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THE Fracking Thread pt 4

Discussions of conventional and alternative energy production technologies.

Re: THE Fracking Thread pt 4

Unread postby ROCKMAN » Tue 11 Sep 2018, 14:56:51

ralfie - I wonder where you get the idea that the petroleum industry has been having trouble raising loans? Apparently you just repeat what you read others are saying. Obviously you don’t bother to search activity in the petroleum bond market. Here’s one relatively small example of the hundreds of $BILLIONS in bonds being placed all the time. From

https://www.investopoli.com/en/2018/03/ ... 74599cn34/

"New bond issue: Occidental Petroleum (NYSE:OXY) issued new debt notes (US674599CN34, 674599CN3) for 1B USD as of February 28, 2018. Tradable at TRACE OTC as of March 1, 2018. Listed at Stuttgart Stock Exchange as of March 8, 2018."

You do understand that these bonds are being bought by very experienced and well skilled traders who study the financial condition of the bond issuing companies in great detail, don’t you?

Marathon Oil alone has issued 100’s of $billions of new bonds. Just search the petroleum bond websites. Companies are constantly issuing new bonds to either raise new monies or replace older bonds that are approaching maturity.

If these represent bad investments I suggest you write those bond buyers and explain the errors of their decisions. They would gladly pay you $millions in consulting fees to save them from themselves. LOL.

As I and others repeatedly explained: during improving market conditions companies INCREASE their debt positions in order to take advantage of such conditions. Which can hurt them badly if those conditions abruptly reverse themselves. Or make the industry $TRILLION+ in profits if conditions hold long enough. The petroleum industry has always been a risk heavy game. And always will be. Fortunately, if things do go bad, it’s the bond buyers that suffer the bulk of the pain. The companies simply file bankruptcy and start over with a relatively clean slate. Some 80+ US public oil companies filed bankruptcy when the oil price collapsed. And with almost no exceptions, all came out of Chapter 11 in good financial condition and carried on doing business. Check Halcon for a great example. They became one of the new big players in the Permian Basin after clearing Chapter 11. And did so with a brand new $600 million credit line. Money lenders just love companies when they clear Chapter 11: often little or no debt and reserves that are proven at the then current price condition.
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Re: THE Fracking Thread pt 4

Unread postby ralfy » Tue 11 Sep 2018, 20:40:39

coffeeguyzz wrote:The 900 million that SWN paid was for a specific portion of their debt portfolio.

Rocdoc attempted, once again, to expand the overall view on how the upstream boys regularly go charging into areas with high exuberance in the early stages of a new region.

It is not uncommon for companies to shed - in multi billion dollar amounts - acreage and operations to both streamline their businesses and reduce debt.

Of all the over arching components into this entire "Will It Work?"/"When Will It Collapse?" imbroglio, the fact that a wide swath of industries from Petro chemical, ports, shipping, pipelines, midstream infrastructure, even the most 'downstream entities like smelters, steel producers, consumer oriented manufacturers (think white goods, vehicles, Foxconn, etc) are cumulatively investing in the trillions of dollars might lead one to expect a whole lot of oil/gas is coming our way.


It's not uncommon as long as there's no such thing as peak oil. That is, there's always another source of energy with high returns that ensures not only continuation of business cycles but ever-increasing production. And given the presence of competition, an increasing rate of production.

Unfortunately, that's not the case due to peak oil, which is the reason for increasing debt and increasing difficulty to pay it.

Not only did you miss that part entirely but the fact that you are posting in, of all places, a peak oil forum!
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Re: THE Fracking Thread pt 4

Unread postby ralfy » Tue 11 Sep 2018, 20:49:59

ROCKMAN wrote:ralfie - I wonder where you get the idea that the petroleum industry has been having trouble raising loans? Apparently you just repeat what you read others are saying. Obviously you don’t bother to search activity in the petroleum bond market. Here’s one relatively small example of the hundreds of $BILLIONS in bonds being placed all the time. From

https://www.investopoli.com/en/2018/03/ ... 74599cn34/

"New bond issue: Occidental Petroleum (NYSE:OXY) issued new debt notes (US674599CN34, 674599CN3) for 1B USD as of February 28, 2018. Tradable at TRACE OTC as of March 1, 2018. Listed at Stuttgart Stock Exchange as of March 8, 2018."

