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All That New Shale Oil May Not Be Enough as Big Discoveries

Unread postPosted: Wed 27 Dec 2017, 10:51:20
by AdamB

Three years after causing an oil-price crash, the shale boom may not be enough to meet rising global demand because the industry has cut back so sharply on higher-risk mega-projects. Discoveries of new reserves this year were the fewest on record and replaced just 11 percent of what was produced, according to a Dec. 21 report by consultant Rystad Energy. While shale wells are creating a glut now, without more investment in bigger, conventional supply, the world may see output deficits as soon as 2019, according to Canadian producer Suncor Energy Inc. “Tight rock is not going to solve the global supply-demand issue,” said Adam Waterous, chief executive officer at the Calgary-based Waterous Energy Fund, which invests as much as C$400 million ($265 million). “Its going to take a long time for those mega-projects to come back on.” Spending Slump Capital expenditures still well below levels before


All That New Shale Oil May Not Be Enough as Big Discoveries Drop

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Wed 27 Dec 2017, 20:22:22
by AdamB
pstarr wrote:The old shale plays (vaca is decades old) had their day in the sun.

What new shale plays?


At least this time you didn't lie first, instead displaying your ignorance as a seemingly honest question.

Nice summary level information information by country here, and recent particulars here, here and here, click around a little, they have quite a few now, going back more than a few years.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Thu 28 Dec 2017, 15:14:05
by shortonoil
What new shale plays?


Any petroleum source with an ERoEI of 6.9:1 or less (which we have shown to be equivalent to a WOR of 45:1; the point where water drive wells are shut in) is not a long term economical process. Shale has been a financial play participated by low interest rates, and currency creation policies implemented by the central banks. The 4.3% spread between historical interest rates, and ZIRP rates on an $8.5 million Bakken well amounts to $50.55 per barrel over the 10 life expectancy of the well. A review of Bakken wells using the ΔS = m*c*ln(T2/T1) equation (Entropy Change of an Incompressible Substance*) shows that a Bakken well that comes in at 450 barrels per day, has reached an ERoEI of 6.9:1 in about 10 months or 77,000 barrels of production. After that point they become net energy negative.

The fact that they become net energy negative within their first year means that they must purchase energy from other sources to continue production after that point has been reached. That results in them becoming cash flow negative operations.

The production from the 4598 wells reviewed followed the logistic curve y = 23.35 / (1- 0.95e^(-0.011x)) where x is years from 1900. Over a ten year life expectancy they will produce on average 256,000 barrels. Of their total life time production of 256,000 only 77,000 of those barrels contributed a positive energy supply to the economy. See following posts for an explanation of how this is possible.

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https://srsroccoreport.com/u-s-shale-oi ... tay-alive/
http://www.thehillsgroup.org

*Page 209, Moran and Shapiro, ISBN 0-471-895776-8

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Thu 28 Dec 2017, 16:55:46
by MD
I will assume that given the shale experience in North America, similar experiences will eventually crop up in other parts of the world. The tools will move around to where they are needed, eventually.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Thu 28 Dec 2017, 17:46:45
by GHung
MD wrote:I will assume that given the shale experience in North America, similar experiences will eventually crop up in other parts of the world. The tools will move around to where they are needed, eventually.


I read somewhere (can't bring it up now) that North American shales are better suited to horizontal drilling, fracking and all that, than are shales in much of the world. Makes them more economical to produce that way.

Anyone have more on that?

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Thu 28 Dec 2017, 19:00:32
by shortonoil
As mentioned, in the post above, Shale is not generally a net energy provider; it is a volumetric source of liquid hydrocarbons. Although it is not a contributor to the general economic state of the economy (it is actually a liability) it does contribute to one aspect of it. It is a huge source of increased income for a part of the petroleum industry. The refining industry, which is mostly owned by a number of producers and their affiliates, consumes 18 million barrels of crude a day, and they must pay market price for that crude. The increase in volume which is added to crude stocks from the production of Shale suppresses the price of crude. At a $10 per barrel reduction in price because of shale, the production of shale saves the refining industry $66 billion per year in raw material costs. With a negative cash flow of about $15 billion per year the Shale industry would be subsidized by the remainder of the industry if other financing became unavailable. It probably already is with the present tightening happening in the HY bond market?

