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The Imminent Peak in US Oil Production

Discuss research and forecasts regarding hydrocarbon depletion.

Re: The Imminent Peak in US Oil Production

Unread postby Plantagenet » Tue 02 Sep 2014, 12:37:41

Pops wrote: the decline is over 5 times that amount and production has barely doubled. What does that tell you about the longevity of all those new wells?


Production from tight oil wells declines very quickly. That is well known.

Pops wrote:I'd guess that those old wells will still be pumping out their 10b/d long after the tight wells are filled with cement and the drillers that made a living drilling wells and extracting investor's cash rather than extracting oil are drinking rum and watching a Cuban girl roll them a cigar on her firm, tan thigh.


I hope you are right. What a nice idea---what could be better then drinking Cuba Libres in free Cuba. :)

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Re: The Imminent Peak in US Oil Production

Unread postby shallow sand » Tue 02 Sep 2014, 18:03:50

Ok. I'm mixing up terms again. Legacy refers to well and not field. And legacy is a well older than 30 days. I assume the explanation for the increased legacy decline is all of the high decline horizontals which are considered legacy wells in month 2. Will be interesting to see how long till they hit a wall with the drilling frenzy. Looks to me they are about to hammer the short term crude price. That may cause a slowdown, but usually the big companies keep on going at a loss, like they appear to be doing in the shale gas areas. I'm not quite a legacy producer yet, at least in my book. Acquired first production in 1997, what a wonderful time in the oil patch. However, dad has been in a lot longer so really started paying attention long before that. Definitely have what anyone would consider legacy wells and equipment. Think long term, however, going to become more and more difficult to fight the decline, which is ALWAYS present. Going to be interesting.
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Tue 02 Sep 2014, 19:00:58

pstarr wrote:
vtsnowedin wrote:One think that continues to disturb me is the flaring of gas in North Dakota. How much would it cost per unit to capture and liquify that gas to allow it to be marketed? Wasting that gas is akin to cutting the last tree on Easter Island.
I don't think it is the same. Little baby birds don't nest in oil reservoirs. That being said, natural gas is flared from oil wells because there is not enough to tie together in pipelines, especially considering fracted wells shut down after a few years. What good would the pipeline be then? Perhaps to collect the tears of brokenhearted enviros? lol
There is not enough to tie it together? Really?? you can see the light from the flares from outer space. They should not be allowed to tap a hole in the ground until they have the infrastructure on site and ready to make good use of every molecule of carbon that comes up out of the hole. More profit just flaring it away? Too DAME BAD.
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Re: The Imminent Peak in US Oil Production

Unread postby Synapsid » Tue 02 Sep 2014, 21:19:36

vtsnowedin,

It's a common problem, I think. Nigeria is another big flarer, and not the only one.

With oil you can start to move the stuff out with trucks if you have to, to get it to a terminal where you can load it onto railcars, or to a pipeline, but with NG you have to have access to that pipeline. To ask that the drilling wait until the infrastructure for gathering and transporting NG is in place is to postpone oil production and the cash flow that comes with it; it looks like North Dakota found itself not so inclined if the thought came up at all.

I seem to remember Rocky Mountain Guy, at TOD, once saying that in Alberta infrastructure for collecting and transporting NG does indeed have to be there before drilling can begin, but that may just be faulty memory on my part. I agree with you that that is the way it ought to be, in this best of all possible worlds.
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Tue 02 Sep 2014, 22:08:15

Synapsid wrote:vtsnowedin,

It's a common problem, I think. Nigeria is another big flarer, and not the only one.

I agree with you that that is the way it ought to be, in this best of all possible worlds.
At the least it is a black eye for the oil industry, proving the points of the Environmentalists. If you wait until you have the pipelines laid to transport the gas away to a processing facility what are the chances that the oil price will have gone down in the interim? I don't care if it takes twenty years to get the pipes there as I'm sure the residual oil will be worth a lot more then then it is now. Let the Saudis , the Iranians and the Russians pump all of theirs out first and save ours for last.
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Re: The Imminent Peak in US Oil Production

Unread postby Synapsid » Tue 02 Sep 2014, 22:37:52

vtsnowedin,

Cashflow is king in the oilpatch, as we are reminded semi-daily. If developing oil had to wait for NG infrastructure how would ROCKMAN keep buying that single-malt Scotch?

