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Guest Post: The Coming Bust Of The Great Bakken Oil Field
Submitted by Steve via SRSrocco Report blog,
There has been a lot of Fanfare on the huge increase of oil production coming from the Bakken Field located in North Dakota. There are many stories of people moving to the state to take advantage of the new OIL BOOM. It seems like everyone is going there to start a new life and make it rich in one of the coldest areas in the United States.
However, with all BOOMS, comes the inevitable BUST. This was true shown by the famous example of the 1800′s California gold rush:
According to the article, “The Bakken Boom: The Modern Day Gold Rush”:
Despite the low productivity of the labor-intensive process of gold panning, annual production grew from just over 1,400 ounces in 1848 to more than 3.9 million ounces by 1852. To put this into perspective, prior to 1848, cumulative U.S. gold production amounted to just over 1 million ounces.
Of course nuggets are easier to find than flakes, and the great majority were discovered in the first few years. By 1852, only four years after gold was first discovered, California gold production began a rapid descent. Production declined 50% by 1862 and 80% by 1872.
The decline was only barely checked by the adoption of ‘hydraulic mining’ – a process by which massive amounts of water under intense pressure is used to disintegrate entire hillsides. At the North Bloomfield mine, for example, 60 million gallons of water per day eroded more than 41 million cubic yards of debris between 1866 and 1884. (http://www.sierranevadavirtualmuseum.com/docs/galleries/history/mining/hydraulic.htm)
Typical of all BOOMS, production increases exponentially, peaks and then declines in the same fashion. However, Even with high-tech hydraulic water mining techniques, the industry could never produce more gold than it did in 1852 when it reached nearly 4 million ounces.
BAD NEWS FOR THE BAKKEN: Decline Rate of 63,000 Barrels A Day
The EIA – U.S. Energy Information Agency is now putting out data on the individual shale oil and gas plays in the country. While the American public and world have been made aware of the huge increase in oil production coming from the Bakken, few are privy to the dark side of the equation. The Bakken’s daily decline rate from their existing oil wells has reached a staggering 63,000 barrels a day.
This means, that every day the Bakken pumps oil, its existing wells are now declining 63,000 (bd) barrels a day. As you can see from the chart above, the rate really started to decline in a big way after 2011 when the average daily decline was only 20,000 bd. In less than 3 years, this rate has increased more than 3 times (63,000 bd).
This next chart gives us the total as well as net oil production increases month over month:
The EIA is showing what is indicated to take place in December over November. If we look at the actual data that comes out of the North Dakota Department of Mineral Resources, Bakken oil field production in September hit 867,123 bd. The difference to reach that 1 million barrels a day is coming from the Montana portion of the Bakken.
Here is an actual screenshot of the ND DMR’s monthly report released November 5th:
Moreover, if we look at total production, again using the North Dakota DMR’s data, their total oil production data for the state in September was 931,940 bd. This includes oil production outside the Bakken and Three Forks (data for Bakken in the EIA charts includes Three Forks).
Astonishingly, 93% of North Dakota’s oil production comes from the Bakken region alone.
The Bakken Drilling Frenzy Gives The Illusion of Sustainable Growth
The typical American believes the United States has all this hidden oil and gas resources that we can easily tap into. I just had a conversation with a neighbor yesterday who told me that he couldn’t understand why we weren’t “ENERGY INDEPENDENT.” Gosh, if I had a dollar for every time someone said that…
Again, the public is only told about all the huge increases in production, but for some strange reason, MSM tends to omit the negative side. The only way oil production is increasing in the Bakken is due to the massive amount of new wells that have been added. The chart below reveals the illusion of this sustainable growth:
First, the figures in white represent North Dakota’s total wells producing for their production of the Bakken. Even though the graph includes Montana’s production, it still gives us a good idea of the huge increase in oil wells it takes to grow production.
Second, in 2008, the Bakken in North Dakota only had 479 producing wells, however at last count in September when then Bakken was producing 867,123 barrels of oil a day, it took 6,447 wells to do so. Thus, the energy companies drilling and producing oil in the Bakken have to keep increasing wells each month (and year) to offset the huge 63,000 bd decline.
For example, there were an additional 135 new wells (ND) producing in Sept. over Aug. which added 20,589 bd of production. If there were only say 100-105 new wells added that month, production would have remained flat or possibly declined for Sept.
Lastly, the best and most productive wells are exploited first leaving the dead-beats for last. This will make things even more fun as the peak and subsequent bust finally arrives.
The Coming Bust of The Great Bakken Field
As with all oil fields, there are only so many sweet spots and areas to drill. The 63,000 bd decline rate at the Bakken only has one way to go — and that’s higher. If the present trend continues (highly likely) then we are going to see a daily decline rate of 75-85,000 barrels a day by the end of 2014.
Thus, the shale oil players are going to have to make those drilling hamsters work even harder as they will need to increase more wells each month just to grow production. At some point in time (sooner rather than later), the daily decline rate will reach a figure that these companies will be unable to offset.
There are only so many drilling locations available and once they run out, the Great Bakken Field will become a BUST as the high decline rates will push overall oil production down the very same way it came up.
Those who moved to the frigid state of North Dakota with Dollar signs in their eyes and images of sugar-plums dancing in their heads will realize firsthand the negative ramifications of all BOOM & BUST cycles. At this time, the word “Cold” will have more than one meaning.
