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THE Shale Gas Thread Pt 2 (merged)

General discussions of the systemic, societal and civilisational effects of depletion.

Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby Graeme » Wed 03 Sep 2014, 18:24:06

The Popping of the Shale Gas Bubble

For much of the past decade we have been inundated by reports of how the wonders of technology, specifically horizontal drilling and hydraulic fracturing, have unleashed a new era for energy supplies. Industry leaders have touted that shale gas, along with burgeoning shale oil production, will lead to America’s energy independence, kindle a manufacturing renaissance, lower bills for everyday Americans and create millions of much-needed jobs. While there is little doubt that booming shale gas production, along with a very deep recession put an end to the natural gas price spike of 2008, much of the accepted conventional wisdom about the longevity of the shale gas bonanza is wrong. America’s shale gas resources and reserves have been grossly exaggerated and today’s level of shale gas production is unsustainable. In fact, due the distortions of zero interest rates and other factors, an enormous shale gas bubble has developed. Like all bubbles, this one will pop sooner than expected and when it does, the aftermath will be very unpleasant.


Make no mistake; shale gas production over the past 12 years has been nothing short of phenomenal. From a standing start a dozen years ago, shale gas production has grown to account for nearly 50 percent of America’s gas production. However, the shale gas boom is rapidly maturing and we are quickly approaching a point where shale gas production heads into decline. In fact, the majority of shale gas basins in America are already exhibiting declining production.

Before discussing how the coming natural gas crisis will unfurl, let’s debunk some of the most commonly held myths about the shale gas.

1) The US has a 100-year supply of shale gas. While many grandiose claims about the potential supply of shale gas, such as ‘the US has a 100-year supply’, have been made in recent years; almost none have ever been supported by any empirical evidence. According to the EIA, marketed production in 2013 was 25.6 trillion cubic feet (tcf). Therefore, using last year’s rate of production, a 100-year supply would be 2,560 tcf of gas. (Note: Total US supply consists of marketed production plus net imports.) No one has ever been able to identify the shale gas fields, resources and reserves that would supply this bounty. More importantly, given that America is the most thoroughly explored petroleum producing country on earth, it is very unlikely new shale gas fields lie in wait of discovery. The only justification ever given for the 100-year supply claim has been that future developments in hydraulic fracturing (“fracking”) technology will unlock all that shale gas that has already been identified. While recent advances in horizontal drilling and hydraulic fracturing have been remarkable, technological progress does not follow a straight line.


forbes
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby ROCKMAN » Wed 03 Sep 2014, 19:48:00

Again I'll remind that oil/NG isn't the computer or Internet biz. Are the shale plays a "bubble"? Of course they are...just like every other oil/NG play that's ever been developed. I can site dozens of examples but I'll stick with a few like the Texas play I'm working now: the Upper Frio/Greta Sand trend along the Texas Gulf Coast. Boomed in the late 30's it peaked just a dozen years later. Dozens of fields ranging from 20 million to 150 million bo. To date 4.5 billion bbls of oil. And then that bubble popped big time. And for good reasons: by 1950 there weren't any fields of appreciable size left to find. Two years ago I drilled three wildcats in the trend: target reserves = 50,000 bbls each. Why didn't I drill for bigger targets? Easy answer: there weren't larger undridled areas between the old productive wells and dry holes for a larger reservoir to exist. Now jump half a century to the 90's when the Austin Chalk in Texas was THE hottest oil play on the planet. And that bubble popped in less then 10 years later. Not because prices collapsed nor did companies run out of capex. They ran out of enough undrilled locations to keep fueling the boom. And it wasn't a small play: it eventually covered an area several times the current extent of the Eagle Ford trend. And have we've forgotten the great East Texas Oil Field: the largest oil field in the world ever discovered by that time. And it boomed: when 30,000 wells were drilled at an unprecedented rate at the time (thanks in part to WWII). Talk about a boom: the US was the Saudi Arabia of the world at that time...5.2 billion bo. Until the bubble popped and drilling faded away because it had been drilled up.

