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Is EROEI Important Pt. 4

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

Is EROEI Important Pt. 4

Unread postby rockdoc123 » Thu 27 Dec 2018, 13:45:42

But at what price. $45 or $80?

Are there still 39.2 billion barrels of reserves available at $25?


Each year's reserves submissions are based on the average price of oil over the previous year. That price is what defines Reserves in general including Proven, Probable and Possible. Proven reserves are made up of Proved Producing, Proved non-producing and Proved undeveloped. A drop in oil price would have to go well below $25 to affect Proved Producing or Proved non-producing given the only costs involved are OPEX related.

In any event, as has been said here many times the cure for low oil prices is low oil prices. Lower oil prices result in fewer wells being drilled and a drop in supplies (exactly what happened in the time frame 2016 -2017) and hence with ever-increasing demand a rise in oil prices which is what happened in 2017 to mid-2018. Increased supply due to those higher oil prices resulted in too much supply for ever-increasing demand to accommodate so hence a drop in price. As David Byrne aptly pointed out ...same as it ever was, same as it ever was.
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Re: Is EROEI Important Pt. 3

Unread postby Pops » Thu 27 Dec 2018, 13:59:06

Yoshua wrote:Lower energy and commodity prices lead to lower production costs. If the energy and commodity prices fall over 50 percent and the cost of production only falls 30 percent...then I think we have a problem.

You do have a problem, it is thinking energy is a large part of production cost.

Especially if you give credit for increasing efficiencies as the tech matures. I don't know many details but longer bores and multiple laterals from a single pad are a couple of developments.

Obviously costs would have fallen further if energy were a large part.
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Re: Is EROEI Important Pt. 3

Unread postby Yoshua » Thu 27 Dec 2018, 14:09:28

If commodity prices fall by 50 percent and the production cost fall by 30 percent...when you are producing commodities...then we have a problem.

To reduce the cost of production even further the U.S would have to go Venezuela and devalue the dollar to bring down the cost of everything else against the world. That is of course if the U.S wants to be a commodity producer.
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Re: Is EROEI Important Pt. 3

Unread postby pstarr » Thu 27 Dec 2018, 14:16:54

Need I remind you rockdoc123, this is a finite earth and new oil discoveries are at an all time low.

Houtson Chronicle, December 21, 2017; Oil discoveries in 2017 hit all-time low
Oil companies discovered less oil and gas this year — 7 billion barrels — than any year on record, the Norwegian research firm Rystad Energy reported on Thursday.

“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, a senior analyst at Rystad. “We have to face the fact that the low discovered volumes on a global level represent a serious threat to the supply levels some 10 years down the road.”


But of course . . . the problem is always 10 years down the road (according to the oil industry whores at Rystad Energy). Not tomorrow?

I think the problem is here right now. :? After another bout of record high fuel prices (the consequence of a world growing population and increasing lifestyle) the world's economy is now in free-fall. Without new oil, no new tight-shale plays, and no new technologies to bail us out . . . there is little or no chance that oil production can possible increase in the future. This is all there is
SA has peaked. OPEC has peaked. So goes the world.
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Re: Is EROEI Important Pt. 3

Unread postby onlooker » Thu 27 Dec 2018, 14:21:58

Unless the increasing efficiencies are not making up for the innate energy costs of fracking, the energy being lost at the wellhead, the costs of continuously having to drill new shale wells because of high depletion rates and greater refining energy costs associated especially with heavy oil
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Re: Is EROEI Important Pt. 3

Unread postby shortonoil » Thu 27 Dec 2018, 16:52:20

You do have a problem, it is thinking energy is a large part of production cost.


It is necessary to differentiate between the various portions of the total production cost. Here is one that includes what we call social costs. Roads, harbors, military protection .... anything that if it weren't present there would be no oil production. It is not important to ask: what oil costs the producers, it is its cost to society that decides when it is no longer wanted.

Image

I have been asked many times if these energy costs included environmental damage. I am not sure?
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Re: Is EROEI Important Pt. 3

Unread postby onlooker » Thu 27 Dec 2018, 17:09:04

The shale oil companies say that technology will solve the problem. But so far, the evidence suggests that the decline curves are getting steeper. Production from new wells is falling faster than before, an indication that companies are already moving away from the best prospects to more marginal deposits. The largest independent oil company operating in the shale oil industry, Pioneer Natural Resources, suffered a decline of 56 percent in the rate of production in 2017 from wells in production at the end of 2016. That means that the company had to replace more than half its production last year with new wells BEFORE it could grow production (which it managed to do).

But as the herculean efforts to grow production face greater and greater decline rates and the need to replace falling production from a larger and larger number of EXISTING wells, it will at some point become impossible to grow production or even to maintain it. The number of new wells which must be drilled will exceed the number of suitable places to drill them and/or the capacity of drilling equipment available.

