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The U.S. Energy Information Administration (EIA) said on Tuesday that the U.S. likely surpassed Saudi Arabia and Russia earlier this year to become the world’s top crude oil producer. The EIA based its disclosure on preliminary estimates in its Short-Term Energy Outlook which is released every month.

The U.S., in news that was widely covered by media at the time, bypassed Saudi Arabia in February to become the second largest global oil producer, the EIA says. It was the first time in more than 20 years that the U.S. out produced Saudi Arabia. Then in June and August, U.S. output bypassed Russia for the first time since February 1999.

The EIA expects that U.S. crude oil production, most of it light sweet crude, will continue to exceed Russian and Saudi Arabian crude oil production for the remaining months of 2018 and through 2019.

The EIA disclosure comes as oil markets are trying to make sense out of both supply and demand questions as well as geopolitical uncertainty. Since President Trump decided in May to reimpose sanctions against Iran over its nuclear development program, uncertainty has seized the market. The first row of new sanctions against Iran were put in place in August, while more hard-hitting sanctions against the country’s energy sector will take effect on November 4.

Trump’s quandary

With the prospect of as many as 1-2 million barrels per day (bpd) of Iranian barrels being removed from global markets, both Saudi Arabia, likely bowing to pressure from Trump, and also Russia, have already pledged to increase output to keep a ceiling on prices. This uncertainty comes as crucial mid-term congressional elections, slated for November, approach. The concern for Trump and Republican candidates has been higher global oil prices and higher gasoline prices hitting voters in the pocket book and possibly causing voter backlash at the polls.

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

EIA’s Latest USA & World Oil Production Data

September 5, 2018

EIA’s Latest USA & World Oil Production Data

These first charts are taken from the EIA’s Monthly Crude Oil and Natural Gas Production. The data are through June 2018 and is in thousand barrels per day.

US C+C production was up 231,000 barrels per day in June to 10,674,000 bpd, an all-time high.

Texas was up 165,000 barrels per day in June to 4,410,000 bpd.

New Mexico was up 5,000 barrels per day in June to 657,000 bpd. The Permian extends into New Mexico.

North Dakota was down 16,000 barrels per day in June to 1,220,000 bpd.

Oklahoma was down 3,000 barrels per day in June to 526,000 bpd.

Colorado was down 24,000 barrels per day in June to 423,000 bpd.

California was down 2,000 barrels per dayin June to 462,000 bpd. California peaked in February of 1987 at 1,109,000 bpd.

Alaska was down 45,000 barrels per day in June to 451,000 bpd. June, July, August, and part of September are the prime maintenance months for Alaska. The maintenance includes pigging the pipeline and overhauling the pumps along the pipeline.

The Gulf of Mexico was up 154,000 barrels per day in June to 1,658,000 bpd. Just a couple of years ago the EIA was predicting the GOM to be at almost 2 million barrels per day by now. I really don’t think that is going to happen anytime soon.

I wanted US Less Permian but the EIA doesn’t break it out that way. So I will just have to settle for all the Permian plus Eagle Ford and East Texas. East Texas is in decline while Eagle Ford is still increasing. But my point is the rest of the US seems to be settling out to about where it was in 2015.

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

The “Weakest” EIA Report In Years

August 20, 2018

The “Weakest” EIA Report In Years

The EIA just published one of the “weakest” weekly oil reports in years, which suggests troubled waters ahead for the global oil market.

The timing of the report is not ideal, coming amidst a currency crisis in Turkey, which has raised fears of financial contagion in other emerging markets. The strength of the dollar is putting a long list of currencies under pressure, vexing policymakers around the world. Some countries, such as Argentina, are aggressively hiking interest rates to defend their currencies (although the peso continues to fall). Others, such as Turkey, are resisting any rate hikes at all, which is clearly not a solution to capital flight and a sharp devaluation.

It is too early to tell whether or not the sudden crisis will be confined to Turkey or if it will mushroom into an emerging market conflagration that sends emerging markets – and perhaps even the global economy as a whole – into a tailspin.

These currency troubles could severely undercut global oil demand. Not only are crude oil prices close to multi-year highs, but the strength of the dollar and the relative weakness of a variety of currencies in the developing world, combine for a toxic brew to demand. Oil prices are up some 6 or 7 percent on the year, but in Turkey, imported oil is now 60 percent more expensive – the result of the meltdown in the lira.