You do understand that these bonds are being bought by very experienced and well skilled traders who study the financial condition of the bond issuing companies in great detail, don’t you?

Marathon Oil alone has issued 100’s of $billions of new bonds. Just search the petroleum bond websites. Companies are constantly issuing new bonds to either raise new monies or replace older bonds that are approaching maturity.

If these represent bad investments I suggest you write those bond buyers and explain the errors of their decisions. They would gladly pay you $millions in consulting fees to save them from themselves. LOL.

As I and others repeatedly explained: during improving market conditions companies INCREASE their debt positions in order to take advantage of such conditions. Which can hurt them badly if those conditions abruptly reverse themselves. Or make the industry $TRILLION+ in profits if conditions hold long enough. The petroleum industry has always been a risk heavy game. And always will be. Fortunately, if things do go bad, it’s the bond buyers that suffer the bulk of the pain. The companies simply file bankruptcy and start over with a relatively clean slate. Some 80+ US public oil companies filed bankruptcy when the oil price collapsed. And with almost no exceptions, all came out of Chapter 11 in good financial condition and carried on doing business. Check Halcon for a great example. They became one of the new big players in the Permian Basin after clearing Chapter 11. And did so with a brand new $600 million credit line. Money lenders just love companies when they clear Chapter 11: often little or no debt and reserves that are proven at the then current price condition.


The idea isn't that they have difficulty getting loans. It's that easy loans were available because interest rates have been low, and they have been low because global debt had been soaring thanks to financial speculation, and economies recovered from that by taking on more loans. That was the whole point in the NY Times article.

In short, the reason for the production "revolution" was easy money. But I'm sure you're aware that there is a cost to that as well.

And then there's one effect of peak oil, which is increasing cost to increase production, leading to diminishing returns, i.e., increasing debt needed for lower increases in production.

To counter that, the industry has to take on ever-increasing debt to fund more expensive production, and to be paid for ever-increasing oil prices for a global economy that needs the opposite!
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Re: THE Fracking Thread pt 4

Unread postby ROCKMAN » Wed 12 Sep 2018, 19:48:40

ralfie - I agree with much of what you say. But: "And then there's one effect of peak oil, which is increasing cost to increase production, leading to diminishing returns, i.e., increasing debt needed for lower increases in production." Not sure what you mean by "effects of peak oil". We are obviously much closer to PO today then in then the late 1970's. But, adjusted for inflation, my cost to develop new oil reserves is much lower today. But this is a very complicated issue. Folks are easily confused. For instance the "easy oil" was found long ago and no longer exists. Such statements are typically made by folks who have never explored for oil. It was never easy. In reality the success rate is much higher today then in those "easy oil" days. Which is due to greatly improved exploration technology. What has changed is the size of fields left to discover: they are much smaller today. That fully explains why the volume of new reserves discovered has declined dramaticly...not because it is neither more difficult nor expensive. In truth many of the fields discovered today would have been impossible to find in the 1950's/60's.

Even the hot trends today (Bakken/Eagle Ford, etc) were known to contain oil long ago. But very little could be commercially developed with technology at that time. Ironically it is because of higher oil prices resulting from aspects of PO that technology was created that allowed unconventional plays to bloom which has delayed to inevitable day global PO is reached.
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Re: THE Fracking Thread pt 4

Unread postby rockdoc123 » Wed 12 Sep 2018, 20:40:30

Rockman you should also include the notion that overall Operating costs have not increased. ON the contrary in most unconventional plays since they got going in '06 -'08 or so all costs have dropped considerably. I noted in another thread that from when I was involved in early drilling in the Marcellus compared to today drilling and completing costs are less than half what they were and the cost to D&C a long reach horizontal is around what it was to D&C a very short reach horizontal not that long ago. Also due to the dropping oil price oil other costs for services dropped (they had to in order to remain competitive).
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Re: THE Fracking Thread pt 4