Once the Bakken and Ealge Ford oil fields peak and decline, the United States has no other “ENERGY RABBIT” in its hat. This is precisely why investors need to understand energy and why its important to own physical assets such as gold and silver.
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I can share with Barbie any time.
I love electric cars..
More gas for me.
what is the point of this? anyone with gray matter knows that oil fields decline. it is no secret
I think that many might think this is new, superior stuff and that it is impervious to exhausting.
I even had a good friend ask me if I'd heard about the "oil" find down in Australia somewhere. This too claimed to dwarf the Saudi's oil fields. I hadn't heard of it. It was thoroughly debunked based on it's very low relevance in the company's latest report and by the fact that the company wasn't seeing any signficant inflows of capital (with all the money-printing going on you'd think that something that was a sure bet would attract a shit-load of money). A low-grade marketing pitch for a low-grade product...
..Really?..
The Liquid Fluoride Thorium Reactor: What Fusion Wanted To Be
THE THORIUM PROBLEM - Danger of existing thorium regulation to U.S. manufacturing and energy sector
So you are pulling for Tesla then?
Because we are talking oil here...
The deficit has dropped to $600 billion over one(12 month) estimate;
Why is that? ANSWER: The sequester, and Imports , via oil/energy. The .gov is still spending like "Drunken Sailors".
Example; The debt ceiling is open currently. The .gov spent almost $1/2 trillion in one month! (October balance sheet)
They replenished extrordinary spending reserves, and added almost $150 billion for new expenses! (midterm elections need lots of paid shills)
" Example; The debt ceiling is open currently. The .gov spent almost $1/2 trillion in one month! (October balance sheet)"
You know the funds that the government used from May had to be returned, so debt would have jumped just for that alone.
Extraordinary measures were returned... The GAO would have a tough time on that one. Congress would go crazy...
I'm sure there was /is some slush---pork though. Good comment.
I agree with Stuck on Zero.
ND oil production to hit 1 million barrels a day next month.
http://www.rigzone.com/news/oil_gas/a/130158/Bakken_Crude_Production_to_...
Every story on here is doom and gloom. It's not all doom and gloom. Just mostly...lol. ND oil production has a long long way to go. There are 3 formations. And you can drive thru areas of northwestern ND that are hardly touched yet. Long way to go.
Happy stories don't keep the huddled masses in a state of perpetual fear.
Got the Peak Oil fever yet?
You are confusing Bakken and ND. There is a chunk of Bakken in Montana. So 1 mbpd is for two states, not 1.
From that article:
I wonder whether that infrastructure was improved via cheap money? And if it was and had that cheap money NOT been available? I'm thinking that prodcution wouldn't have been ramped up.
"Long way to go."
Depends on extraction rates. Faster and faster just means that they'll deplete faster..
This is one dumb fucking article, and that's saying a lot given the recent surfeit of articles proclaiming the Second Coming of fiat currency in the form of Bitcoin.
I mean, i get the idea of declining production from wells, but the question is what is the ROI of this play. I assume it is negative and fueled only by cheap Fed rates. Tell me about that aspect of the business and i am listening.
Read Kunstler's The Long Emergency and cut to the chase of this noise.
I'd made a comment above about an article in Rigzone stating that production was increasing. In that article it mentions recent increases in infrastructure allowing increased refining. Like you, I would like to know whether that infrastructure was built on "free money."
There is money to be made, but understand this is the short game, not the long game....
If I was a major holder like Mutual Fund, I would slowly fade the Bakken...
The reason the Bakken is being moved by Choo-Choo is that economics of a pipeline make little sense given expected long term flows and pipeline cost depreciation....
Sippin dat oil dat purple drank, gon up off dat lean, dat oil, dat Texas tea.
http://www.youtube.com/watch?v=jmAZsP29OXM
Pioneer has a field in Texas they claim is second only to Saudi Arabia's huge field in reserves. Texas is pumping way more than the Bakken already. The irony is that U.S. use of gasoline has been dropping for 5 years, so now we're exporting gasoline.
Of course the U.S. is not the only country with shale deposits, China and Russia have theirs, just lacking the technology to exploit it.
Shale is shit.
"Of course the U.S. is not the only country with shale deposits, China and Russia have theirs, just lacking the technology to exploit it."
See my first sentence.
"The irony is that U.S. use of gasoline has been dropping for 5 years, so now we're exporting gasoline. "
And also interesting is that fact the the US is STILL importing far more "crude oil and products" than it is exporting:
http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbblpd_m.htm
http://www.eia.gov/dnav/pet/pet_move_exp_dc_nus-z00_mbblpd_m.htm
Gasoline exports are up because the US cannot readliy consume what it refines (and it has a lot of refineries- have to keep them running else economies of scale in reverse start kicking the legs out from under the stools). Looking at the above info you see that gasoline exports increased roughly 23% over the six month period. But... "Distillate Fuel Oil" jumped 66%! Distillate fuels are primarily diesel fuels. Imports of distillate fuels dropped some 16%. Canary lurking? (trucking declines)
Facts don't cease to be facts if no one believes them.
Shale is shit.
