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By 2020 it may be clear to everyone that oil decline has begun

By 2020 it may be clear to everyone that oil decline has begun

Preface. There are two parts to Dittmar’s study. The first one concerns production, based on the most recent years of oil production.  Dittmar found a strong pattern of oil decline after the plateau of 3% a year for five years, followed by a decline of 6% a year thereafter.

The assumption that OPEC nations (i.e. Saudi Arabia, Iraq, Iran, Kuwait, UAE, and Qatar) can continue producing oil at the current rate is based on potentially exaggerated reserve figures, which went up substantially in 1985 and haven’t budged a barrel down since then.  But for OPEC, and all other regions and nations, Dittmar predicts the maximum possible production based on his model, and says that perhaps the Middle Eastern OPEC nations can continue to produce as much oil as they are now until 2050.

In my opinion, he overestimates the amount of North American tight shale oil and tar sands oil that can be produced given their low EROI’s and high energy/monetary cost, but since all his figures are the best possible, he assigns 4.5 million barrels per day (mbd) production for USA tight oil through 2030 and 3 mbd for Canadian tight oil plus oil sands.

Of course, no matter how accurate the model is, Dittmar points out that it won’t matter if a civil war, terrorism or natural disasters in any oil-producing or refining region occur, which would quickly reduce exports. Plus competition for the remaining oil might increase conflicts the current world’s major powers with catastrophic consequences. The model only applies to a stable world for the next 30 years.

Here are the nations already declining at 6%: the EU and Norway, Azerbaijan (2017), Asian nations Indonesia, Malaysia, Australia, Thailand, Vietnam (2016), Algeria (2015), and Mexico (2014). All other oil-producing nations will join the 6% club by 2031 except OPEC.  Many are already in their 3% decline state, which starts 5 years earlier.

…click on the above link to read the rest of the article…

Burn Out: The Endgame for Fossil Fuels. Dieter Helm.

Burn Out: The Endgame for Fossil Fuels. Dieter Helm.

Book review

 

Ironically, given its theme, as published early in 2017, “Burn Out: The Endgame for Fossil Fuels” shortly preceded the announcement made by President Trump of the withdrawal by the United States from the Paris Agreement on climate change, driven primarily by an aim to support the US coal industry, which he maintains has been hampered by environmental policies, and disadvantaged in comparison with other countries, such as China. The book’s title offers  a punchy proclamation, that the age of fossil fuels is coming to an end:  this is not as a result of any imminent shortage of them – far from it – but an expectation that natural gas will be employed as a cheap and plentiful bridging fuel,  en route to a dominant electrification of the energy sector, most likely powered by advanced solar technologies, and that such innovations as the Internet of Things (IoT), 3D printing, and robotics will confer a more efficient overall use of energy, hence reducing demand on oil, gas and ultimately renewables.

The author, Dieter Helm, is professor of energy policy at Oxford University, and an outspoken commentator and critic on global energy strategies, including those intended to ameliorate climate change. Thus, this book is in part a consolidation of some views, framed from the viewpoint of an economist, espoused in his various writings on the subject, and an extension of some of the themes covered in his previous books. Helm remains thoroughly censorious of the peak oil concept, and bangs the drum that “peak-oilers” have got it wrong. He stresses that there is no shortage of “oil” (or indeed of the other fossil fuels), and in terms of the large quantities of carbon-rich fossil materials that lie in the ground he is quite correct.

…click on the above link to read the rest of the article…

Saudi/Russia-Led Oil Supergroup In The Making

Saudi/Russia-Led Oil Supergroup In The Making

OPEC oil production

OPEC and the non-OPEC producers’ part of the production cuts deal will have a plan for long-term cooperation drafted by the end of 2018, as they seek to institutionalize their current collaboration into a supergroup of oil producers led by Saudi Arabia and Russia, the UAE’s Energy Minister Suhail Al Mazrouei told The National in an interview published on Thursday.

The producers aim “together with the secretary general [of OPEC, Mohammad Barkindo], to put together a draft agreement for this group [of 24] to stay together for a longer time”, Al Mazrouei said.

Putting together a draft charter and discussing it during the year is one of the UAE’s aspirations, said the minister whose country is currently holding OPEC’s presidency.

“If we achieve the market balance, I think we can see significant amount of investments coming to the E&P business and we can see that many of the 24 countries who have signed the Declaration of Cooperation can benefit from it,” Al Mazrouei told The National.

The idea to follow up on the current OPEC/non-OPEC cooperation came originally from OPEC’s Secretary General Mohammad Barkindo, who said as early as in October last year that the partnership could be institutionalized.

