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The world’s hottest shale basin, the Permian, is leading the second U.S. wave of tight oil production growth and will continue to do so for years to come, all analysts say.

However, signs have started to emerge that the relentless intensification of drilling leads to diminishing returns, Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said in an article this week. Pumping twice as much sand as usual into Permian wells and drilling longer laterals doesn’t deliver commensurate volumes of oil, Flowers notes.

“Drilling costs rise exponentially with depth, and there’s a suspicion that longer wells are hitting a cost efficiency ceiling,” WoodMac’s chief analyst writes.

Moreover, after the early production-exuberance stage, drillers are now much more focused on delivering profits and higher profit margins. They now favor quality over quantity, and value over volumes.

“Might the Permian be reaching the limits of well size and design? Maybe—as Star Trek’s Scotty might observe of an underwhelming high intensity completion ‘you cannae change the laws of physics, Jim’,” Flowers says. But WoodMac suggests that drillers could ‘change the laws of physics’ and that these signs of setbacks may actually be growing pains.

The energy consultancy’s Director of L48 Research, Rob Clarke, argues that there are two basic and very sound reasons that the fading lateral drilling and proppant metrics might be just growing pains. One is much more advanced proppant placement, and the other is the oil majors’ move into the Permian, set to change things.

“Now, pinpoint frac technology can place the proppant exactly where it’s wanted. Science is also being applied to identify the most effective proppant grain size and shape as well as drill bit design and fluid chemistry, all with the aim of boosting EUR,” according to WoodMac.

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

Winter is Coming

November 7, 2017

Winter is Coming

Fall has finally arrived. It’s November, well past the time of year when we normally see freezing temperatures. This year was unusually warm, a phrase that is beginning to lose its meaning since most years now are usually warm. The leaves on the trees are finally turning color. The nights are going to be freezing this week. I look over the garden and see a few peppers I missed and remind myself to pick them before nightfall. I collected masses of dill that reseeded itself from spring plantings. I’ve learned that if I freeze the dill in tomato sauce I canned this summer the flavor in soup is the same as if it’s been picked fresh. Good to know these things if you like the taste of fresh dill in winter soup. I look over the garden and see bunches of herbs I need to pick before the frost or they will be lost to the freeze. I worry about wasting them, and then I smile, remembering that the plants will give me another crop next year. I’m still getting used to this experience of bounty from the perennials in the garden. I’m still conditioned to think of food and herbs as things I purchase from the store, not wanting to waste money by allowing them to go bad. Store bought food is so easily wasted. Gardens are more generous!

Most of my life I’ve been a person who worried about waste; don’t waste electricity, don’t waste your food, “There are starving children in China”. I wonder what was in the news in the 60’s when my mother used this phrase to make us feel guilty for not eating all the food on our plates. Were there stories of people starving in China? What happened, I wonder, to all the starving children?

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

Norway Unfazed By Peak Oil Concerns

October 23, 2017

Norway Unfazed By Peak Oil Concerns

When crude oil demand will peak is anyone’s guess. Forecasts vary widely. Wood Mackenzie says that peak demand is “very real,” and sees a decline of 4 million bpd between 2020 and 2035. Other majors including BP and Total SA see peak demand as coming between 2025 and 2040, as a result of clean energy government initiatives, slower economic growth, and wider use of electric vehicles.

Not everyone is that concerned with peak oil demand, however. Recently, Norway’s Energy Minister said the biggest problem for Europe’s largest oil and gas producer is satisfying near-term demand, which is growing faster than Norwegian continental shelf operators are making discoveries.

It might sound a bit weird that Europe’s greenest country is still so big on oil and gas, but in reality, there’s nothing weird: Oil and gas exports account for a substantial portion of Norway’s export revenues, with their value for 2016 standing at $43.84 billion (350 billion crowns), accounting for 47 percent of the country’s total export value.

Norway’s biggest customer is the European Union. Together with Saudi Aramco, Norway’s state major Statoil accounted for a fifth of the EU oil market last year. Yet demand in the EU is supposed to be falling, with rigorous policies designed to encourage acceleration of the shift to renewable energy.

