[Subjectivist]

.
Arctic off shore probably need a 150$ /Barrel horizon , minimum
not a spike ......a baseline
since this is not going to happen for a few years arctic projects are frozen ( pun)
some exploration will take place but it will just be poking around

How far out into the sea can a rig on the horeline drill horizontally in the Arctic anyhow?

[AndyA]

I doubt very much that the price ceiling is $120, most nations already pay far more then that through various taxes, the US has comparatively cheap oil so they waste it. The ceiling has more to do with where the next marginal barrel becomes available.
Say the average person spends 4% of income on fuel, and the price of oil goes up to $150, a 25% increase. Unless taxes are a % of fuel prices as opposed to a fixed price per gallon, the cost to the average person is at most an extra 1%. That is all, an extra $1 out of every $100. Even if you want to get finicky, total energy is <10% of GDP, and put all energy prices up 25% it costs an extra $2.50 out of every $100. It's hardly going to break the bank, and at $150bbl oil, how much do reserves increase?
Sure it will mean some changes, but given the utility of oil to society, it's hardly going to stop consumption. Even if the US has declining consumption, WT's Chindia will happily sop up the extra.
http://www.statista.com/statistics/2213 ... the-world/

[ROCKMAN]

Sub - here you go: On 28 January 2011 the world’s longest borehole was drilled at the Odoptu field, Siberia, with a measured total depth of 40,502 ft and a horizontal displacement of 37,648 ft.
Maersk Oil Qatar had the previous world record in a well with a measured depth of 40,320 ft including a horizontal reach of 35,770 Ft in the Al Shaheen Field offshore Qatar.
On Aug 26/ 2013 the Orlan Platform, offshore Siberia, had drilled the world longest ERD offshore well with a MD of 40,350'.

MD or measured depth is how far the drill pipe reached from the drill floor. Compare this to TVD...true vertical depth. A well with a 40,000' MD may only have a TVD of 5,000'. So down about a mile and out about seven miles.

Side note: some years ago my consulting company tossed my hat in the ring to be one of the 12 geosteering geologist's for the Al Shaheen Field project. But I decided to I've up international work. Would have been interesting.

[sparky]

.
On the subject of international versus home
there is some flurry of speculation about Petroplex source rock as the new great thing
a very superficial reading is that it sound like bull manure (mostly)
but is there some prospect of a Zombi "West Texas Intermediate" rising from the dead ?

[Pops]

I always say, the second half has to come from somewhere.

[ROCKMAN]

First, the "Petroplex" is not a source rock. From what I can tell someone just made the name up for simplicity's sake. The source rocks of the Permian Basin are numerous and have been known for more that 60 years. There's the Wolfcamp, Bone Spring (actually different members of this formation), Abo, Spraberry, Yeso, Avalon, etc. And there have been many thousands of vertical wells frac'd in unconventional reservoirs in the PB over the last 50 years. One of the reasons over 35 BILLION BBLS OF OIL have already been recovers from the trend. The Permian Basin is the industry's frac'ng "womb". This region has been called "hard rock" by Texas geologist's for almost a century. Hard rock in the sense that you gotta smash the SOB's apart to get the juice out. Trust me: just as the oil patch knew about the oil in the Eagle Ford Shale decades ago we were also very aware of one of the greatest hydrocarbon kitchens on the planet for a very long time. And yes: just like the Bakken and EFS the oil patch will be frac'ng horizontal wells all over the PB. But not because we just "discovered" or just learned how to drill and frac horizontal wells: it's about $100+/bbl oil, baby. LOL. Regardless of how many new wells are drilled in the Permian Basin we will not see the return of $30/bbl oil. And just like all those other shale source rocks in the same area as the EFS (that have been proven to have no significant commercial potential) some of the PB shales will prove to be relatively uninteresting. But soon the oil patch will learn to focus their efforts. Which, in reality, already started some years ago. While the MSM was obsessed with the Bakken and EFS west Texas operators were having their own drilling boom. The PB has almost twice as many rigs drilling as in the EFS. In fact the PB has more rigs drilling than any other STATE in the country which obviously includes N Dakota. And now suddenly the MSM has discovered this "new" play. As we say in the oil patch: a day late and a dollar short...sit down and shut up.

I guess the news cycle slowed up enough that the MSM had to go out and find a "new big" oil story to show the public they were on top of the situation.

[Ayoob]

I'm not sure I buy his logic. He says when the marginal consumer turns his pocket out, that's the ball game. Then he comes up with a great solution, have further government subsidies pay the uh... the uh... who, the drilling company? The refinery? Either way it ends up in the pockets of the producers, which I guess is fair enough. That would put a ceiling on the price at the pump.