Not going to happen, I'm afraid.
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Re: The Imminent Peak in US Oil Production

Unread postby KingM » Wed 03 Sep 2014, 10:00:00

Plantagenet wrote:tu esta un ... oilman? si senor? ...con mucho dinero?


Ouch, that's some bad Spanish. ;)
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Re: The Imminent Peak in US Oil Production

Unread postby ROCKMAN » Wed 03 Sep 2014, 10:22:39

Alberta/Canadian NG flaring: from http://www.theglobeandmail.com/report-o ... e14088342/

"Canada’s oil and gas industry is burning off an increasing amount of natural gas into the atmosphere, a controversial practice known as flaring, driven by a drop in natural gas prices and an increase in unconventional and remote drilling. After years of making progress to reduce flaring, the oil and gas industry acknowledges it has been backsliding and needs to capture more of the gas for both economic and environmental reasons.

The rise in flaring in Alberta comes despite industry efforts, through a group known as the Clean Air Strategic Alliance (CASA), to cut back on flaring as well as venting, which is the direct release of natural gas into the atmosphere. CASA, which includes industry, environmental groups, government and other stakeholders, came up with a flaring management framework and recommendations to address the impact of flaring and venting. Chris Severson-Baker, managing director of the Pembina Institute, which was part of the CASA process, says new bitumen production, as well as hydraulic fracturing techniques known as “fracking,” are to blame for the rise in flaring. He points to a cluster of flaring and venting to the north and west of Calgary, where dozens of wells have sprung up in recent years, alongside public concerns."

FYI: every mineral owner, be it governmental or privately owned, has the option to ban all flaring. Companies only do what they are allowed to do. The Canadian provinces each determine if NG is flared/vented.
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Wed 03 Sep 2014, 17:01:16

They should pay the full market price for every cubic foot flared off and wasted. Make that the rule of law and they will turn off the spigots in a heartbeat.
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Re: The Imminent Peak in US Oil Production

Unread postby Graeme » Fri 05 Sep 2014, 19:43:11

Pops wrote:
Graeme wrote:Aren't we in the green zone for global oil production?

G that is merely an illustration of the idea that the rate of decline will determine our ability to mitigate its effects, IOW it isnt an actual model. Staniford guessed in that post from '05 that the world economy could handle a continuous 3-5% per year decline in oil production and adapt - even continue growth. I'm not sure time has borne that out as we are in the middle of a crappy economy now 8 or 9 years after a mere squeeze in supply. But, Staniford is a computer guy so his worries go along that road more than PO doom, with his main worry about the future being the "singularity": smart machines replacing workers. Link

But lets not go down that rabbithole in this thread, please.

The question Re: LTO of course is how fast they'll run out of places to drill. An encouraging sign for today is the rig count is up 130 YOY in the US with 90 of those in the Permian basin, only 9 in the Williston; or by state: +123 in TX, NM, OK. On the down side, Eagle Ford shows a 35 rig decline.


Anyway, the thing I'm thinking about right now is the old saw that depletion never sleeps. While we are reveling in this new supply, the underlying curve of conventional oil continues downward.

.


Pops, I'm keen to revisit the quote highlighted above. If US production wasn't occurring, what would the global production decline rate be? Less than 5%? Can anyone else tell me? Just wondering whether global oil production can continue to decline now (not in 05) at a rate that won't tank the global economy.

I've found an answer here

Dr. Miller critiqued the official industry line that global reserves will last 53 years at current rates of consumption, pointing out that "peaking is the result of declining production rates, not declining reserves." Despite new discoveries and increasing reliance on unconventional oil and gas, 37 countries are already post-peak, and global oil production is declining at about 4.1% per year, or 3.5 million barrels a day (b/d) per year:


Does anybody disagree?
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Fri 05 Sep 2014, 22:15:59

G, without US production - from LTO - world production would be flat from mid 0'5- 1st qtr '14. I haven't proofed this chart but it is through the 1st quarter, sorted by change 05-14; biggest gainers on top and losers on bottom. The lime color at 20k-30k contains all the other countries whose production stayed relatively the same <1k bopd change over that time frame.