As Seer says, you don't seem to be concerned about the 5-6 million barrels a day of crude we still import into the US. Pioneer has a field "second only to Saudi Arabia's". I will check that out. Sounds like pure unadulterated BS to me.
Redneck Hippy, You seem to confuse "technology" with "expensive enough oil"....
Chevron and Exxon used to say that the Green River shale deposits would be profitable at $40 a barrel, still waiting....
From the November 2013 EIA report:
"Oil production from an average Bakken rig is expected to rise from 481 bopd this month to 496 bopd in December, the most of any of the six U.S. shale regions that EIA tracks in the report."
From the above posted article from Gusher: http://www.rigzone.com/news/oil_gas/a/130158/Bakken_Crude_Production_to_...
That result can be manufactured via shut in.
It's like improving earnings/share by doing share buybacks.
The improvement in flow / well can be done by doing P&A (Plug and Abandon) on low flowing wells. The improved parameter does not bespeak having held off drilling high flow wells until now, which would make no sense.
I tend to look for the details. As I reported above (also to "Gusher's post), that article contains this important bit of info:
I wonder whether that infrastructure was improved via cheap money? And if it was and had that cheap money NOT been available? I'm thinking that prodcution wouldn't have been ramped up.
Then why doesn't Tyler short the oil companies involved in Bakken? With declining revenue and increasing costs they should all go bust.
Dare you. Put your money where your mouth is.
Fading and shorting are two different things, laddie...
What makes you think that "Tyler" has anything to do with endorsing anything in any article that is not specifically written by "them?"
Since you are calling on a wager let's hear your side of the play. "Put your money where your mouth is."
Happy Days are Here Again! (Ben Selvin and the Crooners, 1930)
As I am sitting on a drilling rig in the Eagleford... Perhaps my comments are worth something... perhaps not... we have not come close to tapping the Eagleford... It is true that the depletion rates for fracked shale formations are high... in some case's 50% a year in the first year... It is also true we are only tapping 20-30 percent of the oil available. BILLIONS are being spent on better fracking mixes, better propants, and outside the box ideas. (I like aphron drilling fluids as a contender personally). In addition the Eaglford is one MANY producible shale formations in central/south Texas (alone). Several companies are drilling deeper exploratory and coring wells as much as twice as deep as we are drilling now with 4 to 5 shale formations between here and there. The tools currently do not hold up in the hotter/deeper wells.. yet. Of course they used to say the Eaglford was not producible as well. :-)
How much you making a year, if you don't mind my asking?! And does anyone get laid around there?
I bet he makes a hefty amount and works long hours. Considering your question on getting laid I would wager your chance would be close to zero.....well, if you are looking for a woman. Maybe a farm animal could accomadate your needs.
I am a drilling consultant. The pay ranges from 225- 350 a year. Not bad considering I work 2 weeks on and 2 weeks off and only live 2 hours door to door from my house in Austin. It is tough being away for 2 weeks at a time but nice having a 2 week vaction every month. As to getting laid... I lay MILES AND MILES of (drill) pipe every hitch! :-) Actually.. my lovely wife visits me 2-3 times while I am working and I get laid twice a day everyday while I am off... Usually about the time you are stuck in rush hour traffic going to and from work.
@ So Close How long will the production cycle be? Will you have a job for 3-5 years?
"we have not come close to tapping the Eagleford"
"close?" what kind of metric is that?
"It is also true we are only tapping 20-30 percent of the oil available."
"available?" what kind of metric is that? (are we talking proven recoverable?)
"BILLIONS are being spent on better fracking mixes, better propants, and outside the box ideas."
That's pretty easy to do with all the easy money flowing around. "BILLIONS," would that be TWO billion? How MANY BILLION? And in the total R&D budgets what kind of a percentage does it represent?
"Several companies are drilling deeper exploratory and coring wells as much as twice as deep as we are drilling now with 4 to 5 shale formations between here and there."
And lots of time money ends up down a rat hole. Again, with all the money (but we really don't hear how much exactly, just some big number) that's kicking around (and the fact that, in one of the greatest recessions the US has faced, oil is STILL hovering around $100/bbl- makes it easy to toss some money down holes) all sorts of plays get put (back) on.
"The tools currently do not hold up in the hotter/deeper wells.. yet."
So, not enough BILLIONS spent yet? If they REALLY believe that they've got something then they'd certainly be enticing drilling manufacturers to come up with the "right tools." Of course, it's also possible that it's just not cost effective at about any price (and, with world-wide economies in decline it gets tougher and tougher to justify pumping too much into the speculations).
"Of course they used to say the Eaglford was not producible as well. :-)"
Who? And in what context? (at $8/bbl? or at $100/bbl?)
Not close means not close to what will happen in the future.... as in when this area was not producible at all it was not close to what we are getting out now.
Sure.... a lot of time ends up, "down the rat hole." Like all the time Edison spent on the thousands of attempts at building a light bulb that did not work. You would call that time wasted, "down the rat hole." Right? Edison called it successfully identifying several options that did not work.. yet. Perspective seems to matter in both cases.... and seems to be something you are currently choosing to be bereft of.
Enough billons not spent yet? Currently enough billions have been spent (and decades shoved down the rat hole as well) that we drill and put onto production these wells for about 4.5 million apiece. The investment plus interest (I expect you would call that a "cost") is paid back in 8-9 months of initial production. Everything after that is profit. Which in capitalism is sometimes referred to a risk dividend. Foreign concepts and terms to you I am sure.
