable estimates of how it might perform; and now on the way down, as somehow the whole US oil industry did a passable impersonation of Wile E. Coyote, well beyond the edge of the cliff but somehow defying gravity.

     photo EIA Estimates_zpsacmet2gx.jpg

    AlexS, 02/01/2016 at 2:51 pm
    Monthly Energy Review data for November and December is forecast. MER data for the most recent 2 month has never been reliable. By contrast, Petroleum Supply Monthly numbers released on January 29th are more correct, in my view.

    There were some revisions compared with the previous PSM: September 2015 -11 kb/d;
    October 2015 +23 kb/d.

    The data for November was only -2 kb/d compared with the January STEO estimate.
    In general, the EIA has been making mostly upwards revisions for 2015 C+C production

    [Feb 01, 2016] I'm reminded of how often EIA and NoDak's DMR have quoted numbers in conflict with each other of late

    peakoilbarrel.com

    Watcher, 01/31/2016 at 4:43 pm

    Re: Ron's Ronpost . . . anyone have a source for NGL prices?

    Previous Ronpost - Doug noted that in his experience every geologist in China doesn't have their words filtered by Beijing. So there is truth to be found in provincial quotes of things oil related. If the matter became more overtly national security related, of course that would change.

    I'm reminded of how often EIA and NoDak's DMR have quoted numbers in conflict with each other of late. Not that this need be conspiratorial. We somewhat know EIA numbers come from a model that likely is as worthless as most. This would be a case of provincial data having not been . . . filtered, or smoothed, or seasonally adjusted or whatever else is the change mechanism du jour.

    [Jan 30, 2016] Whoever controls the image of the future controls resources now

    peakoilbarrel.com
    Patrick R, 01/30/2016 at 4:29 pm
    Of course the forecasts by WoodMac, IEA, EIA, etc are little more than posturing. Predictions, after all, are claims on the present, not information from the future. Whoever controls the image of the future controls resources now. Conservatives want you only to fear terrorism and not pollution, and Conservationists the reverse [I like those two words; they have the same root of course].

    Here for example are driving predictions from English Department for Transport and Washington State DoT. Like every single Transportation Dept [read; road builders] they constantly predict more driving for ever and ever. No matter how many years they get this wrong, they've got to predict more because these predictions set their budgets for ever more fancy-arsed road projects.

    Are WoodMac really going to say growth in the sector is over? Haha. And the alphabet institutions [EEEEEIIIIAAA] are extrapolationists, they're never going to catch discontinuity.

    Dang, won't accept the attachments again; here's the link:

    http://transportblog.co.nz/2014/02/19/our-insane-traffic-projections/

    likbez, 01/30/2016 at 8:06 pm
    Patrick,

    "Of course the forecasts by WoodMac, IEA, EIA, etc are little more than posturing. Predictions, after all, are claims on the present, not information from the future. Whoever controls the image of the future controls resources now. "

    Well said. Thank you!

    "Whoever controls the image of the future controls resources now. "

    That's what propaganda is about. Agencies such as EIA and IEA are as much propaganda outlets as they are statistics gathering bodies. As we all know there are three types of lies: "Lies, damned lies, and statistics".

    As Watcher observed: "Countries strive for victory over their enemies. They have nothing to gain by providing accurate information."

    Patrick R, 01/30/2016 at 5:44 pm
    Always the argument is between the trend and the status quo. BAUists will insist we look backwards by demanding data which of course can only be historical. This is an important corrective to theory but never shows the whole picture, because it always of course supports no change, or at most an extrapolation of the past. Never fundamental change.

    Why won't oil's future follow where coal is now? I find this at least a highly plausible possibility. It is not unlikely that a combination of electric supply and climate policies will strand a great deal of oil at any price. How, economics of course:

    http://www.huffingtonpost.com/entry/fossil-fuels-terrible-investment_us_56aa3463e4b05e4e37037321?ir=World&section=us_world&utm_hp_ref=world&utm_content=bufferd6ac7&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

    What is always less clear is how long this takes, if I have learnt anything following global change is that it usually both takes way longer than I first think, and then can also happen very suddenly: Straws do break camels' backs.

    likbez, 01/30/2016 at 8:27 pm
    "Why won't oil's future follow where coal is now?"

