Hockey Sticks of the Day

hedgeless_horseman's picture

Three years ago, on 11/17/2010, I wrote this comment on Zerohedge:

Hey man, I am peak oil aware.  Check my history on this blog. 
Nevertheless, you do know that producers in Eagle Ford are using
horizontal drilling and fracking technology to produce oil, not gas

They are having success all the way up to Dallas county.  I know this
only buys a few months of global demand, but Kunstlers statement re
shale requiring huge investment is false.  This I do know, and with this
knowledge has come some excellent returns.

Today, regular unleaded gasoline is $2.85/gallon here in Texas.   As a follow up to my article from nearly one year ago, Fracking responsible for the big boost in US crude production?, I once again direct your attention to the following chart from the EIA, updated 10/30/13.  The Texas and North Dakota hockey sticks are very impressive.

I am no geologist or petroleum engineer, but one might expect fracking to lead to similiar crude oil production growth in more difficult operating environments such as the GOM and Alaska.

In similiar news, here is a photo from The Houston Chronicle of XOM's new headquarters that is now being constructed just south of The Woodlands, Texas. What do they know?

 

APC is also close to completing it's second office tower just up the street in The Woodlands.  What do they know?

 

Happy Motoring!

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Fishhawk's picture

The presence of oil in the Bakken and Eagle Ford shale fields has been known about for a long time.  So why the sudden explosive development and 'proof' that Peak Oil is a myth?  First, all commenters seem to realize that fracking shale is expensive, and depletion rates are terrible, making any return on investment that much harder to achieve.  Second, all the hype is obscuring the fact that the total contribution from both these huge fields will amount to at most some 2 mm bbls/day for maybe 4 or 5 years, and then drop off to an insignificant level.  For you day traders out there, note that 2 mm bbls/day at $100/bbl is still $200,000,000 per day for 1500 days, or $300 billion, which will pay for quite a few wells. But for a world that is consuming 90 mm bbls/day, this is a 2% increase in world production for 4 years, then gone.  If anything, the fracking craze confirms for me that we have passed Peak Oil.   

MikeMcGspot's picture

$3.279/gal in Minneapolis today including State and Federal tax of $0.47. Only thing I can figure is we are living high on the refinery capacity and distribution channel squeeze here, from a selfish perspective I hope no new pipelines are built soon.

Per my reckoning peak oil happened in the 70s when we maxed out globally on BTU/person use of energy, being on a steady decline per this measure ever since, steadily improving machine efficiency to offset thermal input drops and improve output.

We’re supposed to have 2 – 4 inches of snow by morning here tomorrow.

All hope an printing aside, Eagle Ford or the Bakken will not play well past 2020, so this evening I may curl into a ball at the back of my bedroom closet clutching my silver, gold and automatic rifle in fear.

Dreaming of the golden horde trying to make off with my survival seeds and water filtration equipment.

Waiting for jack booted NSA minions to break the front door down and get my super secret stash of whiskey,  two 5 gallon cans of gas and water filtration equipment.

We will not give up without a fight! I will rally the neighbor hood troops to fight the man down to their last drop of blood.

Conveniently exiting stage left, to my deluxe bug out place in the sky like the current global elite.

As the snow starts to accumulate I will continue to lampoon the madness with good humor.

Get my cross country skis, boots and poles out from under my bed, be ready for a trip to my job downtown tomorrow.

Pour a good glass of whiskey and get to sleep soon.

Offer up a toast to Zero hedgers.

“May Presence and kindness ever rule over prescience and prediction”.

Cheers!

 

bill1102inf's picture

Its easy. They are building now before the news is released that our government, for once, has done something right.  We have built 50 Thorium Reactors that can not only power America, but generate enough synth fuel to power all of our vehicles at a cost of $.50 a gallon for 87 octane gasoline.  The oil WILL ACTUALLY never run out.

MrBoompi's picture

What do they know? When oil rises in price, the oil companies roll in the dough. Faster extraction may mean lowers prices temporarily, but also means we will hasten the decline in supply. Regardless of what anyone might think, there is not an endless supply of oil.

g'kar's picture

OPEC must be debating whether to crank up oil production to get it below the US cost of production.

Flakmeister's picture

There is no debate, they know they can't....

Bennie Noakes's picture

Texas and North Dakota Crude Oil Production Continue Meteoric Rise

I don't think I've ever seen a meteor rise.

kaiserhoff's picture

Thanks, HH.  Prejudices die hard among the Mom's basement crowd.

Gas at 2.83 in the Blue Ridge, and falling.  Now I know why.

walküre's picture

Reuters had a piece on the price of oil the other day from Deutsche Bank. They say new US oil production is driving prices down to $80 by 2020. Think about that for a minute. How much is $80 worth in 2020? And obviously when oil goes down like that, there will be a massive crash first as projections and collateral are all becoming useless.

