[MonteQuest]

However, a model that requires continuous CAPEX just doesn't seem to me to be one that will work out.

Which is why they have chosen cash flow over reserve acquisition.

[shallow sand]

By long tail I mean the steep decline flattens and the wells produce at a nearly constant level for many years. The term I use may be incorrect. What I think is important is that level on average going to be 100 bbl day or stripper rates below 15? If 50,000+ wells are drilled that answer is pretty important, especially when rig rates decline.

I don't long for 60 oil. I was enjoying 95-104 stable very much, but clearly so were the shale drillers. I'm ok where we are at now too. Some argue the shale drillers will keep going all out at this rate. I agree that 60 will slow things considerably re shale and I think most agree on that. That is why I see short term price headed there, which I can deal with but which is a pretty big whack from where the price has been the last 4 years.

[MonteQuest]

By long tail I mean the steep decline flattens and the wells produce at a nearly constant level for many years.

Not.

[MonteQuest]

What I think is important is that level on average going to be 100 bbl day or stripper rates below 15?

As of August, 8287 ND Bakken wells produce 129 barrels/well a day.

A year ago, 6308 wells produced 134 barrels/well a day.

Red Queen Syndrome.

By contrast, the average oil well in Saudi Arabia produces about 6,000 barrels per day.

85% of US oil wells are stripper wells producing less than 15 barrels/day. That represents 20% of US production. Without depletion allowances ( big oil subsidies in the media) they would not be profitable. We are the only country that subsidizes such dinky well output.

[ROCKMAN]

"We are the only country that subsidizes such dinky well output.". And the US is the third largest oil producer on the planet. Essentially pick your poison. LOL.

shallow - Yes: as long as lifting/disposal cost stay low and oil prices stay high enough the strippers could last a good while. And operators like you can make a decent, albeit hard, living. OTOH that level of income typically isn't going to fund much new drilling. And while decline of those old wells might be slow they are still declining. The flurry of shale drilling might have given us a new batch of future strippers but it took exceptionally high oil prices to bring them on. If we are close to the tipping point for shale development then we are also on the verge of losing the next generation of long lived and slowly declining trippers.

[ROCKMAN]

So no return from where we are today? Hmm? Let's make a gross characterization. We migrated from a period of low oil/NG prices which made reserve additions very difficult. But those low prices helped economic growth. But growth led to higher demand putting upward pressure on prices. Higher prices combined with technology advances that opened up new arenas for exploitation. Then add some geopolitical instability around the world mixed with the emphatic demand upon the US pubcos by Wall Street to increase booked reserves. Now we have a full bore drilling boom. But then the inevitable: companies over extend themselves, prices retreat, Wall Street panics and begins to serious downgrade the pubos. Which decreases their borrowing base and leads to less drilling/reserve additions. OMG...we've reached the POINT OF NO RETUN!!!

So under this scenario are we at the point of no return today? Difficult to answer since "point of no return" can mean very different to different folks which essentially says it has no meaning. So lets just call it "the " for simplicity's sake. But we've already seen the future of the presented dynamics: I wasn't describing the period at the beginning of this century but conditions in place more then half a century ago. And as I've pointed out before oil patch management was just as focused on dealing with PO (what we called the "reserve replacement problem") then as they are now. One new tech in the 70's was drilling and producing in Deep Water...the max of 600' then. Just as drilling in 5,000'+ water today. Then there was the great advances in 2d seismic that greatly increased the probability of success. Just as 3d seismic has done today. Of course the prospect of higher oil/NG prices led to a surge in available capex allowing the rig count to boom to 4,500+...compared to the current "boom" of 1,900+. All of which was followed by a great economic contraction which drove oil prices down about 70%...compared to the current drop of 25% we've seen today. Which led to the destruction of hundreds of oil patch operators and service companies. Which we may, or may not, see in the near future.

