[Pops]

People shouldn't draw the conclusion that if drilling retreats that they'll never go back again and that there's no oil to recover. The jury is still out on that. All we know is they don't think it's worth their while right now. I have no doubt that if we have sustained >$100 oil prices that someone will try again.

No they won't. If we return to >$100 the entire world's economy will once again collapse in unison, leaving demand petrified at it's historical norm of $30.

No it won't. I'm not sure of much but that I'm pretty sure of.

There are things at work other than PO in the world. If oil price were the only factor GDP would be booming right now, but it is not.

You are badly mistaken if you think oil is only worth $30. That was the price in a demand constrained world where any increase in demand was rapidly met with an increase in supply, mostly from KSA.
Post-peak is, by definition, supply constrained.

If oil were only worth $30/bbl I'm pretty sure PO wouldn't be much of a problem.

[kublikhan]

No they won't. If we return to >$100 the entire world's economy will once again collapse in unison, leaving demand petrified at it's historical norm of $30.

No it won't. I'm not sure of much but that I'm pretty sure of.

There are things at work other than PO in the world. If oil price were the only factor GDP would be booming right now, but it is not.

You are badly mistaken if you think oil is only worth $30.

+1

Even with oil over $90 a barrel last year, demand was still growing by over half a million b/d yoy. The world economy can tolerate much higher prices than $30 oil. $90+ oil might cause developed nations to reduce their consumption. But this is more than offset by developing countries who continue to increase their demand despite $90+ oil.

As for demand, the lure of $50/bbl oil is boosting growth to a five-year high of 1.7 mb/d this year and an above-trend 1.4 mb/d in 2016. US motorists are taking to the roads, propelling domestic gasoline demand to an eight-year high.

Oil Market Report - International Energy Agency

The oil-market crash that began last summer has “seen demand react more swiftly than supply,” the group said, with daily oil demand growth more than doubling from last year’s increase of 700,000 barrels a day.

IEA: Global oil demand rising fastest in five years

[Pops]

There is no camp.

[kublikhan]

I like to think I am in the reality "camp". In this camp, you have to include data that doesn't necessarily fit your world view. For example, if we posit the theory that the world economy cannot handle oil over $30, we should examine reality and see if this view holds up to scrutiny. Average oil price from 2002-2011 was $64. Average world GDP growth during the same period was 3.9%. The same level of world GDP growth for the last half century. More Recent Data shows the economy continued to grow at over 3% these past several years and into next year. If the world economy continues to grow with oil far above $30, I think it's time to reexamine your theory pstarr.

[ROCKMAN]

I’ll try to cover all the questions with one post. “Rockman by viable do you mean much easy flowing oil and easily accessible gas?” Not that simple an answer. Every prospect, regardless of its location, has a risk to reward profile. I might risk $10 million to test a prospect that has only a 20% chance of success but if it works I’ll make me $70 million. So I’ll drill the well. But one reason I can is because I can afford a $10 million dry hole. Another company might view the prospect as I do but can’t suffer such a loss because their entire budget for the year is just $20 million. They’ll drill less risky prospects that might only yield a 2 to1 return…spend $1 million and make $2 million back. Especially if they are a pubco that could see an increase in share value along with the ROR on the well. Today my company’s biz plan is to put a lot of reserves in the ground that we can sell in 4 or 5 years. We can’t do that sufficiently by drilling low risk/low return wells. Shell Oil also can’t drill low risk wells in order to grow their reserves because there aren’t enough low risk prospect IN THE ENTIRE WORLD to satisfy their reserve growth plan. They have to drill very expensive wells with relatively low probability of success OF VERY BIG POTENTIAL RESERVES. This is why Big Oil gave up on the onshore US for the most part decades ago: lack of “viable” BIG prospects. OTOH Little Oil has drilled tens of thousands of “viable” SMALL prospects in the onshore US. Thus the term “viable” is defined by much more than the geology…very company dependent. For instance even if the chance of finding 1 billion bbls of oil in the offshore Arctic was 50/50 it would not be viable for the Rockman: too big a bet on just one well. Shell OTIOH would pee on themselves with joy at having such a prospect. I have no idea what probability of success the folks at Shell had assigned their Arctic well but I doubt it was better than 30%. In fact it might have been much lower. But Big Oil can’t survive drilling for small reserves even if they had a 100% success rate.