MikeMcGspot's picture

If $80/barrel @ 2020 then US FRN rules per outstanding notes and + Print was the best call.

 

fastfish's picture

Wow! As a petroleum engineer, I can't even express how factually idiotic this comment regarding fracking. Everyone beware of Landrew.

Landrew's picture

Well asshole, that's why it's called SYN crude! It's sold as SYN crude MORON! Some delpletion rates are even higher. I wonder why a petro eng. would not know that.

phaedrus1952's picture

Any well drilled in the Bakken pre June 2013, will not have the depletion curve as many going forward will. The wells are now more consistantly cemented to the toe, zip-fraced with up to 50 stages in increasingly shorter segments, perfed in clusters that are wider as well as more numerous (120 entry holes in the bore rather than the previous norm of 30).  The fissures are shorter in length which will allow more laterals to be run and much, much more oil recovered.

The above-cited Post Carbon Insitute's production projection (which, by the way, is already wrong), uses the number of wells.  THEY NEVER ACCOUNT FOR THE HUGE INCREASE IN EFFICIENCY.  Any true fact-seeker, IMHO, can easily verify or disprove so much that is out there on this topic.

I sometimes feel I'm engaging in a religious discussion or something.   Sheesh.

hedgeless_horseman's picture

 

 

flag as not junk (1)

Thanks, phaedrus1952, for adding so much to this discussion.

Landrew's picture

Fracking isn't CRUDE OIL, it's COAL TAR! Our companies only hope is knowing the stupidity of DOE. DOE will subsidize fracking as they do for  ethanol! Who else would pay people to turn 1.25 gallons of corn ethanol into a gallon of ethanol ha! Who would drill wells with  depletion rates of 25% year over year ha!

phaedrus1952's picture

Evening, Landrew.  If you are the same Landrew that posted on TOD during BP's Gulf blowout, you said some funny stuff back then.  Pretty intense times.  But if you are the same guy, I am very surprised at your referring to the Bakken's world-class quality oil (all derived from fracing),  as tar.   

I wish the best for your brother's status/health and was very disappointed at the arrows directed at that post.

janus's picture

yeah, you did sorta make an ass of yourself there...see comment from pet engineer above ya.

consider this a down vote from janus.

http://www.youtube.com/watch?v=jQ5tKh0aBDc

 

lakecity55's picture

Long oil.

Sitting in cash for after the crash!

*******

" SFC LC, the market crashed! XOM is off 10 bucks!"

"Great, Colonel J!  Now's the time to buy!"

"Too bad you spent all your cash on health care!"

Lmo Mutton's picture

Go Texas.  Bitches.

adr's picture

In NE Ohio for the past five weeks gas has gone down to right around $3 a gallon on the weekend and then jumps 30 to 40 cents during the week. It isn't tracking oil or RBOB, it's just gouging.

 Most people have caught on and the gas stations have insane lines on Sundays. 

I'm wondering when the insanity stops.

Hohum's picture

Yes, North Dakota production is exploding.  And it only takes about $1 B in additional wells per month to get 1.2 M additional barrels.  I am sure this can go on for a long time.

Don't take my word for it, though.  Look at the statistics.

Why doesn't anyone write an article like this and discuss net energy or the cost of extraction?  It seems like something an analytical mind would do.

lakecity55's picture

"If you like your oil well, you can keep your oil well."

MrTouchdown's picture

You didn't build that oil well!

Flakmeister's picture

Provided Exxon wants you to have it....

hedgeless_horseman's picture

 

 

Why doesn't anyone write an article like this and discuss net energy or the cost of extraction?

Does the cost of extraction really matter as long as the US can cover the cost by printing FRNs at ludicrous speed?

All praise Bernanke!  Regular unleaded is $2.85 per gallon, when priced in Federal Reserve Notes.  Take that OPEC!

What matters right now for America and the Petrol Dollar is that all currencies go down together...syncronized diving...rather than a race to the bottom where someone might get left behind.  As long as Europe, Japan, etc. keep printing, too, and China stays somewhat tethered to the USD, then the cost is unimportant, no?

El Vaquero's picture

"Does the cost of extraction really matter as long as the US can cover the cost by printing FRNs at ludicrous speed?"

 

Yes, because the real cost is not in FRNs, but rather in energy.  It takes energy to drill.  It takes energy to  pump.  It takes energy to transport.  It takes energy to refine.  How many barrels of oil can be extracted from the ground using one barrel's worth of energy?  We used to be able to extract oil at a rate of 100 barrels for every barrel's worth of energy expended.  That EROEI of 100:1 was fantastic.  Now, the estimates for shale oil EROEI are all over the map at anywhere from 1:1 to 16:1, with many individual wells being less than 1:1.  A lot of the current estimates put the EROEI at 2-5:1. 