Last month, Khalid al-Falih, the energy minister of OPEC’s de facto leader and largest producer Saudi Arabia, said that “There is a readiness to continue cooperation beyond 2018…The mechanism hasn’t been determined yet, but there is a consensus to continue.”

Al-Falih, as well as Russia’s Energy Minister Alexander Novak, has hinted several times that the cooperation could continue in some form—although not necessarily in oil market management—even after the end of 2018, when the current pact to curtail oil production expires.

In an interview with S&P Global Platts published earlier this week, Novak said that Russia wanted to build a long-term relationship with Saudi Arabia and the broad OPEC alliance once their agreement expires.

OPEC January Oil Production Data

OPEC January Oil Production Data

The OPEC Monthly Oil Market Report is out production data for January 2018. All data, unless otherwise noted, is through January 2018 and is in thousand barrels per day.

OPEC crude only production has held steady for three months. However, this chart masks the fact that November production was revised downward by 45,000 barrels per day and December production was revised downward by 107,000 barrels per day. January production was 76,000 barrels per day below last years 12 month average of 32,378,000 barrels per day and 247,000 barrels per day lower than OPEC’s 2016 12 month average of 32,549,000 barrels per day.

OPEC oil production was down just 8,100 barrels per day in January. November production was revised down 45,000 bpd and December production was revised down by 107,000 bpd. The largest revisions were for Venezuela. Their production was revised down 28,000 bpd in November and 98,000 bpd in December.

Algeria, like at least 8 other OPEC countries, is in continuous decline.

Angola peaked in 2008 at a 12 month average of 1,870,000 barrels per day are currently about a quarter of a million barrels per day below that number.

Ecuador’s crude oil production increased steadily for four and one-half years, from mid-2010 to January of 2015 and has been on a bumpy decline for the last three year

Equatorial Guinea’s chart speaks for itself. I really don’t know why they joined OPEC. Their production is clearly in decline but is not enough to make much difference either way.

…click on the above link to read the rest of the article…

Oil Prices: Collapse Now, Spike Later

Oil Prices: Collapse Now, Spike Later

Oil storage

Oil prices closed out the week sharply down, wiping out all the gains posted since the start of the year.

Surging U.S. shale production, along with broader financial turmoil, has clearly put an end to the bullish mood in the oil market. U.S. shale struck several blows against oil prices this week.

First, the EIA dramatically overhauled its forecasts, predicting U.S. oil production would hit 11 million barrels per day (mb/d) this year, rather than late next year. Then, on Wednesday, it revealed estimates that put U.S. oil production at 10.25 mb/d for the week ending on February 2, a staggering 330,000 bpd increase from a week earlier. Those weekly estimates are subject to revision when more data becomes available, but if those figures hold, it would point to a significant ramp up in drilling activity and new supply coming online.

As a result, it seems that, in the short run at least, U.S. shale has killed off the oil price rally, which saw WTI move from $50 per barrel in October to the mid-$60s per barrel by January. Brent saw a similar jump from the mid-$50s to $70.

But we’re now potentially moving into the next phase of this cycle, an all-too-familiar correction after prices have seemingly climbed too far.

This time around the downward swing could be aided by a rebound in the strength of the dollar. Typically, a weakening dollar pushes up oil prices, and the rapid run up in prices over the last few months occurred not coincidentally at a time when the dollar posted a steep decline. But the greenback has clawed back gains, particularly over the last week, with expectations of rising interest rates.

“The dollar index got down to 86 [cents], crude got to $66,” John Kilduff, founding partner of Again Capital, told CNBC.

…click on the above link to read the rest of the article…

U.S. Shale Companies Are Ready To Expand

U.S. Shale Companies Are Ready To Expand

Pipeline gauge

The latest oil rally, which sees crude trading at close to its highest point in three years, is sufficient to garner considerable attention from market pundits, industry insiders and investors alike. It has raised the ugly specter of a sharp uptick in U.S. oil production driven by the much-anticipated shale oil boom.

Yet, there are signs that the potential for U.S. shale oil companies to rapidly expand production and return to the boom years witnessed before the prolonged oil slump appears overblown.

There are a range of constraints poised to prevent the rapid production growth many mainstream analysts had been predicting.

It was only in early December last year that an MIT study was released concluding that the U.S. vastly overstates oil production forecasts and that the EIA has been exaggerating the effect of fracking technology on well productivity.

According to MIT research, the EIA assumes that regular improvements in drilling technology and well design are boosting output at new wells by around 10 percent, yet their own research shows that it is closer to 6.5 percent. That, along with the EIA’s own monthly production data, which shows that U.S. oil output between January and November 2017 grew at a far more modest monthly average of 1.3 percent, indicates that the EIA’s weekly forecasts could very well be overstating U.S. oil production.