    Because predictions are difficult, especially about the future. So far coal was partially replaced in the only role where new technologies are somewhat competitive - electrical power generation - and this happened not only because the rise of wind and solar, but also because the price of natural gas dropped so substantially. Without the last factor the situation might reverse itself. Not everywhere coal is replaced. High quality coal is indispensable in metallurgy.

    Everything depends on technologies available. Actually the initial idea of diesel engine was to run it on coal powder. It failed. But now with the new level of technology achieved I wonder if something along those lines ("nanoparticles") might be feasible at least for large ships.

    At some level of oil prices coal might also be used to produce liquid fuels for transportation like Germany did during the WWII.

    Natural gas is also well positioned to penetrate heavy truck and marine fuel markets if the price remains low.

    [Jan 30, 2016] Looks like about 4-5 million bbl per day of condensate is produced in the world.

    Notable quotes:
    "... Looks like about 4-5 Mb/d of condensate is produced in the World. As long as this can be easily blended into liquid fuels (such as gasoline) at refineries, it makes sense to call it "oil" as there is a wide range of stuff we are willing to call oil (such as bitumen). ..."
    peakoilbarrel.com
    AlexS, 01/30/2016 at 2:06 am
    Ooops, wrong numbers!

    Below is the corrected chart and numbers:

    EIA Annual Energy Outlook 2015

    Total global liquids supply in 2040: 121.7 mb/d,
    or 118,8 mb/d excluding refinery processing gains.
    or 114.5 mb/d ex. proc. gains and biofuels.

    Note, that AEO 2015 was issued in early 2015 and apparently prepared in late 2014, when oil prices were significantly higher.
    The AEO 2015 projects Brent price at $71 in 2016 gradually rising to $141 (in $2013) by 2040.
    I expect AEO 2016 global liquids supply projections to be lower than in last year's issue.

    Ron Patterson, 01/29/2016 at 10:41 pm
    Enhanced recovery don't seem to get much credit here. ;-)

    Notice that the IEA don't have us reaching 80 mbd, C+C, until 2030, a point that the EIA says we are at today. They, the IEA, has us at about 75 million barrels per day today. My guess is that is about right.

    AlexS, 01/30/2016 at 2:24 am
    Ron,

    The IEA has conventional oil + tight oil+oil sands + GTL and CTL at ~75 mb/d and NGLs at @ 15 mb/d in 2014
    Total (ex. biofuels and processing gains) ~ 90 mb

    The EIA has conventional oil + tight oil+oil sands + GTL and CTL at ~79.4 mb/d and NGLs at @ 9.5 mb/d in 2014
    Total (ex. biofuels and processing gains) ~ 89 mb

    The IEA has included all OPEC NGLs and condensate in global NGLs number.
    The EIA apparently classifies large part of OPEC NGLs and condensate as condensate (part of global conventional C+C).

    (Total OPEC NGLs and condensate production in 2014 was 6.36mb/d)

    Same condensate vs. NGLs shit :-)

    Dennis Coyne, 01/30/2016 at 10:52 am
    Hi AlexS,

    Thanks for the clarification. Looks like about 4-5 Mb/d of condensate is produced in the World. As long as this can be easily blended into liquid fuels (such as gasoline) at refineries, it makes sense to call it "oil" as there is a wide range of stuff we are willing to call oil (such as bitumen).

    We have been counting crude plus condensate for a long time, excluding C2, C3, and C4 makes sense to me, but excluding C5 does not. Just one person's opinion.