Relying on oil being priced in FRNs asking for market distortions. 

FeralSerf's picture

Not to worry -- there will always be market distortions.

Energy is everywhere. You just need smart enough to exploit it. Or else you die.

Flakmeister's picture

It has been done, many times..

Google  "PostCarbon Institute Drill Baby Drill"

SAT 800's picture

$4.30 a gallon in Hawaii; right now; and that 's the price leader amongst the stations. Paradise Tax. It's a complete ripoff. It doesn't cost that much to tow a barge over here from San Pedro; where the commercial Fuels loading facilities are. Un-fortunately everyone is asleep here.

Flakmeister's picture

You do realize that you are merely paying current Global prices? Once the oil is on an tanker, highest bidder will get delivery....

nmewn's picture

I hate it when you're right ;-)

I have to admit, I'm torn by my ideological stance on this, free markets vs whats best for us. Exporting 80 million barrels of finished gasoline seems insane to me, while we still pay over three bucks a gallon.

Flakmeister's picture

Reexporting refined gasoline from crude imports earns the US a seniorage....

You are aware that 10% of "domestic oil production" is actually volumetric gains from refining....

nmewn's picture

It's my understanding we did that for Hugo (damn his soul...lol) but I didn't know about the 10% turn around.

This is more your bag than mine, thanks for the info ;-)

skbull44's picture

The Post Carbon Institute released a study in February called Drill, Baby, Drill: Can unconventional fuels usher in a new era of energy abundance? (http://www.postcarbon.org/reports/DBD-report-FINAL.pdf)
Here's their summary on shale oil:
KEY TAKEAWAYS
-tight oil (shale oil) has grown impressively and now makes up about 20 percent of U.S. oil production. This has allowed U.S. crude oil production to reverse years of decline and grow 24 percent above its all-time post-1970 low in 2008.
-As with shale gas, tight oil plays are not ubiquitous. More than 80 percent of tight oil production is from two unique plays: the Bakken and the Eagle Ford. The remaining nineteen plays produced just 19 percent of current tight oil production. There is also considerable variability within these plays, and the highest productivity wells tend to be concentrated within relatively small sweet spots.
-Well decline rates are steep – between 81 and 90 percent in the first 24 months. The plays are too young to assess overall well lifetimes but production rates in the Bakken after five years are 33 bbls/d on average and after seven years will likely approach stripper well status (10 bbls/d). Eagle Ford wells could reach stripper well status within four years.
-Overall field decline rates are such that 40 percent of production must be replaced annually to maintain production. Current drilling rates are far higher than this level hence production is expected to continue to grow rapidly.
-Ultimate recovery of tight oil plays is governed by the number of available drilling locations. The EIA estimates a total of 11,725 locations in the Bakken (including the Three Forks Formation). This is about three times the current number of operating wells. A similar estimate by the EIA puts available locations in the Eagle Ford at more than three times the current number of operating wells.
-given the EIA estimate of available well locations, the Bakken, which has produced about half a billion barrels to date, will ultimately produce about 2.8 billion barrels by 2025 (close to the low end of the USGS estimate of 3 billion barrels). Similarly, the Eagle Ford will ultimately produce about 2.23 billion barrels, which is close to the EIA estimate of 2.46 billion barrels. Together these plays may yield a little over 5 billion barrels, which is less than 10 months of U.S. consumption.
-The production trajectory of tight oil plays depends on the rate of drilling. If current drilling rates are maintained, tight oil production will grow to a peak in 2016 at about 2.3 mbd assuming the EIA estimates of available locations in the Bakken and Eagle Ford are correct. Production in the Bakken and Eagle Ford will then collapse at overall field decline rates. Assuming production in the other tight oil plays continues to grow at linear rates, tight oil production will be at 0.7 mbd in 2025. This represents a U.S. tight oil production bubble of a little over ten years duration.
-The EIA projections of U.S. tight oil production are very aggressive. They assume that 26 billion barrels, or 78 percent of its estimate of unproved technically recoverable tight oil resources, will be consumed by 2040.

atomicwasted's picture

Yeah, the "Post-Carbon Institute" is going to be neutral and unbiased in its evaluation of fossil fuel.

Flakmeister's picture

Perhaps you could explain to us why the report is wrong as opposed to simply projecting your misguided beliefs...

phaedrus1952's picture

Well Flak, as a matter of fact I can ... as can anyone who just glances at the estimated "peak" daily production number mentioned above - 2.3 million bbl/day.  The Bak and the EF just totaled 2 million last month.   To give some perspective on the size of the numbers here ... there have been only 6 oil fields in history that produced over one million barrels a day.   The  Eagle Ford and the Bakken are now 7 and 8.

