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Peak oil debate

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

Re: Peak oil debate

Unread postby Tanada » Wed 12 Dec 2018, 18:21:39

onlooker wrote:Well if you look at this link, you can see that production in Athabaska 'tar' sands, really took off in the period 2005-2012
2005 = 760,000 bpd
2012= 1.8 million bpd
So again, I am saying production really took off not started

https://en.m.wikipedia.org/wiki/Athabasca_oil_sands


In your original post you said
onlooker wrote:The way I see it, the heavy oil and the light one from Shale/fracking, was NOT used extensively before because the EROEI is not good.


Now 'Extensively' is up for interpretation, but that 760,000/bbl/d of Canadian heavy was accompanied by Californian heavy and Venezuelan heavy, it wasn't just one item in isolation. Californian heavy has been declining for decades and VZ has had serious production problems for a decade so the logical place to increase production was, you guessed it, Canada. The fact that Fracking came on strong in North Dakota making it cheaper to make dilbit from the Canadian heavy oil sand output and the pipeline capacity has been increased significantly since 2005 for cross border shipping both were also factors in making Alberta a more profitable source of the heavy oil for blending. However it was used for that purpose in a steadily increasing amount even longer than I remembered going all the way back to the mid 1970's instead of mid 1980's.

It is nearly always a mistake to cherry pick a particular field/formation/country and try and use that as an example of what is going on everywhere. Laws and regulations on how a particular resource is exploited change every time you cross a state or national border. Economics of any particular source can vary widely due to cofactors like access to transport and thus access to markets that desire the particular production stream.
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Re: Peak oil debate

Unread postby onlooker » Wed 12 Dec 2018, 18:36:19

Okay, I admit I get in over my head when I get into these technical detailed conversations related to Oil. But Tanada, would you not admit that the real ramping up of heavy oil and shale/fracking occurred 2005 and afterwards. I mean in comparision to levels of production before. And one has to inquire the reason. Which is to say that economics is the decisive factor but that stems from the EROEI as energy is priced like any other commodity. So, the EROEI was more favorable to exploit conventional reserves before these unconventional, LTO, Heavy oil, Shale/fracking etc. Just curious your opinion T.
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Re: Peak oil debate

Unread postby rockdoc123 » Wed 12 Dec 2018, 18:39:38

Really. I said extensively. In past times NO talk of a shale boom, or exploitation of the tar sands of Canada or Eagle Ford or Fracking or any of that. Conventional reserves were meeting very well world wide demand. Then in 2005, coinciding with this site going online, we hear of peak conventional crude. We have people freaking out here on this site, We have PO experts like Campbell and Laheire calling peak, we have the runup to $147 oil in 2008. So no you cannot say this was all happening before 2005 because it didn't.


well, I guess you weren't around before 2005, this history of inputs to refineries in the US and US production and imports is pretty clear.

First off the refineries were retooled for heavier blends well before 2005
Secondly, the US has been importing increasing amounts of heavy oil from Canada and Venezuela since the late eighties early nineties
Thirdly US production of medium and light oils which were used to blend with heavy oil has steadily fallen off since the late seventies, and that was offset by imports of lighter crudes up until that was no longer necessary due to the LTO boom.

OK. Here are a few graphs that explain what I was saying.
First, we look at US production by source. By 1970 lower 48 oil which was a mix of medium to light oil started its serious decline, some was replaced by light oil offshore but it wasn’t until 2004 that LTO started into its own and not until 2010 that it took off on its boom.

Image

Then we look at CDN heavy oil production. This has been on a steady rise from the mid-eighties through til now and outside of a small proportion being refined in Canada, the vast majority has gone to the US.

Image

That is reflected in the third chart which shows US imports by API. Note that heavier oils have steadily increased from the eighties onwards but also that imports of medium to light increased significantly from the nineties onwards. That was of course because US production of medium to light was decreasing and the refineries needed those fractions to blend with the heavy oil they were purchasing in increasing amounts. But by the time the shale boom took off the import of light oil dropped right off, simply because now the US was producing all the light oil it needed for blending to the optimal grade for existing refinery setups.

