[westexas]

The really crazy low number is my estimate for the remaining volume of Available CNE (Cumulative Net Exports), i.e., the estimated cumulative remaining volume of GNE (Global Net Exports) available to importers other than China & India.

Available Net Exports (ANE), or GNE less CNI (Chindia’s Net Imports), were 41 mbpd in 2005 (or 15 Gb/year), falling to 35 mbpd in 2012. Based on the 2005 to 2012 rate of decline in the GNE/CNI Ratio, I estimate that post-2005 Available CNE are on the order of about 170 Gb. At the 2005 rate of consumption in ANE, estimated post-2005 Available CNE would be depleted in about 12 years (analogous to a Reserve/Production Ratio).

From 2006 to 2012, cumulative ANE were about 95 Gb, which would put estimated remaining Available CNE at about 75 Gb at the end of 2012. At the 2012 rate of consumption in ANE, estimated remaining Available CNE would be depleted in about 6 years, i.e., the total estimated volume of Global Net Exports of oil available to about 155 net oil importing countries would be totally gone in 6 years (about 2,200 days). Of course, the expectation is for an ongoing decline in ANE, and the current extrapolated data suggest that ANE would theoretically approach zero around the year 2030.

As someone once said, what can’t continue tends not to continue, and there is no way we would have a functioning global economy if two countries consumed anything close to 100% to Global Net Exports of oil, but here’s the problem:

Given an inevitable ongoing decline in GNE, unless the Chindia region cuts their GNE consumption at the same rate as the rate of decline in GNE, or at a faster rate, the resulting ANE decline rate will exceed the GNE decline rate, and the ANE decline rate will accelerate with time. It’s a mathematical certainty.

In any case, the projected rate of decline in the GNE/CNI Ratio puts us at a point in 2030 at which we cannot arrive, but the 2013 data will almost certainly show that we continued to slide toward a point at which we cannot arrive:



Quite the conundrum.

[ROCKMAN]

Pstarr - Having little life outside my recliner I have the patience. But I'll keep it short: EROEI cannot go much below 5 or 6...explained it in detail many times. Unacceptable return on investment will kill drilling deals long before the EROEI gets very low. Yes...the oil patch couldn't care less about EROEI...it has no impact on how we do business.

[Outsailing]

The really crazy low number is my estimate for the remaining volume of Available CNE (Cumulative Net Exports), i.e., the estimated cumulative remaining volume of GNE (Global Net Exports) available to importers other than China & India.

and as per Rockman, how do those numbers change in relation to price.....?

[Outsailing]

I suspect many Americans struggling to pay the higher bill don't feel very successful. But me and the other oil patch hands are feeling damn successful. LOL.

And entire states like North Dakota. Taxing the hard work of industry results in dollars for the state, same thing with the jobs created.

http://jobs.aol.com/articles/2014/03/18 ... -shortage/

Some would say the $400 billion is still economy and contributes to jobs and welfare. But burning/wasting precious fuel on endless fract-water truck trips should not be the job of an advanced industrial society. This is where EROEI connects directly to ECONOMY. What goes down the drill hole and up in smoke contributes only minimally to the economy.

Steel goes down the hole. Hereto unseen oil and gas comes out. Extractive industries have been doing this, and creating economic activity, for quite a long time I think. The jobs, the taxes on those jobs, the taxes on the product extracted, the taxes on the manufactured product sold to the consumer, boy that all sounds like something far more substantial than "smoke".

Great. Another eroei-denier. I don't have the time and patience for this.

You said "minimally to the economy".

The US oil and gas industry provides 60% of America's energy needs using 10 million of its jobs, out of 145 million? 7% of the jobs for 60% of the energy seems pretty energy effective to me.

http://energytomorrow.org/economy

[copious.abundance]

The really crazy low number is my estimate for the remaining volume of Available CNE (Cumulative Net Exports), i.e., the estimated cumulative remaining volume of GNE (Global Net Exports) available to importers other than China & India...

Since the peakers' predictions of just a few years ago that world oil production was going to start declining RIGHT NOW has fallen flat on its face, they are now resorting to increasingly desperate measures to try to maintain their bad-news-is-just-around-the-corner worldview.

To wit: westexas' incessant blatherings about falling world net oil exports. Of all the completely ridiculous (and flat-out stupid) things to cite to maintain some sense of imminent danger, this one is the most ridiculous. Why? Because the main reason why world net exports of crude oil have been declining is because the world's largest importer has stopped importing so much oil! And the reason why the US has been importing less oil is because our own production has been soaring. DUH! In other words, declining world net exports haven't been a sign of scarcity, they've been a sign of abundance! Of course the peaker/doomers who keep citing this aren't bright enough to think of it that way, even though it's obvious to anyone else. So they keep repeating it, thinking it's bad news, when in reality it's good news.

