Posted on 12/03/2014 5:02:23 AM PST by thackney
The world is awash in oil, I’m hearing. The problem is, it’s fairly expensive oil.
Take for example Canada. The country that has managed to increase its production of oil by a million barrels a day over the last decade. But almost all of that increase has come from oil sands. If you consider only conventional crude oil, Canadian production today would be a third of a million barrels a day lower than at its peak in 1973.
Even without counting environmental costs, that stuff’s not cheap. It was profitable when West Texas Intermediate was over $90. But last week WTI closed at $66. Here are some of the estimates from the Wall Street Journal:
The break-even price for new oil-sands surface mines is among the most expensive in the world, at around $85 a barrel, according to Bank of Nova Scotia. Operating costs at existing mines are less than half that amount. But the break-even point for so-called in situ projects, in which bitumen is heated and pumped up to the surface, range between $40 a barrel and $80 a barrel. Such projects represent the majority of future growth.
Or consider the United States, where production has grown 2 mb/d since 2004. More than 3 mb/d of that growth has come from fracking of oil trapped in tight geologic formations. Without tight oil, U.S. production would be down more than a million barrels a day over the last ten years and down 5-1/2 mb/d from its peak in 1970.
Estimates again vary, but prices this low have to severely inhibit new investment in U.S. tight oil. Without continuing new drilling, U.S tight oil production would quickly fall. And the economics of deep ocean drilling, which has also been important in supporting production in the U.S. and around the world...
(Excerpt) Read more at oilprice.com ...
So, North America is self sufficient, or nearly so, and the prices are way down. Is now the time for a new hot mid east war? Could there be a “better” time to punish Iran?
How do you claim that while we import ~7 million barrels a day of crude?
It would seem there are two issues....... drilling and production.
Past drilling or oil sands development have resulted in serious increases in production.
New projects will cost too much to bring on line at prices resulting from the new supply.
But, we have a fantastic production increase already. The question then becomes why attempt further increase if the
costs make the effort unprofitable?
It would seem that fracking made oil sands uneconomic.
The drillers seem to have had their day and the frenzy is waning
Only some of the oil sands (and it is more than just hydro frac'ng). Some of the oil sands, as this article states, are economic down at $40/bbl.
The same thing applies with the US shale oil production. There are areas that are economic at the lower prices and some that are not. The average break-even price will move down because the more marginal (expensive) areas will no longer be pursued.
thanks for that explanation.
I just don't get the point of letting Saudi Arabia's manipulations destroy domestic oil production. Our goal should be self-sufficiency.
> “How do you claim that while we import ~7 million barrels a day of crude?”
Former Proud said ‘nearly so’. Known reserves and what’s coming online can easily displace what’s imported today. Supply is hampered today by the existing pipeline infrastructure from Bakken and other new producing shale regions which is still under construction. But that will change. As it is now the logistics are still a bottleneck.
Further, the existing contracts that Houston and Gulf companies have with importers are multi-year contracts. To get around the market penetration problem posed by import contracts, that problem can be neutered by allowing domestic exports.
Oddly enough the basis for prohibiting domestic oil exports is to ensure a domestic oil supply but refineries, their terminals and storage facilities are awash in domestic oil supply and domestic oil offers. There needs to be a balance. Same goes for domestic natural gas supply which is enormous nowadays in tandem with new domestic oil production.
I don’t believe as this article tries to score that prices will rebound. The Bakken reserves alone are 10 times the reserves of Saudi Arabia and the Australian outback is similar.
The only force holding North American and Australian crude production back is environmentalism and it’s fact that OPEC, especially Saudi Arabia, funds environmental groups to hold back non-OPEC production.
It’s time for OPEC to be taken down several notches or be substantially put out of business.
NO!
No new taxes. No additional government meddling in the industry.
Don't raise prices above the world prices making our refining and petrochem industry priced out of the market place.
US producers were growing production at today's prices 5 years ago.
I don't consider nearly half of the refined product we use to be nearly all of it.
what’s coming online
What is coming in the future production at $70 is not going to be the same growth we were seeing at $100. Expectations that our production growth is just going to continue at the same rate is naive.
. The Bakken reserves alone are 10 times the reserves of Saudi Arabia and the Australian outback is similar.
Oil/Bitumen/kerogen in place, in the ground is not the same as economic production rates. When prices were $100, we were only economically recovering about 5% of the oil in the Bakken.
What you post is only a small view of the bigger picture and your view is not informative to the bigger picture.
Yes, it’s true that oil ‘production’ falls off rapidly as your graphic shows but you are neglecting to inform that 95% of the oil remains behind after the production falls off.
The production falls off because drillers rely on the natural pressure to bring the oil to the surface and it is the declining pressure that causes the production to wane.