In the past, the optimistic figures provided by the EIA have suppressed the price of West Texas Intermediate or WTI, and this in part has been one of the contributing factors to the significant premium that has existed between WTI and Brent.

Nevertheless, that premium is closing, having fallen from over $6 per barrel at the start of 2018 to less than $4 for the last week of January 2018 amid falling U.S. inventories.

…click on the above link to read the rest of the article…

Venezuela Is Moving From Crisis To Collapse

Venezuela Is Moving From Crisis To Collapse

Venezuela

Venezuela’s slumping oil production is a “clear and present danger” to the oil market, RBC Capital Markets said this week.

Venezuela’s production continues to fall at a frightening clip, falling to about 1.6-1.7 million barrels per day (mb/d) in December. On an annual basis, Barclays predicts that Venezuela’s output will fall sharply from 2.18 mb/d in 2017 to just 1.43 mb/d this year, a decline of roughly 700,000 bpd.

The steep declines will increasingly be felt worldwide given that oil demand is growing briskly and the OPEC/non-OPEC coalition continues to keep 1.8 mb/d of supply off of the market. Global inventories have declined so steeply that unexpected geopolitical surprises carry more influence than they used to.

“We continue to contend that, given 2018’s tightening oil market, any potential geopolitically driven supply disruption would have an outsized impact versus recent years when the market was awash in crude,” Helima Croft, head of global commodity strategy at RBC Capital Markets, wrote in a research note. “The clear and present danger to watch is Venezuela, which arguably has progressed past the risk stage given that production is in freefall.

RBC Capital Markets echoed Barclays, predicting output declines on the order of 700,000 to 800,000 bpd.

While that scenario is really bad, the uncertainty for the country’s output is probably skewed to the downside. The economic, political and humanitarian crisis is only getting worse. The government is in a debt vice, and it is hard to see how it will meet payments this year. The IMF predicts that inflation is running at a 13,000 percent annual rate. GDP is expected to shrink by 15 percent this year.

…click on the above link to read the rest of the article…

U.S. Oil Production Is Rising Much Faster Than Expected

U.S. Oil Production Is Rising Much Faster Than Expected

Oil drilling tower

Shale executives have gone to great lengths to convince investors that they will not drill aggressively now that oil prices have rallied into the $60s. But in a new report released on Tuesday, the EIA essentially said that those assurances are just a lot of hot air.

The EIA’s Short-Term Energy Outlook predicted that U.S. oil production would top 11 million barrels per day (mb/d) this year. Last month, the agency said that the U.S. wouldn’t hit that threshold until November 2019.

The revision from just a few weeks ago is dramatic. In January the EIA estimated that the U.S. would surpass 10 mb/d at some point in February. But recently published data shows that the U.S. actually hit that milestone last November, and now, the agency says the U.S. actually averaged 10.2 mb/d in January.

On an annual basis, the U.S. produced 9.3 mb/d last year, a figure that is set to jump to 10.6 mb/d for 2018. Things slow down a bit in 2019, with an average of 11.2 mb/d.

What do we make of all of this? Well, the shale industry is clearly drilling at a frenzied pace, with an increasing concentration in the Permian basin. The rig count continues to rise in the Permian, while remaining mostly flat elsewhere. So far, the Permian has shown no signs of slowing down, despite some evidence of bottlenecking and cost inflation. Production continues to rise at a scorching rate.

The big question at this point is how rapidly expanding shale production will interact with the pace of inventory builds/declines and the OPEC production limits. Some analysts, including Goldman Sachs and S&P Global Platts, recently raised the prospect of OPEC tightening the oil market too much, allowing inventories to drain well below the five-year average.

…click on the above link to read the rest of the article…

Oil Production Vital Statistics January 2018

Oil Production Vital Statistics January 2018

The oil price has begun 2018 strongly with Brent breaking through $70 / bbl for the first time since December 2014. OPEC+Russia+others’ discipline on production constraint remains high with ~ 1.7 Mbd production withheld from the market. The IEA reports an ~1 Mbpd stock draw in the OECD + China in 4Q 2017. IEA revisions transform the picture in the USA from one of static production to one of strong growth over the last 3 months (this undoes one of the assumptions used in my 2018 oil price forecast).

The inset image (live chart below the fold) shows a slow motion train wreck in Venezuela where production has fallen 810,000 bpd since December 2014.