I just think some buyers must have gotten together and said this run up to $140+ is too damn high, I'm not buying any more until the price comes down a little. Gradually, dropping to $100-110, and then settling out wherever it is today.

Too much price volatility, can't run a low-margin business that way. Get a stabilizing subsidy in there and we'll get back to drilling, baby.

[Ulenspiegel]

I'm not sure I buy his logic. He says when the marginal consumer turns his pocket out, that's the ball game. Then he comes up with a great solution, have further government subsidies pay the uh... the uh... who, the drilling company? The refinery? Either way it ends up in the pockets of the producers, which I guess is fair enough. That would put a ceiling on the price at the pump.

I just think some buyers must have gotten together and said this run up to $140+ is too damn high, I'm not buying any more until the price comes down a little. Gradually, dropping to $100-110, and then settling out wherever it is today.

Too much price volatility, can't run a low-margin business that way. Get a stabilizing subsidy in there and we'll get back to drilling, baby.

Personally, I would seperate the discussion about the description of the problem from the discussion of perceived solutions.

Kopits macroeconomic point is - I refer also to many of his contributions on the "Econbrowser" - that we have now a supply restricted market and the carrying capacity of the USA is around 110-115 USD per barrel, i.e. a price above this level has killed and will kill economic activity (GDP growth). As GDP growth is traditionally coupled in the USA and other economies to a large extend with higher fuel consumption this creates a problem.

The other aspect, which works in the opposit direction, is energy efficiency. However, energy efficiency has a quite moderate rate of change (his most optimistic assumption is 3% per year).

Kopits concludes that a high GDP growth is not longer possible when the economy operates near the carrying capacity, i.e. rate of efficiency gains set a limit, and that this reduced GDP growth has of course (ugly) implications for the ability to maintain or even lower GDP/debt levels. For him the low GDP growth is indeed now the rule not the exception, the main driving force is limited supply of oil.

The second of Kopit's talking points is the interesting situation for the oil companies in a market which does not allow higher prices but requires (much) higher investments for production.

[ROCKMAN]

U – “…a market which does not allow higher prices but requires (much) higher investments for production.” Nothing new or unique about this situation. You may recall my company was involved in spending $400 million drilling for deep NG along the Gulf Coast. And after NG prices collapsed we spent $0 drilling for those same targets. Likewise all other operators cut back their similar efforts. But that decrease in activity didn’t significantly reduced the drilling costs. As you point out even though the cost to develop those reserves hasn’t gone down the market hasn’t “allowed” the oil patch to charge more.

Though the topic was focused on oil the same logic should apply to NG. Obviously we’re not supply restricted with respect to NG. And NG as an energy source is a vital component of our GDP. High oil prices may have contributed to our slow recovery. But imagine what it would have looked like had NG prices stayed high. So that begs the question: what is the price of NG that represents the US carrying capacity? Which leads to the obvious IMHO: it’s the combination of all (oil, NG, coal, alts) that determines the country’s carrying capacity. High oil prices have us skewed in one direction with NG prices pushing us in the opposite direction. And where is coal pushing us: NG has replaced domestic coal consumption but coal exports have added a tad to our GDP.

Needless to say it isn’t a simple dynamic easy to predict. But it would seem focusing on just one component of our energy mix leaves us vulnerable to erroneous predictions of the future.

[Tanada]

U – “…a market which does not allow higher prices but requires (much) higher investments for production.” Nothing new or unique about this situation. You may recall my company was involved in spending $400 million drilling for deep NG along the Gulf Coast. And after NG prices collapsed we spent $0 drilling for those same targets. Likewise all other operators cut back their similar efforts. But that decrease in activity didn’t significantly reduced the drilling costs. As you point out even though the cost to develop those reserves hasn’t gone down the market hasn’t “allowed” the oil patch to charge more.

Though the topic was focused on oil the same logic should apply to NG. Obviously we’re not supply restricted with respect to NG. And NG as an energy source is a vital component of our GDP. High oil prices may have contributed to our slow recovery. But imagine what it would have looked like had NG prices stayed high. So that begs the question: what is the price of NG that represents the US carrying capacity? Which leads to the obvious IMHO: it’s the combination of all (oil, NG, coal, alts) that determines the country’s carrying capacity. High oil prices have us skewed in one direction with NG prices pushing us in the opposite direction. And where is coal pushing us: NG has replaced domestic coal consumption but coal exports have added a tad to our GDP.

Needless to say it isn’t a simple dynamic easy to predict. But it would seem focusing on just one component of our energy mix leaves us vulnerable to erroneous predictions of the future.

Hey Rockman, any thoughts on the company they are talking about drilling off Greenland? Will this be like Alaska north slope oil, harder or easier?
post1176524.html#p1176524

[Ulenspiegel]

@Rockman

Of course a combination of all energy prices contribute, the weighting factor for oil is simply much higher.

