Peak Oil- what it is and how it will impact your life

Discussion in 'Peak Oil' started by Minuteman, Aug 4, 2005.

  1. Minuteman

    Minuteman Chaplain Moderator Founding Member

    I am back to work and moving the rig this week so I have time to compose a rebuttal to Collapsenik’s allegations. First as Brokor said comparing qualifications is irrelevant to the facts of the debate. While I agree with that in principle we have to look at how Collapsenik is promoting himself. He states that "peak oilers" don't want to argue facts, yet he himself presents none. All of his posts have figures and statements that have no supporting documentation. The only links he has posted are opinion pieces with nothing to support his claims. He states that he knows what he is talking about, and by inference we should take his word for it, because of his "vast industry knowledge". So he has made it about qualifications. So let's look at that.

    The oil industry is known as "The Dark Industry" due to the fact that most people outside the industry really have no idea how wells are drilled, how oil is produced and marketed and they are certainly in the dark as to the infrastructure and operating structure. Whenever I am involved in a conversation with people outside the industry I always try to use analogies that they will be familiar with to explain the intricacies of our industry.

    For example I was recently involved in a conversation with some people who couldn't understand how engineers, who have been to college and have advanced degrees, could possibly make far less money than someone in my position who are generally lacking of any formal education. I only reference salaries to illustrate the importance of a position in relation to the overall importance to the operation. The more important the position, the higher the salary. There is a very great animosity in this industry due to that. I illustrate it this way.

    Imagine you have a housing developer that wants to create a new housing division. He goes to and architect who uses his education to design a house and draw up blue prints for it. He calculates the load structures and knows how far the spacing on joists has to be etc. The developer pays him a few thousand dollars for the plans. Then he hires an experienced homebuilder to build it. The builder in general lacks the formal education of the architect but he has been building houses for years and he knows how to take the blueprints and make them a reality.

    The first thing he does is start making changes to it. No house in history has ever been built exactly to specs. The architect can design a house but he cannot build one. The builder doesn't change anything structurally but he knows that the outlets can't go on this wall they have to go on that one, the water lines are running through the same wall as the electrical lines and that won't work. The outlets in this room are too low and need to be higher to clear the counter tops etc. So he makes the necessary changes and builds the house. The developer pays him tens of thousands of dollars for the finished product, much more than was paid to the architect.

    This is exactly how the oil industry works. A drilling engineer draws up a well plan and makes a drilling program. Then it is given to an experienced well driller and he makes it a reality. Then you have Production engineers that take the completed well and do the fracking and the production work to make it flow. Like a finisher would come in and install the carpet, the cabinets and appliances. Then you have a Reservoir Engineer who oversees the development, production and distribution of the field. Much like a real estate agent will start selling the houses.

    Each one of these jobs is an integral part of the process. But if you want to discuss the construction business, and you are using only your personal experience as your qualification and justification for your position, then who would you want to listen to? Whose experience is more relevant to the discussion?

    Now I have never said that I am an expert on the entire oil industry or that I have the final word on the peak oil debate. But I started this thread with the statement that I have been in the industry, on the front lines of the industry, for over 30 years and it was my first hand observation that peaked my interest in the peak oil theory.

    A pop quiz;
    What is the largest oil field ever discovered on the planet?

    What is the second largest field?

    The largest oil field in the world is the Gahwar field of Saudi Arabia. It is the field that put Saudi on the world stage as a, or the, major oil player. I was drilling wells in the Gahwar field in the 90's and have stated on here that at that time they would run the pipe line to the location before we even moved the rig in and started drilling. You could not drill a dry hole. As soon as we finished drilling the production guys would come in, perforate the pay zone and open the valve and the well would produce an average of 20,000 barrels of oil a day. And produce at that rate for years. The well would recoup the costs of drilling it and be on 100% profit after only 8 days. The rate in the U.S. at that time was an average of 8 years.

    Now today the Gahwar field has the largest water flood project in the world. They pump over 7 1/2 million barrels a day of sea water into it to flush out the remaining oil. The wells that are still producing are down to less than 5,000 barrels a day. That is first hand, on the battle lines info.

    The second largest field in the world, the Canterell, peaked in production in, IIRC, 2005 and has been losing an average of 150,000 barrels of production every year since.

    I have personally drilled wells in many of the big plays responsible for the recent upswing in US domestic production. I have seen them come on strong only to deplete and decline in as little as two years. These unconventional, high pressure fracked wells are not the wells we drilled in the past. Wells that you could drill for 1 or 2 million dollars and would produce oil for 20 or more years. These wells today are costing as much as 15 million dollars to drill and even with regulated and restricted flow rates they are only producing for 2 or 3 years. You constantly have to drill more wells to replace those depleting in order to keep your production rates up. And you can only drill these wells as long as the price you can sell the oil for makes it economically feasible to do so.

    But Collapsenik tells us from his vast experience that; "I've produced century old shale wells personally as a production engineer with an old independent in the Appalachia Basin, so do you mean "at least for a century" when you say "in just a few years"?

    No I mean only a few years. Those wells were drilled vertically in soft shales and are not even comparable to the tight shales we are doing high pressure fracs on today. Anyone with vast experience would know the difference.