Now, the next thing that'll happen is China - whose oil production has already been going up per the graph below - will start to tap their own shales a la the US (they do have lots of them). So at some point even China will stop importing more oil. At this point we'll hear westexas start going into a frenzy, "OMG OMG! World oil exports are in free-fall! This is a sign of a tighter and tighter oil market!" But in reality it will mean the complete opposite.

[toolpush]

I agree with you, the good old days are over, and good riddance. If you can take advantage of the American consumers who aren't changing their behavior fast enough to free up discretionary income that would otherwise go into their pockets, then good for you! I wouldn't count on folks being that ignorant forever however, jack the price for another doubling and while it might be enough to peak the US at even higher rates, the reaction could be ugly enough to create structural damage in demand.

As an outsider with US ties (wife), I do not see behaviour hanging fast enough, and will not change until getting from A to B becomes the focus and not, which style you get from A to B. The car in the US still remains a status symbol and people at least feel they are judged on what they drive, rather than a car just being a means of transport. Of course this is what salesmen have been milking for years, and unfortunately the consumers still fall for the old trick of being sold what they WANT and not buying what they NEED.

In the mean time i am with Rockman, times are good, but I still drive small economical cars, so I win both ways.

[westexas]

Re: Global Crude Oil (45 or lower API gravity crude oil) Production

In my opinion it is very likely that actual global crude oil production (45 or lower API gravity crude oil) peaked in 2005, while global natural gas production and associated liquids, condensates & natural gas liquids (NGL's), have so far continued to increase.

As I have periodically noted, when we ask for the price of oil, we get the price of 45 or lower API gravity crude oil, but when we ask for the volume of oil, we get some combination of crude oil + condensate + NGL + biofuels + refinery gains.

Shouldn’t the price of an item relate to the quantity of the item being priced, not the item + (partial) substitutes?

In any case, a key question is the ratio of global condensate to Crude + Condensate (C+C) production. Unfortunately, we don’t appear to have any global data on the Condensate/(C+C) Ratio. Insofar as I know, the only complete Condensate/(C+C) data base, from one agency, is the Texas RRC data base for Texas, which is shown below for 2005 and 2012:

2005:

Condensate: 0.12 mbpd
C+C: 1.08 mbpd

Condensate/(C+C) Ratio: 11.1%

2012:

0.30 mbpd
C+C: 1.95 mbpd

Condensate/(C+C) Ratio: 15.4%

The 2013 Ratio (more subject to revision than the 2012 data) shows that the ratio fell slightly, down to 14.7%, which probably reflects more focus on the crude oil prone areas in the Eagle Ford. But rounded off, we are looking at about 15% for 2012 and 2013.

The EIA shows that Texas marketed gas production increased at 5%/year from 2005 to 2012, versus a 13%/year rate of increase in Condensate production. So, Texas condensate production increased 2.6 times faster than Texas marketed gas production increased, from 2005 to 2012.

The EIA shows that global dry gas production increased at 2.8%/year from 2005 to 2012, a 22% increase in seven years. What we don’t know is by what percentage that global condensate production increased from 2005 to 2012. What we do know is that global C+C production increased at only 0.4%/year from 2005 to 2012. In my opinion, the only reasonable conclusion is that rising condensate production accounted for virtually all of the increase in global C+C production from 2005 to 2012, which implies that actual global crude oil production was flat to down from 2005 to 2012, as annual Brent crude oil prices doubled from $55 in 2005 to $112 in 2012.

Normalized global gas, NGL and C+C production from 2002 to 2012 (2005 values = 100%):



Estimated normalized global condensate and crude oil production from 2002 to 2012 (2005 values = 100%):



Re: China's production

The EIA puts China's total petroleum liquids + other liquids (used for net import calculations) at 4.1 mbpd for 2010 to 2012, "Soaring" to 4.2 mbpd for 2013.

Re: Price VS. Consumption Data

The following chart shows normalized liquids consumption for China, India, (2005) Top 33 Net Oil Exporters and the US from 2002 to 2012, versus annual Brent crude oil prices. China's consumption in 2013 (per BP) was up to 204% of the 2002 rate, and the US was up slightly from 2012, to 96% of the 2002 rate.



The $64 Trillion Question

Production by the (2005) Top 33 net exporters was up slightly from 2005 to 2012, but their increasing consumption caused their net exports (what I call Global Net Exports of oil, or GNE) in 2012 to be below 2005, with a sizable rate of decline in their ECI Ratio (ratio of production to consumption).