And what followed that period which many saw it as a "point of no return"... in fact what many saw as TEOLAWKI? Eventually we ended up with the oil/NG drilling/production boom of the 21st century. So history repeats itself. But will in continue to do so? IMHO...no. For a variety of obvious and perhaps no so obvious reasons. The first is simply geography. New tech has allowed us to venture into potentially hydrocarbon bearing Deep Water basins offshore. But that's where the story ends for the most part. It will be of little value to develop tech to go into deeper water further from the continents: the vast majority of the ocean basins have been proven to hold no commercial hydrocarbons. The last basin of significant size left, the Arctic, is starting to be developed. The onshore and shallow water potential has already been well delineated. The bulk of the areas left to be exploited remain so for political reasons more so then tech or geological hurdles. And another factor that may significantly alter the future vector: the increased influence of emerging nations such as China and India. The old path was dominated by the wealthier nations. That dynamic has significantly altered not only due to economic growth with military capability also.

So while history does have habit of repeating itself it does so only when the major elements remain the same.'. just the names change. While there may be some similarities to the dynamics of several decades ago it's neither 1970 nor 1986 today. And IMHO will never be again. So while I won't try to predict the future (since we have plenty folks doing it already) I have a pretty good idea of what it won't look like. And it won't look like anything we've seen n the past. LOL.

[MonteQuest]

Rockman,

In my initial post, I posited whether we had the time to mitigate the consequences of peak oil with complex, technical, and highly capital intensive solutions that could be developed and implemented in a short time frame.

No, we are past the point of no return to do that.

Peak oil, to me, has always been an economic crisis, not an energy one.

All we have managed to do is kick the can farther down the road and make the crisis worse when the crunch comes.

Our system is based upon infinite growth in a finite world. We have been consumed with maintaining GDP growth and nothing else.

[Keith_McClary]

The bulk of the areas left to be exploited remain so for political reasons

Do you have a guess at how much that is, say as a % of original OIP or of ultimate recovery?

[DesuMaiden]

Yeah we are beyond the point of no return. There isn't much we can do but prepare for the inevitable collapse of human industrial civilization. Industrial civilization WILL collapse when oil becomes too expensive to extract and use. It isn't that far away according to this Youtube video...

https://www.youtube.com/watch?v=8j4Tyy5nsQ8

The video is called ""Peak Oil strikes 2020: Oil price spike causes Worldwide Depression and Food shortages """

As the title suggests, we only have another 5 to 6 years left before shit hits the fan. We are SCREWED when the price of oil becomes too expensive for people to afford. Once oil becomes too expensive for people to afford, the economy will collapse because everything we do in our economy (industry, food production, energy production etc) is dependent on oil.

Once the price of oil becomes too expensive for people to afford, society will totally fall apart...food production will effectively grind to halt. No more food production = massive famine on the global scale. And when massive famine starts, society will collapse into total anarchy. Millions upon billions of people will starve to death or die from war, disease, famine, starvation and etc.

What's scary is that this might happen by 2020 which is only five to six years away! I don't know what to do because I am simply not prepared for this!

In short, we are beyond the point of no return. The whole biosphere is fucked beyond belief due to human overexploitation. There are over 7 billion humans on this planet. Once oil becomes too expensive to afford, food production will be gone. And when that happens, the world's population will be reduced by several billion people because there is just NO WAY we can feed 7 billion people without the use of petrochemicals.

When oil becomes too expensive for people to afford is basically the same as oil being totally gone. It doesn't matter how much oil is left in the ground if it is too expensive for people to use it. And when that happens, food production will be GONE. And when that happens, our population will be reduced down to under 2 billion people. So at least 5 billion people will die in the next couple of decades, starting from 2020.

So yes, we are beyond the point of no return. Peak oil will fuck us over within the next decade or two.

[shallow sand]

Monte. Your Bakken graph shows what I was referring to. A long period of low decline/low production. To me 10 bbl per day or less during this time versus 50-100 makes a tremendous difference, that is what I can't get a handle on. In my unscientific review I see some of the oldest Bakken wells cranking out 50-100 bbl day and not declining all that much. Don't know if this is an anomaly.