    Collapsenik also says; "I was doing multi stage frac jobs in shales in the late 80's when oil was $15/bbl and making money at it, and drilling horizontals in the early 90's when prices were about the same."
    and; "Cost to surface in the Bakken, using horizontal wells, 20-30 frac stages, all the modern technology to develop light/tight oil runs about $25-$30/bbl depending on the geology involved. "

    The amount of profit per barrel is a very weak indicator for gauging the profitability of a well. The oil industry reinvests more profit back into future production than any other industry. IIRC, it is on average of .70 cents per every dollar of profit has to be put back into the exploration, drilling and producing of future wells to maintain a production rate that will make it economically feasible to continue drilling that field. You can check the links below and you will find that the estimated break even point on Bakken wells is around $60 a barrel. But breaking even doesn't drill the next well.

    This is firsthand knowledge from the front lines. If I want to understand warfare I would listen to the soldier on the front lines not a REMF.

    So we have Collapsenik who has made statements that raise red flags for anyone who is familiar with the industry.
    Collapsenik states that "a company man with enough experience to have been there when MWD replaced single shots." Umm. Well that is very telling as single shot surveys have never been replaced. They are used on every well drilled. A single shot survey gives you an indication of the degree of inclination at the bottom of the well. It is done with a pendulum effect that is only accurate out to about 18 degrees. It is useless in a highly deviated or a horizontal well. MWD (Measurement While Drilling), is the technology that has made accurate horizontal drilling possible. A tool is run in the drill string as close to the bit as possible. It generates data and sends it via the drilling fluid to the surface where it is captured by equipment that transmits it to a "shack" set near the rig where a couple of techno geeks, usually college kids, take the data and feed it into a computer program that gives us the inclination of the well, as well as the direction the bit is going ( in a 360 degree radius) and the azimuth to the target that we are trying to hit. This data is given to the Directional Driller who takes it and does calculations to determine if a course correction is needed to keep the well on the right path to hit the designated target zone. He then takes that to the Company Man who may or may not approve it. DD's are notorious for wanting to hit a "bullseye". We may have a 50' radius target and if I let them they will waste valuable rig time, and unnecessary twists and turns, trying to look good and hit dead on center. Many times I tell them “no we aren't going to do that”. One foot inside the target is a "bullseye". But they will be gone when the holes drilled and they won't have to fight to get the production string to bottom through all of their course corrections.

    Another red flag is raised when he says; "Fracture pressures of underground formations are nothing to triplex pumps and don't require any more "energy" than is needed to even run the mud systems on the drilling rigs themselves. And those ion industry have been doing that for more than a century now."

    OK. Where to start? Yes we have been fracking these low frac gradient wells for years. They are not the high pressure frac jobs being done in these unconventional tight shales of today. The fracs we are doing where I am now are taking up to 15,000 psi of surface pressure. Try doing that with a tri-plex rig pump and you will have parts flying around like a grenade. I have some of the largest mud pumps in the country and they are only rated at a maximum of 5,000 psi working pressure and at 7,500 psi you are in real danger of catastrophic failure. Companies like Halliburton had to develop special high pressure pump units to handle these kinds of high pressures. Those pumps were not around 20 years ago. It's like saying that a modern automobile is the same thing as a horse drawn buggy. Yeah well I guess they both have wheels.

    Collapsenik states later that he did indeed work for a short time as an MWD tech, probably while he was in college. Then when he got his degree he got a job as a production engineer. He says he comes home every night and gets to see his kids every day. So that tells me he works for a domestic company, probably a smaller independent producer, and manages one area that that company owns interest in. A larger domestic may have interests in a few different plays but mostly the engineers will work on one or two local fields. They sit in their cubicle and draw up plans and programs to manage, produce, and distribute oil from their particular field.

    So again let's put this into a perspective that more people can understand. Basically Collapsenik worked for a company that installed the toilets on the space shuttle. Then he went to work for a waste management company. He sits in his cubicle and manages the collection, treatment and disposal of the waste on the international space station.

    Now I am not denigrating the job. It is an important part of the program. And I appreciate anyone who holds down a job, supports their families and contributes to society. But when they claim that because of this experience they are an astronaut and we should take their word on anything to do with space travel, and that they know more than the guy who has piloted the space shuttle for years then it becomes relevant to the discussion.

    But let’s get to the facts.
    Collapsenik says that peak oilers don't like to discuss the facts. But what facts has he presented? Let's take a look.
    First he derides anything to do with M. King Hubbert. He makes several claims that are just flat out wrong. First he says; "Hubbert predicted peak oil in the US in 1950"

    Hubbert was a geologist for Shell Oil and only started his career with them in 1947. It wasn't until he published a paper in 1956 that the now famous "Bell Curve" model was ever introduced. It would have been impossible to predict a 1950 peak. The "peak" of production was not even common terminology until that time. He was illustrating a model that he had created to take into account all the known factors, and even to incorporate unknowns such as new discoveries and technologies, to determine the life span of a particular field or area. His model had been so successful in individual field predictions that he applied it to U.S. domestic production. His model showed that domestic oil production would peak in a time frame from about 1967 to 1972.

    In 1970 an article appeared in one of the trade papers ridiculing that "crazy geologist" who had predicted that the US would peak. US production hit the all-time high in 1971. But then in 1972 production dropped. Remember that peak oil can only be seen in the rear view mirror. You can't say "Aha, it happened today". It is not until the production rate begins to fall each year that a decline is evident. And that is exactly what happened. US domestic oil production peaked in 1972. It had a small plateau (again a term Hubbert used in his 1956 paper, contrary to another bogus claim by Collapsenik that it was made up by peak oilers) and then continued to decline until the last couple of years when this new frenzied rush to exploit new technologies allowed us to increase our production rate. But it is still nowhere near what it was at the peak in 1972.

