'Peak Oil' far, far away


#3028

The Saudis tried that already and were told where to go, of the 3 players involved the Saudis are holding the weakest hand

This made me laugh, thanks


#3029

Makes you wonder why they don’t use one of the possibly hundreds of thousands of wells that they’re already pumped dry, surely the rock formation will absorb what was wrung out of it?


#3030

We already have storage tanks, they are called “WeWork Offices” :smiley:


#3031

Just on the subject of US Oil. It is mainly fracked. This requires some ‘understanding’

  1. A well is drilled or horizontally drilled. Sometimes these are parked for a while as ‘inventory’ and sometimes they go on to completion.
  2. Completion or fracking is where the drilled well is filled with liquids and sand to get the oil flowing.

Crudely (sorry :smiley: ) stage 1 costs $20 a barrel and stage 2 costs another $20 a barrel. So it costs $40 a barrel to get a US well producing.

In the US fracking (stage 2 of the 2 ) has reduced in each month since February, however…

Blockquote These days Permian wells require about two months from the moment frac operations start until they produce first oil, and require about three months before they reach peak output.

It is clear that fracking is way down in April but fracked output itself will not start to fall as fast as demand has…until August 2020 by my estimate. May and June will be carnage in the US as oil will still be produced but there is nowhere to store it at all. If we then assume that nobody will be daft enough to frack where there is no demand then:.

Blockquote If we assume that no new horizontal wells are put on production from April 2020 onwards, total LTO production will decline by 1 million barrels per day (bpd) by May, 2 million bpd by July and by 3 million bpd by October to November, with the Permian Basin accounting for more than half of nationwide base decline.

Combine this lack of fracking with lack of demand and some shut ins you get to around 8m barrels a day by end 2020 which is the number I posited. That if Trump tariffs imports as I expect he will and sets a floor of around $40 a barrel on oil within the NAFTA area for a period. The US was just tipping 12m barrels a day when the virus hit.

If Trump does not tariff then there will be a very disorderly collapse in the US Oil belt with stupendous losses and writedowns as oil will remain at prices well below the cost of production for the rest of 2020.

If Trump does tariff the hope in DC is that the world price will rise to the same $40 a barrel some time in 2021 rendering tariffs moot. As Trump has an election coming up I am pretty sure he will tariff, 90% sure in fact. The Saudis are engaged in dumping 101 here and the US is allowed to tariff against dumpers.

But I think that 4m barrels of production a day will be gone by this time next year in the US and it will not come back either. Combined with bankruptcies elsewhere this will reduce global demand to 90m barrels a day along with global production.


#3032

Looks like a rerun of the supply collapse in the mid 1970s - caused mainly by a switch out of oil for electricity generation. Plus of course the killing off of many of the worst Gas guzzlers on the roads and the 55 mph speed limits that probably almost doubled the mpg for many of the mobile bricks there were on the roads back then.


#3033

Yep. The OPEC+ plan last week was to temporarily remove 10m barrels a day but actual demand has cratered by 30m barrels a day (100m to 70m) and I simply do not see it recovering to 90m barrels a day any time in the next year. OPEC+ has to get production below 80m barrels a day to try to stabilise prices by the autumn.

Some of the reductions will be organic but a lot of producers like Russia are afraid they cannot restart wells again if they do shut them in for a few months.


#3034

One big problem for the US (and OPEC) is a ‘wrong kind of oil’ problem.

While the US was self sufficient (NET) in oil it had 2 structural problems.

  1. The US produced a surplus of LIGHT oil which was exported, this was frack product.
  2. The US was importing HEAVY oil. This is a legacy of refiners building plants in Texas to import and process heavy Venezuelan crude (by illustration Venezuela has a problem in that most refineries that can handle their heavy gloop are in the US gulf region)

The US would have a far more elegant balance of production/processing if they could simply convert their existing refineries to handle US product and not imported product. Then the US would not be exporting light oil and competing with OPEC+ for light oil markets abroad.


#3035

It was always cheaper to import the really heavy stuff and mix it to get the right mix for the refineries to process.


#3036

The yanks can do that with the heavy Canadian (alberta) crude. In fact the Canadians have to import light US oil first to blend with their own so that it is capable of flowing in a pipeline. I think a pipeline is ‘missing’ from the Canadian equation, the controversial Keystone XL project which may begin construction this year.

They either go with Canadian crude or rebuild their refineries to process Light crude instead of heavy Venezuelan type product.


#3037

#3038

As a follow up to my post #3017 it appears the US may push the button on the Saudis this week

Long piece, a snippet,

Saudi currently provides one of the few large-scale sources of sour crude (including the benchmark Arab Heavy) that is available to the U.S., which is essential to its production of diesel, and to which purpose WTI is less suited. Certainly much of the U.S.’s Gulf Coast refinery system is geared towards using sourer crude, having invested heavily in coking systems and other infrastructure to better handle heavier crudes from the Middle East in recent decades. The other major historical sources of this for the U.S. are not in a position to fill the gap, with U.S. sanctions still imposed on oil imports from Venezuela, Mexican flows unreliable, and Canada’s pipeline capacity to the U.S. not able to handle any more more exports south until the long-delayed Keystone pipeline is up and running at some point in 2023. In a U.S. presidential election year, the last thing that a U.S. president wants is increasing diesel prices or shortages making a coronavirus-hit economy even worse.

