Home » Posts tagged 'shale revolution'

Tag Archives: shale revolution

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Saudi Arabia Plans Its Own Shale Revolution

March 9, 2018

Saudi Arabia Plans Its Own Shale Revolution

Saudi Oil

Saudi Arabia has big gas plans, with Aramco eyeing a twofold increase in its natural gas production over the next ten years as it seeks to switch local power plants to gas from oil, so it can export more crude. This gas, apparently, could come from shale deposits.

The World Energy Council estimates that Saudi Arabia has recoverable gas reserves of 7.49 billion tons of oil equivalent. Proved reserves stood at 8.489 trillion cu m as of 2014. These are just conventional gas figures, the WEC notes. According to Aramco’s head of unconventional resources, Khalid Al Abdulqader, the country’s shale gas resources are “huge.”

One of the top spots for shale gas drilling is the Jafurah basin, which is similar in size to Texas’ Eagle Ford, according to Al Abdulqader, but he declined to give any details regarding the reserves in place. Analysts that Bloomberg’s Wael Mahdi and Bruce Stanley spoke to believe that it is perfectly possible for the shale basins in the Kingdom to contain a lot of gas. The question is whether this gas is actually recoverable at a cost that is low enough to make production viable.

If historical data is any judge, this is doubtful. Mahdi and Stanley note the string of exits by international oil and gas companies after they failed to make any meaningful gas discoveries in the Kingdom. These included French Total, Italy’s Eni, and Spanish Repsol. Exxon and Chevron have operations in the country, but not in gas exploration. Lukoil was the latest to announce it was pulling out of its Saudi gas drilling venture last year after it failed to discover any reserves.

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

U.S. Department of Energy Doubles Down on Shale Optimism

February 13, 2018

U.S. Department of Energy Doubles Down on Shale Optimism

The U.S. stock market is not the only thing that’s gotten overheated in the last few years. Exuberance over U.S. energy output has hit a record high as natural gas production has reached its all-time peak, and oil production nears highs not seen in 47 years. Thanks to the so-called “shale revolution” (tapping previously inaccessible fossil fuels in shale rock deposits through the use of hydraulic fracturing and horizontal drilling technologies), the U.S. government has green-lighted liquefied natural gas export terminals and pipelines and lifted the ban on oil exports. The statistical arm of the U.S. Department of Energy—the Energy Information Administration (EIA)—predicts that the United States will become a net energy exporter in the next five years, a status we haven’t enjoyed since Eisenhower was president.

Although shale development represents a remarkable technological achievement (made possible by cheap loans and questionable finances), the EIA seems to be betting heavily on the long-term prospects of tight (shale) oil and shale gas production, apparently in the erroneous belief that what goes up must keep doing so. This despite ample warning signs that the “shale revolution” will be a short-lived phenomenon. In fact, the higher production goes, the faster and sooner it will decline.

Since 2011 my colleague at Post Carbon Institute, David Hughes (an expert on fossil fuel production who worked for the Geological Survey of Canada for 32 years), has been sounding the warning bell about the danger of betting our energy future on shale. Through intensive analysis of oil and gas production data, he has identified a clear pattern of quite rapid boom and bust cycles in shale plays.

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

When boom is bust: the shale oil bonanza as a symptom of economic crisis

December 5, 2017

When boom is bust: the shale oil bonanza as a symptom of economic crisis

The gradual climb in oil prices in recent weeks has revived hopes that US shale oil producers will return to profitability, while also renewing fevered dreams of the US becoming a fossil fuel superpower once again.

Thus a few days ago my daily newspaper ran a Bloomberg article by Grant Smith which lead with this sweeping claim:

“The U.S. shale revolution is on course to be the greatest oil and gas boom in history, turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets.”

I might have simply chuckled and turned the page, had I not just finished reading Oil and the Western Economic Crisis, by Cambridge University economist Helen Thompson. (Palgrave Macmillan, 2017)

Thompson looks at the same  shale oil revolution and draws strikingly different conclusions, both about the future of the oil economy and about the effects on US relations with OPEC, Saudi Arabia, and Russia.