As an aside, there is a rapid transition to have vehicles - esp over the road trucks, trains and ships - able to run on CNG.  There is a 2014 model F-150 that can utilize CNG. If you all haven't noticed there is a whirlwind of distribution activity at the retail level taking place centering on dispensing CNG.  Nationwide retail prices average about $2.50 per gallon equivalant.  Parts of the mid west are seeing $1 nat gas retail.  Big, big savings there.

Flakmeister's picture

Here is the data:

http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf

Pay attention to the legacy production change... stick that in spread sheet and model production going forward taking into account that you run out of Bakken to drill in about 3-4 years at current rates...

BTW, the Bakken has not hit 1 MM bpd  and the condensate coming out of the EFS ain't oil....And there have been more than 6 fields that produced more than 1 MMbpd.... 

So CNG can fill a niche, BFD, it ain't no game changer. Simply do the math, convert NG to oil on a BTU basis and see what fraction of current production is required to replace 500,000 bpd of demand... Last but hardly least call me when the US is net exporter of NG...

Flakmeister's picture

Never let facts get in the way of someone's fantasy....

atomicwasted's picture

Some reality is a good thing, as opposed to the Kunstler crap that gets reposted here sometimes.

Jumbotron's picture

I'm sorry.  Exactly detail what Kunstler says that is crap. 

Are the cities going bankrupt?  Check.  Happy Motoring Capital of America (Detroit)  gone.  Check.  Infrastructure EVERYWHERE declining and failing.  Check.  The middle class destroyed.  Check.  The government collapsing.  Check.  The monetary system is in full ponzi to keep the artiface afloat.  Check.  Peak Oil.....that is the point in which you cannot add more CHEAP energy at a faster rate than the world demands and needs to keep the magic lifestyle going.  Check.  The erosion of family and community which is devolving into a landscape of zombies marching to Wal Mart to get a 60" LCD to watch Honey Boo Boo and the Kardashians.  Check.

You may not like his politics....but Kunstler IS a keen observer of what's going on....and is knowledgable enough to read the signs of the times.

Get over your ideological differences.  The truth does not care if it comes from the left or the right.  It only cares if you are smart enough to acknowledge it and act upon it.

Flakmeister's picture

If you don't know the difference between condensate and crude you really should simply STFU....

World of Debt's picture

Speaking of "Hockey sticks", here is the CRack Mayor of Toronto... Check it out:

https://www.youtube.com/watch?v=s-nf5G_9kfE

hangemhigh77's picture

Looks so great and good, but what is the lifespan of a fracked oil well?  As I understand it about a year then production drops by up to 90%.  This means in order to replace one well you have to drill two within a year, then 4 then 8 then 16 and so on. It's unsustainable.  Not to mention the malinvestment involved as in the tremendous amounts of water used, the highly toxic chemicals that pollute aquifers, what's the cost of THAT, and the govt, (taxpayer) subsidizing these bastards.  And THAT's why it's profitable. Otherwise if they had to recover these malinvestment costs they would never have drilled in the first place.

phaedrus1952's picture

No offense, Hang (and I'm not gonna get into any cyber spat here), the factual inaccuracies in your post are pretty numerous.

  Should you - or anyone on this site - wish to gather a much broader, certainly "learning moment" type of view, you might want to try just glancing at some more oil-centric sources (gasp).  Themilliondollarway.blogspot.com is an excellent source of up to date info, great for professional and newbie alike.

ANY projection about depletion rates that is older than a few MONTHS (and they all are) is outdated,  easily verified by the current, week by week reports.  The percentage of ultimate recovery is looking to continue its upward trajectory, and - with anywheres from 500 Billion to 900 Billion barrels of original oil in place (OOIP), any single percentage bump translates into a great deal of additional hydrocarbons.

AGuy's picture

http://www.econbrowser.com/archives/2012/12/future_producti.html#comments

"Note the decline profile of Bakken tight oil to well number, extraction/well, and proved recoverable reserves to extraction/consumption. The peak in extraction will occur at diminishing returns to bbl no later than late '14 to early '16, a bit sooner than Hughes's estimate"

http://peakoilbarrel.com/bakken-eagle-ford-eia-data/

 

cougar_w's picture

Won't know until 10 years from now what any of this actually means.

Jumbotron's picture

In ten years you will know what the "Red Queen" really means.

lakecity55's picture

The Red Queen is Valerie J.

"Time for a game of solitaire, Bath House."

"..........Do you see the Red Queen?"

".....Y...e...SSS."

"Now, go read the Teleprompter."