Carpe Diem

Sunday energy links

1. Edmonton Journal: “Remember Peak Oil, the theory that global crude oil supplies have peaked and are in irreversible, long-term decline? The concept got a lot of media play but never really passed the smell test, since it didn’t account for the impact of technological change or rising oil prices.

“In any case, the notion of Peak Oil seems amusingly quaint now that it’s been relegated to the same ideological trash bin as Y2K. Thanks to such innovations as horizontal drilling and fracking (hydraulic fracturing), the U.S. is currently producing more oil than it has in 20 years. U.S. output now exceeds seven million barrels a day, and that has enabled the world’s biggest oil consuming nation to cut its imports to the lowest level in 16 years.” (HT: Jim Ulvog)

2. AUSTIN, Texas (AP) — “[Luxembourg-based] international energy pipeline giant Tenaris said Friday it will build a $1.3 billion Gulf Coast manufacturing facility that will bring 600 new jobs and better supplying operations to Texas’ oil- and natural gas-rich Eagle Shale region.”

3. Plastics News — “Discoveries of shale gas are leading to all sorts of unexpected plastics activity throughout North America. One of the more recent examples is Appalachian Resins, a start-up firm that plans to build a 500 million-pound capacity polyethylene resin plant in Wheeling, West Virginia.” (HT: Joe Lais)

4. San Antonio Express News: Oil’s new reign in “Saudi Texas” draws comparisons to the Kingdom.

5. National Geographic cover story “America Strikes Oil” – “Since early 2006, production from what’s known as the Bakken formation has increased nearly 150-fold, to more than 660,000 barrels a day, moving North Dakota into second place among domestic suppliers, behind Texas and ahead of Alaska. No one but a handful of industry insiders saw that coming. Now some optimistic oilmen predict that the state’s daily output could eventually close in on Texas’—at two million barrels.

“The implications are already reverberating far beyond North Dakota. Bakken-like shale formations occur across the U.S., indeed, across the world. The extraction technology refined in the Bakken is in effect a skeleton key that can be used to open other fossil fuel treasure chests.”

6. See National Geographic photos of the Bakken here.

 

31 thoughts on “Sunday energy links

  1. Peak Oil was nothing but a feckless knockoff of Thomas Malthus hysteria from well over 200 years ago.

    Peak Oil is proof that BULLSHLT is hard to kill.

    • The peak oil theory has a major caveat, that it applies at constant price, clearly there would not be the current production increase at $40/bbl, let alone the $3 in the 1970. The theory holds that the problem is so acute that the economy in general can not adjust to the dimunition of supply at a constant price. As the price goes up both new ways of reducing usage and new methods of product apply. Interestingly the Malthusians have been proved wrong in their view of the economy twice in the last 50 years, once on energy, and once on food, (we were all supposed to be starving by now…). And the world wide reduction in total fertility to about 2.5 children per woman and its continuing fall, calls into question one of Malthus’s basic assumptions about the geometric increase in population.

      • The peak oil theory has a major caveat, that it applies at constant price, clearly there would not be the current production increase at $40/bbl, let alone the $3 in the 1970.

        No Lyle, what is says is that total production will peak. Period. End of story.

        Each well begins with a very high IP rate and begins to decline from there. A field will see an increase in production as new wells are drilled but eventually it will reach a peak and will decline, no matter what happens to price. An oil region will see an increase as new fields are being developed but it too will peak and production will begin to go down. The only way to keep total world production growing is to introduce new regions or new methods. But that too follows the same path and eventually there is a peak that will not be reached again.

        This is what we have seen in most oil producing countries. Their production went up and began to decline when the development process matured because there were no new discoveries to offset the depletion. It has actually been what happened to the production of light sweet crude as the world’s newest fields could not produce enough to offset the decline from the older fields. Now I do not claim that we cannot get past the 2005-2007 peak for a year or two. Clearly it is possible for the water drives to be pushed a bit harder and for a few of the fields troubled by conflict to drill a few more wells. But even such efforts, which will take hundreds of billions in new investments won’t matter because around half the extractable oil has already been produced from those fields. That means that we are at the peak or that it is already behind us.

        Now you can claim that we have a great new technology that can give us new oil producing regions in shale formations around the world. But there is a big problem with that claim. American shale production has been financed by debt and capital destruction. Data show that the massive drilling efforts were unable to get the average Bakken well production to move up materially higher. That means that the producers have to spend billions just to keep their modest, and it is modest, production from falling. And since the new wells have lower IPs and higher decline rates than the older ones the replenishment cycle will have to move faster just to stay at the same level.

