Wait for it, the buys will be in bankruptcy again. Probably not worth $500 and acre bonus right now.
This shift in Saudi strategy is either a ruse or a black swan type event. An article from earlier this week strongly suggests the new young prince is digging in for the long haul. Just amazing, seems to be reacting to a problem they created and can end.
Cutting programs and raising the price of fuel?
http://www.freerepublic.com/focus/f-news/3380092/posts
Privatizing Aramco?
http://www.worldoil.com/news/2016/01/07/saudi-arabia-considering-ipo-for-aramco
Shale can and will reduce their cost but they will struggle to repel the environmental attacks on fracing. In times such as these I have been able to reduce drilling times by as much as 2/3 and over-all cost of wells by 50% through efficiency, waste reduction, detailed time and motion studies, bench marking and solid engineering and technology. The same things are possible in shale. In boom times the mean usually represents about double the optimum that is usually achieved in parts throughout the field but hardly ever combined in one project at one time.
There is a lot of oil and gas in shale. The porosity compared to other rocks of the same depth is massive but the spaces are small and not connected very well if at all. The resource is there but converting it to reserves is not so easy.
I can’t figure out what the house of Saud is thinking or planning with their newly public strategy of digging in for the long haul of a low price environment that they created.
Can anyone else?
On a second subject, I have been a supporter of Berman’s position on shale for some time taking the position that shale is not a company builder since after payout production, while having a long tail, can’t self-fund development. Shale wells have stubbornly held up production this last year and I struggle to see why not being a shale player. I suspect that it is the desperation to continue cash flow just a little longer to save the companies by continuing to drill and frac at distressed prices for services until better days arrive. We all thought that this would be short lived and that the Saudi’s did not have the ability to flood the market as much as they have nor for as long as they have nor did I suspect that US production or even world production would hold up so stubbornly.
Unlike Art, I admit my predictions of almost a year ago were wrong. I had this pegged for another ‘98-’99 event where production and demand came into balance within 18 months by about October of ‘99. It is looking more like ‘86 again where we did not enter boom times again until ‘05. I hope not for the sake of the younger people in the upstream oil and gas industry. Those were gut wrenching decades.
“There is a lot of oil and gas in shale. The porosity compared to other rocks of the same depth is massive but the spaces are small and not connected very well if at all. The resource is there but converting it to reserves is not so easy.”
After working unconventionals in US for a number of years, I am convinced that unconventional oils is not where the greatest potential exists. It is in gas instead.
Oil simply will not flow the very small pore spaces easily enough to find many commercial opportunities. In fact, outside the Bakken, which is a unique petroleum system not found anywhere else that I have seen, the only liquids produced are in the form of gas at reservoir conditions (i.e. -condensates and NGLs), with some true oils when conditions of high gors exist.
Gas on the other hand is massive in potential, and is where the true attractiveness of unconventionals will occur.
So, in a sense, what Art says on oils has some degree of merit, but on the overall unconventionals (and he was using natural gas unconventionals in the Marcellus, Haynesville and Barnett for his original arguments), it is hyperbole.
“On a second subject, I have been a supporter of Berman’s position on shale for some time taking the position that shale is not a company builder since after payout production, while having a long tail, can’t self-fund development. Shale wells have stubbornly held up production this last year and I struggle to see why not being a shale player. I suspect that it is the desperation to continue cash flow just a little longer to save the companies by continuing to drill and frac at distressed prices for services until better days arrive. We all thought that this would be short lived and that the Saudi’s did not have the ability to flood the market as much as they have nor for as long as they have nor did I suspect that US production or even world production would hold up so stubbornly.”
I am not following the arguments you postulate here. perhaps rewording for my benefit?