And yes “low hanging fruit” might be relative. But trust me: finding those big legacy fields was not any easier then what Shell just did at least from a monetary standpoint. I can show you trends in onshore Texas that during those “low hanging fruit” days that had no better success rate the 10%. IOW 9 out of 10 wells did not find commercial oil fields. And this was during times when fields containing 10+ million bbls of oil were common. Today in those same trends it’s difficult to come up with a 50k bbl prospect. But with modern tech the success rate might be 50%...or better. In one NG trend in Texas that had less than a 10% success rate in the “good ole days” the Rockman hit 23 out of 25 wells (a 92% success rate) using seismic technology that geologists 40 years ago didn’t have available. From a geologic evaluation the Shell Arctic well was probably very simple and straight forward. At the depth they drilled the morphology of a potential trap should have been butt simple. OTOH just because there’s a very obvious potential trap doesn’t mean there’s any oil accumulated in it. About 99.8% of all the potential traps in the world contain no commercial hydrocarbons. The risk for Shell was probably in the hydrocarbon generation and timing of migration analysis and not the structural geology per se.

And this was “the best prospect Shell had in the Arctic”. Well…Da! What would you expect a company to do: drill its second best prospect first? LOL. And guess what: today Shell has its new “best Arctic prospect” to drill. The history of the oil patch contains thousands of the “best prospect” being drilled as dry hole with numerous success wells drill in the same tend after those dry holes were poked. Again folks need to give up on the false imagine of companies hitting one big field after another in the old days while drilling very few dry holes.

And let’s not forget there’s more going on in the Arctic then Shell Oil. Russia's Arctic Seas:

“Rosneft launched projects in the Kara and Barents Seas in 2010 after obtaining four licenses to explore Russia's Arctic shelf. Three of the licenses relate to blocks in the Kara Sea and the fourth one is for the South-Russky block in the Pechora Sea. The blocks are estimated to hold 21.5 billion tons of oil equivalent. The Kara Sea is an extension of the West Siberian oil and gas province, which accounts for 60 percent of Russia's current oil production. The sea is 40-350 meters deep with difficult ice conditions (ice-bound for 270-300 days a year). Winter temperatures plunge to minus 46˚С. Ice ranges in thickness from 1.2 to 1.6 meters. The Prinovozemelsky blocks of the Kara Sea have been explored using 2D seismic. Estimated recoverable oil resources in the three blocks stand at 6.2 billion tons and hydrocarbon resources at up to 20.9 billion tons of oil equivalent.”

Given their dependence upon fossil fuel exports it’s easy to forecast increased Arctic activity by Russia.

[Hawkcreek]

"I’ll try to cover all the questions with one post."

Excellent post Rock. This type of informative discussion is why I keep coming back to PO.
Thanks.

[Lore]

The bigger question is will we have the capability 15 -30 years from now to revisit the situation even if we needed to?

[Plantagenet]

Nanotechnology and autonomous vehicles to the rescue!

Congress should pass a law mandating that all autonomous vehicles must be large enough to accommodate a TV, sofa and a fridge in the back so people can snack and watch football and doze as the AI takes them to their next destination.

[ennui2]

The bigger question is will we have the capability 15 -30 years from now to revisit the situation even if we needed to?

Sorry, nobody seems to want to discuss this issue seriously. They'd rather crack jokes.

[Plantagenet]

The bigger question is will we have the capability 15 -30 years from now to revisit the situation even if we needed to?

The oil glut isn't going to last for another 15-30 years. Assuming we don't fall into a global depression, in a few years demand starts to exceed supply and the price of oil heads back up, and oil companies will once again being making billions from their legacy oil fields, and once again will have the cash to burn on long shot drilling prospects in the Arctic.

-----------

Don't let Ennui's lack of a sense of humor bother you Peter. Ennui's a bit of a sad sack type.

[ennui2]

No they won't. If we return to >$100 the entire world's economy will once again collapse in unison, leaving demand petrified at it's historical norm of $30.

Your theory is bogus. Oil drilling didn't stop with $100 oil and the credit crisis is what collapsed the economy.

[Pops]

Got you twice there Pops. Almost left you speechless, huh? lol

You are right about LTO, that guy who said we'd frack the world (Maglieri or something?) made good sense about LTO wells being little universes all their own.

I think you are wrong tho about shale being the swing producer. Little US shale producers are price takers. I think real swing producers are price makers, KSA or RU or US if there were still a TRRC.

Arguably KSA is the price maker atm, producing and drilling flat out.