[godq3]

The critical thing to remember about that chart IMHO is that none of those phases are judged on the basis of EROEI by the folks conducting those operations. In fact the vast majority of those folks are probably not even familiar with the term EROEI.

Their non familiarity with EROEI doesn't change the EROEI's importance. Now EROEI of worldwide oil extraction is too low to maintain the price at level required to maintain global extraction rate.

[Pops]

The critical thing to remember about that chart IMHO is that none of those phases are judged on the basis of EROEI by the folks conducting those operations. In fact the vast majority of those folks are probably not even familiar with the term EROEI.

Their non familiarity with EROEI doesn't change the EROEI's importance. Now EROEI of worldwide oil extraction is too low to maintain the price at level required to maintain global extraction rate.

LOL, why not just start a new thread, put your opinion in it, then lock it?

[ROCKMAN]

God - "Their non familiarity with EROEI doesn't change the EROEI's importance". And your unfamiliarity of how business decisions are made in the energy industry makes reading your posts a complete waste of time IMHO. Read my post again, set your childish stubbornness aside and try to comprehend the simple FACTS I've explained. Nothing that has ever happened in the oil patch has used EROEI as a determining factor nor will it ever. Until folks like you understand that you'll never be able to appreciate the dynamics of the situation.

[ROCKMAN]

God - "Their non familiarity with EROEI doesn't change the EROEI's importance". And your unfamiliarity of how business decisions are made in the energy industry makes reading your posts a complete waste of time IMHO. Read my post again, set your childish stubbornness aside and try to comprehend the simple FACTS I've explained. Nothing that has ever happened in the oil patch has used EROEI as a determining factor nor will it ever. Until folks like you understand that you'll never be able to appreciate the dynamics of the situation. EROEI of oil/NG exploration is INTERESTING but not a determining factor.

[Scrub Puller]

Yair . . . pstarr

Then you raise the price of the oil. Sounds simple. Whatya think?

If only says the oilman.

The oil producers are in the same boat as farmers . . .they do not set the price.

Any commodity, my green onions, ROCKMAN'S oil, your house, your car, your Jackson Pollock on the wall are only worth what people are prepared to pay on any individual day.

Cheers.

[ROCKMAN]

Pstarr - "The more energy you must spend in drilling a well (lower eroei) the more costly that well will be to YOU." Which is exactly what I've been saying. But this is how you say it: The more MONEY you must spend in drilling a well (higher drilling capex) the more costly that well will be to YOU. And it is that COST factor that will condemn all drilling prospects...even ones that have a nice positive EROEI. As I've pointed out many times no company will ever INTENTIONALLY drill a well with an EROEI much below 6. And guess what: that was based upon oil selling around $100/bbl. And guess what now: with prices closer to $50/bbl projects with EROEI's of 10 or so are not going to be very attractive opportunities. Understand that a well drilled when oil was $100/bbl has the identical EROIE as that same well has when oil is $50/bbl. But the rate of return has obviously been greatly reduced. And that means lot of wells that had decent EROEI and were viable at the higher price last year won't be drilled this year due to the lower oil price. And their EROEI's have not changed at all.

"Eroei counts": OK then if it counts tell us exactly why if it isn't being considered in the decision making process of what to drill. As I just pointed out that wells drilled last year with a EROEI of X won't be drilled this year even though they have the identical EROEI value.

[Revi]

The EROEI is important, but the most important thing to the man on the street (or in a car) is the price of the commodity. Now a lot of people are so broke that they can't afford any oil at all. There is a growing segment of the population that is carless, and they aren't buying any oil to speak of. The rest of us are buying some oil, but we are very cautious because we don't really know what's going to happen. I am not going to take out any loans nor am I going to buy a wave runner. Whatever we have we are hanging on to. Our SUV's and trucks are taking up all of our available income, but we are not going to change because that would be admitting that we are sliding backwards.