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Re: Peak oil debate

Unread postby onlooker » Wed 12 Dec 2018, 18:46:29

"but it wasn’t until 2004 that LTO started into its own and not until 2010 that it took off on its boom."
Okay so this confirms what I said and as for heavy, well you have some clear data that refutes my contention, thanks
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Re: Peak oil debate

Unread postby Tanada » Wed 12 Dec 2018, 19:58:53

onlooker wrote:Okay, I admit I get in over my head when I get into these technical detailed conversations related to Oil. But Tanada, would you not admit that the real ramping up of heavy oil and shale/fracking occurred 2005 and afterwards. I mean in comparison to levels of production before. And one has to inquire the reason. Which is to say that economics is the decisive factor but that stems from the EROEI as energy is priced like any other commodity. So, the EROEI was more favorable to exploit conventional reserves before these unconventional, LTO, Heavy oil, Shale/fracking etc. Just curious your opinion T.


The reason why heavy oil production has been ramping up faster since 2005 is pretty much the reason this website exists. Demand for oil on a world wide basis boomed in the 1990's and has continued to boom since 1991 when the Coalition Kuwaiti Invasion threw Iraq out. China started rapid, as in doubling its economy every 4-5 years rapid, economic growth especially dated from the Clinton Administration negotiating most favored nation trading status encouraging American manufacturing to off shore production to China. This started slowly in the 1980's but by the end of the 1990's it was a virtual Juggernaut with more and more companies moving facilities to China as fast as the power grid and other infrastructure could support constructing factories there. At its peak China was adding over 1 GWe generation capacity EVERY WEEK to its grid to supply all this mass influx of manufacturing capacity.

Along about 2005 we hit a tipping point where world 'conventional' sourced oil alone could not meet world demand. However we had already been exploiting 'unconventional' reservoirs like 'tar sands' and to a much lesser extent immature kerogen containing shale and slates in places like Canada for the former and Estonia for the latter. The technology to grow Canadian heavy all production was well known and proven by 2005 having been progressively improved from the 1970's onward so adding Canadian heavy oil production was a 'no brainer' as it were.

At the same time unfortunately Chavez in Venezuela was doing a lot of the wrong things in terms of his oil production infrastructure and the dream of rapidly expanding Venezuelan Heavy oil production ran into one problem after another. At the same time his mismanagement was so bad VZ was struggling to increase its conventional production with moderate success at first to sell into the rapidly rising prices in the world market.

Against this backdrop the USA and elsewhere started straining everything to produce more conventional oil once world benchmark crude passed $35/bbl because at those prices going back and redrilling old fields was an economic winner. There was a miniature conventional oil boom across the USA from 2005-08 with thousands of old small deposits suddenly became economically exploitable. If you look carefully at the EIA data for 2005,2006,2007 you will see the very long term decline which had been happening since Alaska peaked actually stopped and started a slight increase because of the boom in reworking old deposits across the USA. Then we had the price peak in 2008 followed by the crash which reversed within six months and we settled into a new high price band at or over $80/bbl between 2008 and 2010.

While all that was going on in the Oil World the 'natural gas crisis' hit in the winter of 2004-05 when American natural gas shot up to $11/MBTU. That gave great incentive for gas drillers to try out their new expensive slickwater fracking ideas in the slow producing natural gas shale beds that had been exploited for a century or longer with simple vertical wells originally just left alone, then later fracked with chemical explosives and in the 1960's even tested with fission explosive fracking under the Atoms for Peace/Project Plowshare experiments. The slickwater fracking of these deep beds for natural Gas was so incredibly successful prices dropped almost overnight and by 2006 Natural gas was selling for under $2/MBTU. When Oil hit $147/bbl in summer 2008 people in the oil and gas industry decided to try out fracking in 'wet' gas regions and set off the boom in LTO entering the market. By the end of 2009 light Tight Oil was starting to have a significant impact, the USA was increasing total production for the first time since Alaska peaked out in 1988. World oil prices had recovered by then creating all the incentive necessary for the 2010-2014 fracking boom that succeeded in reducing American imports even faster than China/India were increasing demand. In fall 2014 OPEC decided to crash prices to punish America but this backfired hurting them a lot worse than it hurt the USA. In mid 2016 they gave up and started gradually cutting production to increase world oil prices. Last week they decided to keep doing that.

So SURE, production from unconventional sources has boomed since 2005, no argument there. However where we differ is economic drivers completely describe each and every step of the process which took place, which zero need to fall back on the EROEI theory as to why this took place.