The point is very likely that the value of oil is higher in the US due to available infrastructure and obviously(?) the rate of substitution of oil with NG is not very high, the economy still answers fast to supply problems in the case of oil, DESPITE low NG prices (cent/kWh).

[ROCKMAN]

T - Don't have time to pull the references now but there has been some drilling of Greenland already. Don't recall any drilling problems but also seems there was zero success or even optimism generated by those efforts.

[dcoyne78]

... And yes: just like the Bakken and EFS the oil patch will be frac'ng horizontal wells all over the PB. But not because we just "discovered" or just learned how to drill and frac horizontal wells: it's about $100+/bbl oil, baby. LOL. Regardless of how many new wells are drilled in the Permian Basin we will not see the return of $30/bbl oil. And just like all those other shale source rocks in the same area as the EFS (that have been proven to have no significant commercial potential) some of the PB shales will prove to be relatively uninteresting. But soon the oil patch will learn to focus their efforts. Which, in reality, already started some years ago. While the MSM was obsessed with the Bakken and EFS west Texas operators were having their own drilling boom. The PB has almost twice as many rigs drilling as in the EFS. In fact the PB has more rigs drilling than any other STATE in the country which obviously includes N Dakota. ....

Hi Rockman,

You are correct that there are a lot of rigs in the Permian Basin(PB), but the last time I checked about 80% of the rigs drilling for oil are vertical rigs. I looked at a small sample of vertical wells vs horizontal wells in the Permian Basin and they are much less productive with EURs about one third on average of the horizontal wells (the sample size was quite small so this is a very rough estimate). Do all of the vertical wells (and there is a very large number of these probably over 95% of the total) that have already been drilled in the PB make it very difficult to drill horizontal wells? These kinds of questions probably seem dumb to you, but us non-oil patch types, we often get the opposite answer from reality.

Thanks.

Dennis Coyne

[JV153]

PO is when I receive an advertisement in the mail for a 20,000 euro loan with no credit check or downpayment required, as long as you pay the interest rate of 11.25% annually.

Suggestions for using the money (quoted from the advertisement) : go on a holiday, buy a new car, renovate the house.

[Pops]

H/T Admin, from the front page, a good presentation by Kopits:

http://www.youtube.com/watch?v=dLCsMRr7hAg#t=1046

[Mesuge]

Gail has a new post on it, and Kopits lurked into her forum as well..

[Keith_McClary]

H/T Admin, from the front page, a good presentation by Kopits:

http://www.youtube.com/watch?v=dLCsMRr7hAg#t=1046

60 page PDF slideshow (4.4MB):

http://energypolicy.columbia.edu/events ... ey-drivers

[Subjectivist]

H/T Admin, from the front page, a good presentation by Kopits:

http://www.youtube.com/watch?v=dLCsMRr7hAg#t=1046

Holy Toledo! Pops you need to find Mary Poppins or something, I am catching up video links today and this one is downright unnerving!

The US increased production and every barrel not imported was soaked up by Asian countries. So if Fracking is the bubble many members around here think it is we are toast when the bubble pops because we can't get back international supply now going to China.

[dolanbaker]

H/T Admin, from the front page, a good presentation by Kopits:

http://www.youtube.com/watch?v=dLCsMRr7hAg#t=1046

Holy Toledo! Pops you need to find Mary Poppins or something, I am catching up video links today and this one is downright unnerving!

The US increased production and every barrel not imported was soaked up by Asian countries. So if Fracking is the bubble many members around here think it is we are toast when the bubble pops because we can't get back international supply now going to China.

It's just another litmus test that peak oil has passed, if it was wrong, then either the price would have fallen already or oil companies wouldn't have needed to invest so much over the past few years to "hide the decline!"

[ROCKMAN]

DC – Sorry…missed your post. It’s difficult to compare the Permian Basin to the Bakken, EFS or any other shale play. The reservoirs out there fall into a variety of different types some of which are very different from the fractured shales. The big difference is that most of the shale wells are being drilled in areas where little or no shale wells had been produced before. In west Texas much of the drilling is happening in the middle of oil fields that have been producing for decades. So vertical wells would be more common: why spend the extra money to slide a hz well up next to a well that had produced the reservoir for 30+ years? Also while some hz wells might recover 3X as much oil they may also cost 4X+ as a vertical well so you’re not going to get the bang for the extra bucks. And there are also well spacing rules: you can’t get a new hz well too close to a vertical well that’s still producing from the same reservoir. But if drilling vertical wells in between existing producers become economic thanks to higher oil prices one can ask the state to change the field rules and allow closer spacing.