[Ibon]

The EROEI is important, but the most important thing to the man on the street (or in a car) is the price of the commodity. Now a lot of people are so broke that they can't afford any oil at all. There is a growing segment of the population that is carless, and they aren't buying any oil to speak of. The rest of us are buying some oil, but we are very cautious because we don't really know what's going to happen. I am not going to take out any loans nor am I going to buy a wave runner. Whatever we have we are hanging on to. Our SUV's and trucks are taking up all of our available income, but we are not going to change because that would be admitting that we are sliding backwards.

Many of us have lifestyles embedded in the times when the economy was strong and oil was cheap. We bought homes and cars and toys accordingly. Now many are losing these assets.

Look to the young generation now emerging. What are their choices? How are they adapting? What are their values?

When you pay attention to the adaptation happening with the young adults out there you are looking at cultural changes.

We oldsters are embedded in a time that is for many no longer viable. That is our fate.

[ROCKMAN]

Revi - Did you notice you gave support to my position that EROEI is not only UNIMPORTANT with respect to which wells get drilled but also to how refined products are priced and how much the consumers buy? When you go for a fill up do you buy only from stations that sell gasoline made from oils with a higher EROEI? Are you willing to pay more per gallon made from high EROEI oil? From low EROEI oil?

It's getting frustrating. Some folks keep insisting that the EROEI of an oil well is important. I keep asking the same question: how so? And all I get back is "because it's important". Which is the equivalent of a 6 year old explaining why he won't eat his carrots: "Because." LOL. So if EROEI doesn't determine if a well gets drilled or not and nor does it determine what one pays for refined products or where one buys them then, pray tell, how is EROEI important to the daily dynamic?

[Pops]

"Eroei counts": OK then if it counts tell us exactly why if it isn't being considered in the decision making process of what to drill.

It counts in each line item the estimator sticks into the project budget, doesn't it?

Dollars equate with energy to various degree. Dollars spent on miles of casing that goes down the hole and never comes back out for example. Dollars for steel is dollars for energy to a large extent. The complicating part of course is the energy represented in steel is maybe a large part coal coke and/or coal via electricity to heat the furnace.

Which isn't to say you should count the energy required to grind the powdered sugar to cover the doughnuts the hands eat on the way to the site. But, just because ERI isn't a part of the paperwork doesn't mean energy isn't a part of the calculation.

Dollars are energy by proxy.
.

[peripato]

The EROEI is important, but the most important thing to the man on the street (or in a car) is the price of the commodity. Now a lot of people are so broke that they can't afford any oil at all. There is a growing segment of the population that is carless, and they aren't buying any oil to speak of. The rest of us are buying some oil, but we are very cautious because we don't really know what's going to happen. I am not going to take out any loans nor am I going to buy a wave runner. Whatever we have we are hanging on to. Our SUV's and trucks are taking up all of our available income, but we are not going to change because that would be admitting that we are sliding backwards.

This is happening to entire countries now at the end of the age of growth. Greece, the Ukraine, Syria etc etc etc. The weak and expendable go first. They are being frozen out of the credit cycle and can now no longer afford to buy oil. There's simply not enough to go around. Soon others will follow, many, many others, all the way to the top. . Let's keep a tally and see in 5 years time how many more countries have been sent to the knackers yard of history. That's if our own hasn't been poleaxed in the meantime, in which case we will have much bigger fish to fry.

[ROCKMAN]

Pops - "It counts in each line item the estimator sticks into the project budget, doesn't it?" No it doesn't at all. EROEI isn't a category anywhere one my cost estimate sheet. How many times do I have to repeat myself: the oil patch doesn't give a sh*t about EROEI when it comes to making drilling decisions. LOL. Do you think I've been kidding all this time?