To be clear I have never bought into the EROEI theory because the models do not have a set of standards to be used. this means modeler A can include the energy used to manufacture the well casing and operate the drilling equipment while Modeler B might include the energy cost of manufacturing the drill rig and modeler C might include the energy costs of manufacturing all the vehicles used by both the drilling operation and the employees who did the labor while modeler D includes the energy cost of building all the roads used in that region and modeler E includes even more embedded energy from some other place I did not mention. This causes two massive intrinsic problems, first you can not compare model runs from different sources because they use different standard inputs and secondly any modeler anywhere can 'tweak' their inputs to get whatever answer they want to get.

Out here in the real world I first ran into this issue dealing with models from activists opposed to nuclear power plants. See they developed models to demonstrate nuclear power was not only uneconomic in the present but that it would never be economic under any circumstances. They did this by tweaking the models through changing the values for the variables until they got the answer they wanted. For example most of the Uranium mined in the USA is procured through a process called in situ leaching. Two wells are drilled, the first one injects a mildly acidic liquid that flows through the uranium ore bed deep underground and the second well extracts the liquid which has dissolved uranium in it by the time it has passed through the formation to the collection well. this process is relatively speaking dirt cheap. But all the modelers opposed to nuclear power insisted on using the costs associated with a hard rock mine where people use explosives and massive machines to pull rock to the surface, crush it into powder and then leach the Uranium out in a big processing plant. That method was used in the 1940's but is increasingly rare in use today, especially in countries like the USA with advanced drilling techniques. They play the same game with every other step in the process from ore extraction all the way to waste disposal.

Learning about the way activists manipulated nuclear energy models made me automatically suspicious of any advocate for or against any technology. Nearly all of them play with the model until it gives them the answer they want to get before they even started working on it. In the energy industry you can see this with the people opposed to ethanol fuel who insist on using only corn as a biofuel input completely ignoring things like Sugar Cane use in Brazil or use of Potato or Yam as starch sources because all three of them have massively larger output for energy input compared to corn ethanol. You also see it when you get energy output models for things like Natural Gas to Diesel conversion plants or Coal to Diesel plants like those the South Africans have been hugely successful with since the 1970's. Here is a hint, when you take Methane from cheap Natural Gas and run in through a modified Fischer–Tropsch process you can manufacture clean sulfur free diesel fuel for about $1/gallon. The more expensive the gas the more expensive the fuel, but the real cost is in building the processing equipment and maintaining it. This lets you play games by saying the equipment only lasts (for example, not real numbers) 7 years before needing to be replaced when in the real world it lasts 28 years before needing to be replaced. that lets you quadruple the projected price without actually proving a darn thing.

It turns out every EROEI study I have ever looked at is just like that. There are literally an unlimited number of inputs you can choose to use and there are no set numbers for any one of those inputs, which lets the modeler adjust things to their hearts content and makes the model totally useless.
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Re: Peak oil debate

Unread postby rockdoc123 » Wed 12 Dec 2018, 21:04:32

Tanada

Good post. To add my own perspective of having been close to the "sand face" with regards to the decisions made to go forward with both heavy oil and unconventionals later I agree none of this was driven by a notion of EROEI.
The ramp-up in heavy oil in Canada was, as you say, driven by the opportunity proposal of greater oil demand. The mineable oil sands back in the late seventies had been pretty much unexploited mainly because we just didn't have the technology to make it work efficiently and the price of oil was just too low. Over the next couple of decades, those costs to mine and process oil sands dropped and the technology for the easy to get at non-mineable heavy oil also improved. A lot of money was spent on pilot projects that didn't work (example: Wabascaw fire flood) but through government support and continued effort on the part of a few oil companies the technology gradually improved to the point where when oil prices rose quickly due to global demand production of heavy oil was there to be had. The oil companies were looking to make profit out of the heavy oil (both mineable and thermal) that they had held for years and a technology/price point came into play, not EROEI.
And with respect to the unconventionals, I was there in several executive meetings where entry into the shale fracking space for natural gas was argued. It was all about guaranty of predictable production of natural gas beyond declines. With conventional reservoired gas it comes on strong and then declines rapidly without a long low declining phase which is contrary to the situation with unconventional reservoired gas. The hunt for oily unconventional reservoirs only came about as natural gas prices dropped and global oil prices rose so it suddenly made more sense to go after the more liquid-rich zones in the basin-centered plays. These decisions were not driven by a need to fill refineries but rather by oil and gas companies seeing a means to make their business more predictable given exploration in conventionals is anything but predictable.
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Re: Peak oil debate

Unread postby ralfy » Thu 13 Dec 2018, 07:40:22

One should not confuse theory with application.

