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The Imminent Peak in US Oil Production

Discuss research and forecasts regarding hydrocarbon depletion.

The Imminent Peak in US Oil Production

Unread postby Pops » Tue 12 Aug 2014, 11:30:58

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
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Re: The Imminent Peak in US Oil Production

Unread postby MD » Tue 12 Aug 2014, 11:59:06

Nice!

Doomers need not worry about this. It's irrelevant.

:roll:
Stop filling dumpsters, as much as you possibly can, and everything will get better.

Just think it through.
It's not hard to do.
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Re: The Imminent Peak in US Oil Production

Unread postby Tanada » Tue 12 Aug 2014, 20:06:58

Grand timing, right at the start of the 2016 North American silly politics season we hit LTO peak and go into decline. I predict all sides will be pointing fingers and calling names instead of doing something useful.
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Re: The Imminent Peak in US Oil Production

Unread postby ROCKMAN » Tue 12 Aug 2014, 22:23:48

No problem if folks want to call this a peak in production in US oil production. But so far it isn't THE PO of the US. There have been short term peaks in US oil production in 1938, 1958, 1971, 1985 and the current peak. Of course, the current peak (for now) is just 80% of the 1985 peak. It could happen but we still have to increase current production to match THE US PO of 1971. Time will tell. Of course we're till waiting to see if a plateau in oil production develops as it did for about 15 years beginning in 1971. The current surge has lasted only 1/3 of that time so far. Again only time will tell.
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Wed 13 Aug 2014, 11:04:11

I'm not a mathematician, not even much of an arithmetician but the linearization plots in the article are interesting in that they have already settled down to a pretty straight line. Barring another price bump or technology leap or whatever the ultimate amount gettable at this price and tech seem pretty cut and dry.

The big difference between this guess and the EIA guess is the far side of the curve. The EIA thinks the rate of depletion will catch up to new production as new locations dwindle so production will peak at about the same time as the OP.

But the EIA predicts a long flat tail. I'm not sure why. If a lack of new well locations to replace rapidly declining wells causes a peak - how come the same problem doesn't cause a rapid decline? I'd guess there will be a tail of some sort, as long as lifting costs allow a profit but this curve just seems pretty flat.

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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Wed 13 Aug 2014, 11:14:29

BTW, that chart came from the EIA "Table Viewer"

--
And I also just found an excel spreadsheet that uses the Hubbert Linearization for DIY plottage! This is courtesy of Dr. Thomas Huber. It is current to 2011 and uses EIA forecasts from that date. I'll update the table if I can figure it out.

It has a facility to what-if additional amounts but not in a curve fashion. I would be cool for some excel guru out there to modify the sheet to allow the addition of multiple curves instead of the simple addition of a set amount for a set period. I might try but it may be beyond my ability ...
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Wed 13 Aug 2014, 11:38:53

Here is another chart by Ron from back in June: decline rates:

Image

This is the most important part of the story, shale oil decline rates. As you can see the EIA says Eagle Fore is declining at about 7.75% per month and the Bakken is declining at a little over 6.6% per month. And notice the EIA has decline rates rising, not falling. They say the Permian is declining at about 3.2% per month. That is because, in my opinion, the Permian is mostly conventional oil.
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Wed 13 Aug 2014, 14:12:31

LTO decline rate is important because it could compound the shock of our underlying decline. We (US) could experience a greater decline over the next 10 years than we have in the preceding 40 if shale declines as advertised. Like so:

Image

So here we are with Diane Sawyer saying we're going to be the world's largest exporter of oil, watching the messages from the Oil & Gas Industry on the tube and feeling all warm and fuzzy and then all of a sudden the bottom drops out about 2016 with 8-10% per year declines.

The idea that decline rates would never be that large has always been the thing that kept me from being an Overnight Armageddon type. I've pointed to shale as the only thing that has kept global decline at bay but RU has been increasing as well and KSA & Iraq to an extent.

Need I mention that global exports have already peaked, RU is now looking pretty flat and some say peaky, KSA is building rigs right and left to keep up production, the N Sea has been experiencing huge, steady declines as has Mexico - oh, and US nat gas is increasingly coming from those same shale wells that are producing the LTO ...


The only thing worse than hubbert's chart is the shark fin plot

da nuuuu ... da NUUU ... DA NU DA NU
.
Last edited by Pops on Wed 13 Aug 2014, 17:21:04, edited 2 times in total.
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Re: The Imminent Peak in US Oil Production

Unread postby ROCKMAN » Wed 13 Aug 2014, 14:46:46

Pops - It reminds me the joke about plotting the daily happiness of a turkey: it just keeps getting better and better. One could project a nice linear increase in turkey happiness for many years. But the next November comes around and that plot ain’t worth turkey sh*t. LOL.