Indeed, according to European Union statistics, demand is on a stable downward curve thanks to greater energy use efficiency, “structural changes in the economy”, and lower demand for fuels. Still, Eurostat notes, crude oil and its derivatives account for the biggest share of energy consumption in the 28-strong union.

That’s good news for Norway, and there’s more good news from Wood Mackenzie. The energy consultancy has forecast that although in places like Europe, Japan, the United States, and even China, crude oil consumption will plateau by 2035, the demand for petrochemicals will jump considerably.

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

China’s economic boom is about to be cut short by peak oil, warns state-funded study

October 5, 2017

China’s economic boom is about to be cut short by peak oil, warns state-funded study

A new scientific study led by the China University of Petroleum in Beijing, funded by the Chinese government, concludes that China is about to experience a peak in its total oil production as early as next year.

Without finding an alternative source of “new abundant energy resources”, the study warns, the 2018 peak in China’s combined conventional and unconventional oil will undermine continuing economic growth and “challenge the sustainable development of Chinese society.”

This also has major implications for the prospect of a 2018 oil squeeze — as China scales its domestic oil peak, rising demand will impact world oil markets in a way most forecasters aren’t anticipating, contributing to a potential supply squeeze. That could happen in 2018 proper, or in the early years that follow.

There are various scenarios that follow from here — China could: shift to reducing its massive demand for energy, a tall order in itself given population growth projections and rising consumption; accelerate a renewable energy transition; or militarise the South China Sea for more deepwater oil and gas.

Right now, China appears to be incoherently pursuing all three strategies, with varying rates of success. But one thing is clear — China’s decisions on how it addresses its coming post-peak future will impact regional and global political and energy security for the foreseeable future.

Fossil fuelled-growth

The study was published on 19 September by Springer’s peer-reviewed Petroleum Science journal, which is supported by China’s three major oil corporations, the China National Petroleum Corporation (CNPC), China Petroleum Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC).

Since 1978, China has experienced an average annual economic growth rate of 9.8%, and is now the world’s second largest economy after the United States.

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

Peak oil in Latin America

September 11, 2017

Peak oil in Latin America

This post is using mainly BP’s Statistical Review published in June 2017. Although these statistics put Mexico under North America, it is included here and added to South and Central America’s data at the end of this article. We start with 2 big oil suppliers: Brazil and Venezuela.

Brazil_oil_prod_cons_biofuels_1965-2016 Fig 1: Brazil’s oil production, net imports and bio fuels

Brazil’s oil production (crude plus NGLs) has not yet peaked. BP’s consumption data include bio fuels which are a very important contributor to liquid supplies (data taken from EIA’s international energy statistics). We can see that net oil imports have been reduced and even turned into net exports (145 kb/d in 2016) by using biofuels (ethanol and bio diesel, around 560 kb/d in 2016).

Venezuela_oil_production_vs_consumption_1965-2016 Fig 2: Venezuela’s oil production and net exports

Venezuela’s oil production peaked in the 70s and more recently in 2006. Conventional oil fields in Maracaibo peaked in 1997 while extra heavy oil production from the Orinoco belt cannot offset that decline. Low oil prices have worsened this situation. The impact on the economy is devastating as can be seen in media reports every day. They usually blame Maduro’s socialist government for this malaise but rarely mention the oil geological problems. A separate article on this is under preparation. Since 2006, Venezuelan production declined by 930 kb/d, more than Brazil’s growth of 800 kb/d in the same period. Recent monthly data from JODI show these different trends. Venezuela’s sharp drop in 2003 was caused by a PDVSA strike. Can that happen again?

Brazil_vs_Venezuela_crude_2002-Jun2017 Fig 3: Brazil vs Venezuela monthly crude production

In its August 2017 oil market report the IEA showed declining exports from Venezuela.