That’s the point at which the jig is up. That moment could be brought forward for companies if the price of oil crashes or if the economy crashes and investment dollars stop flowing to the shale oil companies. If companies cannot finance extensive new drilling continuously, the illusion of success will be shown for what it is.


https://www.resilience.org/stories/2018 ... consumers/
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Re: Is EROEI Important Pt. 3

Unread postby onlooker » Thu 27 Dec 2018, 17:12:16

saupload_Shale-Breakevens-and-Costs-2017-08_thumb1.jpg
saupload_Shale-Breakevens-and-Costs-2017-08_thumb1.jpg (32.29 KiB) Viewed 1080 times
Dr. Anas Alhaji, an economist and oil industry consultant based in Texas, along with Al Rajhi Capital, compiled the breakeven points for the largest shale producers between 2014 and the start of 2017. When placed alongside a graph of the spot price of WTI oil from the end of three quarters prior, it appears the breakeven points for shale are actually a function of the past price of oil itself.

This indicates that because shale costs are not fixed or even stable, the industry will likely struggle to achieve consistent profit unless the labor market and vendor markets are transformed.

Essentially, shale should struggle to achieve sustained profitability, no matter the price of oil. (emphasis added)

Here's the chart produced by that study. It's plain ugly for shale investors, for a couple of reasons:
First, the blue line is the weighted average breakeven cost to produce oil from shale wells. Second the orange line is the WTI price of oil -- it's usually below the blue line.
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Re: Is EROEI Important Pt. 3

Unread postby rockdoc123 » Thu 27 Dec 2018, 17:40:41

The shale oil companies say that technology will solve the problem. But so far, the evidence suggests that the decline curves are getting steeper. Production from new wells is falling faster than before, an indication that companies are already moving away from the best prospects to more marginal deposits. The largest independent oil company operating in the shale oil industry, Pioneer Natural Resources, suffered a decline of 56 percent in the rate of production in 2017 from wells in production at the end of 2016. That means that the company had to replace more than half its production last year with new wells BEFORE it could grow production (which it managed to do).


Clearly, don’t understand the advancement in unconventional reservoir drilling and completion do they? The initial depletion phase is steeper because the laterals are longer but the IP is also much larger. The shift over to low decline rates as the initial flush production from fractures is produced is at a higher rate than previously and as a consequence of greater sweep the EUR for these wells is also higher. So higher IP generally means quicker payout and is related to higher EUR which means higher NPV. But nice try at turning what is a good story into one that is bad :roll:

It is necessary to differentiate between the various portions of the total production cost. Here is one that includes what we call social costs. Roads, harbors, military protection .... anything that if it weren't present there would be no oil production.


Who do you think pays for this…Santa Claus?

In North America a company that needs a road has to build it and pay for it. The same goes for every country I”ve ever worked in around the world and that is a fair number. It isn't gov't funded nor does it come from taxpayers.

Harbours. If you are bringing a vessel in for offloading you pay the same fees as anyone using the harbor, there is no special deal. If you have offloading facilities onshore at the harbor you pay rent for them.

Military Protection. In North America this doesn’t exist. Everywhere else I have been a company who needs to use the military to provide security for their operations has to pay them. This is nowadays done generally by providing fuel and food and sometimes vehicles to the military rather than money but it is still paid for and accounted for.

So none of these are hidden costs….all part of Capex or Opex captured in financials.
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Re: Is EROEI Important Pt. 3

Unread postby shortonoil » Thu 27 Dec 2018, 18:10:34

According to the numbers taken from that graph, plus the average cost of a BTU (now about 4,900 BTU/$), society is paying $3.21 a gallon. In the US that is not much, in India it is a lot.
134.82/ barrel is a 481% markup from the well head. No wonder most people think that the oil companies are thieves: they are!
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Re: Is EROEI Important Pt. 3

Unread postby Cog » Thu 27 Dec 2018, 18:35:05

Crash psychosis is descended on our board. Hopefully a good stock rally will cure it.
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Re: Is EROEI Important Pt. 3

Unread postby Pops » Thu 27 Dec 2018, 18:52:51

Yoshua wrote:If commodity prices fall by 50 percent and the production cost fall by 30 percent...when you are producing commodities...then we have a problem.

Sorry, it is only a problem if your online persona needs something to fret over.

It really is simple, right now the market is oversupplied, causing the price to fall. If the price falls low enough some marginal production might be taken offline, eventually. More likely new production that will definitely lose money will simply be postponed. Eventually supply balances demand and the price stabilizes.

Here's the picture:

Image

To reduce the cost of production even further the U.S would have to go Venezuela and devalue the dollar to bring down the cost of everything else against the world. That is of course if the U.S wants to be a commodity producer.

I don't even understand what that means, cost has fallen on greater efficiency, and to a lesser extent lower oil price, not anything .gov did. See we have this thing called The Market that magically figures out what the correct price should be based on supply and demand. Scarcity makes things expensive while excess makes them cheap, it's pretty cool.

By the same token, if the price of oil falls to $20 again on continued overproduction, new production will stop, "natural" decline will reduce supply and just like last time the market will balance. Voilå!