Do you think before you type? Or do you just let your cognitive dissonance rush to the surface forced by a torrent of facts that conflict with your chosen world view? Actually I am pretty sure you are not even aware do to your lack of aforementioned perspective.
Wake up… or at least put aside your lackadaisical attitude for whatever time is needed to distill your thoughts into concise, well thought out, logical, second order thinking derived statements.
The second most dangerous quality in a fool it the fervor with which he advances his ideas. Being a "Seer" I am sure you can figure out the which quality is "closer" to the first.
You can still get high a couple of times when you scrape your hash pipe clean...
No one is arguing that you can't...
But you better have a real way forward....
And the ROI in the Bakken is peanuts compared the historical norm for a field producing at its level....
It's a finite planet and we're digging ourselves deeper and deeper into the hole: basing our energies on continuing to promote an energy-intensive paradigm on a planet with rapidly depleting energy reserves.
It's a bubble economy. Has been. How is anyone going to be able to recognize if this is all working as you suggest it is?
Shale is a desperation play. That people will get "rich" off of stuff like this is no indicator of over-all success. "So, Dr. how did the surgery go?" Dr. "It was a success, though the patient died."
So Close, I live in the Eagle-Ford area. It's been a great boost to the local economy. I think we are doing better than most of the country...at least for now. There was a bust in the 80's. Another is around the corner (in about 20 years they say).
.........I've lived in North Dakota my entire 58 years................the "answer" to the article can be made in two words:
THREE FORKS
Of it also will end, but not any time soon.
The usual misunderstanding.
Of course it won't end. Not for a long time.
It doesn't have to end for disaster to arrive. It need only decline.
@ herman55 Crash asked you a question? Should we be worried about a decline in production?
No, there will be no daily decline in production for at least 10 years. The "Bakken" is a strata, at about 10,000 below the surface. However, the Three Forks is another strata about 300 below the Bakken, more or less.................It contains 4 times the oil the Bakken strata does, according to some of those in the know....... Slick water fracking is becoming almost a commodity service in and of itself. The number of drilling rigs in the state is at about 175, down from nearly 225 3 years ago. That said the number of wells being drilled will be higher this year than 3 years ago. The rate that each drilling rig is boring holes is growing almost by the month. They have gotten very, very good at drilling on multi hole pads. I was out on a pad just today, Sunday, near Crosby north dakota--the county that Harold Hamm really got his start in- and I actually had to drive around to find the rig. It had bored 6 holes on 1 pad in less than 40 days and then moved the rig 8 miles west. In all my years out here I never thought I would see new railroad track laid..........I was wrong. No one up here really even cares if they build the Keystone or not. Burlington Northern et.al pulling 100 unit trains out of the state every 44 minutes seems to have taken the buzz off the pipeline. If there is anything else I can help you with let me know.
@ herman55 Thanks for your candid honesty. You're a good man!
"No, there will be no daily decline in production for at least 10 years."
Decline based on today's numbers?
What if oil drops below $75/bbl?
What if the economic decline continues on?
"If, if, if" ... (great poem by Kipling, btw). Guy once told me 'bout IF! "If my aunt had balls she'd be my uncle. She don't so she aint. So fuck you!
Seriously, people, anyone who cannot/does not recognize the enormous upsurge in oil and gas production as of now and in the coming decades is discarding their credibility.
All you Peak Oil guys may get an education (unwelcome as it may be) by reading some of the data coming out of the oil/exploration industries. The ongoing, rapid evolution in developing unconventional plays is accelerating and it's about to explode on a global scale. Shale may be "shit", but it's good shit!
So, we should STF up and NOT ask questions? We should run on ASSUMPTIONS?
I cannot fucking believe that I'm reading shit like you wrote, here on a site about economics. Do you have no FUCKING CLUE about risk assessment?
Go ahead, dump everything you've got into this fucker. Oh, and MOVE there.
The other worrd that you seem to be totally clueless about (besides "risk") is "scale." What has been CLEARLY pointed out is that this will not scale to match the depletion rates of the "ready-made" conventional oil reserves, let alone provide for GROWTH.
Yeah, there's lots of whales still out there...
"The ongoing, rapid evolution in developing unconventional plays is accelerating and it's about to explode on a global scale. "
That's called "strength through exhaustion." It's rapid extraction/mining. Let's call it for what it is rather than attach a bunch of lipstick-like words (such as "developing"). You dig the shit up and burn it; it's then GONE (and there are holes in the earth and polluted water), but HEY, we made money!
There's something to be said about "Judgement Day." I wonder if it'll be folks from past generations being put in front of future generations to explain their [past generations'] behaviors.
You okay man? I'm being serious. You post a million extremely emotional posts everytime oil is the topic. There is so much going on in this crazy floating mud ball that you may benefit from a little chill. The world will go on. This is just a blog for people to put their two cents in and you sure have done that. But it's okay, Seer. Really it is. It'll work out fine. Gerard
"All you Peak Oil guys may get an education (unwelcome as it may be) by reading some of the data coming out of the oil/exploration industries. The ongoing, rapid evolution in developing unconventional plays is accelerating and it's about to explode on a global scale."
thank you for demonstrating just who is being objective
and for admitting what "peak oil guys" already know. It will indeed require "a rapid evolution," "unconventional plays" and an "explosion" in production, just to stay up with the world's growing demand and credit economy.