So yes: the EFS, the Bakken, the Marcellus, the Deep Water plays in the GOM and along the Brazil coast, etc. etc. are all bubbles that will burst. If a price collapse, capex scarcity or a geopolitical upheaval doesn't kill a play the natural life span of every play will bring it to it's end. Nothing new here to look at folks...just keep moving along. LOL.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Wed 03 Sep 2014, 22:17:45

Graeme wrote:The Popping of the Shale Gas Bubble

forbes

As soon as I saw the title of this, I thought, "Bill Powers." :roll: Turns out I was right. :lol:

This guy has been predicting the imminent popping of the "shale gas bubble" for about 3-4 years now. He seems incapable of learning. :roll:
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Wed 03 Sep 2014, 22:28:36

Here we go - LOL!

Bill Powers - Jun. 29, 2010 - Stage Set for Ferocious Rally in Natural Gas
Due to a misunderstanding of the changing North American natural gas supply/demand balance, most investors and many on Wall Street believe natural gas prices will continue to wallow near current levels for much of the next two years. Conventional wisdom will shortly be proven wrong once again. In fact, the improving fundamentals of the North American natural gas market have set the stage for a ferocious rally in natural gas over the next 18 months. Investors who can look beyond today’s gloomy outlook stand to profit handsomely from the UNG and long term options on the UNG as natural gas prices rise and the contango of the futures curve flattens out and heads towards backwardation.

[...]

What does the fall in Texas production mean for the North American supply demand balance? With states such as New Mexico, Colorado, Utah and Wyoming also experiencing falling production, look for storage injections to trend below the five-year average. By the end of the storage injection season at the end of October, I expect U.S. storage levels to be at or below the 5 year average. Reduced storage levels and the recognition of falling production will be quite bullish for gas prices and the UNG. I expect the gas prices to reach $8 per thousand cubic feet by the beginning of heating season (November 1st) and the price of the UNG to move markedly higher with the price of the January 2012 $20 calls options to more than double.

His call for $8 NG in November 2010 turned out to be $3.71. And his January 2012 $20 call options missed by $17.33 - to the downside, of course. :lol:

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Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby Graeme » Wed 03 Sep 2014, 22:50:49

Isn't the author suggesting that this is the final "pop".

The EIA 2014 Annual Energy Outlook projects US shale gas production will grow from 9.7 tcf in 2012 to 19.8 tcf in 2040. I find the EIA’s future shale gas production estimate over the next couple of decades to be wildly optimistic for two main reasons. First, the majority of America’s shale gas fields are already experiencing production declines. According to the Texas Railroad Commission (RRC), the regulator of oil and gas activities in America’s largest gas producing state, natural gas production from all three shale fields in the Lone Star state are no longer growing. America’s oldest ’modern shale gas field’ (A field where the majority of the wells were drilled horizontally and hydraulically fractured.), the Barnett shale, production peaked in 2012 and has been declining steadily despite rising natural gas prices. The Texas portion of the Haynesville shale is in steep decline due in large part to high decline rate of its wells. More interestingly, according to recently published RRC data, natural gas production from the Eagle Ford shale has hit a plateau despite oil production continuing to grow

Production from the Haynesville shale of Louisiana, which in 2009 was expected to “become the largest gas field in the world at 1.5 quadrillion cubic feet” according to former Chesapeake Energy (NYSE:CHK) CEO Aubrey McClendon, has declined precipitously since peaking in 2012. Haynesville production is now down by nearly 50 percent according to data from the Louisiana Department of Natural Resources. To say the field has not lived up to its lofty expectations would be an understatement. The Fayetteville shale of Arkansas has been on a plateau for much of the past two years due to continued drilling by the play’s biggest operator but will likely see production fall off in the next year as it becomes increasingly mature. Natural gas production in the smaller Arkoma Woodford has been declining for several years and shows no sign of reversing.