    The "rosy" pictures painted by media hype were the great news that we were now producing as much as we were in 1985. My posts pointed out that you have to examine that in the proper context. In 1985 we had been in decline for over a decade. And the other "great" news story was that we would soon surpass Saudi Arabia in production. Again look at that in context. Saudi Arabia's production has been in decline for some time now and they are not producing what they once were. So the news that our return to 1985 production levels were meeting Saudi's falling production rate is not such a rosy picture after all. It is a false hope that all is well, we don't have a problem anymore, go back to sleep.

    Another bogus claim that raises red flags where Collapsenik is concerned is when he says that peak oil has occurred many times.
    He says; "I figure any other peak oils will look like past ones. Predicting them are a bit of a bore, does it really matter when the next arrives? Seems like it is more important how many MORE of them there might be?"

    "Whatever it is, it has happened multiple times now. It would seem that any prediction of peak oil should also answer the question why it didn't work out all the OTHER times"

    This is just a plain contradiction and shows a total ignorance of what peak oil is. The definition of Peak Oil is the point in a field or area where it produces the most oil it will ever produce and goes into decline no matter what is done to maintain it. If a peak occurred and was later surpassed then it wasn't a peak at all. A small plateau or even an upswing in production, if it doesn't surpass the production rate at the peak, is not proof that no peak occurred. I think he substitutes price fluctuations with "peaks". Many of his statements just do not make any logical sense at all. Prices are going down so that is proof that no peak occurred. That is just ludicrous.

    Another wild claim is that his vast experience tells us that producers can make a profit on oil at as little as 4$ a barrel. There is absolutely no data that even comes close to that statement.

    He says; "The reason why, to those of us with experience in and around the industry in 5 decades and 2 centuries now, is because operating costs (after the capital has been sunk) isn't that high…and even at $4/bbl there is usually enough cash flow to exceed OpEx"

    "Cost to surface in the Bakken, using horizontal wells, 20-30 frac stages, all the modern technology to develop light/tight oil runs about $25-$30/bbl depending on the geology involved."

    He likes to toss out the occasional oilfield terminology to bolster his credibility so let me revert to common oilfield vernacular, he's talking out his ass.

    He states;

    "Hubbert predicted peak oil in the US in 1950"
    No. His paper presenting his bell curve theory wasn't even published until 1956

    "Other than the peak oilers had been discredited…again…as the world began to produce more oil after the 1979 global peak, and we didn't run out like the experts said we would then either."

    There never has been a global peak of any type in 1979. Domestic in 1972, global in 2009. The vast North Sea oilfield did peak in 1979 so maybe he is confusing that with "Global peak". He doesn't seem to have a very good grasp on the concept. Maybe the "many" peaks he refers to are the individual fields and areas that have undeniably peaked and gone into decline.

    "I figure any other peak oils will look like past ones. Predicting them are a bit of a bore, does it really matter when the next arrives? Seems like it is more important how many MORE of them there might be?"

    It is not a peak if production levels are surpassed.

    "Whatever it is, it has happened multiple times now. It would seem that any prediction of peak oil should also answer the question why it didn't work out all the OTHER times"

    Once for domestic and once for global. What other peaks is he talking about?

    "Global peak oil happened in 1979 or so, did it bother you much while growing up? Took about 15 years to recover back to prior levels and needed the invention of the SUV to do it."

    This one gives me a headache trying to decipher. SUV's? Back to prior levels. WTH are you talking about?

    "Oil and gas aren't energy sources"

    Umm, OK. No comment on that one.

    "Fracking has nothing to do with the lateral section of horizontal wells, horizontal wells aren't unconventional"

    Really? So all the reports of these high pressure frac jobs on these unconventional horizontal wells are what? Made up? Fantasy? Just because we were fracking soft rock formations and drilling horizontal wells for years before this new high pressure fracking of unconventional tight formation shales doesn't mean anything. It doesn't take "vast industry knowledge" to understand that we are talking about two very different things. I work in the "Unconventional Drilling Division" of my company's Exploration Drilling Department. I guess I should inform them that they are wrong. According to Collapsenik's vast industry experience the horizontal wells we are drilling are not unconventional.

    "Fracture pressures of underground formations are nothing to triplex pumps and don't require any more "energy" than is needed to even run the mud systems on the drilling rigs themselves. "

    Yeah, obviously has never seen a tri-plex pump blow apart from too much pressure on it.

    "one with experience spanning as many decades as me would know darn well that horizontals wells aren't themselves part of fracking. He would know, just as I do, that costs for drilling those horizontals has dropped in a HUGE way."

    Again, nope. I would expect someone with experience "spanning decades" to know that the current upswing of production is due to fracking horizontal wells in unconventional tight shales and the costs for that are astronomical. Yes they have improved somewhat with better methods but the average Bakken well costs 12-15 million dollars to drill and bring to production. Compared to 2-3 million I was spending on Vicksburg sand wells in S. Texas just 8 years ago, or the 5 million I was spending to drill and frac Haynesville Shale wells in N. Louisiana. So tell us again how costs have dropped in a "huge" way.

    "a company man with enough experience to have been there when MWD replaced single shots."

    Single shot surveys are the standard in the oilfield and have never been replaced. But I can see where an MWD techno geek, privy to only his one small part of the whole could make that erroneous assumption.

