Replies

You have to understand nuance.

Drillers want to drill. They get paid to drill. They would somewhat like to find oil there, but they aren’t the ones who declare it to be there. That is a different batch of people examining data and cores.

That company mildly, only mildly, wants there to be oil there. If there is oil there, they may get a contract to drill production wells (different from exploratory), but maybe not. The leaseholder likely will fund his own production wells.

Alaska is the prime example. Independents run around screaming about government impediments to drilling, but mostly they are complaining that government HAS permitted drilling — and there is known to be nothing there.

Guys here on FR don’t really know how shale oil production works.

You drill a hole where you know there is oil and up it comes, at maybe 1,500 barrels/day. That flow won’t take long to pay for the drilling expense, but that flow isn’t going to maintain. At the end of year 1, you are down to 750 barrels/day. The next year 500 bpd. Then 350. Etc. The well starts dying the first day it produces.

It does not refill. Abiotic oil doesn’t replace it. If flows until it is below production costs and then you pour concrete down the hole and plug it so no one falls in.

To make that oil field grow you move 1/2 mile away and drill another hole (these bend to horizontal at dept, be aware). That hole flows 1500 bpd on day 1, too. But it then starts dying. Just like well number 1. To get that field to grow, you have to drill frantically to overcome the sum of declines in the wells already drilled.

This worked with interest rates at 0. You borrowed the money to drill. And paid nothing for it. These horizontal wells die vertically, on the production graph. The flow gets big and then it falls sharply, vertically, on the graph.

Contrast with conventional oil like in Saudi Arabia. They have wells that have flowed 1000s of barrels/day for 50 years. Because they aren’t fracturing rock to get it to flow.