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

More Peak Shale: World’s Largest Miner Is Selling Its Shale Assets

August 22, 2017

More Peak Shale: World’s Largest Miner Is Selling Its Shale Assets

Over the past several months, we have wondered if despite new all time high shale production, whether the US shale sector in the has peaked. Some of our recent thoughts can be found in the following articles:

The “peak shale” narrative got a boost in late July when one of the world’s most bearish hedge funds, Horseman Global, announced it was aggressively shorting shale companies on the thesis that funding is about to “run dry”, resulting in a sharp drop in production and with the lack of capex, would lead to another round of industry defaults (while sending the price of oil higher).

More evidence was revealed in the latest Baker Hughes data, which showed that both active Horizontal and Permian oil rigs had finally peaked and were now declining, while the number of oil rigs funded by Public junk bond deals had plateaued, suggesting little interest in future funding:

Fast forward to today when overnight, we got the clearest indication yet that the US shale sector may have indeed have peaked, when BHP Billiton – the world’s largest miner – said it was in talks with potential buyers of its U.S. shale assets, purchased during a frenzied $20 billion buying spree in 2011, just as the price of oil peaked.

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

Falling Interest Rates Have Postponed “Peak Oil”

June 18, 2017

Falling Interest Rates Have Postponed “Peak Oil”

Falling interest rates have huge power. My background is as an actuary, so I am very much aware of the great power of interest rates. But a lot of people are not aware of this power, including, I suspect, some of the people making today’s decisions to raise interest rates. Similar people want to sell securities now being held by the Federal Reserve and by other central banks. This would further ramp up interest rates. With high interest rates, practically nothing that is bought using credit is affordable. This is frightening.

Another group of people who don’t understand the power of interest rates is the group of people who put together the Peak Oil story. In my opinion, the story of finite resources, including oil, is true. But the way the problem manifests itself is quite different from what Peak Oilers have imagined because the economy is far more complex than the Hubbert Model assumes. One big piece that has been left out of the Hubbert Model is the impact of changing interest rates. When interest rates fall, this tends to allow oil prices to rise, and thus allows increased production. This postpones the Peak Oil crisis, but makes the ultimate crisis worse.

The new crisis can be expected to be “Peak Economy” instead of Peak Oil. Peak Economy is likely to have a far different shape than Peak Oil–a much sharper downturn. It is likely to affect many aspects of the economy at once. The financial system will be especially affected. We will have gluts of all energy products, because no energy product will be affordable to consumers at a price that is profitable to producers. Grid electricity is likely to fail at essentially the same time as other parts of the system.

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

James Howard Kunstler: The World’s Greatest Misallocation Of Resources

January 23, 2017

James Howard Kunstler: The World’s Greatest Misallocation Of Resources

And why we appear poised to repeat it

James Howard Kunstler returns to the podcast this week, observing that despite the baton being handed to a new American president, the massive predicaments we face as a society remain the same. And it seems the incoming administration is just as in denial of them as the old.

Kunstler adds fresh critique to his now decades-old warning that we are sleepwalking our way deep into the Long Emergency. The longer we delude ourselves and waste our energies in pursuit of reviving the failed “endless growth” model, the farther our journey back to a sustainable way of living will be when our current system collapses:

I don’t think there is any sense that they really know where we’re headed, what our destination is, and what the imperatives are and what the future is actually telling us that we need to do. Don’t forget that the so-called psychology of previous investment is a very powerful force in American life and it’s prompting us to do everything we can to maintain the investments we’ve already made. Those investments are the ones I have already mentioned: the freeways, the suburban housing developments, the strip malls.

A lot of the hope pinned on Trump is based on the idea that he’s assembling this team of mega-competent capitalist movers and shakers who know how to make deals — the Wilbur Rosses and Rex Tillersons of the world — and that they are going to conjure up a tremendous surge of economic activity that will be majorly fruitful going forward in the future and produce a tremendous amount of new wealth. Of course the stock market has been pricing that in.

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

Peak Oil & System Justification: “Threatening” Status Quo

November 12, 2016

Peak Oil & System Justification: “Threatening” Status Quo

20151028_065852

It’s a lot easier to seek confirmation than information.
So not only does the online world provide less information, it provides more spin and distortion of that information from an online empire of advocates that enables us as never before to find the voices we agree with, and to ignore anybody else.

DENIAL & AVOIDANCE HAVE DRAWBACKS

When you are confronted with information that contradicts your attitudes, beliefs, impugns your identity, or groups that you identify with, you—we—all of us are motivated to reason through that information in a way that keeps our original attitudes intact.
So, we’ll counter argue, we’ll criticize the data source, not pay attention to information that contradicts our pre-existing attitudes.

Mix in the conservatives’ recognized fear of change and support for simplified decision-making with their inclination to support the “system” as currently structured [so as to avoid change and any considerations regarding new perspectives or factors], and then add human nature’s basic desire for consistency in thought and belief, quite the stew is served! Avoiding new and contradictory information is step one, supplanted with a quest for obtaining reassurances as needed.

Questioning what the reassurances are, their sources, how they came to be, or what they are based on and/or if they are even valid are not part of the program. So those so inclined defer knowledge and presumed expertise to others who share their psychological and ideological preferences, and what results is a profound urgency to preserve what they know, regardless of the implications. Sometimes that’s just fine.

RUNNING THE RISKS

But when the challenges we face have the potential for imposing so much change, denying themselves a place at the table carries a certain set of risks. Blithely dismissing those risks—made easier by avoiding information worth at least considering—is a curious strategy.

As liberalism has increasingly been aligned with the values of empiricism and reason, the incentives for conservatives to reject empiricism and reason multiply.
To be a ‘conservative’ increasingly means taking a contemptuous view of reality.

Today we in America are besieged by a reversal of intellectual growth that finds comfort not in scientific inquiry and method but rather in instinctive reliance upon either what we want to believe or what we think others want to hear.

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

Thermodynamic Oil Collapse Interview: Why The Global Economy Will Disintegrate Rapidly

October 23, 2016

Thermodynamic Oil Collapse Interview: Why The Global Economy Will Disintegrate Rapidly

The world is heading towards a rapid disintegration of its economic and financial system due to a “Thermodynamic oil collapse.” I spoke with Dr. Louis Arnoux of nGeni, about the details of the thermodynamics of oil depletion and its impact on the global economy.

Unfortunately, the world is completely in the dark about this energy information and its dire implications to global economic trade and finance, in a relatively short period of time. I would like to emphasize that this Thermodynamic Oil Collapse Video is the most important interview I have ever done.

During the interview, Louis Arnoux discusses the dynamics of the “Thermodynamic oil decline” using six slides, including one on his nGeni technology towards the end of the interview. The information in this interview is so important, Louis needed to take the extra time to explain these concepts in detail.

In the beginning of the interview, Louis describes the significance of the first chart showing how the world’s fuel gauge is now “Running On Empty.”

Dr. Louis Arnoux presents his views concerning the depletion of oil reserves, that is, how to best assess depletion, what stage the depletion is at and what this means in financial and economic terms. This is based on his own research and on that of Bedford Hill and his Hill’s Group team that he has scrutinised in depth. Dr Arnoux is now part of a team of researchers who have recently refined the Hill’s Group work.

They are presently preparing a paper to be published in a peer reviewed scientific journal that will present their thermodynamic analysis of the oil industry, the Hill’s Group Etp model, how this model enables assessing the depletion status of the global oil reserves, and the high fit of their analysis with empirical data.

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

Peak Oil & System Justification: Avoidance

October 16, 2016

Peak Oil & System Justification: Avoidance

080411-042

The researchers found that being intolerant of ambiguity is associated with such conservative characteristics as unwavering certainty and strong loyalty to particular people and positions.
Conservatives don’t feel the need to jump through complex, intellectual hoops in order to understand or justify some of their positions. They are more comfortable seeing and stating things in black and white.…

THE DRAWBACKS OF AVOIDANCE

As much as those on the Right seek to avoid ambiguity, nuance, and examination of the various complexities of most significant social, political, and economic issues, the resistance to acknowledging the potentially drastic impacts and implications of a peak in oil production and climate change cannot be fairly or honestly explained in a sentence or two. Our 21st Century planet is not exactly a black and white/either-or/yes-no world.

