Peak Shale Oil

[bernorange 8377]

Are we near the peak?  I'm seeing some rumblings that we might be there right now.

Quote

... if the situation doesn’t turn around quickly for the shale industry, 2019 might turn out to be the year that production ultimately peaks in the United States.

There several factors that have negatively impacted the U.S. Shale Industry in 2019; the compounded annual decline rate, the massive debt–inability for shale companies to raise money, and the stunning amount of new wells necessary to increase overall production.  While shale experts are knowledgeable of the typical 60-70% first-year decline rate of shale wells, not much is mentioned about the “compounded annual decline rate.”

The chart above shows that as overall Shale oil production increases, the decline curve becomes steeper. U.S. shale oil production in the top four fields hasn’t increased all that much because the nearly 6,000 wells brought online so far this year had to offset the stunning 2 million barrel per day decline from the production in 2018.
...

https://srsroccoreport.com/the-u-s-shale-industry-hit-a-brick-wall-in-2019/

What would if mean for US energy policy and US middle east foreign policy if the US Shale industry does decline?

[Nice Guy Eddie 13568]

“Lord, Grant Me One More Boom and I Promise Not to Screw it Up”

seriously is it in question that shale won’t eventually play out in relative terms? I assume shale wells will exist forever but not at previous levels.

Edited November 14, 2019 by Nice Guy Eddie

[Parliament 14413]

I've wondered the same.  Shale wells play out faster, but we're continuously getting better at extraction.  As it is, I think we can only extract 20% today?  Regardless, any hiccup in technology advancement and production will studder.

[Ted Dantzler 157]

Oil noob here but I love reading about he business. 

I'm assuming that shale oil exists in other places all over the world. Now that the technology to extract it exists what is stopping every other country from frac'n(may not have used the term right) their shale oil and flooding the market with even more oil? 

[Ted Dantzler 157]

WHO DO I BELIEVE?!?

https://www.wsj.com/articles/iea-sees-u-s-shale-squeezing-opec-influence-11573603201

IEA Sees U.S. Shale Squeezing OPEC Influence

U.S. shale-oil production will reshape global energy markets in the years to come, the International Energy Agency said

 

Spoiler

 

U.S. shale-oil production will reshape global energy markets in the years to come, bolstering the country’s influence over OPEC nations, the International Energy Agency said Wednesday.

But Mohammed Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, cautioned that growth in American output was slowing and its role remained essential to stabilize oil supplies.

In its annual World Energy Outlook report, the IEA said that even as annual U.S. production growth slows from its pace in recent years, policies already announced mean that the country will account for 85% of the increase in global oil production to 2030.

“U.S. growth will limit the ability of traditional exporters to manage exports,” said Fatih Birol, the IEA’s executive director. “Countries whose economies are exclusively reliant on oil-and-gas reserves are facing serious challenges.”

The report comes as OPEC leaders and their allies are preparing to meet in Vienna next month to discuss continuing oil production cuts, and as Saudi Arabian Oil Co., known as Aramco, prepares for its long-awaited initial public offering.

Higher U.S. output—rising to 19 million barrels a day of production over the coming decade —will push down the share of the global oil market held by OPEC members and Russia, to 47% in 2030 from 55% in the mid 2000s, the agency said.

Still, Mr. Barkindo said there is growing concern that U.S. shale production is increasingly decelerating. He said his own conversations with American producers suggested U.S. production could grow by 300,000 to 400,000 barrels a day next year, compared with a rise of 2 million barrels a day in 2018.

He said OPEC may also upgrade its oil demand forecast for next year if progress is made in talks between the U.S. and China.

The IEA said “the world still relies heavily on oil supply from the Middle East” regardless of any sustainable-energy policy initiatives announced. Mr. Barkindo said OPEC and its allies “have rescued this industry” by putting a floor on prices and boosting investment.

The cartel and its allies also act as a “global insurance against uncertainty against threat to security of supply,” as demonstrated during recent attacks on Saudi oil facilities, he said, when producers like Iraq or Russia made up for the temporary losses of supply.