    "some peak oilers have an inordinate fascination with the oil and gas industry"

    Umm, peak oil is about the peak of oil and gas production, what other industry would a "peak oiler" be studying?

    " yet no one seems to notice that the same thing happened to Colin Campbell's prediction for peak in about 1989"

    I asked in an earlier rebuttal for a link to substantiate this claim. If true it would be the earliest instance of anyone mentioning global peak oil. Not saying it couldn't be but I never heard of anyone discussing peak oil in the '80's. Again, true to form, more statements with zero corroboration.

    Now I could go through these ridiculous statements one by one and show how asinine they are but he says he wants facts so let's look at the facts.

    Hubbert peak theory - Wikipedia, the free encyclopedia

    Why oil prices might not stay lower for too long - Fortune

    Marion King Hubbert Facts, information, pictures | articles about Marion King Hubbert

    Dream of U.S. Oil Independence Slams Against Shale Costs - Bloomberg

    U.S. Shale-Oil Boom May Not Last as Fracking Wells Lack Staying Power - Businessweek

    Drill Baby Drill! The Fracking Bubble is Bursting!

    Arthur Berman, Shale Is Magical Thinking - Business Insider

    Fuel Fix » Oil slump means canceled projects as investment declines

    Oil Producers Cramming Wells in Risky Push to Extend Boom - Businessweek

    Oil price falls and questions rise | TheHill

    Fuel Fix » Schlumberger CEO: Oil will recover, spur E&P spending

    This Little-Known Region Could Soon Be The World's #1 Offshore Oil Field - Yahoo Finance

    Peak oil in a nutshell - Here comes the nutcracker

    Break-Even Points for U.S. Shale Oil - Bloomberg

    Oil at $80 a Barrel Muffles Forecasts for U.S. Shale Boom - Bloomberg

    Predictions Of 'Peak Oil' Production Prove Slippery
    Fuel Fix » WTI rebound above $80 holds as Goldman Sachs sees no oil glut

    Oil tankers to China jump to nine-month high amid crude rout
    Shale Drillers Feast on Junk Debt to Stay on Treadmill
    Shale Drillers Feast on Junk Debt to Stay on Treadmill - Bloomberg

    OPEC Finding U.S. Shale Harder to Crack as Rout Deepens

    As Oil Prices Drop, Canadian Oil Sands May Be Wasted Investment
    As Oil Prices Drop, Canadian Oil Sands May Be Wasted Investment -

    He claims that many peaks have come and gone. And that the peak predicted by Hubbert never materialized. And that someone was predicting a peak in 1989. He also says that "Global Production" peaked in 1979.

    Here are the facts. U.S. domestic production peaked in 1972 and we have never been able to reach that level again. We were in a steady decline for 4 decades until we began to increase our production rates due to new high pressure fracking methods used in unconventional hard shale formations that horizontal drilling has allowed us to tap in to. But we are still nowhere near our peak production and with the short lives of these wells and the high cost of drilling them we are not likely to ever reach that level again. So that was the peak.

    Global production reached its peak in 2009 and we have been in decline every year since. And nothing we have done has brought us back to that level.

    I have done some research on Collapseniks online profile and it is quite telling. He seems to be the David Mabus of the peak oil boards and peak oil is his "Amazing Randy Challenge". For those who don't know David Mabus is a well-known, one topic poster who trolls forums and mass posts very disjointed diatribes against this "Amazing Randy" and his debunking of paranormal phenomena.

    Collapsenik, as he has done on this forum, only posts on peak oil boards and forums. He has made no other contribution to this forum. He posts his opinions and beliefs with no outside corroboration or resources. It seems to be his mission in life to debunk peak oil. His windmill that he tilts at on any forum that allows him to post in. He is the Gunkid of the PO world.

    I don't mind someone with a different perspective. Someone who will debate the merits of any topic. I have had many very in depth, and really quite enjoyable debates on here with people of completely different mindsets and philosophy’s than mine. But when someone comes on and starts to spout nothing that can be confirmed, only his personal bias, and then tell us that we should accept his view because of his vast experience, that turns out not to be that vast after all, then that I have to counter. And especially when they imply that I have no knowledge of the topic and my opinions or observations are not reliable. All I can say to that is if the toilet backs up, I'll call you.

    This is not a peak oil board. This site is dedicated to survival and prepping. We discuss many potential threats and how we can prepare for them. Climate change, social upheaval, societal collapse, worldwide pandemic. Peak Oil is another scenario that we need to be aware of and to be prepared for. Will the direst predictions come true? Maybe, maybe not. The prudent path as in all things is to take the middle road. The truth lies probably somewhere in the middle between the direst doom and gloom and the cornucopian all is well philosophy. The preppers motto is always to” prepare for the worst, pray for the best”.

    Nothing Collapsenik has posted, here or anywhere else, does anything to help people to do that. He is a one track poster who as I said seems to have made it his life’s mission to debunk anything about peak oil. I would say that the mission has been an unmitigated failure. In my mind he is a troll and has no valid contribution to the topic and I have wasted the last of my time refuting his diatribes.

    The truth is that both our own domestic production and now world production has peaked and has been in severe decline for years. The hoopla around this recent upswing in production is dangerous if not looked at in a critical light. If it is sustainable, and that doesn't look to be very likely, and it continues to rise, to a level over that reached by domestic production in 1972 and world production in 2009 only then will those two peaks prove to have not been peaks at all. And that is great. Cheap fuel built this nation and our entire economy is dependent on cheap fuel. But to adopt the attitude that there is no such thing as peak oil, that we will always have affordable fuel, that our lives will never be affected by falling production rates is nothing more than sticking your head in the sand. If you can't see it, it doesn't exist. I quoted Matt Savinar on here before "Deal with reality or reality will deal with you".