The second reason I find the EIA’s projection for production growth to be inaccurate is the mistaken belief that higher natural gas prices will bring on substantial new shale gas production. More specifically, according to the EIA’s reference case, the agency expects natural gas prices to rise approximately 3.75 percent per annum between 2012 and 2040 with prices reaching $7.65 per MMBTU in 2040 (in 2012 dollars). While many economists like to think that higher prices will always bring about more supply, the laws of physics and geology always win and in increasingly mature areas, like much of the US, rising prices will at best only slow down the production decline. For example, between 1973 and 1984 the average US price for natural gas rose from $.22 per thousand cubic feet (mcf) to $2.66 per mcf, while production dropped an incredible 19 percent.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Thu 04 Sep 2014, 12:13:01

^
In 2010 he thought the final "pop" was imminent - as in months.

And he makes the mistake of assuming the Haynesville shale's decline has been for geologic reasons. No, the reason the Haynesville shale has slowed down is because there is too much supply coming from the Marcellus and other places.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby Timo » Thu 04 Sep 2014, 12:59:50

Nova Scotia just banned fracking. Too dangerous, and not worth the risks. Costs outweighed the benefits.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby ROCKMAN » Thu 04 Sep 2014, 13:03:44

c/a - You're half right...sorta. The HS busted long before the Marcellus was producing much. The bust was all about well head prices. I was at Devon when they were drilling the HS as fast as possible....had 18 rigs running just on our own leases. NG was heading above $12/mcf and they couldn’t buy enough casing to drill the wells they had planned. And then came the price bust. Every day I sat in the morning meeting with an the engineers/managers. Within just several months they began voices a bit of concern which turned into full blown panic in several more months. They made it very clear: if prices dropped below $6/mcf they were screwed. And then it dropped well below that price. By the first quarter of 2009 the cancelled the contracts on 14 of those 18 rigs and paid a total of $40 million in penalties. Paid $40 MILLION TO STOP DRILLING THE HAYNESVILLE SHALE.

As stated above there are three common ways for a hot play to bust: priced collapse, geopolitical upheaval and you run out of locations to drill. The price collapse busted most of the HS play...but not all of it. Devon still kept 4 rigs running around Carthage because that sweet spot still worked at the lower price. So his statement was half right: they ran out of $6+/mcf geology to drill but they still had a bit of $4/mcf geology to drill. So those $6+/mcf locations are still out there waiting for a rig. When prices get high enough (whether the Marcellus is still booming or not) the rigs will return.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Thu 04 Sep 2014, 17:15:54

^
That, of course, begs the question as to why the price crashed in the first place? And the obvious answer is, the price crashed because too much supply was coming online. As I said.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby ROCKMAN » Fri 05 Sep 2014, 06:30:02

c/a - Still not that simple. US NG consumption increased from 2008 to today by 20% according to the EIA while prices decreased from $12/mcf in 2008 to around $4.50/mcf today. And if one studies the rapid price rise followed by an even more rapid price decline there was very few new shale wells drilled during that period. Increased production from the shale plays takes years to affect the market. OTOH consumption levels can drop very quickly as they did when the economy took a hit 6 years ago.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Thu 20 Nov 2014, 00:48:09

Abundance aplenty. Up and up she goes. Where she stops, nobody knows. :)

A couple weeks old, but anyway ...

U.S. shale gas output breaking records: Production in "unchartered territory," Bentek analysis finds
U.S. natural gas production has risen for the 10th consecutive month, moving steadily into "unchartered territory," analysis from Platts finds.

Bentek Energy, the forecasting unit of Platts, found gas production in the Lower 48 states averaged 69.9 billion cubic feet per day in October, breaking the previous record and posting the 10th straight month of gains.

Gas production in October was 7.9 percent higher year-on-year.

Jack Weixel, director of analysis at Bentek, said projects slated to come online in the U.S. northeast should push the U.S. gas output above the 72 billion cubic feet per day mark by the end of the year.

"The current level of production is unchartered territory for the domestic natural gas market and shows no signs of slowing," Weixel said in a Thursday statement.