Furthermore, because of rapid increases in oil consumption by China & India (“Chindia”), what I define as Available Net Exports (ANE or GNE less Chindia’s Net Imports, or CNI) fell much more rapidly than GNE.

What happens from 2012 to 2022 is what I call the “$64 Trillion Question.”

Here are the 2012 values for the Top 33 net exporters in 2005, along with 2005 to 2012 rates of change (total petroleum liquids + other liquids, EIA, for net exports):

Production: 63 mbpd (+0.3%/year)
Consumption: 19 mbpd (+2.2%/year)
Net Exports: 44 mbpd (-0.5%/year)

Chindia’s Net Imports in 2012 and 2005 to 2012 rate of increase:

8.8 mbpd (+8.7%/year)

ANE (GNE less CNI) in 2012 and 2005 to 2012 rate of change:

35 mbpd (-2.3%/year)

If we assume that Top 33 production falls at 1.0%/year from 2012 to 2022 and if we assume that consumption continues to increase at the same rate (2.2%/year), GNE in 2022 would be down to 33 mbpd, almost a 3%/year rate of decline. Given this decline rate, unless Chindia’s consumption of GNE falls at 3%/year, or more, the resulting rate of decline in ANE will exceed the GNE decline rate, and the ANE decline rate will accelerate with time.

For example, let’s assume that Chindia’s rate of increase in net imports falls to 5%/year (versus 8.7%/year from 2005 to 2012). Their net imports in 2022 would be up to about 15 mbpd. ANE would be 33 (GNE) – 15 (CNI) = 18 mbpd (ANE), approximately a 50% reduction in the volume of Global Net Exports of oil available to about 155 net oil importing countries (versus 35 mbpd in 2012 and versus 41 mbpd in 2005). The 2012 to 2022 rate of decline in ANE would be 6.6%/year.

Re: Changes in demand for net imports in net oil importing countries

China has shown a large increase in net oil imports in recent years, while the US has shown a large decline in net imports in recent years (due to a post-2005 decline in US consumption and due to temporarily rising US production). However, by definition changes in the demand for net imports in net oil importing countries have no direct impact on the supply of Global Net Exports of oil (GNE), although changes in demand in net oil importing countries certainly do affect the demand for GNE.

In any case, given that Brent has averaged around $110 for three straight years, demand for GNE remains high, and what the data show is that the developing countries, led by China, have been consuming an increasing share of a post-2005 declining volume of GNE. As noted above, the $64 trillion question is whether, and to what extent, that this pattern continues from 2012 to 2022 and in later years.

[Pops]

The US is importing less, but it is less light oil, heavy oil imports have stayed the same.




We would be importing less regardless of production because we are consuming less due to price. But more important, since what is increasing is production of condensate, which is basically a chemical feedstock used to make plastic and as a chaser to help us swallow tar sand, the imports of actual oil used to make fuel haven't fallen a bit.

Gasoline consumption flatlined back in '04 then began to fall, way before condensate production took off. In fact 2005 was also when product exports began to take off at about the same clip as the falling consumption. Imagine that, high prices caused demand destruction.




So we've increased condensate production greatly, especially in Texas and that's all well and good since it makes iPhone cases sustainable and enables the strip mining of Canada. But it's really a sidebar to the central story, which has always been about transportation. The proof of course is the price refiners pay to produce fuels and in the US it doesn't look like TX hitting 3MB/D has made any difference in that regard.

The reason of course (to repeat myself) is that refiners don't turn condensate into regular unleaded and diesel, not in large amounts anyway.




--
So when someone asks why the high price at the pump in the middle of an oil boom just tell them it isn't really an oil boom, it's just a gas bubble.
--

http://econbrowser.com/archives/2014/03 ... atural-gas

[AirlinePilot]

westexas continues to enlighten us all as to WHY oil prices have not dropped. The markets are telling you all you need to know. The global oil market is screaming Peak despite the cornies hand waving to some obviously flawed total liquids number.

It would behoove the cornies to at least attempt to try to understand his analysis. Personally I believe this is the way to look at the greater picture. This is where we will first see (and ARE SEEING) the cracks in the damn.

How much longer can non crude/tight oil numbers grow and what is the REAL makeup of those numbers. Thanks to Jeffrey for his tenacity and continued work on this, its MUCH appreciated here.

[AirlinePilot]

To those who want to yell about how price increases bring on more supply....its VERY important to look at historical trends. In the past price increases brought steady and linear growth in production. Not so much in the last decade. As a matter of fact its almost as if the treadmill is running so fast that we can only barely remain on it. At least as far as Global Crude goes. The standard economist way of looking at this falls down when it comes to peaking or a decline in the resource.