    Does that mean that we will soon be seeing all the dire predictions? All the worst case scenarios? Will we soon be seeing millions of people drop dead from uncontrolled viral infections? Will we see people starving due to worldwide crop failures? Will we see citizens rounded up and put in camps by an out of control tyrannical government? Will we see rioting in the streets due to a worldwide financial collapse?

    These are the things we look at it here. These are the things we talk about and prepare for. Some are more convinced of the possibility of one or more of those scenarios than others are. Some are more passionate about prepping for it than others may be. But to try to convince the members here that there is nothing to worry about and you are wasting your time thinking about it, preparing for it. That is a dangerous mindset to have and certainly a dangerous one to promote.

    If Collapsenik wants to debate certain aspects of the peak oil scenarios or have a discussion on the topic, I welcome that. But all I have seen on here and the other boards he frequents is a running diatribe against anything he personally doesn't believe in. And he presents no corroborating evidences to support his claims. And to be blunt a lot of his claims and statements are pure BS.

    I am waiting for the tactical wheelbarrow discussion to start.
    Or maybe the tactical oil drum.
    Last edited: Oct 24, 2014
  2. Minuteman

    Minuteman Chaplain Moderator Founding Member

    Just a few facts;
    The Peak of domestic oil production and the recent upswing in production from horizontal fracking in unconventional wells. US_Crude_Oil_Production_and_Imports.svg.

    The peak of the giant North Sea field.


    I had one for World Production but don't seem to be able to find it right now. But here are two major producing regions that are both in decline. That both have Peaked. So yeah, peak oil is real. Nearly every field and region in the world is similar to these charts. The only debate is over when and how severe we will be affected by it.
  3. AmericanRedoubt1776

    AmericanRedoubt1776 American Redoubt: Idaho-Montana-Wyoming Site Supporter+

    MM, thank you for that well-reasoned detailed cogent rebuttal to, what is for me, the first peak oil troll I ever met. :) I took the time to read your whole interesting post as I know nothing of the oil industry and the PO troll's techno-babble had me briefly fooled despite smelling something fishy...until you cleared the air. Survival Monkey's depth and breadth of knowledge combined with civility is amazing.
    Last edited: Oct 25, 2014
  4. AmericanRedoubt1776

    AmericanRedoubt1776 American Redoubt: Idaho-Montana-Wyoming Site Supporter+

  5. Collapsenik

    Collapsenik On Hiatus Banned

    The oil and gas industry is quite exceptional at generating a boom in such a way as to sow the seeds of its demise. As those of us who have been through mutliple booms and busts know, when you are in one, you won't have to wait forever for the other to reveal itself.

    Interesting that there is 10 million barrels a day of shale oil available for prices far below the price peak of 2008, can you imagine what happens to the ideas and credibility of peak oilers when (as it is looking, as compared to if) the US creates ANOTHER peak in oil production, nearly half a century after the one that the Prophet Hubbert declared in 1956?

    Agreed. Logical and reasoned conclusions showing that Hubbert's last claimed "accurate" prediction (US oil peak in early 70's) is about to go right out the window is a gutsy call, but you argued the point well, and the cost of supply curve was the perfect medium to demonstrate it. The only question is will it happen sooner versus later.

    Excellent. Given a choice, I would start with someting fundamental, such as whether or not the bell shaped curve has any ability whatsoever as a predictive method for oil production rates.

    Yes, or maybe no?

    I vote no.

    If you would prefer, we could start somewhere else, but your post was quite voluminous, and I would hate to pick a favorite topic of mine, so if you happen to have one, it would be fair to tackle that for starters.
    Last edited by a moderator: Oct 25, 2014
  6. ghrit

    ghrit Bad company Administrator Founding Member

    Any basic economics text will address market saturation and the effects therefrom. Load up on supply, the price will go down and throttle exploration. A lot of wildcatters went bust, a lot made money, simply by reading the tea leaves correctly (or not) about where the market was headed and/or tapping poor ground. Demise of the industry? Hardly, but demise of those without the ability to bridge the gap between low and high price of the commodity is assured.

    Yep, we see booms and busts in every industry/commodity. Learn to roll with the punches, and be prepared when punched.
  7. Collapsenik

    Collapsenik On Hiatus Banned

    The feeling induced as prices plunge, debt still needs to be serviced from cash flow, and facing less investment and overall activity, is far more visceral than reading about it in a textbook, I can assure you.
  8. Minuteman

    Minuteman Chaplain Moderator Founding Member

    Saudi's might not be able to produce enough oil to export by 2030. This is the largest oilfield the world has ever known. Mathew Simmons used to say "As goes Saudi, so goes the world". But "Peak Oil" is a myth or a ploy to drive up prices. OK.

    BBC News - [HASHTAG]#BBCtrending[/HASHTAG]: What will Saudis do when the oil runs out?

    "Saudis are feeling insecure because oil prices recently hit a four-year low. That doesn't in itself tell us anything about oil supply - indeed if it was running out the price might be expected to rise - but in 2011 a Citigroup report warned that Saudi might run out of oil to export by 2030."
    Last edited: Nov 17, 2014
  9. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    I cant wait for that day, will be drinking a fine drink that day
    oldawg and Yard Dart like this.
  10. Collapsenik

    Collapsenik On Hiatus Banned

    Matt Simmons thought that nuking the Macondo Prospect was the only way to shut it down, as opposed to those of us who are quite capable of, and probably have, drilled relief wells, right MM?