As for the depletion allowance, it doesn't make any wells profitable that otherwise wouldn't be. It reduces income tax on profitable wells. If a well is not profitable, the depletion deduction is disallowed. Strippers used to be exempt from this, but part of the new years day tax compromise that no one noticed was the repeal of unlimited depletion for stripper wells.

And just as we can't paint shale well profitability w a broad brush, neither can you with stripper wells. We have some time clockers that use about $50 of electric per month, make 1-3 bbl per day, minimal water and almost never need pulled. They can almost compete with Saudi LOE. Sometime wish that was all I had, wouldn't be worried about oil price LOL.

Finally, don't complain about our strippers footprint. We don't have 40 frac trucks lined up, heck we rarely frac ours at all. If we do the max will be a 5000 gallon frac. Furthermore our oil is so dead there is no gas to flare.

ROCKMAN. I follow you on the ups and downs. Just can't keep from trying to see the future, even though I know it is pretty much impossible. If 80 or even 60 is the bottom, I'll be a happy camper. Just don't want to revisit the time period of paying to operate underwater (financially) leases as occurred in 1998. I suppose if it does happen again it won't last long. Still really blows while you are living it though.

[ROCKMAN]

Keith - "Do you have a guess at how much that is, say as a % of original OIP or of ultimate recovery?" I don't work the big picture so no, I don't. But I read the analysis of others that do. But between the unknowns and the misrepresentations by NOC's I don't tend to give much credibility to any of those numbers. OTOH I wouldn't care much about the reserve estimates if they were fairly accurate. Given the logistical and political problems the magnitude of the remaining reserves approximates neither future production rates nor prices IMHO. 1 trillion bb''s or 10 trillion bbls...what practical difference does it make? Consider US reserves: all the current shale reserves were there when US production peaked in 1971. Obviously no one was giving any significant recovery for them compared to what they do now. But the oil was there 4 decades ago. So now we have those reserves in the tanks and on the books. But we also have oil prices (adjusted for inflation) much higher now. Who would have accurately predicted either in 1971? Are we any better at making such predictions today?

Monte - IMHO US production had past the PONR by the 60's. By that time we had developed most of our major conventional oil fields. I think some folks still don't believe me when I point out my first employer, Mobil Oil, was in a panic mode over PO in 1975. In 1975 my first mentor predicted, in general terms, we would be where we are today. He wasn't a mystic: just another geologist that had been failing for 15 years to find oil fields comparable to those that led to peak US production in 1971. For the first 30 years of my career I worked with public companies and the overwhelming pressure was the same: find more reserves to book. Profitability was often secondary. And at times with a few companies not even relevant.

We might be at global PO today. Or maybe not. But just like the US some 50 years ago the world has passed the PONR some time ago IMHO. Decades down the road it will be easy for anyone to look back and call the exact date of GPO. Just as we've been able to do for the US. But that's just a simple statistic. Life in a fossil fuel dependent world is a tad more complicated. LOL.

[MonteQuest]

As for the depletion allowance, it doesn't make any wells profitable that otherwise wouldn't be. It reduces income tax on profitable wells. If a well is not profitable, the depletion deduction is disallowed. Strippers used to be exempt from this, but part of the new years day tax compromise that no one noticed was the repeal of unlimited depletion for stripper wells.

Thanks for the update. I wasn't aware.

[Rod_Cloutier]

Once the price of oil becomes too expensive for people to afford, society will totally fall apart

Of course the assumption here is that people will not be able to afford it at some point. Money is a social construction, if they change the rules, print more money, change the way money is distributed in society (Rationing), any of these things will affect peoples ability to afford oil.

When people riot, vote the bums out, or create their own independent systems of trade and exchange, things will change. People will not sit on their hands when problems present themselves and just die, people innovate, relocate, conserve, and so forth. It is not all doom and gloom, it is just change.

[MonteQuest]

Of course the assumption here is that people will not be able to afford it at some point. Money is a social construction, if they change the rules, print more money, change the way money is distributed in society (Rationing), any of these things will affect peoples ability to afford oil.

To date, they haven't been able to do it by changing the rules, printing more money, etc. The only that has happened is the rich got richer.