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Page added on December 25, 2016

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Reservoir Damages May Stop OPEC From Cheating


OPEC oil production comes primarily from conventional reservoirs. These reservoirs require reservoir pressure management. Some have suggested that Saudi Arabia’s rationale for cutting production was to reverse the reservoir damage that overproduction has, or may have, caused. Preservation of reservoir integrity may ultimately limit “immediate” increases to inventories from OPEC.

The temptation to cheat on quotas undoubtedly rises as prices rise, but this will occur in a universe populated by mostly long established fields for which pressure drawdowns due to years of production have left reservoirs in a delicate balance. So it’s quite possible that even if cheating IS encouraged by member nations, long term damage to ultimate cash flow may occur if the cheating barrels are sourced from mature fields.

The geopolitical landscape is absolutely teeming with heightened tensions and potential black swan events.

Inquiries into Russia’s hacking activities, possible re-imposition of Iran sanctions, the increasingly desperate Venezuelan situation, China’s seizure of a U.S. Navy drone and desired control of shipping lanes in the South China sea—not to mention the destabilizing end game in Syria—are likely flash points that could easily escalate into violence that could greatly hamper the ability of OPEC oil to get to market. It’s a good bet that supply interruption, rather than global demand strength is a more likely foundation for future price variability in crude.

If reservoir damage worries are a fact of life for many OPEC producers, U.S. unconventional producers may ultimately be the long-term winners in a universe of rising prices (assuming that OPEC acts rationally for long term gain, rather than to staunch short term cash flow problems.)

10 Comments on "Reservoir Damages May Stop OPEC From Cheating"

  1. Go Speed Racer on Sun, 25th Dec 2016 6:52 am 

    Reservoir Damages. No that is a cool name,
    for a new grunge punk rock and roll band.

  2. Go Speed Racer on Sun, 25th Dec 2016 7:04 am 

    Merry Christmas everybody! Obama had outlawed
    Christmas, but now that Trump is President, he is
    making Christmas great again!

    Finally we are allowed to hang Christmas lights onto
    our roof gutters, to play Christmas music, chop down
    trees for our living rooms and hang electric
    lights on their branches.

    Even better, Trump will bring back Tungsten Christmas
    Lights, and get rid of those nasty stroboscopic blue glare
    LED Christmas lights.

    AND Trump will bring back vinyl records, and driving 200
    miles to
    Grandma’s house in a 14 mpg Ford LTD, playing John Denver 8-tracks all the way.
    And eat mashed potatoes and gravy for Christmas
    Trump will even bring back John Denver. After the
    plane crash they froze enough pieces of him they can
    clone his DNA and hand him a guitar.
    Trump will also bring back Beverly Hillbillies,
    Gilligan’s Island, and the middl class, to
    Make America Great Again.

    Ha ha fooled ya. Merry Christmas!

  3. rockman on Sun, 25th Dec 2016 7:28 am 

    I’ve seen reservoirs damaged by exceeding safe production rates. Which is actually a bit misleading way of describing the primary problem. While if might have a long term effect on EUR typically the most serious damage is to the wells themselves. And that damage can be spotty: hurt production in some and leaving others unchanged. The higher rate might increase the water cut well above what would be normal and often decreases net oil production despite the higher total rate. But the worse case scenario would be damaging the completion to the point where no oil/water can be produced. Sometimes an expensive work over can repair the damage. And sometimes not requiring the well to be redrilled. And if the net oil volume is too low doing so might not be justified.

    Very difficut interpreting what may or may not be happening from afar. Even the company’s engineers and geologists might argue amongst themselves and they have the details we’ll never see. So we’re pretty much left with theories we can’t verify.

  4. Go Speed Racer on Sun, 25th Dec 2016 7:46 am 

    Check out this Obama link.

    Not one word about Christmas, on Christmas Day. They don’t call him O-blah-blah for nothing.

    Too bad that Trump is no better, going to finish off the last of
    the middle class, flying A-10 Warthogs down Main
    Street and blast away the last of your hopes and dreams. Anybody not a billionaire,
    can just pack your bags and get out
    of Trump America.

  5. Sissyfuss on Sun, 25th Dec 2016 9:23 am 

    Sounds like you got a lump of coal in your stocking this morn, Gopeed. Hang onto it as it will increase in value just like a precious metal.

  6. rockman on Sun, 25th Dec 2016 12:05 pm 

    Racer – But the good news for the vast majority of us is that by our own actions we have much more control over our future then any POTUS does. I know for myself the best/worst events in my life were to my credit/blame.

  7. Bob Inget on Sun, 25th Dec 2016 6:28 pm 

    Sudan, Syria, Saudi Arabia, Iraq, Libya, Venezuela..
    Quiz: What do these great ‘producing’ nations have in common?

    (besides stressing oil wells for the last two years of below cost of production costs just to raise cash)

    Give up ?

    Every one is going broke.

  8. makati1 on Sun, 25th Dec 2016 7:47 pm 

    Bob, you can add the u$ to that list. It is already broke and so deep in debt it will never get out. The collapse of America is way past that of those countries and it didn’t even have the excuse of invasion by the empire.

    The Saudis are the only country that has not been meddled with by the U$, but they have their own built-in demolition team called the Saud Family.

    I think we are entering a totally different world and, by2020, will see the collapse of most of what we know and except as ‘normal’. It is going to be very interesting.

  9. Bob Inget on Mon, 26th Dec 2016 11:58 am 

    Because the current thread concerned depletion, over production, stressed wells, America’s debt ‘problems;’ are not at issue here.
    (the US economy is not utterly dependent on oil & gas exports… At least not yet-;)

    Saudi EXPORTS to the US have been falling months before that famous OPEC meet early December.

    Some recent events make perfect non sense.
    Aircraft don’t suddenly fall out of cruising altitude because of ‘pilot error’ a few minutes after a calm, untroubled radio transmission with ATC*.
    So it is with OPEC production. Two years of over stressing wells are having inevitable consequences rat know.

    Insuring steady flow…..

    The US ‘intervenes’ in ME politics by giving support to Saudi sponsored, losing, ‘proxy’ wars in Yemen, Sudan and Syria. Just as KSA dug a carefully constructed trap for it’s own demise,
    Americans fell for the promise of never-ending cheap liquid fuels if only we put up with a few spills, earthquakes from fraccing, selling off our children’s climate future and helping dictatorships. In return we get a delightfully smelling new pick-up truck or SUV…cheaper fertilizer (food) and low cost NG.

    *Russia won’t admit terrorism for a dozen reasons.

  10. Dredd on Tue, 27th Dec 2016 9:35 am 

    It never held them back from anything like cheating before (Don’t Believe In Abrupt Sea Level Change – Know About It – 3).

    Humble Oil-Qaeda you know.

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