    Matt Simmons also claimed that the water cut in Ghawar was itself an indication of its peaking...nearly a decade ago now. Except...the water cut at the field level has been managed quite well, and the field didn't peak back when Simmons was getting lathered up about it. Query your Rystad Energy database if you'd like, certainly not a peak as of 2013, last I checked. This information comes direct from the frontlines, those REFM's also seem to just guess at these things.

    And for the record, Ghawar isn't the world's largest oil field, the Orinoco heavy oil belt is (we can exclude the Athabasca if only because it resembles a mining operation as opposed to operating an oil field as you would Ghawar or developing the Orinoco). You can check this by logging into IHS EDIN just like everyone else does, and checking the original oil in place estimates. If your IHS EDIN database is broken, you can substitute less accurate and a bit amateurish original oil in place estimates from Ghawar from some public analysis such as this:

    The Oil Drum: Europe | GHAWAR: an estimate of remaining oil reserves and production decline (Part 2 - results)

    with the estimates from geologic scientists who estimated not the place, but the technically recoverable from the Orinoco as several times larger.

    USGS Fact Sheet 2009-3028: An Estimate of Recoverable Heavy Oil Resources of the Orinoco Oil Belt, Venezuela

    But Rystad Energy and IHS EDIN have slightly different estimates, as you can check for yourself when your log in and verify everything I've said. Of course, if you use Woods-Mackenzie I suppose their numbers might be slightly different, but when given a choice among the major commercial oil and gas databases, including the one Colin Campbell used when he was busy making peak oil predictions back pre-2000, the old Petro-Consultants information has a historical advantage, and Rystad is quite efficient at newer projects, so that is why I use them, plus I couldn't get the boss to cough up the cash for all THREE of them. Would seem a bit hoggish, having them all. But whichever you use can verify these basic facts of field size based on original oil in place estimates.
  11. Minuteman

    Minuteman Chaplain Moderator Founding Member

    Last edited: Nov 22, 2014
  12. Minuteman

    Minuteman Chaplain Moderator Founding Member

    Oil at $75 Means Patches of Texas Shale Turn Unprofitable - Bloomberg

    Data: Some U.S. shale regions unprofitable at $75 per barrel

    Producers might not profit from 19 shale regions in the U.S., with oil being priced at $75 per barrel, data compiled by Bloomberg New Energy Finance show. However, shale depth and density, use of pipeline and the variety of output from wells still determine a region's profitability. For instance, because drilling in the Tuscaloosa Marine Shale has to be more than two miles deep, break-even price in the play is estimated at $79.52 per barrel. Bloomberg (11/20)

    19 U.S. shale regions are no longer profitable, according to data compiled by Bloomberg New Energy Finance.

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

    At least a dozen companies including Continental Resources Inc. (CLR) and SandRidge, both based in Oklahoma City, said on conference calls in the past month that they would reduce capital spending plans because of lower prices.

    Apache Corp. said today it would cut spending in North America by 25 percent. The Houston-based company said it will still increase production by 8 percent to 12 percent, compared with an annual average of 29 percent since 2009.

    Wells in the 19 regions that according to the data are unprofitable pumped a combined 273,745 barrels a day in June, 38 percent more than a year earlier, according to Drillinginfo, an Austin, Texas-based information provider to government and industry.

    By contrast, the biggest-producing fields -- North Dakota’s Bakken and the Permian and Eagle Ford in Texas -- pump a combined 4.7 million barrels a day, according to the Energy Information Administration. Those regions remain economic at $55 to $65 a barrel, according to Manuj Nikhanj, head of energy research at New York-based Investment Technology Group Inc. What matters more than break-even levels is that lower prices reduce the cash flows companies can use to reinvest in new production, he said.

    This is the crux of the problem as I have been trying to point out. The rise in price spurred the rise in unconventional fields and methods which resulted in a flood of new production which drove the price down. Many already drilled and producing wells are still profitable to produce at the lower price, many are not. But producing does nothing for future production. Future production depends on the profit made and re-invested into drilling the next well. And with the rapid decline in production rates of these unconventional sources the effect of this reduction in expenditure for future production will be felt much sooner and much more severe than ever before. There is a quote somewhere in the voluminous pages of this thread, perhaps in a link, from a peak oil author who posited this exact scenario. I don't have time to go through and find it so take it for what you want. He said that as the cost of oil rose due to depletion we could expect to see investment in more unconventional areas, fields that were to costly to produce before and that would lead to a rise in production levels. To be honest neither him nor anyone else foresaw the gigantic leap in production that we have experienced but the scenario remains the same. We see a huge spike in production but as these new sources deplete and become unprofitable to acquire the drop on the other side is much faster and severe. Instead of a bell curve we have a rollercoaster ride to the top and a plunge down the other side. This is exactly what we are seeing today. We are just nearing the top and the other side is yet to be seen. Will we plateau or will we freefall? Only time will tell. Look at the chart above on domestic production and the steep rise we have been on in the last few years. We basically have strung a tight rope across the Peak oil Chasm and are balancing on it. But the wind is picking up and we have yet to see if we will make it to the other side.
    Last edited: Nov 22, 2014
  13. Minuteman

    Minuteman Chaplain Moderator Founding Member

    IHS: ‘Tight-oil test’ under way in US amid lower oil prices - Oil & Gas Journal
    Even if oil prices decline to $70 per barrel, about 80% of potential growth in domestic gross shale oil output next year would remain resilient, according to an IHS report. Additions to output would have a break-even price from $50 to $69 per barrel, it noted. Existing wells are expected to remain profitable with lower prices, (EXISTING wells. It will not be profitable to drill new wells to replace those when they start to deplete) “Since the highest level of production costs occurs during the initial development phase of a well, existing wells can remain economical at crude oil prices far below the break-even price for new production,” IHS noted.

    “Lower crude oil prices have a greater potential to affect supply growth because new wells require significant investment before production begins. In the initial months of production, the oil price is critical to determining the profitability of a new tight oil well,” it said.

    “Though these are strong reasons to believe in the resilience of tight oil growth, the report acknowledges that the risk of supply growth falling short is much greater now than just a few months ago,” IHS said.

    Burkhard noted, “Expectations of the future—and the trajectory of oil prices—means that prices do not need to fall to the breakeven price before psychology, investment, and thus output, is affected. Lower oil prices bring into question the ongoing extent of one of the most profound developments in the world oil market—the great revival of American production. The ‘tight-oil test’ is under way.”

    As in all things we as preppers look at these scenarios with the mindset of being prepared. Prepare for the worst, pray for the best. Now is not the time to go out and buy that gas guzzler you have been wanting. Now is not the time to say "Ah, the price of fuel is down, all is well". We may indeed be in a short respite that gives us more time to stock up on solar power, fuel efficient vehicles, alternative energy sources. But as is the norm for most Americans, "Let the good times roll". Worry about tomorrow, tomorrow.

    Hmmm, got know idea how these lines got in here or how to take them out. MM
    Last edited: Nov 22, 2014
  14. Collapsenik

    Collapsenik On Hiatus Banned

    Dude. Seriously? This is peak oil.

    Point 5.

    The Oil Drum | A Critical Examination of Matt Simmons’ Claims on the Deepwater Spill

    Google is your friend.

    Start by refuting the geoscientists work, link already provided? Good place to start anyway, them certainly not being REMF. They are quite the disinterested 3rd parties, the particular gang I quoted started using some of Hubbert's work back in 1975.

    Is there any reason you don't consult the reserve and resource databases I've previously mentioned? I recommend IHS EDIN or Rystad, but Woods by-Mackenzie would work as well. Use the one you have been provided with, and get back with us.

    Perhaps you missed the part about original oil in place estimates? You know, the ones contained in the commercial databases? Check it out dude, I certainly wasn't refering to production rates...I mean really? Like if production rates mattered, the Bakken and Eagleford would be like the largest oil fields in the western hemisphere right now.

    And Cantarell isn 't the second largest field either, perhaps while you are verifying the Ghawar thing, you can check the original oil in place estimates there as well, and get back to us?
  15. ghrit

    ghrit Bad company Administrator Founding Member

    Some folks seem to think that addressing others as "dude" is a polite term, and under some circumstances it may be so. However, within the context of a debate, it is not. In fact it is mildly insulting. Read the CoC again, and watch it.
  16. Collapsenik

    Collapsenik On Hiatus Banned

    I shall investigate the CoC to see what the acceptable use of the word "dude" might be. And while some might consider correcting factually incorrect information as a "debate", I'm not sure I would agree with characterization. The in-place estimates of existing oil fields has been documented by not only publicly available information such as the Oil and Gas Journal (which have referenced Ghawar being smaller in size than the heavy oils of the Orinoco), but the documented work of Meyer (1986) and can be easily established just as I have said by utilizing access to the IHS Edin database as well as Rystad UCube. MM can just look it up as can the rest of the industry professionals. These numbers are not in dispute. People can have their own interpretations and conclusion (peak oil causes TEOTWAWKI), they do not get to invent their own facts. This also includes the asshattery of Matt Simmons and his documented suggestions of using nukes to stop well blowouts when both MM and I have undoubtedly been involved with relief wells. Including, in my case anyway, work on various aspects of the Deepwater Horizon. That was an all hands on deck episode, no room for REFM there. I perhaps even have bumped into MM before, if he was working on some aspect of that debacle.
  17. ghrit

    ghrit Bad company Administrator Founding Member

    With all due respect, you may have to think about it a bit since acceptable manners of address are not specified. If you need that sort of detail, we can arrange for you to have time to do the research. You might start with, there are some interesting resources cited on that site relating to dead dinosaur matters other than natural gas.
  18. Minuteman

    Minuteman Chaplain Moderator Founding Member

    Sorry I'm not in the habit of trolling peak oil forums for my "Research". And I certainly don't take things people post on internet forums as "Facts".

    Your "oil in place" estimates you are so fond of, no doubt derived from your cherished engineering data bases, is nothing but gobbledygook. It sounds impressive, and might actually be used to promote your point, that is for those unfamiliar with the "Dark Industry". Unfortunately it doesn't fly with me.

    To clarify for those unfamiliar with the concept let's say I own 100 acres of land. If I planted it all in wheat I could expect to harvest X number of bushels of wheat per acre. So you could calculate my theoretical amount of wheat in place.
    But, of that 100 acres, 50 acres is wooded, 25 acres are rocky outcropping with no top soil. So only 25 acres are level and immediately tillable. What I plant on that 25 acres, and what I harvest from it is my Production rate.