    [Jan 30, 2016] Questioning the reliability of oil production figures reported by various countries and agencies such as the IEA

    Notable quotes:
    "... These are the most important data points on earth, and they are not known to high confidence. This is what one would expect. Countries strive for victory over their enemies. They have nothing to gain by providing accurate information. ..."
    "... If for instance Saudi Arabia says last years production was ten million barrels per day average, exactly, how far off do you think that might be, one tenth of a percent? two percent? ..."
    "... Some countries are going to be notorious liars of course, and their figures might be off by ten percent or more. ..."
    "... The trend in the reported quantity of oil available on international markets ought to be likewise accurate, even though the actual reported quantity of oil available on world markets might have been off by a percent or even two percent or more. ..."
    "... I would assume that EIA has error margin close or above 100,000 bbls/day. So the accuracy of EIA data is just two significant digits maximum. The fact that they provide more digits is just an attempt to be a better Catholic then Pope, if you wish ;-). ..."
    "... Generally they should have strong institutional bias toward lower oil prices and that bias can influence their oil production and consumption numbers. So it is rational to assume that they tend to overestimate the production and underestimate consumption growth. In other words they are predisposed to "revealing" oil glut even if it does not exists. ..."
    "... Some people like Steve Brown recommend reducing their production numbers by 100,000 bbl/day just in case ..."
    peakoilbarrel.com
    oldfarmermac, 01/30/2016 at 10:05 am
    At times there are numerous comments questioning the reliability of oil production figures reported by various countries and by different outfits sucth as the IEA etc.

    No doubt there are serious errors.

    What I would like to know, is this.

    How big do you guys who crunch a lot of numbers think the errors are ?

    How much higher, or lower might the true total world wide production of C plus C be , if it were possible to know?

    How big might the errors be in the worst case countries?

    AlexS, 01/30/2016 at 10:57 am
    OFM,

    The errors can be very big.
    In the World Energy Outlook 2008, the IEA projected global total liquids demand at 106.4 mb/d by 2030.
    In the latest WEO-2015, they are projecting 103.5 mb/d by 2040.

    The trend in the past 10 years was towards lower medium and long-term supply and demand projections

    clueless, 01/30/2016 at 11:07 am
    Generally speaking, when dealing with massive amounts of data, the "errors" largely offset each other. That is, if almost every figure is subject to being either to high or too low, after adding them all up, the total is surprisingly close to what the "real" total should be. Obviously, if you could posit a situation in which every number is likely to be too high (or too low) that would not be the case.

    So, with an individual country, like say Venezuela, maybe it is off by a significant amount.

    AlexS, 01/30/2016 at 11:19 am
    clueless,

    As regards global oil (liquids) supply and demand projections, there were not just statistical errors, but very significant conceptual errors. All agencies have been significantly overestimating global demand and supply.

    Watcher, 01/30/2016 at 11:38 am
    These are the most important data points on earth, and they are not known to high confidence. This is what one would expect. Countries strive for victory over their enemies. They have nothing to gain by providing accurate information.

    If I were China, I'd make oil production a state secret, too.

    Doug Leighton, 01/30/2016 at 1:16 pm
    Hi Watcher,

    I doubt China is playing games with reported oil production capability. I had an office in Harbin for many years where most of my time was spend assessing reserves for NA oil companies who wanted access to Chinese oil. As such I was in contact with numerous local oilmen who freely gave me access to their reservoir data. The Chinese were duplicitous in one respect, in my opinion, by leading American companies into believing they were entertaining potential JV partners when, in fact, they simply wanted to massage business contacts in general. On China's production I expect the following is accurate:

    "… China's crude oil output has stagnated for the past two years despite intense drilling activity on land and offshore. In late 2014, CNPC essentially threw in the towel on its workhorse field, Daqing, announcing that it would allow the field to essentially enter a phase of managed decline over the next five years. Under this new approach, the field's oil production will fall from 800,000 barrels per day (kbd) in 2014 to 640 kbd by 2020: a 20 percent decrease. To highlight the importance of PetroChina's decision, consider that Daqing currently accounts for approximately one in every five barrels of oil currently pumped in China – on par with the role Alaska's massive Prudhoe Bay field has played in US oil production…"

    http://thediplomat.com/2015/07/china-peak-oil-2015-is-the-year/

    oldfarmermac, 01/30/2016 at 11:42 am
    Thanks guys, but I did not mean to ask about PREDICTED oil production but rather about ACTUAL production, this year, and in past years.