And doesn't Buffet own Burlington?
Some titan is going to profit no matter which direction things take.
Buffet and folks like him play games with each other to see who can out-do the other. Of course, if they lose they still get to eat caviar...
Herman... there is something you can help ME with.
I am 26 and a long time ZH reader. I just spent the last year working in the Bakken.
If you could PM me, it'd be much appreciated!
Thanks
Of course, where there is money, there are H'os....
The energy bear thing is unwarranted.
Assuming the near term loss of oil, NG reserves are huge and easily used for heat, transportation, and power generation.
Assuming NG disappears (in 100 years), we have coal that is readily gassified/liquified.
Who is going to pay for all of this?
Corporations aren't going to subsidize US taxpayers.
It's a global marketplace.
Who produces cheapest, Canada, Mexico or the US? And as it has been up until now it's a regional issue- stuff tends to flow closer to the region in which it is produced/processed.
"NG reserves are huge and easily used for heat, transportation, and power generation."
How many semis are running on NG?
Sure, heat and power generation....
Review how NG is routed. It's regional, and it's between Canada, US and Mexico. People need to understand this stuff better. From http://www.eia.gov/countries/country-data.cfm?fips=MX
Care to reconsider that 100 years of NG? (would be nice if you could provide a link to meaningful data)
"coal that is readily gassified/liquified"
Is this the stuff that's being shuffled to China?
Third world countries end up shipping off prized resources. Reduced internal demand (demand destruction) and increased exports. Yeah, it's all so comforting...
The bakken will respond well to CO2 flooding. Bubble on. Authors full of gas on this one.
Haha. Now the neocon "faith in new technology" crowd will have to meet hard reality.
Maybe Kunstler will be proven RIGHT.
Invest in buggy whip manufacturers etc. Not kidding!
I remember back in the mid-70's reading columns written by some supposedly smart fellas with the same attitude as yours. Guess what happened in those intervening years and what happened to the price of oil?
Seriously, read about the past to get an idea of the future.
No time scale...but anyone who denies that Wonderful New Technology will not find anything to replace the energy derived from fossil fuels is deluded.
"but anyone who denies that Wonderful New Technology will not find anything to replace the energy derived from fossil fuels is deluded."
This feels circular. Could you restate?
1971, US oil production peaked. USD went full fiat. Hm... "price of oil"...
Oh boy, all the oil is gonna end. I've been reading similar stories since the mid-70's and guess what? They all have been wrong.
And you know what? There are now 3 1/2 times as many folks in India living on $0.50/day than there are ALL people in the US. That's roughly 750 million. I would wager that for these people (as well as for the majority of humans on the planet), oil isn't even in their view.
BTW - It's about AFFORDABILITY (are you moving closer or farther away from that $0.50/day figure? [if farther, is it at a rate that offsets the increasing oil prices?])
No, it isn't about affordability. At the most basic level, the problem is all about energy in vs. energy out. It really is as simple as that. Extraction will stop when the input/output ratio approaches 1/1.
That ratio has been falling for a long time. Today, even with our best and advancing technology, we have only about a 1/4 ratio, way down from the 1/100 ratio we used to have. That proves Peak Oil right there.
"No, it isn't about affordability. At the most basic level, the problem is all about energy in vs. energy out. It really is as simple as that."
I TOTALLY understand EROEI, so no argument on that.
"Affordability" is EROEI personified. It's how much energy one has to apply (work) in order to get something, in this case, energy. I use "affordability" because over the years I've seen how people can totally get things wrong when using "cost" to describe something: if you can really afford something then cost is just a number.
Anyway... in the Rigzone article (which a bunch of Edward Bernays' disciples are touting) it mentions that production has been able to be increased in large part due to increased transport infrastructure. Who paid for that infrastructure and how? It is, as you understand it, a much bigger picture than just those holes in the ground.
Peak oil is not about the end of oil. It's about it becoming harder and more expensive to get.
No, it is about energy in vs. energy out. This is why ethanol is shit, no matter how much money is thrown at it or how it is financed. It takes as much energy to produce ethanol as you get from it.
No, Peak oil is simply the concept that at some point, the flow of crude oil will be maximum...
If you convert the BTU content of all the liquids that are lumped together as "oil", we are on a bumpy plateau and have been for 8 years...
Conventional crude production was been basically flat for 8 years.... OECD production clearly peaked in 1998...
Economics, aka the price of oil extraction will influence the shape of the extraction curve. Geology determines the peak for all intents and purposes. The Bakken is 1% of the world production, BFD....
EROEI is important, but it currently has zero predictive power, it tells us that we are in trouble but we are still a ways from hitting that wall... For fossil fuels, we are doomed well before that wall is hit. e.g. you don't die when you cross the event horizon in a black hole...
For better or worse, it is still possible to play BTU arbitrage to produce value added liquids...
And with economic collapse looming we could have major demand destruction (already is happening in the US). EROEI would still be what it was/is. Production, however, would drop (which would still be in line with "peak production"). Economies of scale in reverse, watch out!
