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This month, a powerful article in Nature highlighted yet again that most of the world’s oil, coal and gas needs to stay in the ground, if we want to prevent dangerous climate change. This is the “unburnable carbon” analysis that President Obama and Bank of England Governor Mark Carney have both made mainstream in recent months.

Related, over the last 6 months the world oil price has crashed, catching almost all economists and analysts by surprise. As well as profound economic effects, this crash affects “unburnable carbon” in two broad and opposite ways.

It is leading to cancellations of potential fossil fuel projects, as they become less or non-profitable. Great for stopping colossally dirty projects like Arctic oil and Canadian tar sands. And in the opposite direction, it makes oil cheaper, meaning people use it more. Bad for climate, though good for people’s pockets.

How should Governments react to this? A Government who genuinely thought climate change was a global priority would not sit passively by and let these conflicting effects of the oil price crash on climate sweep over us. It would act. Government surveys show the British public want more action on climate change.

Tax Cuts

Despite this, the sole response to the oil price crash from the UK Government is do the opposite – last week it announced detailed plans for tax cuts for oil companies to drill another 11-21 billion barrels of oil from the ground. That’s way more than even the three billion barrels in the Government’s Wood Review on offshore oil and gas. Climate change impacts got one sentence of dismissal. And yesterday, it drove through a clause in the Infrastructure Bill – with almost no debate – requiring the UK to “maximise economic recovery” of North Sea oil.

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

Failing Stimulus And The IMF’s New ‘Multilateral’ World Order

January 28, 2015

Failing Stimulus And The IMF’s New ‘Multilateral’ World Order

My theme for 2015 has been the assertion that this will be a year of shattered illusions; social, political, as well as economic. As I have noted in recent articles, 2014 set the stage for multiple engineered conflicts, including the false conflict between Eastern and Western financial and political powers, as well as the growing conflict between OPEC nations, shale producers, as well as conflicting notions on the security of the dollar’s petro-status and the security and stability of the European Union.

Since the derivatives and credit crisis of 2008, central banks have claimed their efforts revolve around intervention against the snowball effect of classical deflationary market trends. The REAL purpose of central bank stimulus actions, however, has been to create an illusory global financial environment in which traditional economic fundamentals are either ignored, or no longer reflect the concrete truths they are meant to convey. That is to say, the international banking cult has NO INTEREST whatsoever in saving the current system, despite the assumptions of many market analysts. They know full well that fiat printing, bond buying, and even manipulation of stocks will not change the nature of the underlying crisis.

Their only goal has been to stave off the visible effects of the crisis until a new system is ready (psychologically justified in the public consciousness) to be put into place. I wrote extensively about the admitted plan for a disastrous “economic reset” benefiting only the global elites in my article ‘The Economic End Game Explained’.

We are beginning to see the holes in the veil placed over the eyes of the general populace, most notably in the EU, where the elites are now implementing what I believe to be the final stages of the disruption of European markets.

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

40 % of US petroleum product exports didn’t grow since 2011

January 27, 2015

40 % of US petroleum product exports didn’t grow since 2011

This is another post in the series on how US tight oil has impacted on global oil markets. This time we look at US petroleum product exports.

(1) Destination of US product exports

Fig 1: US petroleum product exports by destination and type of growth

Data source: http://www.eia.gov/dnav/pet/pet_move_expc_a_EP00_EEX_mbblpd_a.htm

Exports started to grow already in 2005, a year which appears in many graphs as a turning point. While the growth looks impressive, around 40% of US exports no longer increased since 2011, a year after the very beginning of the tight oil boom (see 1,500 kb/d grid line in Fig 1)

Note that in all graphs of this post 2014 figures have been estimated with data up to October 2014, without seasonal adjustments.

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

Tight Oil Production Will Fade Quickly: The Truth About Rig Counts

January 27, 2015

Tight Oil Production Will Fade Quickly: The Truth About Rig Counts

U.S tight oil production from shale plays will fall more quickly than most assume.

Why? High decline rates from shale reservoirs is given. The more interesting reasons are the compounding effects of pad drilling on rig count and poorer average well performance with time.

Rig productivity has increased but average well productivity has decreased. Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling. At the same time, average well productivity has decreased by about one-third.

This means that production rates will fall at a much higher rate today than during previous periods of falling rig counts.

Most shale wells today are drilled from pads. One rig drills many wells from the same surface location, as shown in the diagram below.

(click image to enlarge)

The Eagle Ford Shale play in South Texas is one of the major contributors to increased U.S. oil production. A few charts from the Eagle Ford play will demonstrate why I believe that U.S. production will fall sooner and more sharply than many analysts predict.

