Author Topic: Is 'Peak Oil' Over?  (Read 16715 times)

Offline Alan Georges

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Re: Is 'Peak Oil' Over?
« Reply #60 on: December 26, 2018, 06:28:18 AM »
That is a lot of oil.  For comparison, the current proven reserves in the U.S. are about 36 billion barrels (wikipedia).  Now, "technically recoverable" and "proven" and "economically recoverable" are all entirely different things when it comes to tight oil, but still, if 10% of this works out it's enough to significantly influence our energy policy for the next decade.

Offline iam4liberty

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Re: Is 'Peak Oil' Over?
« Reply #61 on: December 26, 2018, 09:10:01 AM »
That is a lot of oil.  For comparison, the current proven reserves in the U.S. are about 36 billion barrels (wikipedia).  Now, "technically recoverable" and "proven" and "economically recoverable" are all entirely different things when it comes to tight oil, but still, if 10% of this works out it's enough to significantly influence our energy policy for the next decade.

Yes.  And new tech coal-to-diesel plants are in the works which will potentially double domestic diesel production.  The looming peak oil theory is dead.

Offline Alan Georges

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Re: Is 'Peak Oil' Over?
« Reply #62 on: January 23, 2019, 06:40:43 PM »
Maybe.  Or maybe not so fast.  In a recent podcast with Chris Martenson (link) while discussing the Wolf Camp formation, Art Berman opines:
Quote
Chris Martenson: What?

Art Berman: Yeah, and using the average EUR, the mean, I guess, you know, they give you ranges, using the mean, which I can’t remember what it was, but it was something like 170,000 barrels of oil equivalent, well, run that through an economics program and the break-even price on that great new discovery that isn’t a discovery was $135.00 a barrel.

Chris Martenson: As a break-even, no return.

Art Berman: As a break even.
Emphasis on that price added.  Hm, I'm not sure what to make of this.  Berman always seems like a straight shooter, but I have no way to judge.  Opinions?

Offline iam4liberty

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Re: Is 'Peak Oil' Over?
« Reply #63 on: January 23, 2019, 07:04:22 PM »
Maybe.  Or maybe not so fast.  In a recent podcast with Chris Martenson (link) while discussing the Wolf Camp formation, Art Berman opines:Emphasis on that price added.  Hm, I'm not sure what to make of this.  Berman always seems like a straight shooter, but I have no way to judge.  Opinions?

Um, no.  Not sure where they are getting their data.  The maximum extraction cost was estimated at $45. 

Offline David in MN

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Re: Is 'Peak Oil' Over?
« Reply #64 on: January 23, 2019, 07:09:46 PM »
Maybe.  Or maybe not so fast.  In a recent podcast with Chris Martenson (link) while discussing the Wolf Camp formation, Art Berman opines:Emphasis on that price added.  Hm, I'm not sure what to make of this.  Berman always seems like a straight shooter, but I have no way to judge.  Opinions?

It's a big fat maybe. The problem with oil is the extraction cost and the transport cost. It's a horribly hard calculation to determine the value of oil drilled here to be used there. I spent a few years as an oil trader and what you end up betting on is supply chain. The company with a pipe from Russia to France has the advantage. Conoco Phillips did this in the early 2000s.

A lot of oil trading has more to do with legal BS and commodity pricing. I'm not claiming to have a solution. I claim the problem is much more difficult than most imagine.

You're on the hunt for this issue. I might look at commodity pricing and see a floor and a ceiling. But there are massive supply chain costs that break into oil. You're hitting on a business where it 'makes sense' to tow a floating derrick from Danemark to the Caribbean. I mean millions just to move a drill on the hope it pays. Weird industry.

It's why I wanted this thread. It's such a mess we might not even have a correct costing. Such is life in discovering commodities.

Offline iam4liberty

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Re: Is 'Peak Oil' Over?
« Reply #65 on: January 23, 2019, 07:23:00 PM »
But they are already extracting there in the $30s.  So they can estimate pretty good off that given other assumptions on deeper fields.

https://www.mrt.com/business/oil/article/EIA-economist-Permian-production-is-11107506.php
EIA economist: Permian production is ‘remarkable’
Basin’s daily output expected to hit 2.4 million barrels in May


Even as conventional projects were declining, U.S. shale investments and production rose as production costs have fallen 50 percent since 2014. Of the 85 million barrels per day of global oil output, conventional oil production is 69 million barrels, accompanied by 6.5 million barrels per day from U.S. shale plays and the remainder from other natural gas liquids and unconventional sources such as oil sands and heavy oil.
...
The agency puts the average break-even price in the Permian at $40 to $45 per barrel, with production from U.S. shale plays expected to rise by 2.3 million barrels a day by 2022 at current oil prices. It could be a larger increase if prices are higher.