But the IEA said “pressures on the hydrocarbon revenues of some of the world’s major producers also underline the importance of their efforts to diversify their economies.”

The U.S. also will account for 30% of the increase in natural-gas production to 2025, ensuring that U.S. total shale oil and gas output will overtake that of Russia’s by then.

The IEA’s outlook report came the day before the agency was due to release its monthly market report and hours before OPEC releases its own monthly report. Both organizations cut their demand-growth forecasts for 2019 in their October reports, citing sagging global growth and expanding U.S. shale production.

 

“The shale revolution highlights that rapid change in the energy system is possible when an initial push to develop new technologies is complemented by strong market incentives and large-scale investment,” the IEA’s Dr. Birol added.

In longer term forecasts for the global energy market, the IEA says that even with the policy action and targets outlined by leaders around the world, governments and businesses are on course to fall well short of the policy action needed to secure a sustainable-energy future and avoid the harshest consequences of climate change.

In that scenario, energy demand will rise by 1.3% a year to 2040, “resulting in strains across all aspects of energy markets and a continued strong upward march in energy-related emissions,” while carbon dioxide emissions will “lock in severe impacts from climate change” by that year, even as hundreds of millions of people remain without power, the agency said.

Low-carbon sources—led by solar panels—will supply more than half of the growth, with liquefied natural gas providing another third, even though oil demand will flatten out in the mid-2030s, the IEA said.

 

Annual electric-vehicle sales could rise to more than 30 million in 2040 from 2 million today, the agency said, but noted that a doubling of sales of sport-utility vehicles over the past 10 years is significant because SUVs are larger, heavier, less fuel efficient, and harder to electrify.

 

 

[bernorange 8377]

14 minutes ago, Ted Dantzler said:

WHO DO I BELIEVE?!?

...

That report confirms that shale oil output and growth are slowing.  It then mentions "policies" (not specified) that will boost this growth.  It mentions "conversations with producers" that production could grow.  It does not mention any specifics on how exactly that is going to be achieved.  Either technology has to magically improve production from existing wells (which apparently have a compounding annual decline rate) or the industry needs to be building exponentially more wells every year.  We don't have exponentially growing land/reserves to build wells on, so even if policies made the economics easier for building new wells, it doesn't solve what appears to be a cap on what US production can achieve.

[Cajun 11766]

1 hour ago, Nice Guy Eddie said:

“Lord, Grant Me One More Boom and I Promise Not to Screw it Up”

seriously is it in question that shale won’t eventually play out in relative terms? I assume shale wells will exist forever but not at previous levels.

I can tell you first hand that the decline of production of an individual well in Atascosa and McMullen Counties is akin to a Sumlin coached aggy squad around game six.

[Parliament 14413]

Here in ND, downstream costs are falling, infrastructure is still catching up, and they're just getting "better" at everything.*  But it still takes "step changes" to maintain extraction.  I have tremendous faith in their ability to do it, but it's arrogant to assume they will.

And allow me to go all CR for a minute and say I hope they do.  I hope the US becomes a net-exporter.  Because screw the Middle East.  Would be awesome when, soon, we have leaders brave enough to tell them all to take a hike.

*And it isn't just oil. Last summer they were flaring propane and "Y grade" (whatever that is.)  Now the entire Midwest is out of propane.  Unfuck your shit, Guys.

Edited November 14, 2019 by Parliament

[orange dream 1267]

4 hours ago, Ted Dantzler said:

Oil noob here but I love reading about he business. 

I'm assuming that shale oil exists in other places all over the world. Now that the technology to extract it exists what is stopping every other country from frac'n(may not have used the term right) their shale oil and flooding the market with even more oil? 

Absolutely there are shale (unconventional) plays all over the world.  A fair number of foreign companies have invested heavily in US shale plays in order to understand the technology and how it may best apply to their local assets.  Depending on the area of the world there are likely easier to extract assets that they may produce before they start to produce local unconventional resources but when the economics are right they will get back to it.

[CycleTex87 2991]

There are some political risks to "Fracking" also.  The UK recently halted all hydraulic fracturing in England and Scotland.  If a left of center government in the US comes in, there could be some decrease in fracturing here also.  Elizabeth Warren and Bernie Sanders are on record as saying they would end fracking in the US.  That would devastate US oil & gas production in short order.  

[babysdaddy 2730]

I think they said they'd end fracking on federal land.  how many barrels/day come from federal land via fracking?

[Archer 474]

4 hours ago, babysdaddy said:

I think they said they'd end fracking on federal land.  how many barrels/day come from federal land via fracking?

All of onshore, looks like about 600,000 BPD in 2018. 

[Jeffrey 90]

Plateau and leveling off before the peak

[52-80 19287]

13 hours ago, Ted Dantzler said:

Oil noob here but I love reading about he business. 

I'm assuming that shale oil exists in other places all over the world. Now that the technology to extract it exists what is stopping every other country from frac'n(may not have used the term right) their shale oil and flooding the market with even more oil? 

Europe: Extremely unfriendly regulatory policies.  Denser population / Urban development.  Frac outright ban in some countries.  New hydrocarbon on-shore development banned in many more.  Nobody risking drilling pattern, if they could find lenders or capital commitment in the first.

 

And the geology/play is less friendly.  Poland tried it and failed.  Ukraine wants to try it, because Russian energy...  UK is trying only cuz that ineos guy is megarich, but it's huge uphill battle.

 

And that's about it for the continent.

[tx 3 putt 78010]

Argentina is the next 'shale play' 

[52-80 19287]

2 hours ago, tx 3 putt said:

Argentina is the next 'shale play' 

Yeap, the only one I've heard

[bernorange 8377]

I'm more concerned about the US Shale industry than international shale.  How shale performs domestically is going to have some significant ramifications on energy and foreign policy. 

[CycleTex87 2991]

16 hours ago, babysdaddy said:

I think they said they'd end fracking on federal land.  how many barrels/day come from federal land via fracking?

This is Elizabeth Warren's Tweet:  On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking—everywhere.

[Bateshorn 9969]

7 hours ago, Dr. Beeper said:

It’s all political posturing. They know what such a ban would do to increase oil prices, totally unnecessarily so, and kill their chances of a two term presidency. 

Also, and I'm just speaking practically, not CR, the government really only has a say over federal lands.  A Warren/Sanders administration can make it harder to Frack on federal lands by throwing more regulatory burdens at producers, but an out right ban would probably require an act of Congress, and I don't see that if the current Senate rules structure remains in place.

Now, several blue states have out right banned fracking, but that's a state by state issue.  As far as Texas, the feds have minimal to no impact given the paucity of federal land.  Liz Warren can tweet whatever she wants, but that's not how the Presidency works.  She can issue an executive order, but that doesn't mean it has any practical effect, and if it does, it will likely be tied up in court for years to come.  

 

Offshore drilling is a separate issue, where the executive has more leeway, but regardless, we elect a President, not a King/Queen.  The Trump Administration has been trying to enact "Drill Baby, Drill" for 3 years and......hasn't done all that much in the aggregate.  Shit moves slowly here.

Edited November 15, 2019 by Bateshorn

[CycleTex87 2991]

Bernie Sanders:  Fracking is a danger to our water supply. It’s a danger to the air we breathe. It causes earthquakes. It’s highly explosive. And it’s contributing to climate change. We need to ban it nationwide.

[High Plains Drifter 11085]

23 hours ago, Parliament said:

Here in ND, downstream costs are falling, infrastructure is still catching up, and they're just getting "better" at everything.*  But it still takes "step changes" to maintain extraction.  I have tremendous faith in their ability to do it, but it's arrogant to assume they will.

And allow me to go all CR for a minute and say I hope they do.  I hope the US becomes a net-exporter.  Because screw the Middle East.  Would be awesome when, soon, we have leaders brave enough to tell them all to take a hike.