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

The most important thing to understand about the coming oil production cutbacks

January 25, 2015

The most important thing to understand about the coming oil production cutbacks

What the current oil price slump means for world oil supply is starting to emerge. “Layoffs,” “cutbacks,” “delays,” and “cancellations” are words one sees in headlines concerning the oil industry every day. That can only mean one thing in the long run: less supply later on than would otherwise have been the case.

But perhaps the most important thing you need to understand about the coming oil production cutbacks is where they are going to come from, namely Canada and the United States.

Why is this important? For one very simple reason. Without growth in production from these two countries, world oil production (crude oil plus lease condensate which isthe definition of oil) from the first quarter of 2005 through the third quarter of 2014 would have declined 513,000 barrels per day. That’s right, declined. Including Canada and the United States, oil production rose just under 4 million barrels per day.

That means substantial cutbacks in the development of new oil production in Canada and the United States could lead to flat or falling worldwide oil production.

But, why will any oil production cutbacks come primarily from Canada and the United States? For another very simple reason. Post-2005 oil production growth in these countries came from high-cost deposits in Canada’s tar sands and in America’s tight oil plays. New production from these high-cost resources simply isn’t profitable to develop in most locations at current prices.

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

HYPE, BROKEN PROMISES AND SHALES

January 25, 2015

HYPE, BROKEN PROMISES AND SHALES

The term shale revolution has been used so much that it almost has no meaning anymore. But were shales ever really the energy panacea promised or merely a self styled hype machine? Would the frenzy in drilling ever have truly taken off if it weren’t for cheap money? These are valid questions which have not been explored adequately because too many investors, journalists and elected officials were caught up in shale mania. But was this ever truly an exercise that would provide long term benefits to American consumers?

It is an inarguable fact that shales have produced copious quantities of hydrocarbons in the past few years but this is not really surprising given that the wells, by their very nature, produce the most oil or gas they will ever produce in the first twelve months or so of their lives. So when the industry engages in a frenzy of drilling and brings many wells online very rapidly and essentially all at once, then it stands to reason that it will look like an enormous success. For a short while.

The problem is that operators have not been able to maintain a stable long term production profile. Looking at the following chart, one can see why.

A great portion of all new wells being drilled in the best of our shale plays are doing nothing more than replacing declines in older wells. And older, in this case, means a mere 4-5 years. Not decades. If one considers the per well production in both the Bakken and the Eagle Ford, it peaked in June, 2010. Although there have been countless wells added since that time, the production per each individual well has never reached that level again. This is highly problematic in the long run.

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

Iraq Shrugs Off Low Prices, Boosts Output To Record Levels

January 21, 2015

Iraq Shrugs Off Low Prices, Boosts Output To Record Levels

Despite oil prices at their lowest levels in five years, Iraq is producing at record levels.

For the month of December, Iraq produced nearly 4 million barrels per day, according to Oil Minister Adel Abdul Mahdi, an all-time high for the war-torn country. That is critical for a government that depends on oil for more than 90 percent of its revenues. Rather than paring back production levels to stop a price slide, Iraq is doing what all rational actors are aiming to do (if they can): produce more oil to make up for lost revenues from rock bottom prices.

“Because of the new challenges, especially the price of oil, Iraq has to try its best to raise it oil production and exports,” Deputy Prime Minister Rowsch Nuri Shaways said in Davos, Switzerland on January 21.

OPEC has continuously vowed to let the market sort itself out rather than try to fix falling prices, which has the oil cartel staring down high-cost production in North America. In its latest monthly report, OPEC reported an uptick in production – the 12-member group produced an average of 30.2 million barrels per day (bpd) in December, about 142,000 bpd more than the previous month. The increase came almost entirely from Iraq, which does not operate under the OPEC quota. Iraq managed to boost monthly output by 285,000 bpd, more than offsetting a decline of 184,000 bpd in Libya.

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

12 Signs That The Economy Is Really Starting To Bleed Oil Patch Jobs

January 21, 2015

12 Signs That The Economy Is Really Starting To Bleed Oil Patch Jobs

The gravy train is over for oil workers. All over North America, people that felt very secure about their jobs just a few weeks ago are now getting pink slips. There are even some people that I know personally that this has happened to. The economy is really starting to bleed oil patch jobs, and as long as the price of oil stays down at this level the job losses are going to continue. But this is what happens when a “boom” turns into a “bust”. Since 2003, drilling and extraction jobs in the United States have doubled. And these jobs typically pay very well. It is not uncommon for oil patch workers to make well over $100,000 a year, and these are precisely the types of jobs that we cannot afford to be losing. The middle class is struggling mightily as it is. And just like we witnessed in 2008, oil industry layoffs usually come before a downturn in employment for the overall economy. So if you think that it is tough to find a good job in America right now, you definitely will not like what comes next.