          • What a pile of Global Warming that is…</b.

            How ironic. The Global Warming BS is also supported by press releases from official sources and depends on narrative. Its promoters refuse to look at the numbers carefully and distinguish signal from noise. From what I see the shale gas and oil promoters do exactly the same thing.

    • Peak Oil is proof that BULLSHLT is hard to kill.

      You mean to tell me that the production of light sweet did not really peak in the 2005-2008 period? Or that production from shale wells that average 90 bpd of production can replace what is lost by the conventional giants each year?

      You boys and girls need to stop being emotional and look at the actual numbers. While the aggregate figures can be made to support whatever narrative the reporting agencies like the financial numbers and the detailed data tell different stories. If you want to do well going forward you might want to think about learning how to pay more attention.

    • Oh yes, we are still below the record levels produced in the 70′s and 80′s (more the 70′s). But you also have to remember: this thing is just getting started.

      On top of the Bakken and Eagle Ford Shales, there is now the Monterey Shale in California that is said to hold 400 billion barrels of oil.

      • Jon

        On top of the Bakken and Eagle Ford Shales, there is now the Monterey Shale in California that is said to hold 400 billion barrels of oil.

        From your reference, several caveats, then this:

        “Still, the U.S. Energy Information Agency estimates there are over 15 billion barrels of oil that can be recovered using today’s technology.”

        I’m not a Debby Downer, but it sounds like 385bn of that 400bn is pretty is pretty iffy, and I would feel more comfortable talking about the lower number.

        • Ron H: “it sounds like 385bn of that 400bn is pretty is pretty iffy, and I would feel more comfortable talking about the lower number.”

          I thought the 15 billion number represents what can be recovered using today’s technology. Are you assuming that the remaining oil will not be recovered because technology will not advance beyond today’s levels?

          • The reason I’m making a point about this is because the Club of Rome’s dire resources forecasts of 40 years ago used statistics which were based on what was then the current level of technology.

            Conservative assumptions about innovation feed into the hand of leftists. If they can convince voters that resources will soon be exhsusted, they can usually make a case for government rationing and other interventions.

          • I thought the 15 billion number represents what can be recovered using today’s technology. Are you assuming that the remaining oil will not be recovered because technology will not advance beyond today’s levels?

            While some may see a recovery that will keep growing I am wondering why it is that Intuit is pushing so many QuickenLoans adds about allowing people to refinance even though they owe far more than their homes are worth. From what I see the market will continue to be weak (in real terms) until a true liquidation is permitted to take place. And we all know that Congress has no stomach to step aside and let the market do its job.

          • John Dewey

            I thought the 15 billion number represents what can be recovered using today’s technology. Are you assuming that the remaining oil will not be recovered because technology will not advance beyond today’s levels?

            Not at all. I expect technology to continually surprise us with advances we never dreamed of, as it has done in the past. My only point is that the 385bn bbl is a complete unknown at this time, and I wouldn’t want to make any plans now, based on its eventual availability.

            For all we know something in the near future might make all our discussions of oil as irrelevant as we now view discussions of peak whale oil 150 years ago.

        • I’m not a Debby Downer, but it sounds like 385bn of that 400bn is pretty is pretty iffy, and I would feel more comfortable talking about the lower number.

          Actually, you may be way too optimistic to accept the claim that the 15bn is economically recoverable.

          • Actually, you may be way too optimistic to accept the claim that the 15bn is economically recoverable.

            I can accept that it’s recoverable. Economically may be a different matter.

        • I understand you fully, Ron. You are right that most of the 400BN is hard to get to (I guess the tectonic plates won’t make it easy, either). Maybe this is just me being optimistic, but I believe it will someday become available. Human history is the story of achievement and I see not reason to think it ends now.

          • I understand you fully, Ron. You are right that most of the 400BN is hard to get to (I guess the tectonic plates won’t make it easy, either). Maybe this is just me being optimistic, but I believe it will someday become available. Human history is the story of achievement and I see not reason to think it ends now.

            You are diverting attention from the actual debate. Nobody is saying that we will have a permanent energy shortage or that we will run out of oil. The issue here is about growing production. The Peak Oil people point out that there is a point at which no more production GROWTH is possible. The question about when we get to that point.