"Dollars are energy by proxy." Exactly. And for love of Dog please try to absorb this: the amount of energy used to drill a well is insignificant compared to the amount of energy even a mediocre well produces. In fact there are hundreds of EFS wells that will never recover their full capex investment but will still generate a decent EROEI. A real example: an EFS well burns 200,000 gallons of diesel when it's drilled and frac'd (a high estimate). That 4800 bbls. Assume a 25% diesel yield from a bbl of oil so it takes about 20,000 bbls of oil. For simplicity just throw away the rest of the product. So such a well that ultimately produces 100,000 bbls of oil has an EROEI of 5. Not fantastic but still a nice net gain. The operates gets the revenue of about 70% of that production...about 70,000 bbls. Which at $50/bbl produces $3.5 million. And at $100/bbl = $7 million. And the well cost the company $8 million to bring to production. So at a positive EROEI of 5 he lost his ass. LOL.

So if an company wouldn't intentionally drill a well with such a positive EROEI how exactly important is that metric in the dynamic? And please don't bring up the embedded energy of the infrastructure. That's a "sunk" factor just like sunk money on an investment: that energy has already been consumed whether it drills that well or not. Or ever drills any wells. But if you want to go thru the exercise have ar it. But you'll need to amortize that expended energy with all the wells drilkedcwith that rig over its 25+ year life.

[Pops]

Pops - "It counts in each line item the estimator sticks into the project budget, doesn't it?" No it doesn't at all. EROEI isn't a category anywhere one my cost estimate sheet.

Whether you have a line item or not is irrelevant.

It is amusing that you don't get that "energy" isn't limited to diesel.

I don't have diesel or bunker fuel or nat gas or any of hundreds of other FF derived products in the coffee cup I'm holding.

But I'd not have any coffee in it either without energy.

[Tanada]

My problem with EROEI estimates is pretty simple, how far do you go into the calculation before it starts to lose meaning? ROCKMANS example was 20,000 bbl of Diesel fuel, but as Pops rightly points out what about the fuel used to haul the pipes to the drilling site along with the concrete? After you figure that in what about the fuel to manufacture the pipes and manufacture the concrete? What about the fuel to mine the iron ore, mine the coal and limestone used to smelt the iron ore into steel and supply the raw ingredients for the concrete and power the cement plant? What about the share of the energy used to build the steel mill and build the cement plant and all the machinery in those plants? What about the energy to mine the materials and process them to build those plants? And so on and so on ad infinitum.

In mathematics classes we called this the problem of significant digits. If you calculate a result that does not terminate, say 1/3 or pi, how many steps is it worth taking? Reality is once you get down to the .001 level that is about as significant as you need to go for almost anything in practical engineering. The same is true for EROEI in my opinion, ROCKMAN's definition is way too loose both ways, he only counted diesel fuel in and out. Many of the EROEI proponent go to the opposite extreme throwing everything they can think of into the equation. Reality is somewhere in the middle where Money is the measure. Monetary gain or loss controls financial decisions, but not all wells are drilled for financial reasons. For example in the USSR in the 1970's wells were drilled for independence from the world oil market. The USSR did not care how much a barrel cost to find and produce so long as they could produce enough to supply their military and Warsaw Pact allies.

[Pops]

I think that's exactly right, which is why I argue both sides against the middle, or is that the middle against both sides?

LOL

[ROCKMAN]

Pops - "It is amusing that you don't get that "energy" isn't limited to diesel." Honestly I have no idea what you're talking about. The only ff used directly to drill a well is diesel.

And T - My estimate for the diesel consumption includes all those peripheral components. And a bit of a high estimate at that. A typical EFS takes about 15 days to drill. A big rig burns about 1,500 gallons of diesel per day. So that's about 23,000 gallons...about 540 bbls. So about 2,100 bbls of refined oil.

And as far as " What about the share of the energy used to build the steel mill and build the cement plant and all the machinery in those plants?". For Dog's sake get a grasp of reality buddy. LOL. Do you think they build a new steel plant for each well drilled? Do you think the build a new concrete plant for each cement job? Do you think they dig up an entire mountain to get the ore used to make the casing for one well?

I'm sure you're familiar with the concept of amortization. How much energy was used to build that steel mill per each foot of the MILLIONS of feet of casing made by that mill? How much energy was used to build a drill rig divided by the numbers of well it drills during a decades life span? How much energy was used to build that cement plant divided by the hundreds of millions of pounds of cement it produces over 30 or 40 years?