At one time, I encouraged those that were desperate for employment to check out states like North Dakota and Texas that were experiencing an oil boom. Unfortunately, the tremendous expansion that we witnessed is now reversing…

In states like North Dakota, Oklahoma and Texas, which have reaped the benefits of a domestic oil boom, the retrenchment is beginning.

“Drilling budgets are being slashed across the board,” said Ron Ness, president of the North Dakota Petroleum Council, which represents more than 500 companies working in the state’s Bakken oil patch.

Smaller budgets and less extraction activity means less jobs.

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

On to Plan B as Oil Work Stalls in Texas

January 20, 2015

On to Plan B as Oil Work Stalls in Texas

MIDLAND, Tex. — With oil prices plummeting by more than 50 percent since June, the gleeful mood of recent years has turned glum here in West Texas as the frenzy of shale oil drilling has come to a screeching halt.

Every day, oil companies are decommissioning rigs and announcing layoffs. Small companies that lease equipment have fallen behind in their payments.

In response, businesses and workers are bracing for the worst. A Mexican restaurant has started a Sunday brunch to expand its revenues beyond dinner. A Mercedes dealer, anticipating reduced demand, is prepared to emphasize repairs and sales of used cars. And some well-off oil company managers are cutting back at home, rethinking their vacation plans and cutting the hours of their housemaids and gardeners.

Dexter Allred, the general manager of a local oil field service company, began farming alfalfa hay on the side some years ago in the event that oil prices declined and work dried up. He was taking a cue from his grandfather, Homer Alf Swinson, an oil field mechanic, who opened a coin-operated carwash in 1968 — just in case.

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

Gail Tverberg: This Is The Beginning Of The End For Oil Production

January 19, 2015

Gail Tverberg: This Is The Beginning Of The End For Oil Production

Why the shale collapse is ushering in a permanent turndown

With the recent collapse in the price of oil, Gail Tverberg, returns to discuss the likely impact on the US shale oil industry, as well as the global market for oil.

Gail is a professional actuary who applies classic risk assessment procedures to global resources: studying issues such as oil & natural gas depletion, water shortages, climate change, etc. These days, she writes at her website OurFiniteWorld.com.

While as an actuary, Gail is one to avoid hyperbole and the let the numbers speak, her analysis of the outlook for future oil production is nothing short of dire:

What we need is cheap energy. We need cheap, liquid oil. When it’s high-priced it really messes up the economy. We need oil to run our cars and to operate our trucks and such things, but it needs to be cheap. And it suddenly is today.

But, you have to be able to keep pulling it out at that same price. And the critical thing is, we can’t keep pulling it out at that price. What is going to happen, I’m afraid, is that once production goes down, we won’t be able to get it back up again.

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

New—and Worrisome—Contaminants Emerge From Oil and Gas Wells

January 18, 2015

New—and Worrisome—Contaminants Emerge From Oil and Gas Wells

Researchers find alarming levels of ammonium and iodide in fracking wastewater released into Pennsylvania and West Virginia streams.

Two hazardous chemicals never before known as oil and gas industry pollutants – ammonium and iodide – are being released into Pennsylvania and West Virginia waterways from the booming energy operations of the Marcellus shale, a new study shows.

The toxic substances, which can have a devastating impact on fish, ecosystems, and potentially, human health, are extracted from geological formations along with natural gas and oil during both hydraulic fracturing and conventional drilling operations, said Duke University scientists in a study published today in the journal Environmental Science & Technology.

$Unexpected toxics are surfacing with fracking fluid at drilling sites in Pennsylvania and West Virginia, researchers say. Treatment plants, never designed to handle the mess, are sending the pollutants straight to the region's waterways. Above, fracking waste storage tanks in Colorado. (William Ellsworth/USGS)$

The chemicals then are making their way into streams and rivers, both accidentally and through deliberate release from treatment plants that were never designed to handle these contaminants, the researchers said.

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

Tight oil boom can explain only part of drop in US oil product imports

January 13, 2015

Tight oil boom can explain only part of drop in US oil product imports

We continue to look at what impact US tight oil has on global oil markets, in this post the reduction of US petroleum product imports. This analysis shows that only around one quarter of a drop of 1.7 mb/d since 2005/06 can be explained by the tight oil boom.