None of this is rocket science— unless of course you are trying to shoehorn your theory of overnight armageddon into a completely non-armageddony situation. Now, when shale, directional drilling, frckin-fracking, bank fraud and all the rest has run its course, and old fashioned conventional oil is in decline, the supply will fall way below demand and the price will rise to whatever the pain threshold is at the time. The rise just enough beyond that to lower demand without increasing supply... then I'll join you in the doom doom doomin'

Now is not that time. Now is the time to take advantage of cheap energy to prepare for the future while you still have a chance.
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Re: Is EROEI Important Pt. 3

Unread postby rockdoc123 » Thu 27 Dec 2018, 20:55:32

134.82/ barrel is a 481% markup from the well head. No wonder most people think that the oil companies are thieves: they are!


please show us who is paying that for a boe? And how in the world does this end up in the pocket of any oil company?
Oil companies sell their oil to refineries who will pay somewhere in and around what the going price per bbl is for that particular oil type. The price per bbl of a particular crude at wellhead is only different from the price at delivery by the cost of shipping whether that be by pipeline, truck or rail.
The price paid for products such as gasoline are a product of the crack spread and taxes, none of which go to oil companies.
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Re: Is EROEI Important Pt. 3

Unread postby StarvingLion » Thu 27 Dec 2018, 21:20:26

Bad news, people. I'm afraid the Oil Apocalypse has been superceded by...

Entropic Euthanasia

which will put you all to sleep within 2 years while crows peck at your eyeballs because rockdoc cannot answer these questions....

Why did Exxon go into Coal and office equipment a long time ago and post an immediate 7 billion loss?

KSA has been talking about a modernization programme since 2010 that never happens. Why?

Why are the majors interested in Shale when all the important remaining oil is in the ocean?

It all has to do with EROEI.
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Re: Is EROEI Important Pt. 3

Unread postby asg70 » Thu 27 Dec 2018, 21:31:25

Pops wrote:...when shale, directional drilling, frckin-fracking, bank fraud and all the rest has run its course, and old fashioned conventional oil is in decline, the supply will fall way below demand and the price will rise to whatever the pain threshold is at the time.


Which means ETP stays dead, dead, dead.
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Re: Is EROEI Important Pt. 3

Unread postby StarvingLion » Thu 27 Dec 2018, 21:39:44

Its all over, people. October 1 ,2018 was the turning point after 200 years of Economic Parasitism.

Now Entropy > Fake Money

After the sudden massive collapse the future will be bleak beyond imagination.

80% of the Cities will be bankrupt.

The Greatest Disaster Film never made should have been entitled 'Entropy: You're Doomed'

A New Great Economy Called Recyclables will come into order. Recall the ship breaking down by hordes of peasants with their bare hands. Now will come City Breaking powered by Nuclear Reactors in a great Circular Economy. You'all be given a pail, pick axe and shovel and tear down the Bankrupt Cities with your bare hands. Practically all the cities will become forced labor camps.

Thats the future.
Diesel, so they say, is the root of all evil today.
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Re: Is EROEI Important Pt. 3

Unread postby asg70 » Fri 28 Dec 2018, 00:29:45

StarvingLion wrote:Thats the future.


And if you're wrong, what are you willing to do to hold yourself accountable for such a bad call?

Anything?

Didn't think so.

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Re: Is EROEI Important Pt. 3

Unread postby Cog » Fri 28 Dec 2018, 04:02:57

Of course they won't hold themselves to account for their bad predictions. They Welch on their bad bets don't they?
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Re: Is EROEI Important Pt. 3

Unread postby dirtyharry » Fri 28 Dec 2018, 06:44:40

Pops wrote:
Yoshua wrote:Lower energy and commodity prices lead to lower production costs. If the energy and commodity prices fall over 50 percent and the cost of production only falls 30 percent...then I think we have a problem.

You do have a problem, it is thinking energy is a large part of production cost.

Especially if you give credit for increasing efficiencies as the tech matures. I don't know many details but longer bores and multiple laterals from a single pad are a couple of developments.

Obviously costs would have fallen further if energy were a large part.

Longer bores and multiple laterals save cost only in the initial vertical boring phase of the well . The longer bores/multiple laterals use more pipe, more cement ,more propellant,more water to extract the oil . You only succeed in bringing the oil out much faster which means a higher/faster depletion and decline rate . Is there any advantage in bringing more oil at a faster rate when the well head price is $ 30 or so? Yes, you are also going to be bankrupt much faster .Defies logic but what you can you say in this world ^ Collective madness is called sanity ^.
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Re: Is EROEI Important Pt. 3

Unread postby Yoshua » Fri 28 Dec 2018, 08:03:57

Pops

The supply and demand function is dependent on that there is an equilibrium: a price that both producers and consumers can accept. I don't think that the equilibrium exist anymore.

The producers need a higher price than what the consumers can offer. This happened due to falling net energy from petroleum production. The critical point was the Energy Halfway Point.

Energy is the economy. Nothing moves without energy. Nothing is produced without energy. Every good and service is produced with energy. Energy is what keeps this modern industrialised economy going. Without energy we are back to medieval times...the dark ages.
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