    In the oil industry production rates are all that matters. Especially when looking at the peak of any field or area. There is a lot of oil "in place" in areas around the world. But not all, not even the majority of it, is "recoverable".
    This is all a smoke and mirrors, theoretical, engineering, slide rule measurement that has no real bearing in real life production rates, profit rates, depletion rates. And to say that because the theoretical model predicts this much oil "in place" that makes it the largest oil field in the world. Ha! That's laughable. It's how much is produced, how much is sold, how much is put on the world market that determines the size of a field. No one in the industry disputes the FACT that Ghawar is the largest oilfield the world has ever known. Fact NOT theory.

    You have said on here that you worked as an MWD tech, and now are a Production Engineer. But you tell us that you have drilled relief wells and that you were "on board" for the Macondo relief operation. Niether of those positions qualifies you in any way shape or form to "drill relief wells" and certainly a production engineer would be the most useless person to have "on board" during a kill operation.

    I have to ask, just how brown are your eyes?

    It never has been a challenge to debunk your drivel. Expose you for the poser you are. But now it has even lost it's entertainment value. Therefore I am through responding to your posts. Go ahead and spout your gibberish to those who don't know any better. And you may actually be able to fool some of the people, some of the time. But you don't fool me and I'm through giving you a platform. Maasalama gabi. MM
    Last edited: Nov 23, 2014
  19. Collapsenik

    Collapsenik On Hiatus Banned

    The source was Simmons speaking on Businessweek. Simmon's own words are not trolling peak oil web forums, it was the best place I could get the reference for those who wish to pretend that he wasn't as oilfield ignorant as this example demonstrates.

    You made a claim. I simply provided the source (it isn't an engineering database, why would you say that, if you have access to them?) that contradicted it at the most basic, geologically defensible level. If you do not understand either the in-place calculation itself, or the accompanying uncertainty contained within that sort of estimate, I would be happy to explain it.

    Before you drill your well, someone has decided it is worth $$ to drill. With ZERO production rates. So apparently, what is EXPECTED to be produced matters quite a bit, and you know this. You don't get to general contract the construction of a house until I, the developer, collect the financing for the sub-division. Certainly I do not expect my house contractor to understand what it takes to purchase the property, manage the architectural drawings of future sub-division, allow others to give me a down-payment on their "not yet drilled" houses, collect all funds, make sure the housing contractors do their damn jobs, and at the end of the day pay back the bank, pocket the difference between cost and benefit, and move on to the next project.

    I believe "recoverable" is certainly a word that considers the idea of economics. Ergo, if it is profitable, someone will probably do it. Would you care to venture on the claimed 100% recovery within the diatomites of California? Certainly REFM aren't familiar with this formation, or the estimates of 100% recovery, and why, but I would be happy to discuss it with another front liner, if you wish.

    I have already provided the industry folks (Oil and Gas Journal), scientists (USGS) and best oil and gas upstream databases in the world (IHS and Rystad) who have done EXACTLY that.

    If you are capable of refuting these basic calculations of original in place volumes, I'm sure not only the local forum but the industry publications, Hubbert descendent scientists and best information and engineering analysts in the world would be dying to hear it. I can guarantee that each and every one of them would hear such proof, if you can provide it.

    Not quite. I began running MWD prior to directional drilling. I certainly once was a production engineer. And reservoir engineer. Then the expert witnessing, director of engineering for special projects (otherwise known as unscrewing the pooch after the general contractor was fired), and then I moved in career #2. Which is where I ran into the Deepwater Horizon debacle. I mean really, someone has to understand the technical topics well enough to do the technical review on the new regs so that company men won't hand the GOM that mess again, right?

    Not quite big guy (I have been informed that using the word "dude" is verboten for some reason). You see, someone who wasn't involved needed to be consulted on how to prevent the next disaster from happening, and they called in the folks of appropriate expertise. Including for the review of the new regs, flowrate calculations for the potential size of the spill penalty, and all from the independent 3rd party perspective. I mean, it isn't as though you would ask the company men who were in charge to help sort out where the fault lay, right?

    Are you kidding? You didn't know Simmons wanted to nuke the well, but those watching Businessweek knew. You didn't consult the best available information available to industry before proclaiming Ghawar and Cantarell as #1 and #2 when they are no such thing.

    My drivel? You mean, the FACTS I provided? After you check the recommended sources (did you even READ the info provided?) and come up to speed on industry FACTS, then we can discuss a prep session on getting you up to speed on the in-place calculation. Can't promise that I can teach you the statistics related to the calculation if we decide to incorporate the uncertainties, but I'm game for educating the less well informed in the industry.

    Come to an SPE national or AAPG national convention, I'm bound to be teaching a short course to company men on how to use a calculator or whatnot.
  20. Minuteman

    Minuteman Chaplain Moderator Founding Member

    Ah, ok. Thanks for clearing that up. I suspected reservoir engineer, but a number cruncher makes a lot more sense. So basically a REMF pencil pusher who once upon a time caught a glimpse of the front lines and now thinks they are an expert in battlefield tactics. Got it. Go back to your data bases, engineering seminars, computer simulations and all the slide rule, scientific calculator, theoretical calculations. Meanwhile guys like me will be boots on the ground on the front lines hunting dinosaurs and pulling dragons from the ground. We will be piloting space shuttle missions while guys like you will be designing a better toilet. Thanks for your contribution, I will think of you every time I take a ....
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