One other point that many miss, and that's "peak exports." The big exporting nations are consuming more and more of their own oil (conventional). Production numbers might be elevated but that doesn't mean that YOU/I have access, despite the "global economy" (which will get dumped fast as things start to crumble).
Yes, Net Oil exports have been in decline for 8 years...
That is the real tell...
Peak exports: so true, a lot of folks forget that part (see our wars).
And the part about us being a very large consumer who can't possibly come close to producing their current needs while wasting time, amking enemies, and failing to build new systems
Hey guess what? The past doesn't control the future and I doubt you did any kind of analysis before making your learned conclusion.
The end has been nigh for many years, I expect if you are young enough to be around in 2060 (I won't be) the end will still be........nigh.
Will this particular boom end, perhaps in five years or so.....of course, but I believe in technology and the inventive nature of men. The only real danger is if the gaia religionists gain control.
"but I believe in technology and the inventive nature of men. The only real danger is if the gaia religionists gain control."
Spoken like a true city boy.
Technology is a PROCESS. It does not create energy or matter: it requires/utilizes both.
Where the fuck is my flying car that was promised by our "technoology knows no limts" Bernaysians of the 1950s? And "free" nuclear energy?
Just look at RE price trends thereabouts.
Welcome to the "treadmill" that makes the oil business what it is.
It is simple, as old wells decline, more new wells must be drilled to maintain production. The more wells that are completed, the more wells there are to decline, so the faster new wells have to be drilled. The "treadmill" runs faster and faster until the Money (not the oil) runs out. Then it is fruit-basket-turn-over time. Experienced oilmen sell declining fields to eager novice investors for top dollar, ride out the bust with cash in the bank and start making plans for the next boom.
Sometimes even experienced operators begin to believe their own glorious story about infinite riches forever and go bankrupt (Chesepeake was close to falling into that trap when they recently made a CEO change).
It has a rhythm all its own and is a beautiful thing to watch.
Your comment makes no sense at least the "treadmill" running faster comment. In theory you can maintain production by drilling at a steady pace, not "faster and faster". Unless your decline rates change, or you want to increase production, your replacement rate can be a constant.
If all we are talking about it maintaining production, then you are right. But we are being told the Bakken will go up, up, up. And so far it has, but even assuming flat decline rates, that means more and more wells will have to be drilled to at least maintain wherever the producing rate ends up. Red Queen effect.
Trenchant!
6,500 wells drilled out of 40,000 planned. The wells produce the most when first drilled, thus, the more you drill the bigger the total ldecline overall in the Bakken. but the level of oil coming out of the Bakken keeps expanding. Oil need to stay well above 50 bbl or they will curtail drilling because the break even is about $50.
And even that $50 break point can be heavily caveated. I bet that there's still quite a bit of fresh capital rolling through these mills and that should the core conventional stuff start struggling that the picture on this second-class stuff starts to get more of a tarnish.
Eventually it all comes down to REAL demand. With the world's economy being un-real I'd place this all as pretty precarious...
chesapeake may still end up B/K. I asked a guy I know, in the oil industry, where he thought opportunities would open up in the future, for good jobs. he said the permian basin. I said what about water. he said they'll get what they need.
"As with all oil fields, there are only so many sweet spots and areas to drill"
With shale oil that's not so true. The oil is not concentrated in a few porous zones like conventional oil, it's dispersed throughout the shale formation. Not perfectly dispersed, but certainly more so than conventional oil. So in that sense finding the oil is not so difficult.
Yes and the Bakken boundaries have been completely defined and the sweetspots have been drilled...
Google Hughes Report Drill Baby Drill...
But then again it's the mining and processing...
I'd have figured, though, that the most readly playable spots have been first to bat. Folks putting up money want to see results. Not thinking that they're going to say, "well, let's go for a lower return and hold out on the bigger stuff for now." But, perhaps... (thinking that conventional production will start straining)
And then there's all the money that the high-rollers are playing with these days. Given enough money you can make all kinds of stuff look good.
@joego1
You just keep buying electric cars.
My Firebird needs the premium gas.
Every thing is good, and everyone is happy.
It's weekend at (Bernies)TOTUSs' <>
Reminds of articles they used to host over at www.theoildrum.com. One of my favs before they decided to archive the site. Miss those guys.
But... ZH still going strong.
So few people understand the energy situation. It requires at least 100 hours of research to get to an understanding, and 1,000 is better. Reading a few articles, especially from the MSM is not sufficient.
First of all, oil is a fungible commodity that is priced on a global scale. It really doesn't matter if oil production increases in the US, if it is declining elsewhere. Currently, the global oil supply is sufficient, but that doesn't mean that the Bakken and Eagleford will have enough oil to maintain that sufficiency.
What people fail to understand is that once there is a shortage ANYWHERE in the world, it reverberates everywhere. If you look at the chart of oil production that is used in refineries and is used for transportation fuel, that chart has been on a plateau since 2005 (around 73 mbd). That is a long time to be spinning in place. We literally have not grown oil production - the stuff we use in refineries - in nearly a decade.
Now why is that? Two reasons. First, we stopped finding oil in significant quanties around the year 2000. Thus, there are not enough drilling projects in the pipeline to expand production globally, and currently we can only spin in place. Second, the decline rate is increasing. The global decline rate for existing wells is about 4 to 5%. That means we have to drill enough new wells to produce 3 to 4 million bpd just to spin in place. If it wasn't for the Bakken and Eagleford, this already wouldn't be possible.