[americandream]

westexas continues to enlighten us all as to WHY oil prices have not dropped. The markets are telling you all you need to know. The global oil market is screaming Peak despite the cornies hand waving to some obviously flawed total liquids number.

It would behoove the cornies to at least attempt to try to understand his analysis. Personally I believe this is the way to look at the greater picture. This is where we will first see (and ARE SEEING) the cracks in the damn.

How much longer can non crude/tight oil numbers grow and what is the REAL makeup of those numbers. Thanks to Jeffrey for his tenacity and continued work on this, its MUCH appreciated here.

I need to have a look at those long term oil charts. Will do and let you guys know my reading in a while.

[Quinny]

Thanks for the data and analysis.

[Mesuge]

Lets assume for a moment that the shale craze is in fact the last status quo extender, "the final" time borrower machine if you will. From all these reports and models it seems N.A. shale reaching plateau, i.e. end of the rocket growth, by 2015-2017 and visible declines to all before 2020. Also lets assume in conventional oil things remain as they are no further destruction or miraculous oil revival on the market (Iran, Libya, Iraq, Saudi, W. Africa, ..)

Now here comes the question what will be the sequenced reaction to shale cooling off, could some of the market participants front run it, meaning they will stop lending as soon an early at the 2015-2017 phase or is there going to be another PTB's 5-10yr papering it over again etc. ?

I know it's foolish to see the future on such tiny scale 5-10yrs forwards, but concerned people like to play with probabilities when the major crack in the system visits us say 2015ish or more towards 2020.

The recent very fast reshuffling of geopolitical activity seems to point for picking up earlier date of the scale, but the PTB have always managed to wave the magic wand once more again. That's what to expect anyway since they juggle a multidimensional game of armies-msm propaganda-high finance-industry-espionage as oppossed to the flat world of paycheck mortals.

[Pops]

I'm more and more convinced that LTO means very little in the overall scheme because it doesn't affect transportation or household energy costs all that much.

There has not been the promised fall in crude oil prices because LTO isn't crude oil, it's condensate.

The long term viability of tight gas is much more important. Low nat gas price offsets high unleaded and diesel price because it lowers the overall cost of energy for the average consumer. If nat gas prices had followed the trend and were at the multiples crude oil is, the impact on the consumer would be much greater.

[Mesuge]

Thanks but this seems a bit like US centric view on the problem since nat gas is quite a regional specific issue, but I know cheap US natural gas affects gasoline-diesel rafineries in the EU etc.

I'll try to rehash my question though, so is the "demise" of LTO bonanza pre 2020 a systemic danger to the overall status quo or not?

Frankly, I fear the prolongated option of bouncing around +/- 0.something real gdp growth for the next 6-8yrs, which could be pretty well micro-managed by the PTB, in a way storing energy for some very nasty Seneca Cliff bursting event for the early mid 2020s. I'd rather see a stair case scenario with blowing off the steam in smaller increments now, which is more survivable/preparable. Understandably that's not much in line with the wishes of the top dogs there.

[Pops]

Oops, premature submitulation there ...

I think LTO is indeed a great victory, not of technology but of PR. We think we're saved and so we act like were saved so we are saved, for a while. But like you say M. this could lead to the Shark-fin like production curve.

I'd say that PO is progressing as outlined by the moderate predictors regardless of it's many pronouncements of death - of course all justified by fracking for plastic. Obviously the fighting over oil provinces is as foretold, but demand destruction, higher prices, low spare capacity, etcetera. The reasons oil prices didn't go all "Matt-Simons-ish" is because they can't, demand is in fact elastic over time, that was a big error on the peakers part.

Production of actual oil is stagnant over a period of 8 or 9 years now, production of potential substitutes has increased with some of the "all-they-gotta-do" replacements already abandoned. Ron has a post today talking about the slowing of replacement renewable supplies.

I think once fracking for plastics slows and the price of nat gas increases, fracking for dry gas will increase. I have no actual knowledge of whether this will work anywhere but Texas or not, but kinda hope so because it is the true bridge fuel.

[AirlinePilot]

I personally believe we will see some "interesting" price moves once real decline sets in. This bumpy plateau just doesnt signal any greater urgency right now on the part of markets, nor what happens to the nation state producers when the realization we begin falling OFF this plateau sets in.

While I agree about the price elasticity, I think there will be a period of significant volatility in price, mostly towards the upside. It will also be very interesting to watch what happens as decline is acknowledged vis a vis hoarding and how the Mid East does geopolitically as this story unfolds. I honestly dont think we have that much longer to wait. I wouldnt put a prediction on this, but my feeling with regard to the US fracking boom is we have a few years...maybe 5 at the outside..before we get to the acknowledged decline phase. We will see.