Of course, that immediately presents a bit of a challenge. Being pre-disposed to ignoring or dismissing any set of facts which create cognitive dissonance [or stimulate the fear they are actually trying to avoid], may offer some comfort, but….For those ensconced inside their denial bubbles, choosing to ignore the very information they’ll need to manage the conditions which arouse those very fears is a curious approach.

The conservative inclination to “cut to the chase” in decision-making and policy-making is a time-saver, to be sure! But once we get beyond kindergarten or first grade problem-solving, avoiding the complexities of modern society’s greatest challenges [with the myriad perspectives, differences, needs, purposes, and expectations which contribute to both the challenges and the solutions] by cutting to the chase is at its very best intellectually lazy. Actually, it’s counterproductive in the extreme.

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

Peak Oil; Climate Change; & System Justification Pt 10

October 1, 2016

Peak Oil; Climate Change; & System Justification Pt 10

100_0020

Shaping our identity in large part by the groups we align ourselves with for emotional, psychological, cultural, and political reasons are powerful anchors—individually and collectively. All of us are much more inclined to seek out information and assurances which bolster who we believe ourselves to be rather than contemplate facts or assessments casting doubt about our choices and conclusions.

GROUP INFLUENCE

The more solidly anchored one might be in the identity of their chosen group(s), the less likely it is that information contradicting “group-think” will be received well, or at all. Human nature being what it is, we’re all psychologically inclined to seek out and accept information which supports our beliefs and values, and thus much less inclined to consider data which casts doubts on what we’ve come to believe.

Being actively critical of something one is dependent on is thought to be psychologically uncomfortable, and therefore avoided in favor of increased perceptions of legitimacy, trust, and desirability. System justification theory posits that people are motivated to justify and legitimize the status quo and the system in which one lives. Many mechanisms for this motive have been proposed and studied, including threats to the system, decreases in personal control, feelings of restricted exit, and feelings of dependence on the system. In such situations, instead of becoming increasingly critical of a system that one is dependent on, which would cause considerable dissonance and psychological discomfort, people have been shown to become increasingly motivated to justify and legitimize that system (citations in original quote).

So the message that our technological prowess is a direct contributor to the problems of a warming planet, and/or that for all of our ingenuity and technological advances industry will not overcome the realities of drawing down a finite resource, is especially troubling to a conservative mindset firmly convinced that our market system can solve any problem.

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

Mexico, China and Beyond

September 25, 2016

Mexico, China and Beyond

Ron Patterson’s post asking if China’s oil production has peaked reminded me of Mexico
which also produces mainly from supergiant fields. Mexico’s oil production peaked in 2004 and has averaged a 3.5 percent per annum decline rate since, with a peak yearly decline rate of 9 percent in 2008. China’s oil production has fallen 10% from its peak in 2015. Part of that is oil price-related as the Daqing oil field has an operating cost of $46 per barrel and could reverse as the oil price rises. The comparison of China and Mexico with a projection to 2023 is shown in the following figure:

da-1

The production histories tracked each other from 1965 until they parted ways in 2005. Themainstay of Mexican production had been the Cantarell field as shown by this graph from The Economist with data up to 2011:

da-2

Cantarell production had been pumped up with nitrogen injection until sudden collapse in2005. Part of the decline from Cantarell was offset by increased production from Ku-Maloob-Zaap. Mexico is now producing slightly more oil than it consumes. In the absence of successful privately funded oil exploration from here, Mexico will become an importer of both oil and food.