Same thing with shale well locations. Same thing with every geologic trend bearing oil/NG reserves. As long as the economics hold one can just keep drilling more locations. But only as long as there are locations left to drill. Every oil/NG developed in the world either has or will run out of a meaningful number of locations to drilling. As I’ve pointed out many times the horizontally drilled Austin Chalk was THE hottest oil play on the planet in the 90’s. The play eventually covered several times the areal extent of the current Eagle Ford Shale play. There a bit of AC drilling happening today but not very much given oil is selling for more than 3X what it was when the play was red hot.

One cannot plot the past production trend of any play to predict future drilling activity. The only chance one has to make that estimate is to map out the remaining number of viable locations left to drill. Unfortunately that map is a lot more accurate after you’ve drilled enough wells that should not have been drilled. By then you have a pretty good idea of the extent of a play since you’ve gone beyond its economic.

Not to take anything away from the man but as far as doing a Hubbert style analysis one needs to remember that his projection was based on the analysis of US oil trends that were very mature and had already developed the vast majority of wells that would eventually be drilled in all of those trends. Which is why some for wrongly criticize Hubbert for an incorrect projection: he was only projecting production from the trends he had in his data base. And that didn’t include the shale plays of the DW GOM. For the system he analyzed Hubbert has been proven to be quite accurate. Just as one will certainly be able to make an equally accurate projects of the EFS or Bakken once 70%+ of all the viable locations have been drilled.
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Re: The Imminent Peak in US Oil Production

Unread postby Subjectivist » Wed 13 Aug 2014, 15:34:02

ROCKMAN wrote:Same thing with shale well locations. Same thing with every geologic trend bearing oil/NG reserves. As long as the economics hold one can just keep drilling more locations. But only as long as there are locations left to drill. Every oil/NG developed in the world either has or will run out of a meaningful number of locations to drilling. As I’ve pointed out many times the horizontally drilled Austin Chalk was THE hottest oil play on the planet in the 90’s. The play eventually covered several times the areal extent of the current Eagle Ford Shale play. There a bit of AC drilling happening today but not very much given oil is selling for more than 3X what it was when the play was red hot.

One cannot plot the past production trend of any play to predict future drilling activity. The only chance one has to make that estimate is to map out the remaining number of viable locations left to drill. Unfortunately that map is a lot more accurate after you’ve drilled enough wells that should not have been drilled. By then you have a pretty good idea of the extent of a play since you’ve gone beyond its economic.


Hey Rockman, care to make a guess how many old plays will get the horizontal multi completion treatment? IIRC you have been doing some of those projects yourself with good ROI for the shareholders. How many more old already tertiary drilled fields are in the USA worth multicompletion redrilling?
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Wed 13 Aug 2014, 15:46:45

ROCKMAN wrote:One cannot plot the past production trend of any play to predict future drilling activity.

To me the value of the linearization is in being able to say "If nothing changes, this." Obviously things change all the time and such plots are no crystal ball when the history is so short otherwise there would be no futures to trade.

OTOH, because rapid decline like my jiggered chart above is the real Mad Max scenario it should be considered. Some folks don't have the luxury of waiting 70 years to make plans. Here is Staniford's conceptualized economic chart showing various decline rates ...

Image
Simple model of economic response to varying decline rates. If decline rate is low, adaptations and continued economic growth are possible. If decline rates are higher, sustained but orderly economic contractions occur. If decline rates were extremely high, adaptation would be infeasible, and society would collapse.

http://www.theoildrum.com/node/815
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Re: The Imminent Peak in US Oil Production

Unread postby Graeme » Thu 14 Aug 2014, 00:01:00

Aren't we in the green zone for global oil production?
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Re: The Imminent Peak in US Oil Production

Unread postby vtsnowedin » Thu 14 Aug 2014, 05:57:44

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

Well sort of. Think of the Wilee coyote that has just chased the road runner off the edge of the cliff and hasn't figured out why there is no ground below his feet.
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Re: The Imminent Peak in US Oil Production

Unread postby ROCKMAN » Thu 14 Aug 2014, 08:30:51

Sub – “…Hey Rockman, care to make a guess how many old plays will get the horizontal multi completion treatment?” You might be able to answer that question yourself: with oil being $90+/bbl for some years now how many other plays, besides the Bakken, EFS and Marcellus, do you see booming? At the moment I count zero. And it hasn’t been for a lack of trying: $billion have been spent evaluating the dozens of other fractured reservoirs plays in the US and still 80%+ of the unconventional oil is coming from just two reservoirs. Hundreds of wells have been hz drilled and frac’d in those other formation. Some small economic successes but nothing big popping. The only other area where there’s a boom is in the Permian Basis. But almost all of that gain is coming from previously producing reservoirs in known fields. That activity isn’t so much finding new reservoirs but just accelerating the recovery of proved reserves. Which is a good thing from a production rate standpoint but isn’t adding as much to the nation’s reserve base as many assume.