The dramatic slide in oil production in Venezuela began ~ December 2014. We have to presume that the collapse in the oil price has something to do with this. There is however no sign that rising price, now offset by falling production, is averting that country’s collapse. The oil price was held back in 2017 by rising production in Nigeria and Libya. Production in Libya is now holding steady at ~ 1 Mbpd  and production in Nigeria is holding steady at ~ 1.65 Mbpd. According to the IEA, OPEC compliance with the agreed cuts is now running at 129% in part due to the unscheduled collapse in Venezuelan supply.

I have been following bio-fuel production, pointing out that it had been on a cyclical high last autumn and was scheduled to fall by ~ 1 Mbpd over the winter. This fall is duly underway (below). This, combined with the collapse of Venezuela and continued OPEC++ discipline has underpinned the strong oil price rally.

The following totals compare December 2016 with December 2017:

  • World Total Liquids 97.87/97.59 -280,000 bpd
  • OPEC 12: 32.87/31.89 -980,000 bpd
  • Russia + FSU 14.53/14.44 -90,000 bpd
  • Europe OECD 3.66/3.24 -420,000 bpd
  • Asia 7.57/7.20 -370,000
  • North America 19.48/21.04 +1,560,000 bpd

In summary, we see production constraint in OPEC+Russia, production decline in Asia and Europe offset by production growth in N America.

…click on the above link to read the rest of the article…

The 10 Oil Projects Adding 1.1 Million Bpd To Global Supply

The 10 Oil Projects Adding 1.1 Million Bpd To Global Supply

Rig

The ten largest upcoming onshore oil projects worldwide are expected to add 1.135 million bpdto the global oil supply by 2025, according to research and analytics firm GlobalData.

The ten biggest onshore projects—out of a total of 126 such developments worldwide—are expected to consume US$83.1 billion of investment to bring them to production, Oilfield Technology reports, quoting figures by GlobalData.

Of this spending, US$46.7 billion is expected to be made by 2025.

The ten largest onshore projects are expected to produce a total of 9.7 billion barrels of crude oil over their lifetime, according to GlobalData.

In terms of single project development investment, the Kuyumbinskoye conventional oil development in Russia is the leader, with US$12.8 billion expected to be spent over the field’s lifetime. The project is expected to have peak production at 215,485 bpd in 2029. The Kuyumbinskoye project is followed by Cenovus Energy’s Telephone Lake oil sands project with investment of US$10 billion throughout its lifespan, GlobalData says, as carried by Oilfield Technology.

The average breakeven oil price for the upcoming top onshore fields is US$55 per barrel, with Canada at the lowest breakeven of US$52 a barrel and Russia at the highest at US$57 per barrel.

Full-cycle capex per barrel of oil equivalent is expected to average US$7.5 for conventional oil projects, US$9.2 for oil sands developments, and US$9.8 for heavy oil projects, according to GlobalData.

Confidence in the oil and gas industry has started to return with higher oil prices, and a majority of respondents in a DNV GL survey have recently said that they plan to increase capital expenditure this year. The Norway-based energy industry advisory firm noted that while last year confidence in the growth prospects for oil and gas firms had stood at 32 percent of respondents, now it has gone up to 63 percent.

Art Berman: Like It Or Not, The Future Remains All About Oil

Vladimir Yudin | Dreamstime.com

Art Berman: Like It Or Not, The Future Remains All About Oil

And competition for it is heating up 

Art Berman, 40-year veteran in the petroleum production industry and respected geological consultant, returns to the podcast this week to talk about oil.

After the price of oil fell from its previous $100+/bbl highs to under $30/bbl in 2015, many declared dead the concerns raised by peak oil theorists. Headlines selling the “shale miracle” have sought to convince us that the US will one day eclipse Saudi Arabia in oil production. In short: cheap, plentiful oil is here to stay.

How likely is this?

Not at all, warns Berman. World demand for oil shows no signs of abating while the outlook for future production looks increasingly scant. And the competition among nations for this “master resource” will be much more intense in future decades than we’ve been used to:

Since the 1980s, we simply have not been replacing reserves with new discoveries. So how does that work? Well, obviously, we’ve got a lot of oil on production and in reserves, so we’re essentially drawing down our savings account if you want to think about it that way. You can do that for a long time if you’ve got a whole lot of money in your savings account, and we as a planet do. But you can’t do it forever.

Eventually, you either have to stop spending as much so you don’t draw down your savings, or you need to put some money back in the account. And it doesn’t seem like we’re doing much of either, and haven’t been doing much of either for a long time. So the concern is tremendous, at least, in my estimation(…)

…click on the above link to read the rest of the article…

Can Anything Stop The Shale Surge?

Can Anything Stop The Shale Surge?