A good description of the Chinese oil production industry is provided by a paper by Aleklett, from the University of Uppsala, et al from 2010 using data up to 2007. One field, Daqing discovered in 1959, had been producing about a million barrels per day for close to 30 years:

da-3

Table 2 from that paper is reproduced following. It shows that only one of the Chinese giant oilfields would not have entered decline by 2015:

da-4

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

Peak Oil; Climate Change; & System Justification Pt 8

September 17, 2016

Peak Oil; Climate Change; & System Justification Pt 8

IMGP0789

Of course it’s threatening to think that our lifestyles, systems of governing, and capitalist processes themselves may all face drastic changes in the not-too-distant future because of the facts and reality of Peak Oil and climate change! I’m certainly notthe poster-child for Peak Oil advocacy and lifestyles. I have a very nice, capitalist, well-to-do lifestyle. To hell with all of you, I don’t want MY life to change!

STATING THE OBVIOUS

I’ve noted this on several occasions: I’m willing to wager that almost all those urging greater awareness of the oil production/energy supply challenges we’ll be facing soon enough would be delighted to be proven wrong. None of us are eagerly—or in any other manner—awaiting the onset of the inevitable magnitude of personal, economic, commercial, and cultural changes which our beliefs about peak oil suggest. Being wrong about this would be ideal, but we—I—have serious doubts about that outcome being the likeliest.

There’s too large a group of ardent and well-financed others well aware of the inherent limitations finite resources carry. They more than most appreciate how widespread will be the impact of a diminishing energy supply colliding with increasing demand and a growing worldwide population. They also understand—as do those opposing/denying the facts of climate change—the costs and consequences to their own organizations once their Business As Usual practices succumb to the production facts of these finite resources.

What worries us: the problems will be of such scope and impact and complexity that we strongly believe in a need for planning to take place now—by all of us, both Left and Right—and we’re not seeing enough honest, intelligent, rational analysis from those whose contributions will be every bit as important and meaningful. The ideology sponsoring practical and effective adaptations and solutions won’t matter to us if they work.

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

China’s oil peak 45 years after the US peak

September 10, 2016

China’s oil peak 45 years after the US peak

Empty_roads_Hangzhou_G20

Fig 1: Oil crisis in China like in 2005? No. By order: Free roads for G20 in Hangzhou

https://www.theguardian.com/world/2016/aug/31/china-hangzhou-propaganda-facelift-g20-summit

Strategically published only days before the G20 summit the Wall Street Journal had an article on peak oil in China:

China’s Decline in Oil Production Echoes Globally

25/8/2016

chinapeakoil

Fig 2: A flat production peak in China
http://www.wsj.com/articles/chinas-decline-in-oil-production-echoes-globally-1472122393

It hasn’t echoed during the G20 summit.

If China is at peak oil now, then China is where the US was in 1970, 45 years ago. Let’s first have a look at what happened in the US. We limit ourselves to 30 years because 2000 was the last “normal year” before 9/11 and the Iraq war.

US_30_years_after_1970_peak

Fig 3: the first 30 years after the US oil peak

When US oil production peaked in 1970, US oil net imports were 3.4 mb/d. 30 years, 2 oil crises and 1 Desert Storm later the US imported 12 mb/d, a total of 85 Gb during that period.

Of course it is nearly impossible to compare the US and China. The IEA has a table on Chinese oil demand in its World Energy Outlook WEO 2015:

US_China_oil_demand_to_2040_WEO_2015

Fig 4: Oil demand table in the IEA World Energy Outlook 2015

http://www.worldenergyoutlook.org/weo2015/

Note the opposing trends for the US and China:

Comparison_US_China_oil_consumption_200-2040_WEO2015

Let’s put the Chinese consumption into a graph, together with an assumed production profile, (similar to Fig 3):

China_oil_production_consumption_2010_to_2045

Fig 5: China’s oil imports for several scenarios

We assume that Chinese decline after peak production will follow the US pattern. On the consumption side the dashed line is the New Policies Scenario in the IEA WEO 2015, the thin straight line a 1.5% growth scenario starting with 2016. The IEA also assumes a CAAGR of 1.5% but applies it to a lower consumption level in 2014, explaining the difference in the later years.

For orientation and comparison, the dotted line shows the US consumption path shifted by 45 years to the Chinese consumption level in the production peak year 2015.

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

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