Also, I have no idea how EROEI is still a theory, unless one can safely assume that no energy is needed to, say, extract and process oil.
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Re: Peak oil debate

Unread postby onlooker » Thu 13 Dec 2018, 08:05:23

ralfy wrote:One should not confuse theory with application.

Also, I have no idea how EROEI is still a theory, unless one can safely assume that no energy is needed to, say, extract and process oil.

I think Ralfy, Tanada and Rockdoc refer to EROEI theory as a way of modeling real world events via projections or analysis utilizing the metric of energy inputs and outputs. I do agree with Tanada, that modeling can be subject to subjective interpretation and manipulation. By the way the Hills Group ETP is a good example of this EROEI modeling. On the other hand your point is well taken. Energy as the driver of economic activity is uniquely prominent as a resource that should be keenly accounted for, measured and quantified. Can it really be done in a comprehensive accurate manner? I have no idea. But I do feel that economics alone does NOT give a full or totally accurate indication of the energy balance at any given time that an Economy is working with and by extension what the expected energy balance will be going forward. Tanada and Rockdoc, would say that it does not matter as economics will dictate the viability of continuing to utilize a particular energy source. The question for me is how precisely.
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Re: Peak oil debate

Unread postby Tanada » Thu 13 Dec 2018, 10:58:11

onlooker wrote:I think Ralfy, Tanada and Rockdoc refer to EROEI theory as a way of modeling real world events via projections or analysis utilizing the metric of energy inputs and outputs. I do agree with Tanada, that modeling can be subject to subjective interpretation and manipulation.

But I do feel that economics alone does NOT give a full or totally accurate indication of the energy balance at any given time that an Economy is working with and by extension what the expected energy balance will be going forward. Tanada and Rockdoc, would say that it does not matter as economics will dictate the viability of continuing to utilize a particular energy source. The question for me is how precisely.


Not quite. Economics are a huge factor certainly, but political decision making both local and international also has a huge impact. For example Fracking in Pennsylvania and New York state is much more restricted by political decisions passing bans or regulations on the industry compared to Ohio (sharing the same source rock as Pennsylvania) or North Dakota or Texas where the state governments want to encourage fracking because it brings jobs and employee income taxes or sales taxes when they buy stuff is income for the government to play with. On the other hand the anti-nuclear hysterics have created such a regulatory tangle that building a new power plant in the USA is extremely difficult and that makes the expense of construction so high that even the very cheap electricity produced can't bring in enough profit to make the construction worth while from an economic standpoint of private companies.

You really want to unleash energy in the USA? Have the US Army Corp Of Engineers build the natural gas to diesel plants and the nuclear power plants and the new heavy oil upgrading plants preventing all the legal challenges in the civil court system and making following all the government regulations automatic from day one. Then have the government sell those facilities for cost to private businesses to own and operate. The price of diesel fuel would collapse overnight! For the nuclear simply build the new plants alongside the existing plants that are reaching the end of their useful lives and allow the utilities to upgrade their efficiency and safety systems without a 12 year court battle over ever piece of paperwork attached to the project. That would increase the already admirable safety rating of nuclear power to unseen levels and reduce fuel demand by a massive quantity providing continued cheap baseload nuclear electricity to the grid. You also avoid all the environmental impact studies, costs associated with creating new infrastructure and employment for the existing workforce for another 60-80 years before that Gen III+ plant needs to be replaced itself at end of useful life. For Ethanol fuel widen the subsidies to include all crop types, not just corn, and watch as the farmers in Iowa who want to sell to ethanol plants switch to growing sweet potatoes or sugar beets because their energy output is 12-15 times as high as that for corn starch.