    If for instance Saudi Arabia says last years production was ten million barrels per day average, exactly, how far off do you think that might be, one tenth of a percent? two percent?

    Some countries are going to be notorious liars of course, and their figures might be off by ten percent or more.

    But even though the total reported world production might be wrong by a percent or more, in either direction, up or down, the TREND in reported production still ought to be accurate.

    The trend in the reported quantity of oil available on international markets ought to be likewise accurate, even though the actual reported quantity of oil available on world markets might have been off by a percent or even two percent or more.

    AlexS, 01/30/2016 at 11:58 am
    Historical demand and supply numbers are constantly revised, but in most cases revisions are not too big.

    Revisions of the US oil production numbers were relatively big in 2015.

    likbez , 01/30/2016 at 2:21 pm
    I would assume that EIA has error margin close or above 100,000 bbls/day. So the accuracy of EIA data is just two significant digits maximum. The fact that they provide more digits is just an attempt to be a better Catholic then Pope, if you wish ;-).

    Generally they should have strong institutional bias toward lower oil prices and that bias can influence their oil production and consumption numbers. So it is rational to assume that they tend to overestimate the production and underestimate consumption growth. In other words they are predisposed to "revealing" oil glut even if it does not exists.

    The margin or error is different for different types of oil with those areas that are served by pipelines more precise (offshore is one example here).

    Some people like Steve Brown recommend reducing their production numbers by 100,000 bbl/day just in case :-)

    http://oilprice.com/Energy/Energy-General/Is-The-EIA-Too-Optimistic-On-US-Oil-Output.html

    [Jan 29, 2016] EIA data suggest that most, if not all, buildup of inventories consists of condensate

    Notable quotes:
    "... Note that US C+C inventories rose by 100 million barrels from late 2014 to late 2015. So, as we saw a 100 million barrel increase in US C+C inventories, US net total liquids were up by 13%, from 12/14 to 12/15? Almost makes one think that most, if not all, of the C+C build consists of something besides actual crude oil. ..."
    "... This is yet another indirect confirmation of "Great Condensate Con" hypothesis. ..."
    peakoilbarrel.com
    Jeffrey J. Brown, 01/28/2016 at 3:42 pm
    API: US December, 2015 Petroleum Demand Highest in Five Years

    http://www.ogj.com/articles/2016/01/api-us-december-petroleum-demand-highest-in-5-years.html?cmpid=EnlDailyJanuary282016&eid=291006698&bid=1295150

    EIA Annual Energy Review data complete for 2015 (subject to revision):

    http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf

    Based on foregoing, annual 2015 US net total liquids imports were still down in 2015, versus 2014, but US net total liquids imports rose from 4.5 million bpd in December, 2014 to 5.1 million bpd in December, 2015.

    Note that US C+C inventories rose by 100 million barrels from late 2014 to late 2015. So, as we saw a 100 million barrel increase in US C+C inventories, US net total liquids were up by 13%, from 12/14 to 12/15? Almost makes one think that most, if not all, of the C+C build consists of something besides actual crude oil.

    (As usual, there appear to be some discrepancies between the EIA Weekly Supply data and the Annual Energy Review data in regard to total liquids net imports. In any case, the four week running average data show that US net crude oil imports rose from 6.9 million bpd in December, 2014 to 7.3 million bpd in December, 2015. Net crude oil imports are not broken down separately in Annual Energy Review.)

    likbez, 01/29/2016 at 1:12 pm
    This is yet another indirect confirmation of "Great Condensate Con" hypothesis.