Trump is seemingly looking both at tariffs directed at the Saudis and at enacting the “NOPEC” Bill which is parked in congress.


#3039

Back in 2020 Shell piled into Hillbilly or Marcellus Shale Gas, paying $4.7bn to buy East Resources in 2010.

Today Shell sold off the East Resources business at a loss of just over $4.15bn over 10 years.

Shell, for example, reported $1.93 billion related to impairments in 2019, primarily in unconventional gas assets in the US and a drilling rig joint venture.

Another supermajor, U.S. Chevron, reported for Q4 2019 impairments and write-offs totaling $10.4 billion. More than half of this was related to the Appalachia shale, Chevron said a few months earlier, when it warned the market of the huge impairment charges.

Unlike OIL, Natural Gas Prices in the US went through the floor around 4 years back…and have stayed there since.

https://seekingalpha.com/article/4343083-shell-exits-marcellus-shale-losing-4_1-billion-and-raising-questions

In the acquisition of the asset, it was disclosed that current production was 60 mmcf/d, and that it included “650,000 net acres of ‘highly contiguous, operated acreage’ in the region and 1.05 million net acres in the Marcellus Shale overall.” In the divestiture of the asset, current net production is disclosed as 250 mmcf/d and net acreage is 450,000 acres. Likely substantial capital was spent developing the asset to increase production 4x, while a large portion of the lease position was allowed to lapse, with the acreage position declining from 1.05 million net acres to 450,000 net acres.

This raises a few questions and concerns beyond Shell’s recent dividend cut, share price fall, and the oil and LNG price crashes that precipitated it. These include: 1) what was the vision for the asset and the company at the time of the $4.7 billion purchase? 2) what changed about the asset and/or company plan such that this same asset was sold for $500 million 10 years later? and 3) are there bigger problems at Shell that pushed it into a dividend cut at a time when peers maintained their dividends?


#3040

Back when Shell bought East resources NG prices were bouncing back from their GFC trough and had spiked from $3 to $7 per Mcf, seemingly on their way back to pre-GFC levels of $10 / Mcf. At the upper end they’d be turning a profit on their investment in well under ten years. It was a false dawn as expanded fracking and new efficiencies led to today’s massive gas glut, and prices under $2 (even before COVID-19). I wonder how many companies will use the virus pandemic as a cover for bad news. It’s a good time to use the tanking economy as an excuse.


#3041

Efficiency was a myth seeing as Shell and others flooded the US Natural Gas market and lost Shell near 90% of their investment in the Pennsylvania shale. Nobody has made any money in shale in the past 10 years in the USA and they are realising around a THIRD of a TRILLION dollars in losses (between oil and gas) now they cannot extend and pretend anymore in that ‘market’.


#3042

I’m sure that most of you can name the Big 3 Auto Makers in Detroit (even after a few mergers over the years)

Problem is there is a new big 3 and only one of the tradtional big 3 auto makers is on it. As you might guess Tesla is now the biggest of all Auto makers and the other company in the new Big 3 is one you NEVER heard of. That might be because they haven’t made any cars yet, :frowning:

But they are coming into the Tesla space and because Green beats Revenue they are now almost as large as GM. Meet NIKOLA


#3043

Until Nokia produce a working prototype of any of their trucks its hard to take them seriously


#3044

#3045

That’s very interesting but the website is extremely “hypey”. All the news articles are written by Prometheus themselves or sourced from interviews with them. This one comes closest to giving any information about the technology itself:

It gives four reasons why fuel from air is feasible now:

  • cheap renewable sources of electricity,
  • fuel generation by aqueous electrolysis,
  • alcohol separation from aqueous solution by nanotube filtration instead of distillation,
  • more efficient upgrading of fuels to different types.

I can think of lots of reasons to doubt the hype. All that renewable electricity is already powering the grid. You’d need to produce double the current electricity output – all of it, not just renewables – to power transport. And then the process is only max 60% efficient, so you’d need to almost double it again. The article says 150,000 plants each producing a million gallons a year would be needed. That’s not going to happen in less than many decades.

But why are we even talking about air capture? If the technology is feasible then there is low hanging fruit that could be tackled much more easily. All those corn ethanol distillation plants that currently only have a marginal return on their energy inputs could be upgraded to use the new filtration mechanism. If we see that happening I’d be more inclined to believe the rest of it. The bottom line is that the huge majority of new energy ideas, even if they make it out of the laboratory, fail at the scaling up stage.


#3046

Exactly. Good work finding the paper

There are exceptions

This came out of Imperial College. After twenty years and £100 million it is a commercial success.

https://www.ceres.tech/

https://www.ceres.tech/technology/steelcell/


#3047

I agree, but one of their claims is that they will be selling fuel late this year, if they do that then I will pay closer attention, if they miss that mark badly, then yes its just another BS company with a nice “hypey” idea