While the specific percentages might vary from country to country, much of the world is experiencing painful increases in fuel because so many currencies are being trampled by the strength of the dollar.

The early signs of trouble to the oil market are starting to materialize. The EIA’s weekly report showed a massive 6.8-million-barrel increase in crude oil inventories.

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

The Productivity Problem In The Permian

August 16, 2018

The Productivity Problem In The Permian

The multi-year campaign to boost efficiency and productivity in the U.S. shale patch could be nearing its limits.

Output in the Permian basin is already starting to slowdown, largely due to pipeline constraints. However, there is also a series of other data points that suggests that shale drillers are bumping up against a ceiling in terms of productivity and efficiency.

New data from the EIA shows a rather startling slowdown in the amount of oil that the average rig can produce from a new well in the Permian. In September, the EIA expects new-well production per rig to fall by 10,000 barrels per day (bpd) in the Permian, compared to August levels. That means that when a company deploys a rig to drill a new well, that rig will produce a little less oil than it did compared to the average rig did a month earlier.

(Click to enlarge)

New-well productivity has seesawed a bit over the years, spiking in 2016 when the industry scrapped inefficient rigs during the market downturn. Indeed, some of the recent decline in new-well productivity can be chalked up to the industry rushing to drill more. In this sense, it isn’t that the rigs are necessarily less productive, just that there are so many of them out there in the Permian, that the productivity figures fall because the denominator is larger.

But it’s also a reflection of the fact that drillers are being forced into less desirable locations with the field so crowded.

“We believe that the short-cycle nature of shale exploitation and the intensity of activity in the Permian means that production from Tier 1 geological locations (e.g., those with the best pay, the optimum pressure) is starting to move to Tier 2, which is unable to achieve the same rates of productivity,” Standard Chartered wrote in a note.

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

The U.S. Oil Production “Mirage”

August 4, 2018

The U.S. Oil Production “Mirage”

Some of the surge in U.S. oil production this past spring might have been “a mirage.”

On July 31, the EIA released monthly data on U.S. oil production, which revealed a decline in U.S. output of 30,000 bpd in May, compared to a month earlier. The dip is a surprise, given the widespread assumption that U.S. shale production was continuing to grow at a blistering pace.

To be sure, a big reason for the decline in overall output was the 75,000-bpd decline in production from offshore Gulf of Mexico. But Texas production only rose by 20,000 bpd, a disappointing figure that likely came in far below what most analysts had expected.

Moreover, the monthly total of 10.442 million barrels per day (mb/d) for May is sharply lower than what EIA itself thought at the time. Here are the weekly estimates for U.S. oil production that the EIA put out back then:

April 6: 10.525 mb/d
April 13: 10.540 mb/d
April 20: 10.586 mb/d
April 27: 10.619 mb/d
May 4: 10.703 mb/d
May 11: 10.723 mb/d
May 18: 10.725 mb/d
May 25: 10.769 mb/d

The weekly estimates tend to be less accurate than the retrospective monthly numbers. That is not a new dynamic, and estimating on a weekly basis inherently involves a lot of guesswork, so this is not a knock on the EIA.

Yet the discrepancy is rather striking. Not only did the EIA estimate that production in April and May was much higher than it actually was, but the agency also thought production was rising quickly.

If the weekly estimates were to be believed at the time, production would have climbed from 10.525 mb/d in early April to 10.769 mb/d by the end of May, an increase of 244,000 bpd over a roughly eight-week period.

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

Top U.S. Shale Oil Fields Decline Rate Reaches New Record…. Half Million Barrels Per Day

July 26, 2018

Top U.S. Shale Oil Fields Decline Rate Reaches New Record…. Half Million Barrels Per Day

While the U.S. reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever. This is bad news for the U.S. shale industry as it must produce more and more oil each month, to keep oil production from falling.

According to the newest EIA Drilling Productivity Report, the top five U.S. Shale Oil fields monthly oil decline rate is set to surpass a half million barrels per day in August. Thus, the companies will have to produce at last 500,000 barrels of new oil next month just to keep production flat.

Here are the individual shale oil field charts from the EIA’s July Drilling Productivity Report:

The figures that are shown above the UP arrow denote the forecasted new production added next month while the figures above the DOWN arrow provide the monthly legacy decline rate. For example, the chart on the bottom right-hand side is for the Permian Region. The EIA forecasts that the Permian will add 296,000 barrels per day (bpd) of new shale oil production in August, while the existing wells in the field will decline by 223,000 bpd.

If we add up these top five shale oil fields monthly decline rate for August will be 503,000 bpd. Thus, the shale oil companies must produce at least 503,000 bpd of new oil supply next month just to keep production from falling. And, we must remember, this decline rate will continue to increase as shale oil production rises.

We can see this in the following chart below. Again, according to the EIA’s figures, the top five U.S. shale oil fields monthly legacy decline rate increased from 398,000 bpd in January to 503,000 bpd for August:

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

Why The Coming Oil Crunch Will Shock The World

July 7, 2018

Anton Balazh/Shutterstock

Why The Coming Oil Crunch Will Shock The World

And why we need a new energy strategy — fast.

My years working in corporate strategy taught me that every strategic framework, no matter how complex (some I worked on were hundreds of pages long), boils down to just two things:

Where do you want to go? (Vision)
How are you going to get there? (Resources)

Vision is the easier one by far. You just dream up a grand idea about where you want the company to be at some target future date, Yes, there’s work in assuring that everybody on the management team truly shares and believes in the vision, but that’s a pretty stratightforward sales job for the CEO.

By the way, this same process applies at the individual level, too, for anyone who wants to achieve a major goal by some point in the future. The easy part of the strategy is deciding you want to be thinner, healthier, richer, or more famous.

But the much harder part, for companies and individuals alike, is figuring out ‘How to get there’. There are always fewer resources than one would prefer.

Corporate strategists always wish for more employees to implement the vision, with better training with better skills. Budgets and useful data are always scarcer than desired, as well.

Similar constraints apply to us individuals. Who couldn’t use more motivation, time and money to pursue their goals?

Put together, the right Vision coupled to a reasonably mapped set of Resources can deliver amazing results. Think of the Apollo Moon missions. You have to know where you’re going and how you’re going to get there to succeed. That’s pretty straightforward, right?

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

USA and World Oil Production

June 5, 2018

USA and World Oil Production

All data below is from various sources. All US data is from the EIA. Unless otherwise noted is in thousand barrels per day.

US C+C production through April, 2018. For the last 8 months, the average increase in US production has been 168,000 bpd. Most of this has come from the Permian.

This chart is through February, 2018. US net imports peaked in 2006 and have dropped about 9.5 million barrels per day since then.

Alaska through March, 2018. Alaska’s decline has definitely slowed.

GOM through March. The resurgence in GOM production seems to have petered out about a year and a half ago and is now holding at about 1.7 million barrels per day.

North Dakota through March. Has shale production peaked in North Dakota? It does appear that they are having trouble increasing production in the last six months.

Texas through March, All that increase in US production has come from Texas, primarily from the Permian. For how long and for how much will this increase continue? I have no idea but guesses will be welcome in the comments below.

This data is from the Canadian National Energy Board and is through December, 2018. They say all data from September 2017 through December 2018 is an estimate. They are expecting production to bottom out in May 2018 and then increase for the remainder of the year.

This data is from the Russian Minister of Energy and is through May, 2018. Russian production has been almost flat for the last three months. Data from the Russian Minister of Energy averages about 400,000 barrels per day higher than the EIA’s estimate.

China through February, 2018. China is clearly in decline though the decline seems to have slowed.

Mexico through February, 2018. Mexico is in a slow decline though the decline has slowed in the last few months.

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

What Patient Zero, Japan, Can Tell Us About China & The Developed World At Large

June 4, 2018

What Patient Zero, Japan, Can Tell Us About China & The Developed World At Large

To see the future, sometimes you have to look to the past. Japan is patient zero in the global epidemic of slowing growth and although Japan was assumed to be the emerging world power in the ’80’s, we now know better. The title of emergent power now rests with China…and for the same reasons it didn’t work out for Japan, it won’t work out for China. To make my case, I’ll use UN population data coupled with EIA total primary energy data (cumulative energy consumption from coal, oil, natural gas, nuclear, and renewables), plus EIA fore-ward looking forecast data (the International Energy Outlook, 2017 or IEO’17).

First, Japan.

The Japanese 15 to 60 year old population peaked in 1993 and declined over 15% by 2018. The core population will continue falling, down 24% by 2030, and 34% by 2040. Energy consumption growth began stalling in 1997, consumption peaked in 2006, and has declined 17% from the ’06 peak through 2015. However, the EIA estimates the falls seen since ’06 will cease shortly and energy consumption will stabilize through 2040.