Unread postby ralfy » Wed 12 Sep 2018, 21:26:26

ROCKMAN wrote:ralfie - I agree with much of what you say. But: "And then there's one effect of peak oil, which is increasing cost to increase production, leading to diminishing returns, i.e., increasing debt needed for lower increases in production." Not sure what you mean by "effects of peak oil". We are obviously much closer to PO today then in then the late 1970's. But, adjusted for inflation, my cost to develop new oil reserves is much lower today. But this is a very complicated issue. Folks are easily confused. For instance the "easy oil" was found long ago and no longer exists. Such statements are typically made by folks who have never explored for oil. It was never easy. In reality the success rate is much higher today then in those "easy oil" days. Which is due to greatly improved exploration technology. What has changed is the size of fields left to discover: they are much smaller today. That fully explains why the volume of new reserves discovered has declined dramaticly...not because it is neither more difficult nor expensive. In truth many of the fields discovered today would have been impossible to find in the 1950's/60's.

Even the hot trends today (Bakken/Eagle Ford, etc) were known to contain oil long ago. But very little could be commercially developed with technology at that time. Ironically it is because of higher oil prices resulting from aspects of PO that technology was created that allowed unconventional plays to bloom which has delayed to inevitable day global PO is reached.


Peak oil refers to a peak in oil production. The effects of peak oil, which include economic crises, take place before the peak takes place.

That is because the oil is used by a global capitalist system coupled with competition, which means it requires not only continuous growth but growth at an increasing rate. That is turn is needed because of financial speculation (e.g., a credit market with a notional value of $1.2 quadrillion and many times larger than the global economy itself) coupled with overproduction (i.e., businesses need to sell more than their competition), especially when it comes to maximization of profit and a consumer market consisting of a growing global middle class, and for which demand will require, in terms of energy and material resources, more than one earth.

Unfortunately, diminishing returns does not make that possible. The phenomenon, which refers to decreasing amounts of new production in exchange for increasing amounts of energy and debt needed to ensure them, is the reason why fields left to discover are much smaller, and why debt has been soaring to increase oil production. A global capitalist system as described above will eventually experience one financial shock after another coupled with high prices not just for oil but for various goods and services dependent on it, including food.

In general, the belief is that technology will solve this problem, just as the use of oil led to the formation of that same global capitalist system. But the same solution actually creates more problems, as increased production thanks to technology is achieved only with the premise of increased consumption, which leads to more profits (hence, profit maximization). But as explained earlier, the system on which that oil is used needs higher energy returns, which means cheaper oil.

This explains why, as pointed out by the Times article, increasing amounts of debt (i.e., easy money) was needed for fracking. But as implicit in my previous posts, there is a price to pay for easy money, which in this case should be "easy oil" or larger, easily accessible fields.
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Re: THE Fracking Thread pt 4

Unread postby coffeeguyzz » Thu 13 Sep 2018, 11:54:13

Rocdoc

The productivity out of the Appalachian Basin these past few years is nothing short of astonishing.
Currently, the are 3 wells that have either exceeded or are about to pass the 10 Bcf mark in UNDER their first year online!!

There has been ongoing, albeit minimal, targeting of the shallower Upper Devonian formations with SEVERAL near-Marcellus results from both the Genesee and Geneseo formations.

For point of reference, the Wrightstone group estimated over 100 Tcf recoverable from the Burket and Geneseo trends. This, while using production numbers far lower than what is being seen today.

The Big Brother in the Basement may ultimately surpass them all as SWEPI (Shell), CNX, JKLM, Seneca and others are showing signs of having effectively cracked the code.

Data point never mentioned ...
Currently about 3 million electric vehicles worldwide.
Currently about 24 million natgas vehicles worldwide.

As the upcoming maritime regulations are showing, the impetus to use natgas versus oil products is strong and growing.
Rapid innovations in natgas handling/storage are already upending long standing practices.
(See WATT Fuel Cell. Tiny outfit near Pittsburgh doing beta testing with 100 retail customers.
They claim their gizmos can produce same amount of electricity using standard 20 lb. propane tank (barbeque size) as 55 gallon drum of diesel fueling standard generstors. Amazing).

We are on the cusp of the Age of Gas.

When developments such as MOFs enable practical use of regular vehicle transportation using natgas (Iranians claim to have just perfected this), the concern over oil supplies will recede dramatically.
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Re: THE Fracking Thread pt 4

Unread postby pstarr » Thu 13 Sep 2018, 12:36:20

Not so new coffee
wiki wrote:The Honda Civic GX first appeared in 1998 as a factory-modified Civic LX that had been designed to run exclusively on CNG (compressed natural gas). In 1998 the Civic GX cost $4500 more than a comparable Civic LX.[9] The car looked and drove just like a contemporary Honda Civic LX, but did not run on gasoline. In 2001, the Civic GX was rated the cleanest-burning internal combustion engine in the world by the EPA.[10][11]

MOF? You are not referring to the the work being done on gas masks and the Iranian Chemical Society? That is years down the road. Peak oil is now.
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Re: THE Fracking Thread pt 4

Unread postby coffeeguyzz » Thu 13 Sep 2018, 14:01:32

As per the NGV Global site, there are over 10 million Ngv fueled vehicles in China and Iran alone.
Throw in India, Pakistan, Argentina and Brazil gives you an additional 10 million.

Italy over 1 million.

Interesting to scan the global distribution on that site and correlate existing fueling stations as well as proximity to inexpensive, abundant fuel.
Absent Italy, European countries are barely a blip, which might explain the media blackout on this topic.

Worldwide research involving MOFs has exploded in recent years with 6,000 new iterations introduced annually to join the approximately 60,000 samples extant.
Flexible MOFS, liquid, Interpenetrated, on and on.

Applications range from microbial dosing, atmospheric water capture, toxic gas control, along with methane storage for vehicles.
Nanotechnology, materials compounding, along with ultra high data crunching with super computers are amongst the factors spurring developments.

One researcher claims MOFs will impact society on the scale of plastics.
Cutting edge samples sized at 1 gram have internal surface area of 10,000 square meters ... about the surface area of 2 football fields.

New world is dawning, folks.
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Re: THE Fracking Thread pt 4

Unread postby ralfy » Thu 13 Sep 2018, 21:09:56

coffeeguyzz wrote:As per the NGV Global site, there are over 10 million Ngv fueled vehicles in China and Iran alone.
Throw in India, Pakistan, Argentina and Brazil gives you an additional 10 million.

Italy over 1 million.

Interesting to scan the global distribution on that site and correlate existing fueling stations as well as proximity to inexpensive, abundant fuel.
Absent Italy, European countries are barely a blip, which might explain the media blackout on this topic.

Worldwide research involving MOFs has exploded in recent years with 6,000 new iterations introduced annually to join the approximately 60,000 samples extant.
Flexible MOFS, liquid, Interpenetrated, on and on.

Applications range from microbial dosing, atmospheric water capture, toxic gas control, along with methane storage for vehicles.
Nanotechnology, materials compounding, along with ultra high data crunching with super computers are amongst the factors spurring developments.

One researcher claims MOFs will impact society on the scale of plastics.
Cutting edge samples sized at 1 gram have internal surface area of 10,000 square meters ... about the surface area of 2 football fields.

New world is dawning, folks.


The ecological footprint for the current global population is above the biocapacity of the planet. The same population will continue to rise to 9-11 billion while the middle class is expected to make up at least 50 pct of the same population. The biocapacity needed to sustain basic needs is equivalent to one more planet, and middle class conveniences three to four more.

Given what has happened during the last ten years and warnings by multiple organizations, technologies needed to create that "new world" will need to provide energy returns many times higher than the current one at a fraction of the price, or basically the equivalent of one more planet, and immediately.
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Re: THE Fracking Thread pt 4

Unread postby Carnot » Tue 18 Sep 2018, 11:31:53

WATT power. Well it did not take me long to be concerned. Somewhat economic with the truth.

There are several producers of fuel cells, none of which could remotely be described as affordable as the up-front cost would make for very expensive electricity indeed.

The WATT Imperium produces about 500 watts continuously at a fuel consumption (propane) of 0.34 lb/hr or about 3.7 kg per day. Rated output is 14 kWh per day. 1 kWh is 3.6 MJ so the power produced is 50.4 MJ per day.