    [Jan 26, 2016] The problems inherent in counting condensates as crude

    Notable quotes:
    "... Yeah, distillate yield is the big deal. Gasoline doesnt move food. ..."
    "... insofar as condensate is concerned, the biggest problem with too much condensate as a percentage of Crude + Condensate (C+C) refining feedstock is that condensate is deficient in distillate (jet fuel, heating oil, diesel, etc.) plus heavier components. ..."
    "... we have been on an Undulating Plateau in actual global crude oil production (45 API and lower crude oil) since 2005, while global natural gas production and associated liquids, condensate and NGL, have (so far) continued to increase. ..."
    "... I suspect that US (and perhaps global) refiners hit, in late 2014, the upper limit of how much condensate that they could process if they wanted to maintain their output of distillates and heavier products, which plausibly contributed to the 100 million barrel build in US C+C inventories, from late 2014 to late 2015, as US refiners increased their net crude oil imports from December, 2014 to December, 2015. ..."
    "... EIA data indicate that about 40% of US Lower 48 C+C production in 2015 exceeded 42 API Gravity, which is the maximum upper limit for WTI crude oil. ..."
    peakoilbarrel.com

    dmg555, 01/25/2016 at 1:43 pm

    Dear Mr. Jeffrey Brown:

    Of all the contributors on this site, you have highlighted the problems inherent in counting condensates as crude. I am not a petroleum chemist so am not so familiar with the limitations of condensates. Could you briefly tell me what you can and can not use condensates for? I get that one can refine 30-45 WTI into gasoline and other useful fuels like jet fuel, but: Can you drive on condensates? or am I correct in believing the condensates can only be turned into heating fuels.

    Thanks for your answer in advance

    Watcher , 01/25/2016 at 3:40 pm
    Yeah, distillate yield is the big deal. Gasoline doesn't move food.
    likbez , 01/25/2016 at 5:18 pm
    > "Can you drive on condensates?"

    Yes, but it's illegal in most states (https://en.wikipedia.org/wiki/Natural-gas_condensate)

    It is also harmful to modern engines due to its low octane rating ( about 30 to 50) and possible presence of cancerogenius additives (benzene) and sulfur. Before 1930 it was used as an ICE fuel in low RPM, low compression engines. Both Karl Benz engines, and early Wright brothers aircraft engines used it. It has a distinctive smell when used as a fuel, which allows police to catch people using condensate illegally.

    The white gas sold today as a fuel for stoves is a condensate with the benzene and sulfur removed.

    Adding ethanol improves the octane number (https://en.wikipedia.org/wiki/Octane_rating) and makes it possible to drive regular cars on distillate. You need E85 mix for that.

    My impression is that the drive to blend ethanol with gasoline (most of the gasoline now sold in the United States contains some ethanol) and introduction of E10, E15, and E85 that happened in the USA was at least partially dictated by the desire to blend condensate (as a substitute for gasoline) with ethanol killing two birds with one stone. Moreover denaturized ethanol contains at least 2% of condensate. All gasoline engine vehicles can use E10 so some amount of condensate is present in US gasoline almost by definition.

    E85 (used only in flexible-fuel vehicles (FFV) ) allows blending of considerable amount of reprocessed condensate (probably 40-50%) with ethanol and still getting acceptable octane number. E85 is an abbreviation for an ethanol fuel blend of 85% denatured ethanol fuel and 15% gasoline or other hydrocarbons by volume, although the exact ratio of fuel ethanol to hydrocarbons can vary considerably while still carrying the E85 label. The ethanol content is adjusted according to the local climate to maximize engine performance. ASTM 5798 specifies the allowable fuel ethanol content in E85 as ranging from 51% to 83%.

    Condensate has a very low viscosity and often used to dilute highly viscous heavier oils that cannot otherwise be efficiently transported via pipelines.

    Jeffrey J. Brown , 01/25/2016 at 1:55 pm

    I'm actually not anywhere close to be a refining expert, and I think that Fernando can give you more detailed answers, but insofar as condensate is concerned, the biggest problem with too much condensate as a percentage of Crude + Condensate (C+C) refining feedstock is that condensate is deficient in distillate (jet fuel, heating oil, diesel, etc.) plus heavier components.

    However, the quality issue, in my opinion, is something of a Red Herring.

    My principal point is not that the liquid partial substitutes for crude oil, i.e., condensate, natural gas liquids (NGL) and biofuels, are deficient in quality compared to crude oil; my principal point is that the available data, at least in my opinion, strongly suggest that we have been on an "Undulating Plateau" in actual global crude oil production (45 API and lower crude oil) since 2005, while global natural gas production and associated liquids, condensate and NGL, have (so far) continued to increase.