Petroleum's ability to supply energy to the general economy is declining. It has already fallen 34% since its peak in 1979, even though on a volumetric bases production has increased by 56% over the same period. The economy is becoming slowly starved of energy. Many more attempts to reduce energy consumption in the transportation sector will occur as this trend (as the Second Law requires) must continue. The sudden interest now seen in EVs is testimony of that now happening.

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A $10 per barrel reduction in price from all sources for just producing shale, which accounts for only 3.6% of total world production, gives the industry tremendous leverage, and incentive for the subsidizing of shale. A 440% return on an investment, each year, would be attractive to any business in today's economy.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Thu 28 Dec 2017, 19:38:09
by AdamB
shortonoil wrote:
What new shale plays?


Any petroleum source with an ERoEI of 6.9:1 or less (which we have shown to be equivalent to a WOR of 45:1; the point where water drive wells are shut in) is not a long term economical process.


Right. The shale production discussed in the Appalachian Gas Play atlas beginning between 1860 and 1880 and continuing on through the 1990's when the atlas was published never was a long term economic process.

Anything else you would like to make up, because you can't be bothered to, like, LEARN anything about historical resource development? I can give you the USGS author's name who wrote the Atlas article, but really, their laughter at being confronted with such a neophyte might hurt your self esteem.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 08:12:55
by shortonoil
Right. The shale production discussed in the Appalachian Gas Play atlas beginning between 1860 and 1880 and continuing on through the 1990's when the atlas was published never was a long term economic process.


Oil is a liquid at S/T/P. Gas is not. The post is talking about OIL. Eat a can of beans and test it out yourself. Try the scientific approach for a change?


The economy is now replete with companies that do huge transaction volumes, and operate with negative cash flows. The FANGS that consist of more than 30% of the S&P 500 are mostly cash flow negative;Tesla, and Chinese steel producers are other good examples. It should hardly be surprising that oil extracted from something very much like a brick should be any different (see two posts above). Low permeability source rock, at very deep depths, where petroleum was formed under conditions of high temperatures and pressures produce abundant quantities of gas, and very few of the molecules needed to produce fuels. Although not economical for the economy, Shale is profitable for the industry, so we can expect it to continue for as long as the industry can fund it. The industry will be able to fund it for as long as the central banks can move money from productive assets to zombies that add nothing of value except to a few specific recipients. The growing spread in wealth inequality should hardly come as a surprise. The growth in the junk bond markets, and the number of negative interest rate investments attest to this. A few are getting fabulously wealthy at the expense of impoverishment for all the rest.

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Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 08:38:16
by dirtyharry
MD wrote:I will assume that given the shale experience in North America, similar experiences will eventually crop up in other parts of the world. The tools will move around to where they are needed, eventually.


They crop up from time to time .Poland ,UK have tried to devolp their shale resources ,but failed . Why ? Because they do not have the liberty of printing unlimited amount of their currency ,unlike the USA . Shale is drilled only in the USA because of unlimited finance . It would never have occurred was it not of this . After all the Bakken etc were known to the oil industry for over several years . This will not occur in any other part of the world ,even in the RU where there is a large resource called Bazanov(or something ). Nothing is going to move around (eventually) because shale is a low EROEI and does not make economic sense .The shale kid in the USA will go down once the money stops . As to the other parts of the world ,it will never start because after exploration they will realise this is a waste of time,money and energy .

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 09:58:41
by AdamB
GHung wrote:
MD wrote:I will assume that given the shale experience in North America, similar experiences will eventually crop up in other parts of the world. The tools will move around to where they are needed, eventually.


I read somewhere (can't bring it up now) that North American shales are better suited to horizontal drilling, fracking and all that, than are shales in much of the world. Makes them more economical to produce that way.

Anyone have more on that?


Yes. It is incorrect. Clay content, measures of brittleness, porosity and fracture densities are known in international shales and just like in the US some are better, some are not. Sedimentary basins and the shales in them are not unique to the US.

But what MIGHT be unique to the US is private ownership of mineral rights, and the presence of American exceptionalism firmly installed in American independent producers spanning the last century. These folks can pincushion an area faster and more efficiently than any other gang on the planet.