[...]
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread (merged)

Unread postby copious.abundance » Sat 14 Feb 2015, 22:41:58

copious.abundance wrote:Abundance aplenty. Mass quantities of plenitude. Billowing founts of wholesome goodness. :)

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http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby Tanada » Sun 15 Feb 2015, 09:46:05

The Sierra Club has weighed in on the issue, and got Edward James Olmos to narrate it for them.

http://youtu.be/FuQNqm6dk2g
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby ROCKMAN » Sun 15 Feb 2015, 10:13:12

"Abundance aplenty". Yes indeed. According to the latest numbers the boom in the Marcellus has required us to import only a net 141 bcf in Nov 2014 (a 40% increase from the previous March). Maybe some day if this booming "abundance" continues the US will produce more NG then it consumes and we won't have to import the balance. USA! USA! USA! LOL.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Sun 15 Feb 2015, 18:35:48

Um, Rock, if you look at the actual data you'd notice imports have been going *down* since 2007:
http://www.eia.doe.gov/dnav/ng/hist/n9100us2m.htm
And 99.9% of those imports come from Canada ... which practically doesn't even count since it's basically just a proximity/convenience issue.

And we're even exporting more - though maybe that, too, topped off a couple years ago:
http://www.eia.doe.gov/dnav/ng/hist/n9130us2m.htm

And both those numbers are dwarfed by total consumption. Total consumption in November was 2,375,309 million cubic feet. http://www.eia.doe.gov/dnav/ng/hist/n9140us2m.htm

Imports were 227,536 million cubic feet (9.6% of consumption) and exports were 113,258 million cubic feet (4.8% of consumption). So the net imports represent a whopping 4.8% of total consumption. We're basically self-sufficient already.
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http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby ROCKMAN » Sun 15 Feb 2015, 18:57:03

copious - Mucho thanks for backing up my post. "So the net imports represent...4.8% of total consumption. We're basically self-sufficient already." Self-sufficient if you're not the 1 in 20 NG user who would be sitting in the cold right now if the US weren't a NG importer.

"...basically self-sufficient". A wonderful phrase...right up there with being "a little pregnant". SPINNNNNNNNNN. LOLLLLLLLLLLLLLLLLLL.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Sun 15 Feb 2015, 19:17:41

As I said, the only reason why we import anything all is a convenience factor from Canada. Some consumers happen to be closer to Canadian sources than US sources, so they import it from the Canucks instead of using domestic sources. We even had this discussion not too long ago, if I recall.

Do you have any doubt that if the northern border of the US were a sea instead of the landmass known as "Canada" that that 99.9% of our imports sourced from Canada would come from domestic sources instead?

SPINNNNNNNNNN. LOLLLLLLLLLLLLLLLLLL.

The spin here is coming from someone who refuses to acknowledge that importing a mere 4.8% of consumption, almost all of it from a neighbor whose imports exist only from mere convenience, constitutes defacto self-sufficience. I'm not even sure why you think net imports of 4.8%, almost all of it from a neighbor whose natgas gets imported out of sheer geographical convenience, represents some sort of failure of the entire US shale gas industry. :roll: :badgrin:
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http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby ROCKMAN » Mon 16 Feb 2015, 11:56:56

Speaking of the Marcellus: the latest word from the EIA: http://www.eia.gov/petroleum/drilling/pdf/marcellus.pdf

The MS rig count has been fairly flat for the last 2.5 years thru Feb 2015: about 105 rigs with a dip below 90 in early 2013. And during the last year the rate of increase in production from new wells per rig has improved a bit but nothing like the big gains between 2012 and the end of 2013. And that was after the rig count plunged from 140 to 110. That indicates probably longer laterals and better identification of the sweet spots.

The good news: production from new wells in the last year increased by 0.79 bcf/day. The bad news: production from older wells decreased 0.61 bcf/day. So despite some good drilling results in 2014 the net gain was only 0.17/bcf/day. That represents only a 1% increase in net production. So even if the rig count in the MS doesn’t drop it looks like the days of big production increases have passed. Now it looks like the drilling pace will have enough trouble just keeping the gross production from falling.

Time will tell but we may be at Peak MS…at least until NG prices increase significantly.


BTW: the US consuming more NG then it produces is not spin: it's a cold hard truth some refuse to address.
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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby copious.abundance » Mon 16 Feb 2015, 19:24:34

ROCKMAN wrote:BTW: the US consuming more NG then it produces is not spin: it's a cold hard truth some refuse to address.