Technological developments are solving the pressure fall off by pumping high pressure inert gas and water to bring the remaining oil to the surface.
In short, your view neglects to mention that American technologists are never stopping to bring new methods to the problem just as they did with the technology that underlies the boom, hydraulic fracturing.
The domestic oil boom will continue because of American technology, innovation and ambition. And the margin to economic feasibility will continue to change as more efficiencies are realized just as they are today. It never stops because even a $5 profit margin is enough for investors and innovators to get in and stay in the game.
I think the Saudi attempt at a price war hurts them in the long run.
http://bakkenjournal.uberflip.com/i/251815/45
You’re short-sighted in your view. Plenty of people opined years ago (and you were probably one of them) that there was no way that domestic oil production would ever satisfy 50% of USA demand. Where are those people now?
Self-sufficiency for North America is well within reach.
Are you trying to claim are not using oil pumps producing oil in the Bakken field?
In short, your view neglects to mention that American technologists are never stopping to bring new methods to the problem just as they did with the technology that underlies the boom, hydraulic fracturing.
Actually, my comment reflects current, economic technology. I suspect they will continue to find more ways to produce more of the oil economically. But you are wrong in your assumption that current production is only by natural pressure. And falling prices will tend to slow down new technologies and make smaller that amount of oil economic to produce.
Keep making uniformed assumptions about me.
> “Keep making uniformed assumptions about me.”
Ah, it’s all about you eh?
Mine was an inference and was not ‘uninformed’. It’s taken direct from your presentation where you show a graphic which is misleading because you failed to articulate the reason behind it and you failed to point to those forces that are solving the problem reflected by your graphic. So how is that ‘uninformed’?
If I extrapolate your reasoning ability based on a graphic you present, a graphic that is flawed and misleading in its message, then my extrapolation tells me I can infer you would never have predicted nor supported a view that the USA today would satisfy more than 50% of its crude demand from domestic sources.
I am sorry Thackney but you have set yourself as some sort of expert and it’s just not impressive.
Are you going to ignore the information in post #13 that shows just how misleading and concealing your graphic in post #7 is? Or are you going to be humble enough to acknowledge you lacked the bigger picture?
So far your response is one of just wanting to stick your finger in the eye of anyone that refutes your view.
Pathetic.
Nope, the topic is not about me at all, but your (false) words were: "and you were probably one of them". I responded to the false accusation about me that had no basis.
Mine was an inference and was not ‘uninformed’. It’s taken direct from your presentation where you show a graphic which is misleading
It is not misleading. It is factual. It was produced by the North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division. The latest version can be found in their report:
Activity Update NCSL Bismarck 6-11-14
https://www.dmr.nd.gov/oilgas/presentations/ActivityUpdate2014-06-11NCSLBismarck.pdf
which is misleading because you failed to articulate the reason behind it and you failed to point to those forces that are solving the problem reflected by your graphic.
Factual is misleading because I didn't make reference to hopeful future changes? And you falsely assumed the field is only flowing under natural pressure?
So how is that ‘uninformed’?
Because it in no way related to opinions I may have had in the past that you accused me of having. I have worked in the oil/gas/petro chem industry for a couple decades. I strongly support American ability to grow and produce our resource. I greatly blame NIMBYs, Environmentalists and foolish politicians that cater to them to holding back the US, along with the voters that put them in office.
If I extrapolate your reasoning ability based on a graphic you present, a graphic that is flawed and misleading in its message, then my extrapolation tells me I can infer you would never have predicted nor supported a view that the USA today would satisfy more than 50% of its crude demand from domestic sources.
mindless and false crap, nothing more
I am sorry Thackney but you have set yourself as some sort of expert and it’s just not impressive.
It isn't about me, in spite of your attempts to make it a personal attack.
Are you going to ignore the information in post #13 that shows just how misleading and concealing your graphic in post #7 is?
You mean the part where you don't know they use pumps and have for decades in North Dakota, including the Bakken?
Or the part about a technology not yet developed with no discussion of economics make a factual production chart misleading?
So far your response is one of just wanting to stick your finger in the eye of anyone that refutes your view.
Bring some reality and we can discuss that. But please, leave the personal insults in your mind and not on the thread please.
Some people are self-proclaimed experts. Just because they put gasoline in a car they know all there is to know about the oil business.
Some listen.
Some listen to learn
Some listen to find something wrong.
Very frustrating, since this is a good example of what I was posting here a few years back.
This Week In Petroleum {Domestic oil production reversed decades-long decline in 2009 and 2010}
http://freerepublic.com/focus/f-news/2711717/posts
ExxonMobil Goes for the Gold at California Unit
http://209.157.64.201/focus/f-news/2495429/posts
Oil Firms Could Produce on Atlantic Shelf in 7 Years - Study
http://209.157.64.201/focus/f-news/2484709/posts
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