And that does matter, because they won't go to work for one of those countries that DOESN'T have private ownership without enough of a cut to make them happy at the $$ involved. Anyone who has examined the levels of government take around the world knows what that means in terms of absolute $$.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 10:02:06
by AdamB
pstarr wrote:'Right. The shale production discussed in the Appalachian Gas Play atlas beginning between 1860 and 1880 and continuing on through the 1990's when the atlas was published never was a long term economic process.'

Sure Adam. Them old timeys had horizontal drill strings, and fancy surfactants made from animal hides.


Shales do not require horizontal wells for development. They didn't before you were born, and that is how shale development began. Shorty knows no more about this than you do. The difference being he thinks he knows something about them in general and bluffs until he runs into folks who do and then he looks stupid, and you don't know anything and just say stupid things because..well...it is your defining characteristic.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 10:06:14
by AdamB
shortonoil wrote:
Right. The shale production discussed in the Appalachian Gas Play atlas beginning between 1860 and 1880 and continuing on through the 1990's when the atlas was published never was a long term economic process.


Oil is a liquid at S/T/P. Gas is not. The post is talking about OIL. Eat a can of beans and test it out yourself. Try the scientific approach for a change?


Fortunate then that those plays also produced oil.

Do try and learn even the most basic references (let alone write something worth reviewing by anyone) before pretending that your kindergarten knowledge has any relevance in a conversation involving how the oil and gas business does anything. And I've been searching the IHS database for those 84% recovery factor reservoirs, and just can't seem to find any? Which reservoir engineer did you talk to that claims these things are chock a block all over the international fields?

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Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 10:18:56
by GHung
Yet another obnoxious juvenile gif posted by someone who expects to be taken seriously. Really?
Even my 8 year old grandson has moved beyond his attention-seeking phase.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 11:24:47
by rockdoc123
They crop up from time to time .Poland ,UK have tried to devolp their shale resources ,but failed . Why ? Because they do not have the liberty of printing unlimited amount of their currency ,unlike the USA . Shale is drilled only in the USA because of unlimited finance .


completely incorrect. What happened with the Ordovician shale play is that although rock properties, in general, were very similar to those in the US it wasn't until someone actually attempted a frac that it was discovered the marly shales there have a tendency to behave plastically and not brittlely when subjected to high confining pressures. As a consequence, the fracs are much less effective and rates per well are less attractive. And it was not Polish companies pursuing this, it was the big independents and multinationals. Chevron and Exxon both had exploration blocks in the shale trend, Talisman Energy and a couple of other larger independents were chasing the play as well. What made Poland particularly attractive for the premise of shale gas was the high prices realized in winter months due to occasional insufficient supply from Russia. But the rocks just didn't cooperate.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 12:18:26
by shortonoil
shortonoil wrote:
Right. The shale production discussed in the Appalachian Gas Play atlas beginning between 1860 and 1880 and continuing on through the 1990's when the atlas was published never was a long term economic process.

For about the 50th time that you have done this, I did not write that. Can you stop your stupid, childish games of deceit. Pstarr quoted it, and you wrote it; you moron:

dirtyharry wrote:
They crop up from time to time .Poland ,UK have tried to devolp their shale resources ,but failed . Why ? Because they do not have the liberty of printing unlimited amount of their currency ,unlike the USA . Shale is drilled only in the USA because of unlimited finance . It would never have occurred was it not of this.


Even the Chinese, that have huge shale deposits, aren't developing them, and cash is in no short supply for them. They have their own central bank to print up piles of it, and they do. The primary reason that shale development was initially pursued in the US was because they had a market for it. The Bakken was developed to supply diluent for the Canadian tar sands industry. The Eagle Ford, with shallower wells, and higher per well production rates with access to the pipeline network then jumped in to supply the growing Canadian market. That was when oil was still heading for $100 per barrel.