*And it isn't just oil. Last summer they were flaring propane and "Y grade" (whatever that is.)  Now the entire Midwest is out of propane.  Unfuck your shit, Guys.

 

Are you sure it was propane they were flaring, and not natural gas?

 

I agree that we need to become a net exporter and tell the middle east (Saudi Arabia specifically) to fuck off. More production is only half that equation. Less consumption is the other half.

[Neonmoon 38130]

I’m curious how the next 20 years play out. The climate change crowd isn’t going away. Renewables aren’t going away. The worldwide demand for energy isn’t going away. The energy transition has already started. I guess I’m most curious about the speed of the transition. Are we at peak shale? Maybe. I don’t know. I think innovation will have a say in it. Economics will have a say in it too. 

[sunset87 250]

Who knows if its peaked or not.  I do know in the Permian the best areas are currently and have been drilled. The shale companies are having a hard time raising money because a lot of them aren't making money at these prices.

I'm sure advances in technology will help, but in particular they have to address pressure depletion (not reserve depletion) in these shale reservoirs. If you don't have sufficient pressures your not going to move the hydrocarbons out of these tight rocks.

Internationally, I'm hearing, excluding politics, that infrastructure and expertise are still behind.

 

[Liquor and Poker 3659]

On 11/14/2019 at 8:23 AM, Ted Dantzler said:

WHO DO I BELIEVE?!?

https://www.wsj.com/articles/iea-sees-u-s-shale-squeezing-opec-influence-11573603201

IEA Sees U.S. Shale Squeezing OPEC Influence

U.S. shale-oil production will reshape global energy markets in the years to come, the International Energy Agency said

 

  Reveal hidden contents

 

U.S. shale-oil production will reshape global energy markets in the years to come, bolstering the country’s influence over OPEC nations, the International Energy Agency said Wednesday.

But Mohammed Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, cautioned that growth in American output was slowing and its role remained essential to stabilize oil supplies.

In its annual World Energy Outlook report, the IEA said that even as annual U.S. production growth slows from its pace in recent years, policies already announced mean that the country will account for 85% of the increase in global oil production to 2030.

“U.S. growth will limit the ability of traditional exporters to manage exports,” said Fatih Birol, the IEA’s executive director. “Countries whose economies are exclusively reliant on oil-and-gas reserves are facing serious challenges.”

The report comes as OPEC leaders and their allies are preparing to meet in Vienna next month to discuss continuing oil production cuts, and as Saudi Arabian Oil Co., known as Aramco, prepares for its long-awaited initial public offering.

Higher U.S. output—rising to 19 million barrels a day of production over the coming decade —will push down the share of the global oil market held by OPEC members and Russia, to 47% in 2030 from 55% in the mid 2000s, the agency said.

Still, Mr. Barkindo said there is growing concern that U.S. shale production is increasingly decelerating. He said his own conversations with American producers suggested U.S. production could grow by 300,000 to 400,000 barrels a day next year, compared with a rise of 2 million barrels a day in 2018.

He said OPEC may also upgrade its oil demand forecast for next year if progress is made in talks between the U.S. and China.

The IEA said “the world still relies heavily on oil supply from the Middle East” regardless of any sustainable-energy policy initiatives announced. Mr. Barkindo said OPEC and its allies “have rescued this industry” by putting a floor on prices and boosting investment.

The cartel and its allies also act as a “global insurance against uncertainty against threat to security of supply,” as demonstrated during recent attacks on Saudi oil facilities, he said, when producers like Iraq or Russia made up for the temporary losses of supply.

But the IEA said “pressures on the hydrocarbon revenues of some of the world’s major producers also underline the importance of their efforts to diversify their economies.”

The U.S. also will account for 30% of the increase in natural-gas production to 2025, ensuring that U.S. total shale oil and gas output will overtake that of Russia’s by then.