Before diving into Thompson’s analysis, let’s first look at the idea that the shale revolution may be “the greatest oil and gas boom in history”. As backing for this claim, Grant Smith cites a report earlier in November by the International Energy Agency, predicting that US shale oil output will soar to about 8 million barrels/day by 2025.

Accordingly, “ ‘The United States will be the undisputed leader of global oil and gas markets for decades to come,’ IEA Executive Director Fatih Birol said … in an interview with Bloomberg television.”

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

Why The Shale Oil “Miracle” Is Becoming A “Debacle”

August 27, 2017

klublu/Shutterstock

Why The Shale Oil “Miracle” Is Becoming A “Debacle”

Dispelling the magical thinking behind the hype

Energy is everything. 

This is an amazingly important concept. Yet it’s almost universally overlooked.

Sometimes it’s hard to appreciate the magical role energy plays in our daily lives because most of what we experience is a derivative of it. The connection is hidden from direct view.  Because of this, most people utterly fail to detect or appreciate the priceless and irreplaceable role of high net-energy fuel sources (such as oil and gas) to our modern lifestyle.

With high net-energy, society enjoys increasing complexity and technological advances. It’s what enables us to pursue massive goals like desalinating billions of gallons of seawater, or going to Mars.  But without high net-energy fuel sources, our capabilities quickly regress to those of decades — or even centuries — past.

Which is why understanding where we truly are in the ‘net-energy story’ is so incredibly important. Is the US on the cusp of being “energy independent” from here on out? Is the “shale miracle” ushering in a glorious new ‘boom’ era that will vault America to unprecedented prosperity?

No. The central point of this report is that the US is deluding itself when it comes to energy abundance (generally) and oil (specifically).

Yet that’s not what we hear from the cheerleaders in the industry or in our media. From them, we hear a silver-tongued narrative of coming riches — a narrative that contains some truth, some myth, and a lot of fantasy.

It’s those last two parts — the myths and fantasies — that are going to seriously hurt many investors, as well cause a lot of extremely poor policy and investment decisions.

The bottom line is this: The US shale industry resembles a fraudulent Ponzi scheme much more so than it does any kind of “miracle”.

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

It’s Happening: Debt Is Tearing up the Fracking Revolution

July 22, 2015

It’s Happening: Debt Is Tearing up the Fracking Revolution

The shares of Chesapeake Energy, second largest natural-gas driller in the US, crashed nearly 10% today, to $9.29, the lowest price since August 2003, down nearly 70% since oil began to plunge a year ago. The company’s $1.1 billion of 5.75% notes fell to an all-time low of 84.88 cents on the dollar. And its 4.875% notes dropped to 81.25 cents on the dollar, from 86 last week, according to S&P Capital IQ LCD.

All this in the wake of its announcement that it would suspend its dividend for the first time in 14 years. It’s trying to conserve cash, and that dividend costs $240 million a year. It’s dumping assets as fast as it can, including some Oklahoma fields that will save it another $75 million a year in preferred dividends. It’s cutting operating costs and capital expenditures. It’s trying to stay alive.

It has been cash-flow negative in 22 of the past 24 years, according to Bloomberg.

The only thing surprising is that it took so long, that Wall Street kept funding its cash-flow negative operations and dividends for all these years.

Chesapeake used to be mostly a natural gas producer. But the price of natural gas plunged over five years ago and has remained below the cost of production for most wells for much of that time. The only saving grace was that these wells also produced natural-gas liquids and oil, which sold for much higher prices. As its natural-gas business model collapsed, Chesapeake began chasing after oil-rich plays. But a year ago, the price of oil collapsed.

Among natural gas drillers, Chesapeake isn’t in the worst shape. Much smaller Quicksilver Resources filed for Chapter 11 bankruptcy in March. It listed $2.35 billion in debts and $1.21 billion in assets. The difference has been forever drilled into the ground. Stockholders got wiped out. Creditors are fighting over the scraps.