The chart below breaks down the annual change in the 15 to 60 year old Japanese population versus the annual change in energy consumption. The twin deceleration should be fairly obvious.

Below, the actual data as above versus the EIA IEO’17 forecast. While the core population will fall at an even faster rate, the EIA forecasts energy consumption will stabilize (against all logical rationale)?!?

To round out the picture, the Japanese 15 to 60 year old population versus 60+ year old population. All growth is currently in the 60+ population until it too is projected to peak in 2040 and begin declining.

What does this mean for China?

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

US Light Tight Oil (LTO) Update

May 22, 2018

US Light Tight Oil (LTO) Update

I have updated my scenarios for US LTO output, based on both EIA tight oil output data and average well profile data from Enno Peters’ shaleprofile.com. I have also created a scenario for the Niobrara shale oil play and for “other US LTO” which excludes the Permian Basin LTO, Eagle Ford, North Dakota Bakken/Three Forks, and the Niobrara.

chart/

Niobrara play

The recent Niobrara wells have an estimated ultimate recovery (EUR) of 143 kb. The oil price scenario below is used for all of the scenarios.

chart/

Well cost is assumed to be $4.5 million in 2017$. The scenario below assumes EUR starts to decrease in Jan 2019 as sweet spots become fully drilled. Economically recoverable resources (ERR) to 2040 are 2.7 Gb with 21,000 total oil wells completed, peak output is 623 kb/d in early 2021. Fewer wells are completed relative to the North Dakota Bakken and Permian basin because the wells are less profitable.

chart/

Other US lto

For US other LTO, much of the output is from condensate from gas wells so the analysis is more approximate and a discounted cash flow analysis is beyond the scope of this post, the “average well” produces only about 38 kb over its life, but in many cases the output of natural gas makes the well profitable, there are some areas where shaleprofile.com does not have data such as the Anadarko basin, so I have simply taken the average well profile for areas covered (excluding ND Bakken, Eagle Ford, Permian and Niobrara) and then found the number of these “average wells” that fit US other LTO output data from the EIA(including Anadarko). The true average well profile for all areas including Anadarko is unknown.

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

Why oil prices can’t rise very high, for very long

April 20, 2018

Why oil prices can’t rise very high, for very long

Oil prices are now as high as they have been for three years. At this writing, Brent is $74.14 per barrel and West Texas Intermediate is at $68.76. These prices aren’t really very high, if a person looks at the situation from a longer term point of view than the last three years.

Figure 1. EIA chart of weekly average Brent oil prices, through April 13, 2018.

There is always a question of how high oil prices can go, and for how long.

In fact, we have many resources, of many kinds, whose prices of extraction keep rising higher. For example, obtaining fresh water for the world’s population keeps getting more and more expensive. Some parts of the world need to resort to desalination.

The world economy cannot withstand high prices for any of these resources for very long. Certainly, it cannot withstand high prices for a combination of necessary resources, because people need to cut back on other purchases, in order to afford the necessities whose prices are rising. This article is a guest post by another actuary, who goes by the pseudonym Shunyata. He explains in a different way why high resource prices cannot last, whether they are for oil, or natural gas, water, or even fresh air.

Dear Readers:

As you are no doubt aware, Gail has created a fantastic portfolio of blogs that explore our energy/financial/economic system, blogs that reveal many hidden or misunderstood aspects of our situation. I have found these discussions invaluable and share them wherever I am able; to solve our societal problems we need to develop a societal understanding of these issues.

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

Oil Prices Fall As EIA Confirms Inventory Build

March 28, 2018

Oil Prices Fall As EIA Confirms Inventory Build

After a surprise 5.32-million-barrel inventory build reported by the American Petroleum Institute (API) weighed on oil prices yesterday, the Energy Information Administration (EIA) is reportinga build of 1.6 million barrels for the week ending March 23.

The markets, which have not had a chance to react to the EIA report as of the time of writing, could ease their downward trend given the nearly 4-million difference in build in the official figures.

However, they could also take this as confirmation of a reversal of expectations. Heading into Tuesday’s API data, expectations were for a draw of around 430 million barrels.

The authority said refineries processed 16.8 million bpd of crude in the reporting period, unchanged from a week earlier. Gasoline production averaged 10.3 million bpd, compared with 9.9 million bpd a week earlier, and distillate output averaged 4.8 million bpd last week, versus 4.5 million bpd a week earlier.