Offline Alan Georges

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Re: Is 'Peak Oil' Over?
« Reply #66 on: January 23, 2019, 08:13:05 PM »
It's why I wanted this thread. It's such a mess we might not even have a correct costing. Such is life in discovering commodities.
Yes, with industry experts "agreeing" within a factor of 3, it's hard for an outsider to make a call.  As always, my bets are hedged.  This is a surprisingly touchy subject.  Thanks for the link, i4l.  It's a new avenue to research.

Offline David in MN

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Re: Is 'Peak Oil' Over?
« Reply #67 on: January 24, 2019, 06:05:56 AM »
Actually as I slept on this it occurred one could claim 'peak oil' has taken victims. Just not as predicted. Perhaps the first to suffer were the Venezuelans. You could make the case that they hit peak production or peak profits and then disaster befell them. It's also hurt Russia and parts of the Middle East.

Commodities are goofy.

I called it Danemark. That's what happens when the only Dane you speak to uses German.

Offline alexlindsay

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Re: Is 'Peak Oil' Over?
« Reply #68 on: February 02, 2019, 04:37:35 AM »
I have a least a decent understanding of what berman is talking about there. EUR means estimated ultimate recovery or the total amount of oil you're going to get out of a well over its lifetime. it is the calculation they use to determine breakeven price. Lets say you drill a well and it produces a million barrels, 1 million was your ultimate recovery. Now lets say that well cost you 10 million to drill, automatically your bare minimum break even price is 10$ plus whatever your time value of money is. Then you add on your lift costs, often 10-20$ per barrel. Then you add in finance costs, then you add in transportation costs, then you add in general and administrative costs, hedging costs, mineral right leasing or buying costs. divide all that crap by your number of barrels you will produce and you get a break even price, or at least you should. Many companies have been giving numbers using two falsehoods. one, they call breakeven price whatever price they need to cover their non capital costs (lifting, transport, G&A, but excluding drilling and leasing). the other trick which i see more and more is to increase the EUR. so if you spend 10 million capital on a well and mineral rights you can dramatically lower your breakeven price if you say "this well will make a million barrels and not half a million". if you look at the EUR's in many shale plays they have dramatically increased while evidence has not shown why. They have used bigger and bigger fracks but the wells seem to peter out just as fast.

The other thing to look at is a pure shale oil company that can drill out of cashflow. Basically that doesn't need to borrow to drill more, I will wait here while you find one. If your company is making all kinds of money you shouldn't need to borrow to fund the most basic element of your growth or even just maintenance. most shale oil are barely or not at all cashflow positive and are heavily indebted, if interest rates went way up they would be pooched. Shale oil is a function of cheap money plain and simple. Way way more oil is technically available than we can use, I'm a consultant in the oil industry in canada and the facility i am currently working in is just realizing the true ultimate recovery it's capable of and all i can say is what Canada can actually produce economically make Saudi Arabia look small. give us enough pipelines and enough demand and we could crank out 20 million barrels a day for 100 years at a price that would make money even today. estimates based on the industry data (literally created in the facility in which i work) i have seen says we could economically extract 672 billion barrels out of north east alberta at todays prices.

Don't worry about oil running out, there are too many people like me who have fun and make a bunch of money getting it out. Worry about government making life unaffordable with carbon taxes and crap like that.   

Offline iam4liberty

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Re: Is 'Peak Oil' Over?
« Reply #69 on: February 02, 2019, 07:36:42 AM »
Don't worry about oil running out, there are too many people like me who have fun and make a bunch of money getting it out. Worry about government making life unaffordable with carbon taxes and crap like that.

Thanks for the insiders look!

Would love to hear your thoughts on transportation.  It is shocking to me that we are back to transporting  oil by truck because they wont let pipe capacity keep up with production. How much does that add to costs?  It's been great for Indiana as we are trucking capital of US.  But gosh it seems backwards to truck haul oil huge distancces.

https://www.wsj.com/articles/hot-commodity-in-the-shale-boom-truckers-1528459200
Hot Commodity in the Shale Boom: Truckers
Pipelines filled to the brim drive up demand for Permian Basin drivers; signing bonuses and six-figure salaries

Offline Alan Georges

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Re: Is 'Peak Oil' Over?
« Reply #70 on: February 02, 2019, 07:51:51 AM »
Thanks for a knowledgable take on this thread, Alex.