The IEA’s outlook report came the day before the agency was due to release its monthly market report and hours before OPEC releases its own monthly report. Both organizations cut their demand-growth forecasts for 2019 in their October reports, citing sagging global growth and expanding U.S. shale production.

 

“The shale revolution highlights that rapid change in the energy system is possible when an initial push to develop new technologies is complemented by strong market incentives and large-scale investment,” the IEA’s Dr. Birol added.

In longer term forecasts for the global energy market, the IEA says that even with the policy action and targets outlined by leaders around the world, governments and businesses are on course to fall well short of the policy action needed to secure a sustainable-energy future and avoid the harshest consequences of climate change.

In that scenario, energy demand will rise by 1.3% a year to 2040, “resulting in strains across all aspects of energy markets and a continued strong upward march in energy-related emissions,” while carbon dioxide emissions will “lock in severe impacts from climate change” by that year, even as hundreds of millions of people remain without power, the agency said.

Low-carbon sources—led by solar panels—will supply more than half of the growth, with liquefied natural gas providing another third, even though oil demand will flatten out in the mid-2030s, the IEA said.

 

Annual electric-vehicle sales could rise to more than 30 million in 2040 from 2 million today, the agency said, but noted that a doubling of sales of sport-utility vehicles over the past 10 years is significant because SUVs are larger, heavier, less fuel efficient, and harder to electrify.

 

 

This is what Bob Hope told me in 1976.

[Bateshorn 9969]

As my uncle, who worked in the industry for 40+ years put it:  There isn't anything in the oil business that $100/barrel prices won't fix.

Edited November 15, 2019 by Bateshorn

[SquishMitten 10466]

On 11/14/2019 at 9:38 AM, Parliament said:

*And it isn't just oil. Last summer they were flaring propane and "Y grade" (whatever that is.)  Now the entire Midwest is out of propane.  Unfuck your shit, Guys.

They were flaring propane? Or they were flaring everything else along with the gas? Cuz it's not always practical to separate those

[blacklab 12006]

1 hour ago, Bateshorn said:

As my uncle, who worked in the industry for 40+ years put it:  There isn't anything in the oil business that $100/barrel prices won't fix.

This is the correct answer, summarized much better than I could.

Dem president bans stuff->price of oil goes up->now makes sense to drill where we are not currently drilling->more oil out of the ground->price goes down->goto 10

 

[Parliament 14413]

4 hours ago, High Plains Drifter said:

 

Are you sure it was propane they were flaring, and not natural gas?

 

I agree that we need to become a net exporter and tell the middle east (Saudi Arabia specifically) to fuck off. More production is only half that equation. Less consumption is the other half.

 

1 hour ago, SquishMitten said:

They were flaring propane? Or they were flaring everything else along with the gas? Cuz it's not always practical to separate those

Is propane made from Y Grade?  I don't know much about such things.  Y grade for sure was flared.

[HoustonFrog 368]

Definitely need to figure out how to drill within cash flow and return money. More and more are slowing production to get within cash flow. Nobody is interested in these bullshit drilling projections, the type curves are garbage. Time to perform

[ryskey 447]

10 hours ago, Bateshorn said:

Also, and I'm just speaking practically, not CR, the government really only has a say over federal lands.  A Warren/Sanders administration can make it harder to Frack on federal lands by throwing more regulatory burdens at producers, but an out right ban would probably require an act of Congress, and I don't see that if the current Senate rules structure remains in place.

Now, several blue states have out right banned fracking, but that's a state by state issue.  As far as Texas, the feds have minimal to no impact given the paucity of federal land.  Liz Warren can tweet whatever she wants, but that's not how the Presidency works.  She can issue an executive order, but that doesn't mean it has any practical effect, and if it does, it will likely be tied up in court for years to come.  

 

Offshore drilling is a separate issue, where the executive has more leeway, but regardless, we elect a President, not a King/Queen.  The Trump Administration has been trying to enact "Drill Baby, Drill" for 3 years and......hasn't done all that much in the aggregate.  Shit moves slowly here.