But the political influence of the traditional oil refineries, anti-nuclear activists, and corn growers association are all fighting against those steps every minute of every day. Our nation is not operated in a rational manner to seek the best results for the general public or future generations, it is oriented to the next quarterly profit for the people with political pull.
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Re: Peak oil debate

Unread postby rockdoc123 » Thu 13 Dec 2018, 11:16:41

Tanada and Rockdoc, would say that it does not matter as economics will dictate the viability of continuing to utilize a particular energy source. The question for me is how precisely.


the answer is pretty simple as I see it. If the energy source be it natural gas, oil, hydro electicity, nuclear electricity etc are available at a price people can afford they will be purchased as long as there is no readily available and efficient cheaper alternative. And if people will buy it companies will look to see if they can produce it for a profit. And that is where all the efforts lay with regards to oil and gas companies. They don't concentrate on improving the BTU value of what they produce they concentrate on lowering their cost base average. I remember when I first started in the business some wells drilled into conventional reservoirs immediately adjacent what are now the unconventional targets could take a month, sometimes 2 months to drill and complete. In the old days drilling rigs weren't as efficient, bits didn't last as long and the knowledge of how to avoid stuck pipe or hole collapse was in its infancy. There has been vast improvement so that now those wells drilled to the same measured depth are taking a couple of weeks at maximum. The costs are much lower which improves the profit margin, of course, you could argue EROEI has improved but then that flies in the face of the arguments the EROEI proponents have been tossing around here...that it has gotten much worse. The bottom line is it costs less to drill and complete wells these days in general (comparing apples to apples), partly due to better technology and in part due to a greater depth of experience in how to avoid lost time incidents. That is what drives the decisions, that and of course the increase or decrease in commodity prices.
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Re: Peak oil debate

Unread postby onlooker » Thu 13 Dec 2018, 11:32:46

"But the political influence of the traditional oil refineries, anti-nuclear activists, and corn growers association are all fighting against those steps every minute of every day. Our nation is not operated in a rational manner to seek the best results for the general public or future generations, it is oriented to the next quarterly profit for the people with political pull."
Now you have opened up a whole different can of worms T, only kidding. Well, yes certainly all Economics is operating within the confines of political decision making and leveraged influence. Rockdoc, though would probably say that in the end all the executive decisions one way or the other are taken up by the Economic system. Which is I believe true. Facilitating or not Oil and Gas R & D, ultimately affects the bottom line. Assessing what Capitalism would call externalities to the private sector obviously raises costs, ie. cleanup, safety etc. All this in effect, I think highlights my claim that economics is limited. It is a subjective discipline that is beholden to the irrational whims of the political body and consumers/voters. So, a clear picture of the energy balance is ambiguous at best. We cannot mix human systems with purely natural systems. The only thing humanity can do is attempt to live within the capacity of natural systems as they and they alone ultimately dictate what the limits are of what society is capable of attaining. Ex. If no unlimited energy exists in the Universe to exploit, living beings are limited to energy from stars, and other terrestial and Universal forms of energy.
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Re: Peak oil debate

Unread postby Pops » Thu 13 Dec 2018, 17:06:27

Majors focusing on LTO.

According to Bloomberg, shale has become “a safe haven” for Big Oil amid the recent increased volatility in prices. The argument is that shale production costs are much lower than a few years ago and combine with the opportunity for a steady production increase and quicker returns than conventional projects.
link

Thing is, every year that capex goes mostly to shale is a year, 5-7 years hence, when conventional production will fall that much. I don't have a guess as to the actual number but it seems $10M invested in shale in 2019 isn't going to be worth nearly as much in 2025 as the same invested in conventional – unless there simply is no more conventional to develop.

Either way, sounds like
duunnn dunnn... duuuunnnn duun... duuunnnnnnnn dun dun dun dun dun dun dun dun dun
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Re: Peak oil debate

Unread postby Plantagenet » Thu 13 Dec 2018, 17:59:20

Pops wrote:Thing is, every year that capex goes mostly to shale is a year, 5-7 years hence, when conventional production will fall that much. I don't have a guess as to the actual number but it seems $10M invested in shale in 2019 isn't going to be worth nearly as much in 2025 as the same invested in conventional – unless there simply is no more conventional to develop.


We are getting close to peak conventional oil.

The judgement of the oilcos is that there aren't many conventional oilfields left to develop that can compete economically with shale oil under current economic scenarios.

At a big oil company every project they consider doing goes through a rigorous economic review first. The economists plug the project into their economic models, estimate the future costs and risks, and then estimate a future ROI. All potential projects are ranked, and the ones with the best ROIs are the ones that get done and the others are put on hold or sold off to another company.

One big part of the economic review is the estimate of the chance of striking economic amounts of oil in a new conventional oilfield. The odds of success might be 50% or less. The economists therefore require a ROI for conventional oil fields at least twice that for a shale oil play where the chance of hitting oil is ca. 100% ---- and under current economic scenarios that is hard to do.