 

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

Global Shale Revolution On Hold

March 21, 2015

Global Shale Revolution On Hold

Along with the rest of the energy world, we have been closely tracking rig counts (now down 40 percent from last fall) and other data to try to determine where the oil markets are heading. This week, the Energy Information Administration reported that production is finally set to decline in several key U.S. shale regions; a long-awaited development. The Eagle Ford, Bakken, and Niobrara shales are expected to see a combined 24,023 barrel-per-day decline in production in April, the first significant dip in output since oil prices collapsed last year. The monthly data may be a bit obscured by the fact that the Permian basin is expected to see production increases of 21,254 barrels per day. Overall, total U.S. production may stay flat. There is still a great deal of uncertainty about the next few months, but with declines beginning in the Eagle Ford and Bakken especially – two critical regions that drove the U.S. shale revolution – there appears to be light at the end of the tunnel for the oil glut.

The Federal Reserve caused a bit of a ripple in the oil markets this week when it appeared to slightly slow plans to raise interest rates later this year. The Fedlowered its estimate for the federal funds rate this year and next, an indication that it will not let its foot off of the gas pedal in terms of loose money. With low inflation and still room for labor markets to heal, the Fed sees no reason to pull back too quickly. Loose monetary conditions push up oil prices, so WTI and Brent rallied a bit this week on the news (after falling significantly). WTI closed out the week around $45 and Brent at $55 per barrel.

 

…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.

image

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…

 

19 US Shale Areas That Are Suddenly Endangered, “The Shale Revolution Doesn’t Work At $80” | Zero Hedge

November 26, 2014

19 US Shale Areas That Are Suddenly Endangered, “The Shale Revolution Doesn’t Work At $80” | Zero Hedge.

Despite the constant blather that lower oil prices are “unequivocally good” for America, we suspect companies working and people living these 19 Shale regions will have a different perspective…

Drilling for oil in 19 shale regions loses money at $75 a barrel, according to calculations by Bloomberg New Energy Finance. Those areas pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc. and company presentations.

“Everybody is trying to put a very happy spin on their ability to weather $80 oil, but a lot of that is just smoke,” said Daniel Dicker, president of MercBloc Wealth Management Solutions with 25 years’ experience trading crude on the New York Mercantile Exchange.“The shale revolution doesn’t work at $80, period.”

Source: Bloomberg

The Peak Oil Crisis: A Reality Check Post Carbon Institute

October 31, 2014

The Peak Oil Crisis: A Reality Check Post Carbon Institute.

For the last four or five years, we have been bombarded with a stream of stories about the “shale revolution.” Horizontal drilling and fracking, mostly in the U.S., were said to have released oceans of new oil and a virtually endless supply of natural gas. These developments have brought, or will soon bring, great benefits to the American people. Our oil imports are down as are gasoline prices. Factories utilizing the flood of natural gas will soon create many new jobs as manufacturing returns to the US. We will soon have so much oil and natural gas that we can export much energy to our friends and teach our enemies a lesson.

Now it is perfectly true that there has been a major increase in US oil and natural gas production in recent years. Oil production is up by some 4 million b/d and natural gas production is up by 5 trillion cubic feet/year since the boom began. What the stories about all this abundance fail to address, outside of vague generalizations, is just how long this upward surge is going to last and what happens then.

To fill in the gap between oil companies, their consultants, their financiers, and friendly media hype, we have only the Department of Energy’s Energy Information Administration (EIA) to guide us on the many critical decisions ahead. Now the EIA does not have a very good track record when it comes to projecting the future. Until last winter two-thirds of America’s shale oil reserves were supposed to be buried under California which would become fabulously wealthy when we brought it to the surface. Then all of a sudden, and likely under pressure from outside observers, California’s shale oil was not there. The whole notion of oceans of oil under California was nothing but oil company hype, aided by a consultant, and a stamp of approval from the EIA.

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

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress