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Shale Oil is now profitable at $20 barrel

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Shale Oil is now profitable at $20 barrel

Unread postby Plantagenet » Mon 27 Mar 2017, 18:39:35

The oil majors are moving into Shale Oil production. Exxon, Chevron and Shell have all taken big positions.

The technology of producing oil from Shale has developed and improved so it now costs MUCH less to produce shale oil then it used to. For instance, oil can be profitably produced at Shell's acreage in the Permian Basin of west Texas even if oil prices fall to $20/bbl. Now not every shale oil play is as good as the Permian---but even so this is much much cheaper then anyone throught shale oil could be produced at just a few years ago.

shells-new-permian-play-profitable-20-barrel

The large drop in price to produce oil from shale is a big BIG BIG BIG deal.

1. US oil production is now predicted to rise to ca. 10 million bbls/day by next year, thanks to even more growth in shale oil production. This will equal or perhaps even exceed the 1970 "peak" in US oil production.

2. There are huge amounts of Shale Oil out there. The Permian basin alone holds an estimated 60-70 BILLION bbls of oi.

3. The big improvements in shale oil technology make shale oil the dominant factor in the oil market today. Shale oil is now cheaper then offshore oil or tar sand oil or even most conventional oil. This means money will flow to shale oil, starving other parts of the oil biz. And shale oil production is easy to scale up or scale down. When prices are high---drill and frack more wells. When oil prices are low.....take a break. Its not like an offshore play where you've got huge infrastructure costs up front before you even start producing.

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Cheers!
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Mon 27 Mar 2017, 18:48:23

Boy, thanks for the great NEWS!!! Now we ONLY HAVE to worry about frying the planet! But as long as there is money to be made, who the fck cares?
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Subjectivist » Mon 27 Mar 2017, 18:51:59

For how long? With states like New York still oppossed to fracking and the known plays now being worked ever harder in Texas how long till they run out of leasable locations? Are we talking 5 years or 25 years?
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Re: Shale Oil is now profitable at $20 barrel

Unread postby pstarr » Mon 27 Mar 2017, 18:54:33

The post header deserves a simple conjugated expletive beginning with bull and ending with sh#t thus denoting nonsense. The rest my attention.

But why bother?
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Re: Shale Oil is now profitable at $20 barrel

Unread postby pstarr » Mon 27 Mar 2017, 18:57:17

New resource extraction tech or new marketing BS tech?
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Re: Shale Oil is now profitable at $20 barrel

Unread postby pstarr » Mon 27 Mar 2017, 19:02:03

Plant you earlier claimed to be geo/physicist but you are increasingly sounding like an intern at Chesapeake Energy . Wait! They went bust :(
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Plantagenet » Mon 27 Mar 2017, 19:06:21

Subjectivist wrote:For how long? .... Are we talking 5 years or 25 years?


Lets do the math.

The Permian Basin currently produces about 2.2 million bbls/day. That means at current rates there would be roughly .73 billion bbls of oil produced in a year.

Since there are an estimated 60-70 BILLION bbls of oil, production should easily blow past the five year mark, and still be going strong 25 years out.

Cheers!

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Re: Shale Oil is now profitable at $20 barrel

Unread postby Paulo1 » Mon 27 Mar 2017, 19:13:27

Sorry Plant, nothing is profitable at $20. Well, maybe Crown Royal. Certainly not LTO.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby peripato » Mon 27 Mar 2017, 19:21:15

Considering the new projects and the resurgent shale boom, Goldman Sachs expects oil output to increase by 1 million barrels a day year-on-year. The outcome is an oversupply in the next couple of years.

There's your problem right there! Let's see them turn a profit with oil at ~$20 a barrel. :roll:

BTW. This concept of $20 profitability is complete b.s. But hey fake news is feel good news. And feels is what peeps and perps want. Who wants to be bored/stymied with factual stories about how we're going to hell in a hand basket. Not good for business or a good time.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby mmasters » Mon 27 Mar 2017, 19:31:08

More shale and natural gas than you can throw a stick at and we have common sense in the white house. There wont be any doom anytime soon.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Subjectivist » Mon 27 Mar 2017, 19:34:26

Plantagenet wrote:
Subjectivist wrote:For how long? .... Are we talking 5 years or 25 years?


Lets do the math.

The Permian Basin currently produces about 2.2 million bbls/day. That means at current rates there would be roughly .73 billion bbls of oil produced in a year.

Since there are an estimated 60-70 BILLION bbls of oil, production should easily blow past the five year mark, and still be going strong 25 years out.

Cheers!