We have bought some time, perhaps another 3 to 5 years, but at some point the fat lady is going to sing. And when that happens the production plateau that we are on is going to head downward. That event is going to change our way of life. We can switch to electric and natgas cars, but I guarantee you the transition won't be pleasant.
I would estimate that the majority of new cars purchased in the US this year will not reach their normal end of life (approximately 12 years). Why? Because fuel costs will rise so high that fewer people will drive extensively. We are entering the end of the oil/gasoline/diesel era. We're not there yet, but within a decade we will be. My guess is we have about 3 to 5 years before shortages begin.
Newager
And I think that we got to the spinning-wheels point out of pure illusion. That is, we created a view of growth, but in reality that growth was just pulled, at a hyperbolic rate, from the future. So, I think that all the producers are starting to get nervous. Conventional because it's clearly in decline. And the non-conventional folks because they have to know that they won't be able to hold the gap and that when it starts to spread more (as conventional declines) they'll start getting massive pressure (and many will accuse them of all sorts of things- and due to all their pimping they won't be able to say that they were BS-ing because they'll either get hung or no one will believe them). And meanwhile lurking over it all is the loss of (world-wide) QE to keep demand going; and when QE stops it'll be a HUGE hit- when massive numbers of people are unemployed the demand for oil products is going to drop dramatically; there will be a LOT of severely underutilized equipment (economies of scale in reverse).
Hey, New, I do not understand your statement that we stopped finding new supplies since 2000. Do you follow any of the discoveries in the Deepwater Gulf? There are several fields down there with estimated recoveries in the tens of billions of barrels total. And they are still looking.
One of the most significant of ramifications of the now-established (yet continuously evolving) accessibility of shale oil/gas is the HUGE amounts of it world wide that may now be recovered. CNG is now selling US average at $2/gal. equivalent (and in the mid-west just over $1).
I personally think that Rossi's E-Cat cold fusion/LENR work will be the real game-changer worldwide. The test/experiment this past March convinced even many of the skeptics that there is something going on there.
"discoveries in the Deepwater Gulf"
Reported by?
Two words: Deepwater Horizon.
My dog spots owls and, being an LGD she's wired to run them off, always, of course, hopes to catch one. She SEES them but she ain't going to catch one. Because you can spot oil doesn't mean you can extract it: the processes and materials are becoming more and more complex to the point that risk starts pushing things into a corner- well, if it wasn't for those damned "gaia" fishermen in the Gulf then there would be much less "risk."
"I personally think that Rossi's E-Cat cold fusion/LENR work will be the real game-changer worldwide."
And you're invested in it, right?
Years ago I was a big fan of fusion (the man-derived kind), until, that is, I realized that energy just allows us to do more work and that the work that we've done tends to result in major impacts to our nests (one need only look at the pollution in China to see).
If production is bell-curved, then things are going to get worse at a faster and faster rate after the inflection point. What happens to 7 billion people? Do we keep getting our oil for cheap from exporting nations? Talk about normalcy bias.
In the end it comes down to a worldwide system which was based on unlimited growth. Natural resources such as oil are not unlimited. The system was doomed by the constraints of reality from the begining. Yes, we are nearing the end of this system.
Add; In 2009 the average Well production was 224 BPD.
Now, in 2013 the average Well production is 124 BPD.
If you understand production, You know this is a seriously ugly trend.
In the end it comes down to a worldwide system which was based on unlimited growth. Natural resources such as oil are not unlimited. The system was doomed by the constraints of reality from the begining. Yes, we are nearing the end of this system. dd; In 2009 the average Well production was 224 BPD. Now, in 2013 the average Well production is 124 BPD. If you understand production, You know this is a seriously ugly trend.
Exactly right. Malthus was right about growth being unsustainable. And Marx was right about "capitalism" on monopoly scale would end up destroying itself.
Forget the US/Canada and the EU. We're already fading away in the sands of history.
If you want to see what the future looks like, look at China. And it's only in my lifetime that Nixon did the China thing. It really was not that long ago that Taipei was claiming to be the legitimate government of all of China. My how things have changed!
Chinese shoppers clog our designer boutiques and spend thousands of USD a day on expensive crap to bring back home and flaunt, but those are the favored elite trusted to return home. But the elite all have extended families who will be favored with private houusing and private automobiles.
What's gonna happen when there are a billion privately owned automobiles in China?
P.S. Please email me because its very difficult for a thinking person to be living in a "isolation ward" in this asylum which is run by lunatics and populated by zombies.
I think that China's expansion of consumption will get restrained by the total global marketplace. Ultimately it takes a lot of money flowing in (the rest of the world is struggling, so consumption of Chinese goods has nowhere to go but drop), that and or print your own and force the rest of the world to accept it (US-style).
If one understands the fundamentals then there's really no need to double-check them with others. You know what to do, just, Do It :-)
Good summary, and in fact the peak of oil discoveries was in the sixties, below chart gives the overall view between discoveries and consumption :
http://planetforlife.com/images/growinggap.jpg
Well noted...
I estimate I spent 5 hours a week for many years to gain my understanding of the energy complex, to this day I still devote 1 to 2 hours weekly reading about the nuts and bolts of the energy business...
