Skip to comments.When will the Shale Bubble Burst?
Posted on 11/01/2013 7:03:46 AM PDT by thackney
Most of us are aware by now that the introduction of widespread hydraulic fracturing into the oil and gas business has resulted in a rapid growth in U.S. production. U.S. crude output is up by nearly 2.5 million barrels a day (b/d) since mid-2007 and natural gas production is up by 25 percent. The key question of course is how long production will continue to grow before it inevitably declines. Optimists maintain that we have just scratched the surface of our shale oil reserves and that production will continue increasing for years, if not decades.
Realists are not so sure, noting that not only is fracked oil very expensive, requiring circa $80 a barrel to cover the costs of extraction, but that production from fracked oil wells drops off quickly so that new wells have to be drilled constantly to maintain production. Until recently information about just how fast our fracked oil wells were depleting was rather hard to come by, so that the hype about the US becoming energy independent and a major oil exporter became conventional wisdom for most.
Last week the USs Energy Information Administration issued the first in a new series entitled Drilling Productivity Report for key tight oil and shale gas regions. This report analyzes the six onshore oil and gas regions in the U.S. where 90 percent of the growth in oil production and nearly all of the growth in natural gas production has taken place in the last few years. The report tallies the number of drilling rigs at work in these six regions; the amount of new oil and gas they are bringing into production each month; and most importantly, the rate at which production from those wells already in production is falling.
Nearly all.. growth... from NorthDakota's Bakken... Texass Eagle Ford.
(Excerpt) Read more at oilprice.com ...
Peak oil never dies.
Hu knows. I guess as long as the geological forces that created our current supply continue.
Once those forces end, all bets are off.
Since the international bankers rig the price at the New York rate, and it is so much cheaper to get than the muslim oil, even with the barriers that Baraq Hussien has erected, the shale boom will wane only when refineries are built to exploit even cheaper sources.
When liberals completely take over our government.
Quit exporting and keep it home and we would be truly energy independent. Then stop importing.
When liberals completely take over our government.
Where you been?
You have multiple delusions...
I think these stories are fabricated to make it sound like oil supplies are short to rationalize high prices like gas over $3.00 for over 1000 days.
We consume 16.5~16.9 MMBPD of products refined from crude oil.
We produce domestically ~7.5 MMBPD of crude oil.
You must have different math than what I use as an engineer.
My grandfather was a petroleum engineer, active in the industry from the mid 1920s right up to his death in the mid 80s. 60 some odd years.
We have known for decades the oil that was easy to pump was like (to borrow an overused metaphor) the part of an iceburg that sicks up out of the sea. There is an order of magnitude more oil to be fracked than there ever was to be brought out of the ground in gushers.
You must use far different math in your branch of engineering than that compatible with ordinary addition and multiplication.
The rest of us consider increasing production to be the solution - but you can go right ahead with your zero sum gain view of the oil industry.
Peak Oil and now Peak Gas Alarmism:
Personally I hope they soon develop the technology to safely mine the undersea methane ice fields, which are basically giant bombs waiting to go off with little or no warning, and likely with both short and long term destruction on a huge scale.
Even if they were mined just using the energy produced to mine more, it would be worth it. But since mining would likely make available a very large source of energy, we might as well take advantage of it.
When Obama outlaws it....by whatever means....
Drill. Build nuclear and natgas plants to produce electricity. Drill more. Buy from Canada.
BTW, I am an engineer as well. My statement was not based on math, but on desire and necessity.
Where do you see oil prices bottoming out? $80? $60? Are the Saudis about to crash oil prices just to make life interesting for fracking operations?
The Green River shale does not have crude oil that has been cooked out of the rock like the Bakken or Eagle Ford. It is a less thermally mature formation
It can only be produced by retorting, essentially cooking the shale to release kerogen, which is made into a synthetic crude oil for use in a refinery.
It is significantly more expensive. That $35 number turned out to be far off when Shell did their Mahogany Pilot project and turned the theories into actually flowing wells.
Mahogony Oil Shale Project
So you know we are a net importer. And you still think is we stop exporting we would be energy independent?
You changed the method from this post to the last one.
Yes if we grow production enough we could overcome the need to import. That wasn’t what you wrote.
Sorry, that wasn't you. But it was the post I was responding to.
They tried a nuclear detonation to get the crude oil out but it left a huge underground cavern and they got little oil.
So to become energy independent, we stop exporting the surplus refined products that we don't use, wait for the magic to happen, then stop importing?
I believe it was for Natural Gas.