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Re: Peak oil debate

Unread postby rockdoc123 » Thu 13 Dec 2018, 18:38:31

All potential projects are ranked, and the ones with the best ROIs are the ones that get done and the others are put on hold or sold off to another company.


Not all the time. Everything gets considered, above ground risks, below ground risks and Rate of Return is one that is actually low on the list because the number changes depending on where you are in the project. Metrics used more commonly are a combination of NPV/bbl, Discounted Profit to Investment Ratio, Payout, Recycle Ratio etc.

The odds of success might be 50% or less. The economists therefore require a ROI for conventional oil fields at least twice that for a shale oil play where the chance of hitting oil is ca. 100% ---- and under current economic scenarios that is hard to do.


Not exactly. Most companies have some form of formal risk assessment. The most utilized is Pete Rose’s risk matrix analysis. In general it is bad practice to try to account for risk with economics (years ago the economists thought it was a good idea to use a higher discount rate to account for risk). The recommended methodology which is employed by all the big companies and many of the intermediates is to rank the entire portfolio based on risk and reward, this might take the form of a chance of success versus NPV chart or maybe Prospect Risk versus Reserves. And then added on top of that is the analysis of business risks such as security, environmental, safety, contract sanctity etc. The big companies all have separate groups that look after corporate prospect risking and generally it is best done independently of the play generators. Devil is in the details.
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Re: Peak oil debate

Unread postby Plantagenet » Thu 13 Dec 2018, 19:02:07

Most companies have some form of formal risk assessment.


Of course. Thats what I just said.

The recommended methodology which is employed by all the big companies and many of the intermediates is to rank the entire portfolio based on risk and reward


Of course. Thats what I just said.

The big companies all have separate groups that look after corporate prospect risking


Of course. Thats what I just said.

--------------------------------------------------------

The bottom line is shale oil pencils out to be competitive and even attractive right now. The drilling and fracking costs have come down, and shale oil plays in known productive areas are less risky then undertaking new exploration projects in hopes of finding previously unknown conventional field. Add to this the inherent ability of shale oil operators to increase or decrease production in response to changing oil prices, and you've got a list of reasons why shale oil has been much more successful then its early critics ever imagined.

the-rise-of-shale-oil

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Re: Peak oil debate

Unread postby Pops » Thu 13 Dec 2018, 19:30:53

Plantagenet wrote:We are getting close to peak conventional oil.

All the they're-just-out-to-make-a-buck aside...

The fastest way to peak conventional is to stop developing conventional resources and let them degrade at whatever their natural decline rate and concentrate on quick-buck shale. Likewise, the fastest way to peak oil is to burn through shale, while draining the giants and ignoring the rest, all while we go happily motoring along on cheap unleaded due to a permanent Cushing glut.

Here from last month is the bonanza in the Permian, 299mb/d of oil from NEW wells last month!
The only problem is oil from old wells declined at a rate of 236kb/d — meet the Red Queen.

Image


78% of new well production went to make up for declines in previous wells, mostly wells that were drilled last month -36 months ago.

This article says 14% rates are the average with significant numbers falling as fast as 25%

The study by Wood Mackenzie, Everything is Accelerating in the Permian, Including Decline Rates says the “terminal decline rate” is far greater than the widely used rule of thumb of 5-10% a year.

“For Wolfcamp wells in terminal decline… the most common occurrence is a decline rate of 14% a year,” said Robert Clarke. research director for Lower 48 Upstream at Wood Mackenzie.
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Re: Peak oil debate

Unread postby ralfy » Thu 13 Dec 2018, 21:01:09

Tanada wrote:
Not quite. Economics are a huge factor certainly, but political decision making both local and international also has a huge impact. For example Fracking in Pennsylvania and New York state is much more restricted by political decisions passing bans or regulations on the industry compared to Ohio (sharing the same source rock as Pennsylvania) or North Dakota or Texas where the state governments want to encourage fracking because it brings jobs and employee income taxes or sales taxes when they buy stuff is income for the government to play with. On the other hand the anti-nuclear hysterics have created such a regulatory tangle that building a new power plant in the USA is extremely difficult and that makes the expense of construction so high that even the very cheap electricity produced can't bring in enough profit to make the construction worth while from an economic standpoint of private companies.