Did you or did you not post that a major drilling boom was goin on in the Permian? That being the case te 2.2 you quote will necessarily become much great, likely cutting that 25 year estimate in half or even further.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby pstarr » Mon 27 Mar 2017, 19:40:43

mmasters wrote:More shale and natural gas than you can throw a stick at and we have common sense in the white house. There wont be any doom anytime soon.

Rah make america great again yuck
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Plantagenet » Mon 27 Mar 2017, 19:47:39

Subjectivist wrote:
Plantagenet wrote:
Subjectivist wrote:For how long? .... Are we talking 5 years or 25 years?


Lets do the math.

The Permian Basin currently produces about 2.2 million bbls/day. That means at current rates there would be roughly .73 billion bbls of oil produced in a year.

Since there are an estimated 60-70 BILLION bbls of oil, production should easily blow past the five year mark, and still be going strong 25 years out.

Cheers!


Did you or did you not post that a major drilling boom was goin on in the Permian? That being the case te 2.2 you quote will necessarily become much great, likely cutting that 25 year estimate in half or even further.


Yes. Of course. But you are wrongly assuming that 2.2 million barrels/day will use up the resource in 25 years.

Thats why I said "do the math".

If you do the math you'll find that ---as I said in my post above----there is way more oil than can be produced in 25 years at current rates or even at significantly higher rates of oil production.

Thats means its highly unlikely the resource will depleted in 12.5 years or less as you suggest.

Cheers!

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Re: Shale Oil is now profitable at $20 barrel

Unread postby rockdoc123 » Mon 27 Mar 2017, 20:07:42

Sorry Plant, nothing is profitable at $20. Well, maybe Crown Royal. Certainly not LTO.


the number does sound low but one has to take into account that the EUR /well in the Permian is higher than the rest of the shale plays due to the stacked nature of the reservoirs.

Rystad Energy who have been pretty good about pulling apart the numbers and speaking to improvements in cost control suggest the breakeven price for the Permian at the end of 2016 was around $33/boe
http://www.worldoil.com/news/2017/2/28/rystad-examines-what-to-expect-from-us-shale-break-even-prices-in-2017
Others think it is more likely somewhere north of $40/boe
https://btuanalytics.com/trends-in-us-shale-breakeven-prices/
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Plantagenet » Mon 27 Mar 2017, 20:28:57

nothing is profitable at $20. Well, maybe Crown Royal. Certainly not LTO.




Not so fast----

Legacy oil in KSA can be produced for under $10/barrel.

There's a reason the majors are now buying up land in the Permian. Shell says they are doing fine right now in shale oil on their property in the Permian Basin at $40/barrel, and can be profitable down to $20/barrel. I assume that means just in the "sweet spots."

Its a fact that the costs of drilling and fracking have come way down, and the wells are getting longer and frack jobs bigger, greatly reducing the cost of production. Under US law a company like Shell can't misrepresent their costs or the SEC will get after them.....and Shell says they can make money at $20/bbl.

CHEERS!

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PS please tell me where can I can a barrel of that Crown Royal for $20? That would last me for decades.
Last edited by Plantagenet on Mon 27 Mar 2017, 20:31:42, edited 1 time in total.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby AdamB » Mon 27 Mar 2017, 20:29:39

Plantagenet wrote:Image
Where the action in the oil biz is now

Cheers!


And we appreciate having been warned of this by our tax dollars in action! Increasing production being a leading indicator for a given price level. If they didn't think they would make some money, they wouldn't be doing it!

https://www.eia.gov/todayinenergy/detail.php?id=28772
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Re: Shale Oil is now profitable at $20 barrel

Unread postby ROCKMAN » Mon 27 Mar 2017, 21:09:53

"...nothing is profitable at $20." There are prospects profitable at $20/bbl and prospects that would loose money at $120/bbl. There is no set price that any trend is or isn't profitable. I've explained many times but no more. Folks can keep arguing over a nonexistent issue to the cows come home. I'm done.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby kublikhan » Mon 27 Mar 2017, 23:18:53

Plantagenet wrote:The technology of producing oil from Shale has developed and improved so it now costs MUCH less to produce shale oil then it used to.
The article below has a different take on the matter. The large decrease in break even price was not because of any miracle technology but was instead because the entire industry was in recession and oil service companies have had to slash prices to keep customers. This always happens when there is slack in an industry. Profit margins erode, strong companies have to slash prices to keep customers, and weak companies often go bankrupt altogether. Once the industry starts to peak up speed, this slack is absorbed, and more marginal plays are targeted, expect break even prices to rise again.

I am tired of hearing about the unbelievable impact of technology on collapsing U.S. shale production costs. The truth is that these claims are unbelievable. The savings are real but only about 10 percent is from advances in technology. About 90 percent is because the oil industry is in a depression and oil field service companies have slashed prices to survive.