            The question may seem simple but it really isn’t because we do not use crude as an end product and not all types of crude are equal. What really matters is how much of the end products that we value so highly we can make out of the oil that we produce each year. On that front it is very likely that the Peak is behind us. It certainly is pretty clear that light sweet, which produces the most high quality end products peaked a few years ago. It is also clear that some of the accounting process leads to double counting. After all, if I use one barrel of crude to make one barrel of biofuel it makes no sense to claim that I produced two barrels. And let us not start down the ethanol and NGL accounting issues.

            The simple fact is that we have to avoid being optimistic or pessimistic about any of these issues. All we have to do is to look at the actual data and the arguments and see if they make sense. Technology or no, and what we have is not really all that new, shale and tar sands are near the bottom of the barrel when it comes to quality and cost. Even if you look at some of the better shale areas today you see that massive drilling was unable to get the average production rate to move significantly higher. That tells us that the depletion is far too high for the hype to warrant much acceptance and that what we need are to look at the actual data ourselves.

            This plot has been created ND data. There are many similar plots, some that look just at the ND new horizontal wells, some that look at the full Bakken area and include data outside of ND, and other permutations and combinations. The conclusions are very similar; you need a huge amount of new investment just to keep average production flat. To increase production you need to drill even more wells but that will mean even more drilling in the future just to keep production from falling. But more drilling is not always possible because the projects are not self-financing and because you run out of other resources or quality targets.

            This inability to move the needle on well productivity through new drilling is exactly why the shale argument given by many of the promoters is a scam. As long as the bubble stays inflated the governments, insiders, and workers keep getting paid and money is thrown by the industry to purchase ‘independent’ research that keeps geologists well compensated.

          • Jon

            Maybe this is just me being optimistic, but I believe it will someday become available. Human history is the story of achievement and I see not reason to think it ends now.

            I fully agree, Jon, I too am an optimist. My only point, as I explained to John Dewey, is that it’s not available today, so I can’t make plans for it today. It’s also possible that all discussions of oil could become irrelevant in the not too distant future. We just don’t know.

            There’s a tendency, I think, to repeatedly discuss oil in terms of 400bn bbl until everyone pictures 400bn bbl when in reality, today, there are only 15bn bbl.

    • Manufacturing as a percent of GDP peaked out over 40 years ago both here in the USA and globally. A little over 100 years ago, we needed 50% of our population employed on farms to feed us. Today, we feed the world with 2%. Does that mean or imply we are out of stuff and food? Last I heard, we pay farmers not to grow crops.

      Take your head out of the sand, Luddites like you and “shortage doomers ” like Malthus are proven intellectual losers.

      • Manufacturing as a percent of GDP peaked out over 40 years ago both here in the USA and globally. A little over 100 years ago, we needed 50% of our population employed on farms to feed us. Today, we feed the world with 2%. Does that mean or imply we are out of stuff and food? Last I heard, we pay farmers not to grow crops.

        Moving the pea and diverting attention from the material points will not change the facts. American production did peak in the early 1970s just as Hubbert predicted in 1956. Throwing a lot of debt on shale wells that go to stripper status in seven years will not get production above that level again.

        And you fail to note that if you have cheap energy you don’t need a lot of farmers to grow food. The agricultural revolution was based on cheap energy that allowed mechanisation and the use of artificial fertilizers, pesticides, and herbicides. Yes, you pay some farmers not to grow food. But you also subsidize the crops that many other farmers grow.

        Take your head out of the sand, Luddites like you and “shortage doomers ” like Malthus are proven intellectual losers.

        This debate is about oil. And on that front the Peak Oil people have the data on their side. The US, Venezuela, and Libya peaked in 1970. The oil production in Kuwait, Indonesia Iran, Iraq, and Brunei peaked before 1980. The oil production in Russia peaked in 1987. Production in the North Seas UK sector peaked in 1999. Norway followed in 2002. The production of Malaysia, Yemen, and Oman is also in decline. All in all you are looking at 40 out of 55 or so countries that have seen their best days behind them. The biggest exporter, SA, is showing a big problem as water cuts rise and some of the previously abandoned high-cost fields are brought on-line at huge expense.

        The shale promoters are ignoring the reality as they mistake a process that destroys capital as sustainable and low prices due to a collapse in demand as evidence of salvation. Did you notice how all those well off people on the cruise liner resorted to fighting for sandwiches that used condiments as their main ingredients? Imagine what happens when reality finally intervenes and consumers find that they can’t get enough gasoline at a price that they can afford.