    The obvious question is that if it took trillions of dollars in post-2005 global upstream capex (spent on oil & gas projects) to keep us on an undulating plateau in actual global crude oil production, what happens to global crude oil production given the large, and ongoing, cutbacks in global upstream capex?

    Jeffrey J. Brown , 01/25/2016 at 2:00 pm
    But in regard to refinery yields, here is a chart of refinery yields by API Gravity. Note that Cat Feed + Distillate Yield drops from about 55% at 39 API gravity (approximately the average API value for Brent & WTI) to about 20% at 42 API Gravity (which is the maximum upper limit for WTI crude oil).

    Here's a link to, and an excerpt from, the source document for the chart:

    http://www.nrcan.gc.ca/energy/crude-petroleum/4561

    The figure below illustrates the product yield for six typical types of crude oil processed in Canada. It includes both light and heavy as well as sweet and sour crude oils. A very light condensate* (42 API) and a synthetic crude oil are also included. The chart compares the different output when each crude type is processed in a simple distillation refinery. The output is broken down into five main product groups: gasoline, propane and butane (C3/C4), Cat feed (a partially processed material that requires further refining to make usable products), distillate (which includes diesel oil and furnace oil) and residual fuel (the heaviest and lowest-valued part of the product output, used to make heavy fuel oil and asphalt).

    As I have previously discussed, I suspect that US (and perhaps global) refiners hit, in late 2014, the upper limit of how much condensate that they could process if they wanted to maintain their output of distillates and heavier products, which plausibly contributed to the 100 million barrel build in US C+C inventories, from late 2014 to late 2015, as US refiners increased their net crude oil imports from December, 2014 to December, 2015.

    *The more common dividing line between crude & condensate is 45 API Gravity, but EIA data indicate that about 40% of US Lower 48 C+C production in 2015 exceeded 42 API Gravity, which is the maximum upper limit for WTI crude oil.

    [Jan 25, 2016] There are still significant discrepancies between the EIA monthly and weekly data for the US C+C production

    peakoilbarrel.com

    AlexS, 01/24/2016 at 10:54 am

    There are still significant discrepancies between the EIA monthly and weekly data for U.S. C+C production.
    Weekly numbers show an increase of 139 kb/d from September 25 to January 15, including an uninterrupted growth (of 71 kb/d) over the past 6 weeks from December 4.

    likbez , 01/24/2016 at 3:07 pm

    Alex,

    Thank you --

    This large discrepancy between weekly and monthly data suggests that sources are at least partially different and somewhat incompatible. This also puts a shadow on the accuracy of EIA data in general, especially provided by the monthly short term energy outlook.

    I think similar problems exist in other statistical data that EIA the short term energy outlook provides.

    Previously I asked a similar question about reliability of their world C+C production and consumption data, but I did this from the point of view of accuracy individual country data (which are probably less then 1%):

    http://peakoilbarrel.com/opec-except-iran-has-peaked/#comment-557103

    It is well known that OPEC countries used to cheat on their production data as their quotas depend on the current volume of production.

    Amatoori also provided a link for the following article which is relevant to this discussion: http://www.reuters.com/article/us-oil-prices-kemp-idUSKCN0V0276?feedType=RSS&feedName=GCA-Commodities&utm_source=dlvr.it&utm_medium=twitter&dlvrit=1391616

    See also response of Watcher to his comment:
    http://peakoilbarrel.com/opec-except-iran-has-peaked/#comment-557074

    AlexS, 01/24/2016 at 7:04 pm
    likbez,

    We have many times discussed the [un]reliability of the EIA U.S. oil production statistics. They have previously relied on the state-level data, which in many cases is uncomplete, with few exceptions (like North Dakota). The EIA was adjusting these numbers according to their old methodology. But their numbers were still inaccurate and had to be revised many times during the next 12 months.