Image

Some of those countries at the bottom of the pile are politically constrained and not really peaked: Syria, Iran, Libya and Iraq and somalia (hidden in 'other') are all artificially constrained.

As for the world production declining at 4-5% per year, the journalist (and maybe Dr. Miller) doesn't specify what exactly is declining. If they had said old, legacy well production is declining then yeah, thats within what I always read. We hear all the time about how fast fracked tight shale wells decline; 40-50-60+ percent the first year. Old conventional wells decline too, just much slower (not all the time but most times I think).

But overall production isn't declining 4.5% because there are still new wells left to drill. New little fields or pockets or old fields getting reworked or infilled or whatever, even some big fields waaay deep offshore or up north or wherever. Peak oil doesn't mean there will never be another well drilled or discovery made, just that they won't be enough to keep production increasing. Right now they must be putting 3-4mmbopd of new production online every year to make up for the decline in old well pooping out.

That of course is how it has always been, old wells always decline and are replaced with new ones - its just getting harder to find new locations to drill.

The obvious point to be made is production isn't increasing either, at least not by historic norms. Drilling as fast as they can, they haven't increased production much, again by the historic standard of 2.5% year average. So what comes next is either a surge in production; shale fracking everywhere maybe, or peace could breakout in the muslim world - that would put 3mmbd online quickly, or ... I can't really think of anything else

On the flip side, fracking could peak in the US and not spread, the old giants could really take a tumble. I think 15% of the wells produce 70 of the oil (but don't quote that) and they are oldies but goodies. If a bunch were to flood out over a span of a few years ...
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Fri 05 Sep 2014, 22:30:49

A little off topic but here is another chart, this one from last year showing regions:

Image

Notice especially Eurasia (Russia) that has doubled production since 200 but has plateaued these last few years, they offset the decline in the north sea (Europe) which, though never ever mentioned ahs combined with the growth of China to be the root cause of the production struggle since 2002-3.

The N sea is declining faster than the average because it is all offshore in nasty water and those wells are designed to pump the stuff out fast since it costs so much to operate out there.
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Re: The Imminent Peak in US Oil Production

Unread postby Plantagenet » Sat 06 Sep 2014, 00:27:02

Pops wrote: fracking could peak in the US and not spread ...


Too late for that. Things are going so good at Vaca Muerta in Argentina that Soros just doubled his stock holding in the company developing it, and Soros is nobody's fool.

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Fracking is now spreading from the US to other countries.
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Re: The Imminent Peak in US Oil Production

Unread postby Graeme » Sat 06 Sep 2014, 01:32:19

Pops, Thanks. It's certainly worth while putting US LTO production in a global context. Looking further down in same article, I saw this:

Dr. Miller is co-editor of a special edition of the prestigious journal, Philosophical Transactions of the Royal Society A, published this month on the future of oil supply. In an introductory paper co-authored with Dr. Steve R. Sorrel, co-director of the Sussex Energy Group at the University of Sussex in Brighton, they argue that among oil industry experts "there is a growing consensus that the era of cheap oil has passed and that we are entering a new and very different phase." They endorse the conservative conclusions of an extensive earlier study by the government-funded UK Energy Research Centre (UKERC):

"... a sustained decline in global conventional production appears probable before 2030 and there is significant risk of this beginning before 2020... on current evidence the inclusion of tight oil [shale oil] resources appears unlikely to significantly affect this conclusion, partly because the resource base appears relatively modest."

In fact, increasing dependence on shale could worsen decline rates in the long run:

"Greater reliance upon tight oil resources produced using hydraulic fracturing will exacerbate any rising trend in global average decline rates, since these wells have no plateau and decline extremely fast - for example, by 90% or more in the first 5 years."