  2. From the author of The Prize, Daniel Yergin, The Quest. Could there possibly be a role for inefficient, monopolistic Government, that could never grow an economy?

  3. There’s a difference between a renewable resource and a depletable resource.

    I stated before: World oil production has been roughly flat, since 2006. It seems likely, we can expect higher prices, more conservation, and greater use of alternative energy, including ethanol and natural gas.

    ******

    The Oil Drum
    July 11, 2012

    “To estimate the global production capacity that is lost each year, it’s necessary to estimate the production-weighted aggregate decline rate of all fields, including those in build-up and plateau. Using the IEA data, we estimate this figure of 4.1%/year which is comparable to CERA’s estimate of 4.5%/year. This implies that around 3 mb/d of capacity must be added by new investment each year, simply to maintain global production at current levels.”

    • “To estimate the global production capacity that is lost each year, it’s necessary to estimate the production-weighted aggregate decline rate of all fields, including those in build-up and plateau. Using the IEA data, we estimate this figure of 4.1%/year which is comparable to CERA’s estimate of 4.5%/year. This implies that around 3 mb/d of capacity must be added by new investment each year, simply to maintain global production at current levels.”

      Funny how people still respect CERA and the IEA figures even though they had underestimated decline rates and were reporting those low rates until the skeptics forced a review that showed them to be off by 50%. We need to be mindful and read what is provided very closely. From what I see there is no way that the needs of a growing world can be supported by current crude production fundamentals.

  4. I disagree with the comment that Y2K belongs in the ‘ideological trash bin.’ Y2K was an anticipated problem which was dealt with effectively.

    Think of Y2K activity along the same thoughts as if the dykes along the Mississippi had been fixed prior to Hurricane Katrina.

    • re: y2k – agree.. many proprietary operating systems had already been tested and determined the would fail unless the code was found and fixed.

      And the morning of the day when Y2K went live was an exciting time in many IT shops.

      • re: y2k – agree.. many proprietary operating systems had already been tested and determined the would fail unless the code was found and fixed.

        Not only software but hardware that provided only a 2 digit date field.

        And the morning of the day when Y2K went live was an exciting time in many IT shops

        That day was Jan 1, 2000, a Saturday. Monday Jan 3rd was also a tense day as all normal business activity resumed after a weekend.

        Then in the months that followed IT budgets were slashed and thousands of IT and IT related workers who had been retained in the 2 or 3 years prior to 2000 were laid off.

        You could even make a case that Y2K fears helped prop up the stock market tech bubble which promptly collapsed after March 2000.

        • Ron,

          “You could even make a case that Y2K fears helped prop up the stock market tech bubble which promptly collapsed after March 2000.”

          I’ve been saying that for years. I saw firsthand how the major corporation I was working at was throwing money at the Y2K project, sparing no expense. Every major business in the US was doing the same thing. The layoffs started pretty soon after New Years.

          Great timing for Bill Clinton, who got out just as the roof was caving in.

          • Paul

            Great timing for Bill Clinton, who got out just as the roof was caving in.

            No kidding!

            I think there’s a tendency now to ridicule Y2K as a groundless fear, but it was a real and well understood problem, and the uncertainty was very real at the time. Billions were spent on “Y2K compliance”, and it’s a credit to a lot of hardworking people who turned it into a non-event.

            One of the funnier stories I remember from that time is one about a company that wrote to all their suppliers and vendors asking that they certify the product or service they provided to be Y2k compliant.

            One response went something like this: “We certify that the sand you have been purchasing from our company will continue to function as expected after Jan 1, 2000.”

        • “That day was Jan 1, 2000, a Saturday. Monday Jan 3rd was also a tense day as all normal business activity resumed after a weekend.”

          Alan Greenspan also noted that the Y2K financial systems re-work helped the US markets recover quickly after the 9/11 attacks.

          Many or most of the IT people making software changes knew that their employment on the projects would be limited after the new millennial.

          Yes, the necessary hardware upgrades also contributed to the Y2K disaster avoidance.

    • I disagree with the comment that Y2K belongs in the ‘ideological trash bin.’ Y2K was an anticipated problem which was dealt with effectively.

      Absolutely. The problem was very real and well understood, but the extent of the problem was unknown, and the fear was that some instances of the problem had been overlooked, and would result in critical systems failures.

      The general level of anxiety was unjustifiably high, as are so many things that people don’t understand well enough. It’s a credit to those who understood the problem and took extensive corrective action that Y2K was essentially a non-event.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>