You really want to unleash energy in the USA? Have the US Army Corp Of Engineers build the natural gas to diesel plants and the nuclear power plants and the new heavy oil upgrading plants preventing all the legal challenges in the civil court system and making following all the government regulations automatic from day one. Then have the government sell those facilities for cost to private businesses to own and operate. The price of diesel fuel would collapse overnight! For the nuclear simply build the new plants alongside the existing plants that are reaching the end of their useful lives and allow the utilities to upgrade their efficiency and safety systems without a 12 year court battle over ever piece of paperwork attached to the project. That would increase the already admirable safety rating of nuclear power to unseen levels and reduce fuel demand by a massive quantity providing continued cheap baseload nuclear electricity to the grid. You also avoid all the environmental impact studies, costs associated with creating new infrastructure and employment for the existing workforce for another 60-80 years before that Gen III+ plant needs to be replaced itself at end of useful life. For Ethanol fuel widen the subsidies to include all crop types, not just corn, and watch as the farmers in Iowa who want to sell to ethanol plants switch to growing sweet potatoes or sugar beets because their energy output is 12-15 times as high as that for corn starch.

But the political influence of the traditional oil refineries, anti-nuclear activists, and corn growers association are all fighting against those steps every minute of every day. Our nation is not operated in a rational manner to seek the best results for the general public or future generations, it is oriented to the next quarterly profit for the people with political pull.


No amount of increased credit or central planning will reverse diminishing returns, especially given the amount of credit not available and the size of the human population.
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Re: Peak oil debate

Unread postby Tanada » Fri 14 Dec 2018, 11:57:45

Pops wrote:Majors focusing on LTO.

According to Bloomberg, shale has become “a safe haven” for Big Oil amid the recent increased volatility in prices. The argument is that shale production costs are much lower than a few years ago and combine with the opportunity for a steady production increase and quicker returns than conventional projects.
link

Thing is, every year that capex goes mostly to shale is a year, 5-7 years hence, when conventional production will fall that much. I don't have a guess as to the actual number but it seems $10M invested in shale in 2019 isn't going to be worth nearly as much in 2025 as the same invested in conventional – unless there simply is no more conventional to develop.

Either way, sounds like
duunnn dunnn... duuuunnnn duun... duuunnnnnnnn dun dun dun dun dun dun dun dun dun


That video that got posted a few days ago basically predicted this as the next move of the oil majors. Fracking is now considered 'safe' because the successful payback rate on fracked wells is something like 95%, very few dry holes and very few that deplete before paying back the CAPEX investment. In a business that has spent 150 years playing hunt and poke to even find the oil flowing formations with a heck of a big chance of a dry hole at the end of the poke that must seem like an irresistible gift from geology.

Unfortunately only something like 15% (IIRC) of tight rock formations even have the kind of hydrocarbon content needed to make fracking a method of extracting those hydrocarbons. Of that 15% the economics depend on flow rates and depletion rates and estimates range all over the place. For whatever reason drilling in the Utica in Ohio took a big hit in the last few weeks, I don't know why. Could be something the incoming new Governor said, some new law passed, or just a case of the rigs were pulled away to work in a different formation with a bigger payout. The new large diameter natural gas line through the county where I live from east to west was built this last 18 months, they are basically completely done restoring the landscape above it as of November so it is now flowing at least as far as Toledo.
For those not from this area Toledo has had a long running controversy because two major pipelines for Natural Gas ran through the city, but one was dedicated to carrying gas on to Detroit and could not sell into the Toledo market making them captive market for a single supplier. A big push for this new gas line was related to that issue, otherwise the NIMBY forces might have gotten the whole project cancelled. We were told it would be carrying cheap Utica gas from eastern Ohio to the local markets here and introduce competition in the natural gas supply. Far too soon to tell how that will actually work in practice.
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Re: Peak oil debate

Unread postby Revi » Wed 19 Dec 2018, 08:59:19

We'll see. The natural gas boom was promising a couple of gas lines up here, but then the mills went out of business and I think they lost interest. Maybe they didn't have as much as they thought. We had two competing pipelines planned at one point...
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Re: Peak oil debate

Unread postby Revi » Thu 20 Dec 2018, 09:07:35

How about the diesel shortage? Distillates in storage are at the bottom of their range in the US also. Are we headed for trouble? Here's an article about how diesel shortages are the "everything pin" which pops the everything bubble. Plausible?

https://consciousnessofsheep.co.uk/2018 ... thing-pin/
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