In my project I’m doing the same thing. Almost all the fields in my trend still have a significant number of the original producing wells. But typically those wells are each averaging several bopd and 100 to 200 bbls of salt water/day…that oil stained water folks refer to. My well is doing 125 bopd and 400 bwpd. But I’m not developing new reserves but the ones that were already proven more than 50 years ago. But if I drill another 50 to 100 wells the rate gain will be invisible in the national oil rate stat. Good for me but nothing for the rests of you. There’s only one other company trying to do what I’ve done: their first wells is doing 40 bopd and 2000 bwpd. And that’s in the same field I’m drilling in. They thought they understood what I was doing when they tried to copy me. They were wrong…very wrong. LOL.
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Re: The Imminent Peak in US Oil Production

Unread postby Tanada » Thu 14 Aug 2014, 08:36:11

Pops wrote:
ROCKMAN wrote:One cannot plot the past production trend of any play to predict future drilling activity.

To me the value of the linearization is in being able to say "If nothing changes, this." Obviously things change all the time and such plots are no crystal ball when the history is so short otherwise there would be no futures to trade.

OTOH, because rapid decline like my jiggered chart above is the real Mad Max scenario it should be considered. Some folks don't have the luxury of waiting 70 years to make plans. Here is Staniford's conceptualized economic chart showing various decline rates ...

Image
Simple model of economic response to varying decline rates. If decline rate is low, adaptations and continued economic growth are possible. If decline rates are higher, sustained but orderly economic contractions occur. If decline rates were extremely high, adaptation would be infeasible, and society would collapse.

http://www.theoildrum.com/node/815


Given the last 9 years of anemic to non existent economic growth that green zone seems hopelessly optimistic. When I first joined this looney bin back in 2005 I thought we were dead set for the yellow zone because I have seen humans historically speaking connive their way through one disaster after another. Unfortunately after 9 years of following the topic closely I have seen little if any movement towards adaptation for an orderly contraction. Having now dismissed the Green and Yellow options in this post I will freely admit the Red option scares the beejebers out of me. Ten days ago 400,000 of my near neighbors lost their city water supply for three days and practically went insane with anxiety. Two days ago a massive rainstorm flooded parts of Detroit stranding over 1,000 cars and destroying many of them via flooding. We got lucky that only one lady died, she apparently had a coronary event when her car got stranded and could not make it to help before she died. Yesterday the same storm that hit Detroit hit my sister and her adult kids families in New Hampshire and Maine causing basements to flood and lots of property damage. One of my nephews is particularly upset about his motor cycle getting flooded up to the bottom of the engine where he had it parked outside. Here near Toledo the storm just brushed us, but it took a day or so for the flooded fields to drain and life to resume normal.

Natural disasters appear to be arriving with greater frequency and much more randomly than they did earlier in my life, and if we hit that Red Cliff we will not have the energy to rapidly recover from them. Sandy destroyed a bunch of structures in New Jersey and New York, but just about everything is perfectly normal there now two years later. New York and New Jersey are fairly affluent places. Katrina did a number on Mississippi and Louisiana and almost a decade later neither has fully recovered from the damage. In the red cliff world we are all Louisiana and Mississippi and each random natural disaster will leave us poorer than before as personal property and infrastructure losses accumulate without ever being fully repaired.
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Re: The Imminent Peak in US Oil Production

Unread postby ROCKMAN » Thu 14 Aug 2014, 09:00:49

Pops - So based on that chart how many Eagle Ford Shale wells will ultimately be drilled? How many future Bakken wells? Do those numbers represent 100% of the potential physical locations in the play? 50%? 150%? And what price assumption is the basis for that projection? IOW what would that chart look like 10 years ago if one assumed $30 oil today? $90 oil today? Do you believe that chart if oil drops to $40/bbl. Increases to $160/bbl?

This has been my point all along: any of these projection plots are meaningless unless one understands the price assumptions behind them as well as the actual number of potential locations left to drill. It doesn't matter how good the economics of the previous average EFS wells looks at $X/bbl if most of the potential drill sites have already been developed...the boom is over.
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Thu 14 Aug 2014, 09:05:50

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.

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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Thu 14 Aug 2014, 09:11:29

ROCKMAN wrote:Pops - So based on that chart how many Eagle Ford Shale wells will ultimately be drilled?

The original "US tight oil prod." chart from PeakOilBarrel?
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Re: The Imminent Peak in US Oil Production

Unread postby Subjectivist » Thu 14 Aug 2014, 09:29:05

Rockman thanks for the comprehensive answer. You burst my bubble, but at least I know counting on multi completion reworking of old field is not a panacea that will delay decline significantly.
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Re: The Imminent Peak in US Oil Production

Unread postby Pops » Thu 14 Aug 2014, 09:44:01

You're way more of a mathematician than I am ROCK, so you know that the linearization bit is simply modeling the ultimate extraction/production of X from the past extraction/production of X. IOW it has nothing to do with the manner of extraction or any other "above ground" influences, merely that it will be done as fast as is possible.

Of course there is no way for it to forecast extraction of Y or Z, merely X.

And definitely there is no way for it to forecast a change in technology or area although it seems to have worked pretty good up till now (well at least till 2007, I can't find a more recent fit):

Image
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