Since there is no other oil to be found that the industry or the economy can afford, Shale has taken on a life of its own. The refining industry discovered that it was helping to keep the price of oil down, which made it very competitive in the international market for its finished products. The US is still importing 7 mb/d to use for the production of fuels while producing 3½ of shale. Shale is still used as a diluent for heavier oils, and as a feedstock for the petrochemical industry. As long as the FED keeps interest rates low, and liquidity abundant shale will plug along. That, however, is not likely to be the case for very long. Many people are sounding the alarm, and Stockman is among them:

http://davidstockmanscontracorner.com/t ... it-part-1/

Along with the equity market and bonds, oil is now in a state of "irrational exuberance". It is about $10 higher than the economy can afford to pay for it. That will put the brakes on the economy, and Stockman's predictions will come true. Of course, when the bottom starts falling out (most likely this coming spring) they will blame it all on Trump. Energy is still not considered by economists to be an essential part of the economy! We will have a lot of oil, and no economy, and people will be asking the central banks to tweak the economy back into shape. Lots of luck with that one!

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 12:37:53
by rockdoc123
Even the Chinese, that have huge shale deposits, aren't developing them, and cash is in no short supply for them.


as with pretty much everything else to do with the oil and gas industry, you haven't even the slightest clue.

China has become the world’s third-largest shale gas producer, after only the U.S. and Canada, Iran’s PressTV reports, adding that last year, China pumped almost 8 billion cubic meters of shale gas. The annual result was a 76.3-percent improvement on 2015, China’s Ministry of Land and Resources said – a record amount. Investments in shale gas exploration reached US$1.3 billion.


https://oilprice.com/Energy/Crude-Oil/China-Becomes-Worlds-Third-Largest-Shale-Gas-Producer.html

It is about $10 higher than the economy can afford to pay for it.


Right, that’s why demand is still rising, all the oil being produced has found a buyer. But apparently they really can’t afford to buy it? I guess anything is possible in your bizarro alternate universe.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 13:48:30
by evilgenius
It's only on an atomic, a chemical level, where you can count energy transfer without regard for filters of efficiency. Unless you do that you can't account for how one person on foot can carry something heavy a certain distance while another person on a bike can carry it the same distance, the heavy thing being carried that distance amounting to the work being done. Energy is simply a measure for amount of work that can be done. The two people don't have to put themselves out equally to accomplish the task. One, the person on foot, has to put their self out more.They only have all of the innate levers of their own body, which work to do a much wider variety than toward what is needed. The bike is more specialized, for just carrying. You might complicate the bike, to get over rough ground or increase the total capacity it can carry, but the basic thing will pretty much cover what you are about doing.

By the same token, it doesn't cost as much to keep an endeavor in business as to start one the same size from scratch, especially if there are a lot of problems to solve in that type of business. Hard definitions like using hours worked to compare economic viability can get you into trouble when the output from the hours is expected to be a 'eureka' moment. The number of hours required to discover how to do things the best way as to take the best advantage of what is available to you shouldn't come back into the calculation unless there is a whole new process transformation taking place, otherwise, no matter how long the benefit lasts, it is a sunk cost.

Any business running a similar process would arrive at the same place. Their costs may or may not equal yours. The only thing that matters is making enough going forward to cover operational costs. Those are, again, managed. I don't know that there is a hard tipping point with EROI. The biggest, and perhaps most important, thing to look out for would probably be debt. The efficiency of how a company runs its operations might show up in how much debt a company keeps.

Re: All That New Shale Oil May Not Be Enough as Big Discover

Unread postPosted: Fri 29 Dec 2017, 14:05:19
by rockdoc123
The biggest, and perhaps most important, thing to look out for would probably be debt. The efficiency of how a company runs its operations might show up in how much debt a company keeps.


Debt in the oil and gas industry has always been viewed differently than other industries. The reason is that most companies are seen to be growth engines, fewer are there with a mandate to stay flat and deliver stable dividends. Because the oil and gas industry is capital intensive (it requires a steady reinvestment of cash flow in order to keep growing) coupled with the competitiveness (many companies chasing the same plays) and need to grow as fast as possible debt is an attractive enabler. Generally, companies are measured by a number of metrics that incorporate debt in the equation, one of them is debt to enterprise value, another is debt to EBITDA, debt to reserves etc. When does debt get out of hand? When the carrying charges start to get high enough that it impedes reinvestment of capital in the business. A number of companies hit that level in 2015 and were either bought by other companies or instead renegotiated terms with lenders.