Shale

Higher oil prices may lead to huge growth in U.S. shale production, according to revised predictions from both OPEC and the IEA.

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OPEC December Oil Production

OPEC December Oil Production

The latest OPEC Monthly Oil Market Report is out with production numbers for December 2017. All data is in thousand barrels per day.

Total OPEC crude only production was up by 42,400 barrels per day in December. However, that was after November production was revised downward by 75,000 bpd. So OPEC production was actually down 33,000 bpd from what was reported last month.

I have posted OPEC production according to “secondary sources” as well as OPEC production based on “direct communication” in order to show what Venezuela said they were producing when called by the editors of the MOMR. More about that below Venezuela’s production chart.

Algeria was up 30,000 bpd in December but the downward trend continues.

Angola’s crude oil production is holding steady.

Ecuador’s latest peak was in 2015 and they have been in slow decline since then.

…click on the above link to read the rest of the article…

OPEC Oil Production Rose In December Despite Plunge In Venezuela Output

In its latest monthly report, OPEC announced that according to secondary sources, December oil production by the cartel rose by 42.4kbpd from November to 32.416mmbpd, if 144kbpd below October’s 32.56mmbpd level, and just below the mandated production ceiling of 32.5mmbpd.

While the biggest producer Saudi Arabia saw its output dip by 11kbpd to 9.918mmbpd, it was Venezuela’s production that tumbled by nearly 5%, or 82.2kbpd, to 1.745mmbpd, and is rapidly becoming the biggest swing factor in rising oil prices. The decline was offset by a jump in Nigerian oil production, which pumped 75.7kbpd more in December, to 1.861mmbpd. Algeria, Angola, Iran and Kuwait also saw their output increase in December.

OPEC also revised its 2017 global oil demand growth higher, now at 1.57mmbpd, averaging some 96.99mmbpd in 2017. For 2018, oil demand growth is anticipated at 1.53mmbpd, or some 98.51mmbpd.

Meanwhile, world oil supply in December increased by 0.40 mb/d m-o-m, to average 97.49 mb/d, representing an increase of 0.83 mb/d y-o-y. Preliminary non-OPEC oil supply, including OPEC NGLs, was up by 0.35 mb/d m-o-m in December to average 65.07 mb/d. For 2017, non-OPEC supply is estimated to grow by 0.77 mb/d y-o-y to average 57.79 mb/d, representing a downward revision of 0.04 mb/d from last month’s report, following a downward revision in OECD and DCs by 28 tb/d and 35 tb/d, respectively, while the oil supply forecast for the FSU was revised up by 32 tb/d.

For 2018, y-o-y growth of 1.15 mb/d is forecast, following an upward revision for production in the US, Canada, Mexico and the UK and downward revisions in Norway and Argentina, and showing total supply expected at 58.94 mb/d. In December 2017, OPEC crude oil production increased by 42 tb/d, according to secondary sources, to average 32.42 mb/d. Separately, non-OPEC oil supply growth – mostly shale – in 2017 was revised fractionally lower to 0.77mmbpd.

…click on the above link to read the rest of the article…

What’s The Limit For Permian Oil Production?

What’s The Limit For Permian Oil Production?

Permian

The ‘hottest shale play’ has been the media’s favorite cliché for the Permian Basin over the past year. And while cliché, the basin straddling West Texas and New Mexico has lived up to this description—its oil production, unlike that in other basins, did not fall off a cliff during the downturn, it recently beat its own record from the 1970s, and is expected to continue to increase production more than any other U.S. shale play and account for most of the American oil production growth.

The Permian has been pumping oil since the 1920s. Conventional oil production started to decline in the late 1970s, but the fracking boom revitalized the oil-producing region in the early 2010s, and as oil prices rose last year, the Permian beat its previous record for annual oil production dating back to 1973.

The Permian surge in oil production is also revitalizing other industries in small Texas towns, from frac sand trucking and oilfield services to overbooked hotels and full restaurants, as Robert Rapier wrote in Forbes about his recent visit to the Permian.

This shale basin will continue to drive the U.S. oil production growth in the short to medium term, forecasts suggest. But analysts have started to question just how long the Permian can keep pumping at this relentless pace before hitting geological or financial constraints.

The Permian is now nearing 2.8 million bpd of oil production, EIA data shows. To compare, in October 2013, before the oil price crash, Permian production was 1.29 million bpd. In January and February 2016, when oil prices dipped to below $30 a barrel, the Permian production was still ticking up and exceeded 2 million bpd, compared to drops in all other main producing shale regions, including the Eagle Ford and the Bakken.

…click on the above link to read the rest of the article…

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