Fig 1: US product imports

The graph shows that US product imports peaked already in 2005/06, long before the tight oil boom started. The drop between that peak and 2010 was around 1 mb/d. Remember that the US went into recession end 2007. A further drop of 700 kb/d happened during the tight oil boom.

(1) US product imports from Venezuela

The biggest drop came from Venezuela and Virgin Islands.

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

The Scariest Chart For America’s Shale Industry

January 12, 2015

The Scariest Chart For America’s Shale Industry

Back in early November, when we posted “If WTI Drops To $60, It Will “Trigger A Broader HY Market Default Cycle“, it was greeted with the usual allegations of conspiracy theorism, tin-foil hattery and pretty much everything else, except rebutting facts.

Two months later, it was none other than Goldman which threw in the towel on its call from July 28 of 2014 when it said that “the long-awaited global recovery appears to be getting on track, lifting commodity demand” and scrambled to explain overnight that nothing short of a mass default wave within the shale space will end the ongoing collapse in prices, which are driven not by supply/demand fundamentals but by ZIRP, and a generation of junk bond BTFDers, who can’t wait to invest in the latest 10%, 15%, 20% or higher “yielding” opportunity (ignoring that the issuer may default before even one coupon is paid). In other words, those bond holders who wish to blame someone for the collapsing prices of junk bonds, feel free to address them to Ben Bernanke and his successor, who have enabled insolvent companies to live long beyond their viable lifecycle thanks to a zero cost of capital and a generation of traders who no longer know risk.

This is how Goldman’s Currie tongue-in-cheekly explained this dilemma:

[U]nlike physical stress, how low prices need to go is dependent upon the producer’s view of the future and the persistence of the current low price environment. The lower and more persistent the producer views the future pricing outlook, the quicker the restructuring. Given the optimistic nature of the oil drilling business, producer views are unlikely to change until the environment becomes extremely hostile with prices low enough such that survival becomes questionable.

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

North Dakota county feels Bakken boom ebb away as oil falls

January 12, 2015

North Dakota county feels Bakken boom ebb away as oil falls

(Reuters) – Just over a decade ago, this sleepy farming community on the fringe of North Dakota’s Bakken shale formation hosted the state’s first horizontal oil well to be hydraulically fractured, or fracked, helping set in motion an economic revolution that shook the world.

Today, Divide County may be another vanguard for the state, this time ominous, as the first to feel the full effect of a collapse in prices that has lopped more than 50 percent off the price of oil since the summer.

Only five oil rigs were drilling in Divide County this week, down from 12 last August, according to state data. While those only account for a handful of the more than 162 rigs still drilling in North Dakota, the drop has been much steeper than elsewhere in the state and could signal trouble across the No. 2 U.S. oil producer behind Texas if prices continue to slide.

A “Coming Soon” sign still marks the spot on a patch of fallow farmland just outside of Crosby, the county seat, where a 200-person “man camp” to house oil workers was set to be built. Late last fall, Timberline Construction Group, an Alabama-based contractor, put the project on hold after an oil company pulled out of a housing contract.

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

Are The Bakken’s Sweet Spots Past Their Prime?

January 12, 2015

Are The Bakken’s Sweet Spots Past Their Prime?

This post is an update on total Light Tight Oil (LTO) extraction from Bakken in North Dakota based upon actual data as of October 2014 from North Dakota Industrial Commission (NDIC). It further presents a statistical analysis on developments of well productivity with a detailed look at developments in Parshall, Reunion Bay and Sanish.

• There were general improvements in LTO well productivity in Bakken during 2013.

• Present trends in LTO well productivity for Mountrail’s sweet spots (Alger, Parshall, Reunion Bay, Sanish and Van Hook) suggests these are past their prime.

• Figure 29 in this post shows development in well productivity for Alger and Van Hook and figures 06, 08 and 10 for Parshall, Reunion Bay and Sanish. A common feature for Parshall, Reunion Bay, Sanish, and Van Hook is that these reached new highs in well productivity for wells started in 2013.
Alger has been in general decline since 2011.

• LTO extraction in recent years may be viewed as a source for global swing production for oil.

Figure 01: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of October 2014 in Bakken North Dakota [green area, right hand scale]. The top black line is the price of Western Texas Intermediate (WTI), red middle line the Bakken LTO price (sweet) as published by the Director for NDIC and bottom orange line the spread between WTI and Bakken LTO wellhead all left hand scale.

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

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