Please explain to me why US natural gas producers domestically producing 95.2% of US consumption represents a failure of said producers? And please explain to me why the chart below also represents a failure of US natural gas drilling companies? Thank you.

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Re: THE Shale Gas Thread Pt 2 (merged)

Unread postby Tanada » Wed 11 Oct 2017, 04:57:11

Lancashire For Shale yesterday held a very successful briefing to an audience of interested parties, on the benefits of how shale gas and manufacturing can grow together to create more jobs and secure our future.

The event, held at Burnley Football Club, included four speakers, a short Q and A session and highlighted that Lancashire has a very significant manufacturing sector, including being number 1 in the UK for aerospace and advanced manufacturing, as well as a growing energy and environment cluster, employing 41,000, supported by four Enterprise Zones (the only county in the UK to have four).

A major conclusion from the presentations was that a thriving shale gas industry in the county would help to boost Lancashire’s economy and position our energy industry companies as a new centre of excellence. Lancashire could be the focus of the next industrial revolution.

Furthermore, a successful Lancashire shale gas industry could create new supply chain opportunities for local manufacturing and engineering companies, as well as encouraging greater investment in these vital sectors.

Francis Egan, CEO of Cuadrilla welcomed guests and emphasised that: “We are making significant progress with the drilling of the two wells at our shale gas exploration site in Lancashire. Whilst the industry is still at an early stage, we continue to put local suppliers first wherever possible and are proud to be employing local people. The future opportunities for Lancashire manufacturing and engineering businesses are considerable as the shale gas industry grows”.

The meeting then watched a video featuring Katie Klaber, a leading energy consultant in the USA, and the former CEO of the Marcellus Shale Coalition, an organisation at the forefront of bringing together all the components of the shale gas value chain in America’s leading shale gas producing area.

She commented: “The shale gas industry and its supply chain really took off here in the Marcellus region in Pennsylvania after 2009. Before then, we produced around 25% of our own gas from conventional wells, now, after just about a decade, we produce 25% of our entire nation’s gas, so that gives you some idea of the scale of it here.

“There are a lot of opportunities for local manufacturing and engineering firms, for instance making tanks for water storage and other fabrication. And then there’s all the ongoing maintenance. It’s much more cost-effective to use local suppliers.

“Shale gas here has boosted the manufacturing economy more broadly by making energy more secure and affordable. It’s also encouraged the reshoring of some manufacturing capacity that had gone abroad, and that’s had a knock-on benefit. There’s no doubt it’s been responsible for billions of new investment.”

The next speaker, Miranda Barker, CEO East Lancashire Chamber of Commerce, added: “To date, over 500 companies have registered for the Shale Gas Supply Chain portal at www.shalegaslancashire.co.uk and contracts worth approximately £3 million have been tendered, giving plenty of opportunities for local suppliers to benefit from shale gas exploration.

“The revised online site is a major engagement tool for local businesses. This is because the new supply chain portal enables them to register their interest in the shale gas industry, specifying their areas of expertise and qualifications. The site also reflects the latest developments with the exploration programme and the quality and safety standards required.

“Business opportunities and invitations to tender will be updated on a regular basis and will ensure that millions of pounds of future spend remains in the county, supporting local jobs.”

Final speaker was John Baldwin, Managing Director, CNG Services Limited, who informed the audience that: “The biomethane sector is a great analogue for what UK shale gas could one day be.

“Britain has a growing biomethane industry, taking energy from crops, farm slurry, sewage sludge and food waste, and turning all that into natural gas through a process of anaerobic digestion. The gas can then be used to generate electricity on site or be injected into the gas grid.

“Delivering growth has only been possible with the development of an accompanying supply chain. The industry has been built on the support of UK manufacturing and engineering companies and it’s very easy to see how a successful shale gas industry will create similar opportunities for equipment manufacturers and engineering suppliers in Lancashire.”

A detailed questioning of the speakers then took place.


https://businesslancashire.co.uk/2017/1 ... -together/
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