To complement what Beeper said, there's a prevalent sentiment among the E&P finance community that a Warren presidency would better for the E&Ps that don't have federal leases.  

[J.R. 150]

6 hours ago, Parliament said:

 

Is propane made from Y Grade?  I don't know much about such things.  Y grade for sure was flared.

If they are flaring gas from the flow station near the well head chances are they are flaring rich nat gas from which propane and other natural gas liquids could recovered and that, when condensed, are referred to collectively as Y grade. The only way to effectively separate the Y grade is to process the gas before flaring. On new wells or remote wells this is often not feasible. The recovered Y grade can be fractionated into its components including propane. This also is often not feasible in certain locations. 

[Parliament 14413]

I kinda follow that. I ask a friend who works in the industry the same question. It seems he concurs.

[Jhawk 1075]

A little different prospective as a far upstream guy, we're seeing a lot of PE money get antsy.  Lot of PE groups taking a more active role in what is being purchased and rejecting a lot of acquisitions.  I specifically know of one situation where an operator is selling an asset at a loss to go away from the PE investor model and back to bank debt.  I wasn't around when the banks ran away from oil last time but it seems that banks are starting to come back around, just as PE is starting to dry up.

My idiotic opinion is that PE threw too much money into the industry too fast.  With a 5 year window to exit.  When you have $500M and you can't get it deployed, producing, and then sold then you're going to have a bad time.  Guys were big time overpaying for assets to deploy capital.

[sidis 9873]

On 11/15/2019 at 11:26 PM, Parliament said:

I kinda follow that. I ask a friend who works in the industry the same question. It seems he concurs.

y grade liquids are all the C2+ natural gas liquids (ethane, propane, isobutane, normal butane, pentanes+) all mixed together that are separated from a natural gas stream at a processing plant.  y grade liquids are then transported to fractionators (the two most well known being in conway, ks and mt. belvieu, tx) to make the individual products like propane.  the methane that remains after processing is called residue gas and is sold as such downstream, odorized, and goes all the way to your burner tip.  all of that stuff is entrained together in the gas production until it is processed (save for a little bit of condensate and other liquids separated on-lease).  if oil wells making casinghead gas are flaring the gas production, then all the entrained liquids would be flared as well.  if they have some separators on lease separating heavy liquids (these generally don't get much propane), i strongly doubt they are "flaring" what is in the tanks.  there is no way to flare "just propane" at the well but instead, the entire gas stream including all the NGLs would be flared.  whoever said that is a fucking idiot.

[The Royal We 3072]

I think this type of "Peak Oil" is much different than the type that was discussed in Twilight in The Desert and other similar books.  They theorized that total global reserves of oil would peak and no amount of drilling would be able to keep production from falling off a cliff and oil going to $300/bbl. 

Production in the US dropping due to the price of oil being depressed for a significant amount of time is not the same thing and certainly isn't "Peak Oil," at least in the manner that I always understood it.

But, the PE model of E&P is definitely broken at the moment - there are nowhere near enough buyers to provide a timely and profitable exit to all of the portfolio companies that want to sell.  Most of them that I talk to say that they are now having to focus on building sustainable companies that can continue to be profitable without the hard exit at 5 years. 

[Jhawk 1075]

The unfortunate, or fortunate part depending on who you are is that PE brought a lot of sophistication to upstream math. Margins are definitely tighter on minerals and leases from what they were a few years ago. 

[PenelopeWitherspoon 19246]

We should be talking about peak oil demand vs. peak supply.

[HouTex 1902]

The oil in the shale in California dwarfs what’s in the Permian. So I’m told by several reputable o&G analysts. But the politics of Cali . . .

When the price is right it will get drilled.

[Johnny Chimpo 481]

Myself and my friends were involved in completing and placing on production multiple wells in the Monterey shale out in California for various operators. To my knowledge no operator has really figured out the formula for success out there. I left in early 2018 though. 

Also, California is making it really hard (even more than usual) on oil companies lately after a few well publicized spills that have occurred over the course of 2019.