Most of the celebration of efficiency and productivity is really about a depression in the oil industry that has resulted in massive price deflation. I estimate that only about 10-12% of the cost reduction is because of technology and most of that was a one-time benefit in the first year or so it was used. Going forward, efficiency gains are a few percent at most. Costs have come down for all oil and gas producers since the oil-price collapse in 2014. Most of the savings are because of lower oil field service costs and not so much because of improved technology.

Cost pressures are already surfacing in the Permian, which will dampen capital efficiency going forward.
Tech Miracle In U.S. Shale Is A Media Myth
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Plantagenet » Mon 27 Mar 2017, 23:37:20

kublikhan wrote:
Plantagenet wrote:The technology of producing oil from Shale has developed and improved so it now costs MUCH less to produce shale oil then it used to.
The large decrease in break even price was not because of any miracle technology but was instead because the entire industry was in recession and oil service companies have had to slash prices to keep customers.


Its not just about cutting costs from suppliers. There has been a big change in the size of wells and frack jobs that are being done in the last few years. The trend towards doing bigger and bigger frack jobs with more powerful pump rigs has proven highly successful at bringing down costs while increasing the oil production from each well.

"When US shale oil production was still rocketing higher in 2013, about 1,400 rigs were drilling wells. The average horizontal well was 6,200ft long and was pumped full of 106,000 barrels of fracking fluid and 4.4m pounds of sand and other materials to coax crude out of stubborn rocks, according to Rystad Energy, a consultancy. 

Today, after a devastating oil rout, the number of rigs has fallen to 529. But horizontal wells average 7,100ft long and are flooded with 226,000 barrels of fluid and 9.2m lb of “proppants” such as sand, Rystad says. 

One result has been a stunning rise in output from the average US oil well. The total volumes have been significant enough to alter the world supply picture. This week the US government reversed its forecast of a decline in US crude output in 2017 and called for an increase." 


Increasing productivity of oil wells in shale 


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Re: Shale Oil is now profitable at $20 barrel

Unread postby kublikhan » Tue 28 Mar 2017, 00:03:25

Yes but Rystad said that large factors in the price decline were declining service company prices and high grading(drilling only sweet spots, using only the most efficient crews and equipment, etc). As the industry recovers these price advantages erode.

Permian is dominating the US rig counts, with more active rigs than in other major shale oil plays combined. The resilience of Permian is due to the competitive economic metrics of the wells drilled in the sweet spots.

The decreasing well cost per boe during 2014-2016 reflects lower unit wells costs and higher EUR per well. Significant service cost reductions and efficiencies have been achieved particularly over the last year. In addition, optimization of completion techniques (reduced cluster spacing, increased proppant and fracking fluid, longer laterals) and a shift of focus to the best parts of Permian results on improved well performance. In 2015, the lowest average well cost per boe in Permian was achieved in Culberson County, mainly due to wells with high 30-day initial production rates* and EUR.
Permian sweet spots are getting sweeter

One sign that things are getting better for US onshore exploration is the revival of talk about looming shortages and bottlenecks. By mid-year, sand to prop open fractures and trucks to pump those jobs are expected to be in short supply. Oilfield hands are already a scarce commodity. Those are solvable problems, but at a price some companies may find uncomfortably high.

Surveys by branches of the US Federal Reserve Bank done in the fourth quarter of 2016 said that the break-even oil price for companies in Texas and surrounding states varies widely, and is generally greater than USD 50/bbl. The survey by the bank’s Dallas branch found that nearly 60% of the 141 companies surveyed said that it would take a price from USD 55/bbl to USD 65/bbl to “substantially increase” US crude oil drilling. And that was before service costs began rising.

Rystad Energy said the average price needed to profitably produce oil in the US nonconventional sector has dropped by 50% since the downturn hit in late 2014, but a lot of that is based on supplier discounts. “Lower unit prices of service companies are a major reason for the drop,” said Jon Duesund, senior project manager for Rystad, during a recent briefing in Houston.

At the top of its list of sustainable ways to save is high-grading. That covers everything from hiring only the most efficient drilling rigs and crews to methods used to target the most productive rock. The payoff from high-grading, though, will be lessened when rising demand forces companies to be less selective about the equipment leased and the spots drilled, Duesund said. “Some of the efficiencies we see disappearing,” he said. “We will not see the [break-even cost] level in 2014, but it will be higher than current levels.”

Richard Spears, managing ­partner for Spears & Associates, said discounts from service companies could be as much as 75% of the reduction in the break-even cost of producing a barrel of oil.
Rebound To Test If Cost Cuts Will Last
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