Think about it: every component used to drill a well, either directly or offsite, has an energy input component, right? And so do you think all those manufacturing companies get that energy for free? Of course not. Do you think when those companies sell the components or lease the hardware they eat the cost of the energy input or do they add it to their price? Da...another easy answer.

So again guys...a little common sense: do you think the cost of every Btu consumed to create the entire oil/NG development dynamic isn't paid by the companies doing the drilling? And do you think all the service companies (drilling contractors, cement companies, casing companies, trucking companies, etc) are only charging the cost of the energy they consume in their operations? Of course not.

The bottom line: the monetary cost of drilling a well is much greater then the cost of all the energies used in the process. If you believe otherwise show me your numbers. The anecdotal praddle is meaningless. And as far as "...but not all wells are drilled for financial reasons." Now you've completely lost all credibility IMHO. Who the f*ck cares what Russia ever did? LOL. I've drilled in the US for over 40 years and I've not seen one well drilled for anything but financial consideration. If that's the best argument you have you lost this debate before you woke up this morning. LOL.

And again, all you spectators, please note that no one has yet presented any FACTUAL support for EROEI to ever be part of the decision process in drilling for oil/NG. Praddle on boys but EROEI has never been used to make a drilling decision. If you know otherwise please post the link so that I may be enlightened.

[Pops]

Pops - "It is amusing that you don't get that "energy" isn't limited to diesel." Honestly I have no idea what you're talking about. The only ff used directly to drill a well is diesel.

Come on ROCK.

If the 6-8-10 mil or whatever it cost to frac a shale well is anything other than labor; if any of it is material or equipment that took energy to produce or deliver; then a fracked well takes more energy to make than one not fracked.

How hard is that?

Energy was used to produce that material and equipment. Whether you have a line item for that or not doesn't matter. Whether you consider that energy or not doesn't matter.

We all know the energy business isn't in business to make energy, it's in it for profit.

For that matter the consumer doesn't care about net energy either as long as they can afford to buy some—if the balance was 1:2 or 1:10 who cares? We've been wasting 70-80-90% of the FFs we've extracted up to this point so why would we start to care now?

.

[ROCKMAN]

Pops - "If the 6-8-10 mil or whatever it cost to frac a shale well is anything other than labor". I'm on a well this weekend but when I have time I post a detailed breakdown of the costs. But:"If the 6-8-10 mil or whatever it cost to frac a shale well is anything other than labor." The "labor" cost involved in drilling and frac'ng a well is so insignificant it usually isn't even a line item factor. In fact often the diesel cost isn't broken out. Likewise the actual materials used (casing, drill mud, etc) are minor components. Typically the most significant material cost is the casing. But on an $8 million drilled and frac'd well the total casing bill is often less than 15% of the total.

A hint: the majority of the cost is the rental rates of the infrastructure. And how "hard" are those costs? Consider an extreme example: an offshore mobile drilling rig. I've seen the same rig swing from $750,000/day to $300,000/day over the course of 4 or 5 years when then was a huge drop in demand. So the cost of a 60 day well (for just the rig cost alone) dropped from $45 million to $18 million. Same rig... same well... same operator ...same diesel consumption ...same amount of drill mud ...same amount of casing ...same amount of labor ...same embedded energy in the infrastructure. And in the first case the drilling contractor pocketed an extra $27 million. Or, conversely, the operator got dinged for an extra $27 million. Consider the impact of that on a well's rate of return.

And a little closer to home: the Eagle Ford Shale trend. I've just seen a rig that operators were paying $28,000/day before the oil price collapse and is now being offered for $14,500/day. Same rig ...same well ...etc ...etc. And same EROEI for a well. BTW all the other costs have fallen 15% to 30%...or more. And the discounting continues to increase.

And none of those huge price swings impacted the EROEI one tiny bit.

[Revi]

Call it uneconomical instead. We may never see another time when people were ready to throw money into things like shale oil. There's no return, so why do it?

They might puff up some new bubble, but I doubt it.

We are at the end of that game.