Any one here want to tell me the importance of Mt. Belvieu without googling it?
Nobody gives free information wanting nothing in return. So this guy is short the bakken.
Have you ever been to North Dakota? I have. You all know that I live in Minnesota on the I-94 corridor. I can tell you that there is a lot of heavy material moving that direction. Structural steel, heavy equipment, you name it. If you went to Fargo you would be amazed. Everything is brand new. All the roads are new, all of the infrastructure is new.
This got me to thinking. What is going on there? Should I move there? The sand they use for fracking comes from Wisconsin and southern Minnesota. It's heavy and it ruins the roads and highways when hauling it though. There is going to be an issue and there actually already is with this fact. If we hadn't ruined our railroads the whole prospect might work. The Bakken extends into Wyoming and people are coming here in droves. I do not know how long they stay because the winter weather in North Dakota would kill 95% of Russians much less any Americans who are not from here. I know this for sure because I live right on the edge of the Eastern Prairie . The winter wind alone will kill you.
If the local .govs are going to ban sand mining or impose a tax on sand from being transported on their roads then the Bakken will be a bust. NoDak is a bunch of clay. DYODD.
http://www.startribune.com/local/177697161.html
Thanks for the reality check!
INFRASTRUCTURE!
It was kind of skim-commented on in that Rigzone article, as though it was window dressing. Infrastructure is EVERYTHING. That's why so much energy and bloodshed surround oil pipelines. Transport by anything other than pipeline is really tough.
The carpetbaggers running in ND are externalizing their costs by way of leaning on the roads. I happend to live in an area that doesn't experience the hell that is freezing and thawing, as it applies to infrastructure.
I think the way to manage things is to mandate that the offspring of those pushing exploitation to live in the area that is being expoited, to NEVER be able to relocate.
What can not go on forever, won't. Not an original thought.
Great Bakken becomes Great Kraken?
The American attitude toward Peak Oil today is like the American attitude toword Honda automobiles a few decades ago. No American wants to believe that he is slipping from the number one position, so he shouts down anyone who tries to point out the decline, and thereby accelerates it.
Slipping???
It has been a long time since US was number one in anything that reflected the state of the average joe...
Unless you think high prison incarceration rates are a desirable goal...
US oil production peak occured in 1970 (end of the year), and by the way, this was also the major reason for the first oil shock (together with oil majors/countries rebalance on each barrel revenue, and dropping of B Woods in 1971), much more than the so called "arab embargo" little song (almost a non event in terms of barrels taken out of the market, lasted 3 or 4 months).
A summary on this below (in the comment the link points to) :
http://patzek-lifeitself.blogspot.com/2013/06/the-ghost-of-julian-simon....
As to current global situation, below the key graphs and link to Laherrère's latest oil and gas synthesis :
http://www.powerswitch.org.uk/forum/viewtopic.php?t=23200&highlight=
Also what is kind of amazing, is that the IEA gain managed to give some kind of "positive messages" in its last WEO2013 in the summaries, but the report itself contains some "harsh" realities, see for instance below quick summary with several graphs from the original report (in Spanish but gg translate works ok) :
http://crashoil.blogspot.fr/2013/11/weo-2013-anuncio-de-curvas-peligrosa...
More peak oil fear mongering. How sad.
Lead by the Flak monger - a true believer...
Math doesn't lie... I am sorry if you are incapable of grasping the concepts...
Let me guess, you base your world view on a piece of narcissistic 2nd rate fiction?
"Let me guess, you base your world view on a piece of narcissistic 2nd rate fiction?"
You suggesting that it's narcisstic to believe in unicorns? </sarc>
"They call me deranged. The hope is that they are right! It is of no greater or lesser import for yet another fool to wander this Earth. But if I am right and science is wrong, then may the Lord God have mercy on mankind!" - Viktor Schauberger
For the unacquainted with Viktor Schauberger's thoughts, the "science", being referred above, relates to the established ideas for explosion technology, that is ALL of the technology, out current energy transformation, is based on. In contrast with implosion transformation technology Viktor Schauberger was trying to evangelize resonating with the fundamental free movement of Energy in Nature.
What about "science" was Schauberger worried about being wrong about?
Science is a PROCESS of understanding/learning.
Technology is a PROCESS of application.
When we believe that science has it all figured, that technology can be manufactured to solve all our problems (even though it may be based on incomplete science), well...
As Dirty Harry put it: "you have to ask the question: 'Do I feel lucky?' Well, do ya, punk?" (kind of funny in that this movie was released in that magical year that is 1971)
It isn't a "process" at all
Creativity plays a big part in both.
And by the way if you consider that Maths is science, we now know that science is infinite
It certainly is a process, even the most creative insight takes huge effort to go through the process of verification...
As for your second statement, I trust you are being facetious...
Facetious ?
No I'm not, but you might be ignorant :)
(Gödel theorem rings a bell ? Or not ? )
It certainly does, I was not aware we were discussing axomatic logical systems...
Given that the universe is effectively infinite, it does make the cataloguing of every different phenomena a tad tricky... So the appearance of an unpredicted phenomena is likely... Witness dark energy...
You were being facetious with the meaning of infinity whether you realized it or not...
For shits and giggles, have you ever actually done science, like a write a paper for respected peer review and get it published?