    The EIA now has a new methodology: they get production data directly from the largest companies, which account for about 90% of total output in each state. This survey-based approach now covers 15 individual states and the federal Gulf of Mexico, where the bulk of U.S. C+C is produced. The EIA claims that the new methodology has improved the quality of their estimates. But, as can be seen from the chart below, the numbers still need to be revised, and all of the revisions over the past 4 months were upward (see the chart below).

    In 2015, the EIA has not only underestimated U.S. oil production numbers for the past months, but its predictions for the next several months were also too low. As a result, the most recent numbers for some months are up to 0.5 mb/d higher than earlier estimates.

    The EIA weekly numbers are based on completely different methodology, and they were always seen as very inaccurate. Furthermore, unlike monthly statistics, weekly numbers are never revised.

    What is interesting, weekly statistics from my chart above show a rising trend in U.S. oil production from October to January, while monthly numbers suggest a declining trend. But monthly numbers for October may again be revised upward, while the numbers from November are forecast, rather than estimate. We may not know the more or less exact numbers for end-2015 until mid-2016.

    U.S. C+C production estimates from the last 5 issues of the EIA Short-Term Energy Outlook

    likbez, 01/25/2016 at 10:01 am
    There are several hypothesis that can be advanced based on the data accuracy and a huge lag of EIA and IEA data (as somebody aptly noted: the main purpose of IEA data is to please Americans):

    1. Any talk about world glut below 1 Mb/d should be dismissed as statistical noise as the accuracy of supply/demand data for most countries does not allow to defect such a glut or oil shortage.

    2. EIA is not only statistical outlet but also a propaganda outlet as well providing (sometimes false) signals to Wall street traders and as such having outsize influence on the dynamic of oil prices. They literally can move oil up or down.

    3. "The Great Condensate Con" was probably intentional and essentially is equal to creating an artificial additional pressure on oil prices via manipulated statistics.

    4. The only data that can counterbalance EIA/IEA bias can come from OPEC, but taking into account outsize influence of Saudis within the organization chances are slim.

    5. Rebound of prices, if any, can be pretty abrupt as lack of supplies will be detected only when it becomes acute.

    6. Repeating Watcher "It is indeed astounding that oil numbers, the most important numbers for all civilization, are not reliable."

    [Jan 25, 2016] The problems inherent in counting condensate as crude

    Notable quotes:
    "... Yeah, distillate yield is the big deal. Gasoline doesnt move food. ..."
    "... insofar as condensate is concerned, the biggest problem with too much condensate as a percentage of Crude + Condensate (C+C) refining feedstock is that condensate is deficient in distillate (jet fuel, heating oil, diesel, etc.) plus heavier components. ..."
    "... we have been on an Undulating Plateau in actual global crude oil production (45 API and lower crude oil) since 2005, while global natural gas production and associated liquids, condensate and NGL, have (so far) continued to increase. ..."
    "... I suspect that US (and perhaps global) refiners hit, in late 2014, the upper limit of how much condensate that they could process if they wanted to maintain their output of distillates and heavier products, which plausibly contributed to the 100 million barrel build in US C+C inventories, from late 2014 to late 2015, as US refiners increased their net crude oil imports from December, 2014 to December, 2015. ..."
    "... EIA data indicate that about 40% of US Lower 48 C+C production in 2015 exceeded 42 API Gravity, which is the maximum upper limit for WTI crude oil. ..."
    peakoilbarrel.com

    dmg555, 01/25/2016 at 1:43 pm

    Dear Mr. Jeffrey Brown:

    Of all the contributors on this site, you have highlighted the problems inherent in counting condensates as crude. I am not a petroleum chemist so am not so familiar with the limitations of condensates. Could you briefly tell me what you can and can not use condensates for? I get that one can refine 30-45 WTI into gasoline and other useful fuels like jet fuel, but: Can you drive on condensates? or am I correct in believing the condensates can only be turned into heating fuels.

    Thanks for your answer in advance

    Watcher , 01/25/2016 at 3:40 pm
    Yeah, distillate yield is the big deal. Gasoline doesn't move food.
    likbez ,