Offline alexlindsay

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Re: Is 'Peak Oil' Over?
« Reply #71 on: February 03, 2019, 02:17:27 AM »
Trucking oil away from wellheads is a reality in many places for a variety of reasons. One is the absence of local and regional pipeline capacity, which can be a short or long term problem and a local or regional problem. In the short term it takes a while to prepare a project and build a pipeline into a given region and their needs to be enough oil production for a period of time to justify building a pipeline. Locally it may not be economical to build flowlines (tiny pipelines) to individual wells or pads because the realistic production cycle of the well or pad is too short, which may be the case with many tight oil wells. in that case all the trucking may only be for 5 - 10 miles or less and possibly it is cheaper to pay a trucker 100 grand a year than to pay a legion of pipeline welders 300k a year to build all that infrastructure. Pipeline bottlenecks are a thing that has happened as long as there has been oil booms, if it purely a lag time problem it won't last forever. this is what it appears to be in many tight oil basins in the US. Then there are long term pipeline bottlenecks like you see in Alberta right now that are caused by regulations and government obstruction. Those a much different and bigger problem. If you are wondering about that look at the local cost of a barrel of oil in west texas when oil was originally discovered there (went from several dollars to 40 cents)  or even in alberta in the last 6 months. A barrel of the bitumen we produce was selling for under 11$ when WTI was over 60$ because the cost to get it out of this landlocked area was so high and producers need cash to cover costs and we as a country elected a green brained retard to kill our economy.

Trucking and transportation adds a lot to the cost of oil, trucking oil 50 miles to a tank battery likely costs as much as a 500-1000 mile ride on a pipeline. With that said it doesn't really impact the end user cost because oil is sold by companies at terminals. So all the costs to get oil from the ground to a terminal are born by the production company and it comes off the top of what they get paid for a barrel. This could potentially have a long term impact on the amount of wells they drill and if they are economical or not but doesn't add to the broader cost of the commodity except in the long term sense mentioned. At a certain point the oil company just won't drill development wells if it is going to be too expensive to get the oil to market.

 Remember that crude oil is a commodity that physically is traded by very few entities. The only people who actually buy/sell crude are marketing firms who sell oil for smaller companies, large oil companies who have their own trading desks, mid stream companies that act as middle men to refineries and refining companies themselves. That's it. Many people trade oil and make money on it that don't have anything to do with actual oil and couldn't even identify it if they saw it. Everyone else is buying derivatives of oil price movement or some paper surrounding it. More paper oil is sold in new york in a day than actual oil is used in a year. The people that actually buy and sell oil have pretty good info on it and the market is pretty transparent. If there is a substantial market distortion in the physical market it's there for a reason and won't last forever, the oil market actually functions pretty efficiently albeit with a lag time for various things. Things only get weird when you start to deal with paper oil which is a broader world commodity that is traded almost entirely based on market sentiment by people who've never seen an oil well. The reports from major oil agencies are also total bullshit, the IEA or API or whatever have no fucking clue. They base huge numbers on voluntary reporting from a fraction of the companies that produce oil with zero accuracy checking or ability to enforce anything if they did find malfeasance. If you google "missing barrels" you'll find that there is about 1% uncertainty in oil numbers reported, which amounts to about a million barrels a day. yet they then sit around and say things like "the oil markets will be oversupplied by 300k barrels a day" yet they don't add "plus or minus a million barrels a day because how can you possibly accurately count this crap". I do trade some oil ETF's and oil stocks based on my own knowledge but really that is just fancy gambling. Oil markets are only predictable in very long terms. It appears right now that we are at the beginning of a long term secular bull market for oil much like occurred from 2002 - 2014. If you'd like more info read the Q4 Goehring report. With that said governments can ruin it for a given country or region and short/medium term change things. Long term we haven't invested much of anything in finding more affordable or economical oil in a bunch of years and eventually people will stop giving money to shale companies once they clearly realize they aren't going to get it back. I hope the 100k a year truckers save some money or invest it in something outside of consumer goods because long term it won't likely be there.