Project Gasbuggy tests Nuclear Fracking
It did release more gas, but the gas was radioactive. Although a 50-kiloton nuclear explosion to fracture deep oil shale deposits Project Bronco was proposed, it never took place.
Shale gas acquisition deals and enthsiasm are down and somnolent due to the very low US price for nat-gas. Oil being 100x more fungible has a better future at the moment.
I hear this stuff from my cuz who is an energy trader.
The EFFECTIVE Oil and Gas Reserves are a function of the price a buyer is willing to pay for Oil and Gas.
The lower the price the less profitable will be the production of Oil and Gas, and thus the lower the volume of profitable Oil and Gas Reserves.
At a certain point, the demand for Oil or Gas will cause the price to go up, and then there will be more effective (=profitable) reserves.
Although there is a finite amount of Oil Shale in the World, and thus an even smaller finite amount of Oil and Gas that can be produced from that shale, small amounts of Oil and Gas are being continuously generated in some sedimentary basin “kitchens” with suitable conditions.
Estimates of future supply and demand usually deplete Oil and Gas Reserves in the Hundreds of years range.
If I could predict where oil/gas prices were going to move to, I would not have to work for a living. Understanding how the oil industry works is far different than predicting everything that effects the price of oil, like politics, wars and new technology.
Are the Saudis about to crash oil prices just to make life interesting for fracking operations?
I do not believe they have that ability. They are spending more and more dollars themselves for enhanced oil recovery projects. They are no longer doing simple drilling themselves.
If we have a surplus why are we importing? It is not that hard. Use what we have first then buy what we need. Not buy first. Damn economics, I am tired of feeding muzzies missile money.
Where did you hear about this ?
If true, there will come a day when their domestic gasoline (sold at $0.45 per gallon) subsidies will cost them real money instead of representing opportunity cost.
We do not have a surplus of crude oil. We need a lot more crude oil to meet our demand of refined products.
We are exporting some surplus refined products. Since our domestic demand is smaller than our total refinery capacity, we import more crude than we need and export the higher dollar value product. It keeps more jobs in the US, helps keep us a running refinery capacity surplus, and give a bit to help our trade balance.
It is not that hard. Use what we have first then buy what we need.
Crude oil is not the same as gasoline. It takes refining first.
It cost them real money now. They consume ~3 MMBPD and only refine 2.1 MMBPD. They have to pay someone else to refine the difference, import the product, then give it away in country.
I suspect it was while boating on a major river in Egypt.
Here are some more interesting facts that I will soon forget.
I still think nat gas is hotter...
Not exactly. If prices fall and profits with it, you can increase revenue by increasing production. The only problem is “cost of production”. As technology advances or regulation declines, “cost of production” will also decline.
Americans are terrific at this. We can do the same with energy and produce giant volumes of low cost energy while protecting the environment. Capitalism works! Unchain the capitalists, set them FREE.
Yes, but out of date.
They talk about the same Shell project I linked as ending around 2010~2012. So it was written before 2010. The results of the completed test are available.
I don’t know why you think that. Less BTUs, smaller molecule with less atoms to oxidize. Test result show differently.
But hope springs eternal...
Here you go - heating oil pricing calculated for New York Harbor.
And retail gasoline is calculated off of what it costs at New York harbor, not what it would cost at the local refinery. Big profits to the oil company, bigger profits to the international bankers who rig the market.
It used to be more than that not to long ago. At least we have reversed the trend. The percentage is going down not up.
In 2006, our crude oil production was 27% of our refined product consumption.
U.S. Field Production of Crude Oil
U.S. Product Supplied of Finished Petroleum Products
Do you think a link of price in some way validated your false claims?
God’s Peace be with You.
You might start here:
And if you think that supply-and-demand controls the prices, we probably don’t have a place to start a discussion.
So which of those ten question had anything to do with your claim? Asking what OPEC stood for? Volumes imported?
None of it was related to your claims.
On the new topic you jumped to, do you understand government regulations, taxes and the liquidity in the market all are part of the supply and demand curves?
Art Behrman’s analysis from last year presents the decline for shale oil. He took all the wells drilled to the end of 2010 and stopped drilling at that time then tracked just the ensuing two years or so of decline. It drops like a rock. Like all “resource” plays shale required drilling like a mad man to keep production going and the drilling pace has to ever increase to keep production growing.
People don’t understand that we will run out of rate long before we run out of reserves. From time-to-time people figure out how to coax some more squeal out of the pig at ecoomic recovery rates. You gotta convert resources to reserves. Lots of resources for conversion by someone who can figure out how.
So it has been, so it is and so it will be.
Well said, BTTT