Propane HHV (higher heating value) is 50.35 MJ/ kg which gives a daily input of 3.7 x 50.35 = 187 MJ

Efficiency is 50.4/187 * 100 = 26.95%

A suitcase generator and a 1 1/2 gallons of gasoline will do the same job at about 1/10 the price and will generate a little more noise. Efficiency wise I doubt if there is much in it.

Making a comparison of 20 lbs of propane with 55 gallons of diesel is plain nonsense. They have made a comparison with a 40 amp alternator on a 3 cylinder diesel engine. 55 gallons of diesel would weigh about 170 kg which would have an energy content of 7616 MJ. That would be a conversion of the diesel to electricity of 0.6%. A steam engine could do better. Any company that prints such nonsense should be viewed with extreme caution. In other words pure BS.
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Re: THE Fracking Thread pt 4

Unread postby ROCKMAN » Tue 18 Sep 2018, 15:57:04

Carnot - Thanks for all the details. Which I'll assume are correct until someone challenges you since I don't understand half of it. Geologists are simple creatures, after all.
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Re: THE Fracking Thread pt 4

Unread postby Carnot » Wed 19 Sep 2018, 05:06:24

Rockman,

I am far from perfect but I think my calculation is sound. As an aside there has been a recent study by WoodMac on Permian decline rates, especially the terminal decline rates. I cannot post the article but the JPT has a a posting on the subject here which makes for very interesting reading indeed. Your thoughts on the matter would be welcome.

https://www.spe.org/en/jpt/jpt-article-detail/?art=4532

Here is the gist of the article:

The long-term outlook for Permian Basin producers may not be so bright, based on a new study showing production from older tight oil wells sinking faster than expected.

The study by Wood Mackenzie, Everything is Accelerating in the Permian, Including Decline Rates says the “terminal decline rate” is far greater than the widely used rule of thumb of 5-10% a year.

“For Wolfcamp wells in terminal decline… the most common occurrence is a decline rate of 14% a year,” said Robert Clarke. research director for Lower 48 Upstream at Wood Mackenzie.

Unconventional wells are known for rapid decline rates. Permian wells often produce 40% of the oil and gas they are expected to produce over their lifetime in 36 months, according to the report. But the conventional wisdom has been that sometime after year 5, the decline rate flattens out for a slow, steady decline lasting for decades.

Decline rates of 14% could be a problem because the report authors say estimated ultimate recovery (EUR) calculations are generally based on the 5-10% rule of thumb, with many companies assuming a 5% rate.

“The push for 5% is very aggressive,” said Ryan Duman, a principal analyst for Wood Mackenzie who co-authored the report, adding that “from an EUR perspective that can have a dramatic impact on what you are showcasing.”

This chart (Fig. 1) is an example of that. There is a nearly a 100,000 bbl difference in the EUR of the 5% and the 15% decline rate wells. The difference in the later years is even sharper if one considers that about half the production occurs during the first 5 years.
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Re: THE Fracking Thread pt 4

Unread postby rockdoc123 » Wed 19 Sep 2018, 14:51:43

I see at least three major problems with the Wood Mac study.
1. If they are talking about wells that have been producing for 5 years minimum then we are talking about wells that had less lateral length, less intense induced fracturing and less optimal completion fluids/methods than wells be currently drilled. Suggesting all new wells will perform the same as these older wells is not a valid approach.
2. The Permian wells as a whole have much higher IP's than some of their counterparts in the Eagleford, Bakken etc. That means one should expect the shape of the decline curve to be somewhat different. Whereas Eagleford wells may have gone through the primary high production rate, into the intermediate rate and into the terminal rate in the first 36 months it may take much longer for wells in the Permian to make it through to the terminal rate, indeed the rates they measure after five years may not be the terminal rate but rather an intermediate rate. If that is the case the EUR will not be smaller but in some cases would be larger. The shape of the curve is a product of various reservoir characteristics but one important one is Kh or permeability height which is, of course, higher in longer laterals.
3. Decline curves are a product of reservoir parameters. Shales are not all created equal as we have seen from areas in the Eagleford and Bakken. There are clearly better areas with higher IP and higher EUR and these do not always correspond to the oldest producers and would certainly not do so in something like the Wolfcamp where some of the five-year producers were drilled prior to a good understanding of where the sweet spots are.
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