Gasoline inventories, the EIA said, fell by 3.5 million barrels in the week to March 23. In the week before that, gasoline inventories marked a decline of 1.7 million barrels. Distillate inventories last week shed 2.1 million barrels, compared with a decline of 2 million barrels in the prior week.

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

United States as energy exporter: Is it “fake news”?

March 4, 2018

United States as energy exporter: Is it “fake news”?

Much of the media coverage of the American energy industry implies that America has become a vast and growing exporter of energy to the rest of the world and that this has created a sort of “energy dominance” for the country on the world stage.

Whether such reports qualify as so-called “fake news” depends very much on three things: 1) How one defines “fake news,” 2) whether writers of such reports qualify the words “imports” and “exports” with the word “net” and 3) which energy sources they are discussing.

In this case let’s define “fake news” as claims that official, publicly available statistics show plainly to be false. By that criterion anyone who claims that the United States is a net energy exporter would certainly be guilty of propagating “fake news.”

Energy statistics from the U.S. Energy Information Administration (EIA) show that in November 2017 (the most recent month for which figures are available) the United States had net imports 329.5 trillion BTUs of energy in all its forms.* That’s down from a peak of 2.74 quadrillion BTUs in August 2006, something that is certainly a turnabout from the previous trend. But all claims that the United States is a net energy exporter must be labeled as unequivocally false.

It turns out, however, that most people making misleading claims about America’s energy situation don’t actually say or write things which are technically false. What they do is use language which intentionally or unintentionally misleads the reader or listener.

For example, the claim that the United States is an exporter of crude oil is true. But that claim is entirely misleading. While the United States exports about 1.5 million barrels a day (mbpd) of crude oil, it also imports 7.5 mbpd.

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

EIA USA Reserve Estimates

February 21, 2018

EIA USA Reserve Estimates

EIA reserve estimates for USA for 2016 have been issued (a couple of months later than usual). The numbers they provide are ‘proven’ reserves of crude, condensate and natural gas.

chart/

The data is provided directly by the E&Ps with some adjustments made by EIA for missing numbers. The data show reserves for the end of a given year, plus the reasons for change over the year: basically discoveries, production, revisions and sales. Until 2015 EIA had different categories for discovery (essentially a new reservoir, although there may be new pockets in existing freservoir) and extension (an increase in the area of an existing field). Recently most of this category has been extensions to LTO fields (i.e. an increase in the expected economic drainage area of a play). This year the reporting has changed so all discoveries and extensions are reported as a single figure and I’ve shown only this sum for previous years too. I have summed revision gains and losses plus adjustments to give a net number, and similarly for sales and acquisitions.

This year the data include non-producing reserves. I don’t know for sure if this is new but I haven’t noticed it before and can’t find any history for previous years. ‘Non-producing’ may mean reserves behind wells that are offline (e.g. are uncompleted, for maintenance or because of lack of processing or transport capacity); or that have real development plans for their production (typically starting within the next five years according to SEC rules, although for large, long cycle conventional projects the time can be extended). The undeveloped values for 2016 are shown on each chart.

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

LNG comes to Boston, a harbinger of the future?

February 18, 2018

LNG comes to Boston, a harbinger of the future?

The most curious natural gas story of the year so far comes out of Boston and seems to have echoes of a deepening Russia-related scandal in Washington. A liquefied natural gas (LNG) tanker bearing natural gas produced in part in Russia delivered its cargo to the Boston area for insertion into the natural gas pipeline system there. Apparently, the Russian company that supplied some of the gas may fall under U.S. sanctions against the financing and importation of Russian goods.

One of the many ironies of the delivery is that the United States is simultaneously importing LNG in one place even as it exports LNG from another. (I’ll explain later why this may become a more frequent occurrence in the years ahead.)

The hue and cry from the natural gas partisans blamed Boston’s predicament on the lack of pipelines to carry growing gas production from the nearby Marcellus and Utica shale deposits to needy Bostonians whose gas supplies had been depleted by a deep winter freeze.

Within the context of this narrow appraisal, the partisans are mostly correct. Attempts to bring more pipeline gas to New England have come to grief, especially in New York state where residents have strongly opposed new natural gas pipelines and storage facilities.

In addition, the state banned hydraulic fracturing—the main method for extracting gas from the Marcellus and Utica deposits—in 2014, claiming the process threatened water supplies. That ban, of course, prevented any shale gas development in southern New York under which the deposits lie. And, it brought into disrepute all things related to hydraulic fracturing or “fracking” including natural gas pipelines and storage facilities.

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

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