I looked around for further info and found this on the ASPO site which may be of interest to our community:

Depletion rates after the peak can vary widely, from about 2% per year for a well-managed onshore field, to 20% or more per year for deepwater fields like Mexico’s Cantarell field, and other deepwater fields in the Gulf of Mexico. Of the 42 largest oil producing countries in the world, representing roughly 98% of all oil production, 30 have either plateaued or passed their peaks.

Anyone familiar with a balance sheet should understand this concept, but many observers routinely miss it. World oil production must first struggle against a background decline rate of about 4.5% from mature fields before it can manage any increases. In recent years, the net increase in global oil production is about 1% per year, but we expect that to fall to zero and then go negative by 2015.

The IEA’s World Energy Outlook 2008 included, for the first time, a study of the depletion rates of the world’s top 800 oil fields. It found rates of 6.7% for past-peak fields, increasing to 8.6% by 2030 (the end date of the report’s “reference scenario”). Averaged across all fields, the rate is 5.1%. Against such high decline rates-up from a generally accepted 4.5% estimate only a few years ago–the agency calculates that the world would need to add a whopping 64 million barrels per day (mbpd) of new capacitybetween 2007 and 2030 in order to meet an anticipated demand growing at 1.6% per year. That’s like adding six new Saudi Arabias.

The IEA concluded that the world will have a hard time reaching 100 mbpd within the next two decades. Their projected supply curves are now sharply reduced, while their global demand projections continue to show about a 1.5% annual rate of growth.
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Sat 06 Sep 2014, 10:18:29

As the supply curve turns down the demand curve will have to follow it very closely. The question is what price will it take to accomplish that and what effect that will bring to the world economy. The idea that demand will continue to grow at a steady rate regardless of price or supply is quite short sighted.
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Re: The Imminent Peak in US Oil Production

Unread postby ROCKMAN » Sat 06 Sep 2014, 12:37:41

vt - "Make that the rule of law and they will turn off the spigots in a heartbeat." I suspect you understand that those who make the "rule of law" don't want the spigots turned off. Doesn't matter if it's N Dakota or Nigeria.
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Sat 06 Sep 2014, 14:36:32

ROCKMAN wrote:vt - "Make that the rule of law and they will turn off the spigots in a heartbeat." I suspect you understand that those who make the "rule of law" don't want the spigots turned off. Doesn't matter if it's N Dakota or Nigeria.
Perhaps we need most of the people who make the rule of law.
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Sat 06 Sep 2014, 18:09:30

vtsnowedin wrote:
ROCKMAN wrote:vt - "Make that the rule of law and they will turn off the spigots in a heartbeat." I suspect you understand that those who make the "rule of law" don't want the spigots turned off. Doesn't matter if it's N Dakota or Nigeria.
Perhaps we need most of the people who make the rule of law.

Sorry about that got distracted by HRH. it should read.
Perhaps we need to change most of the people who make the rule of law.[/quote]
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Re: The Imminent Peak in US Oil Production

Unread postby JV153 » Sat 13 Sep 2014, 02:57:57

Pops wrote:
Plantagenet wrote:With an estimated 70 BILLION bbls of oil

Estimated by whom?

The same folks who just said "nevermind" on the 98 billion of Monterey "oil"?

resources ≠ reserves ≠ production


Plantagenet is using the oil in place (OIP) estimate for the Permian.
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Re: The Imminent Peak in US Oil Production

Unread postby Tanada » Wed 06 Jan 2016, 14:04:36

Pops wrote:Hats off to Ron Patterson at POB for continuing good work, this is from a post by David Archibald

The seven years of production of tight oil in the US has produced enough data to
enable estimation of the amount of oil that will be recovered from these systems and
the timing of peak production. Based on data to May 2014, the four main tight oil
basins will produce a total of 7.7 billion barrels with a peak production rate of 3.9
million barrels per day in mid-2015. Following that peak, production is predicted to
decline as rapidly as it rose. That in turn is expected to cause a re-assessment of the
ability to produce sufficient transport fuels based on current policies.

The Bakken in North Dakota

Jean Laherrere has plotted monthly oil production from the Bakken Fm in North
Dakota using Hubbert linearization:

Image


...

Image



It looks more and more like Ron was good for this prediction, even if the date is not a perfect bullseye.
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