Oh The Irony

Gazzatrone · Posted: Tue Oct 07, 2008 8:20 am Post subject: Oh The Irony

World starts coming apart at the financial seams and oil is heading for $10 a barrel (read sarcasm). But seriously did anyone see the price of oil go so fricking low a couple of months back?

I'm pretty sure it was strapped to the Space Shuttle on launch day and not due back to Earth for like ever.

Let it be known that I think the cheap oil we are seeing now is quite possibly the WORST thing that could happen to a finite resource in its silver years.
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THE FUTURE IS HISTORY!

ROCKMAN · Posted: Tue Oct 07, 2008 11:13 am Post subject: Re: Oh The Irony

Actually Gazza oil is right about where most of the E&P companies had projected it to be. I've been in the oil patch 33 years and see the economic analysis of drilling projects daily. No one used price assumptions over $80 a bbl. The E&P side of the biz could care less how the future traders play the game. We have to model price expectations over a minmum of 7 or 8 years. High and low jumps don't play into the analysis. In fact, most companies were using $70 - 80 oil for the first 12 months and then dropping it back around 10 -15% for the next 24 months and then adding a slight escalating factor for years 4+.

You have to remember that the wells which were drilled last year were based upon $50-60 oil. No one, except a promoter conning investors, sells a drilling idea using inflated oil prices to justify the risks.

yesplease · Fission Joined: Oct 03, 2006 Posts: 2564

Rockman, about how much would we see production increase over a decade with consistent ~$150-200/bbl prices?
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ColossalContrarian · Intermediate Crude Joined: Jun 20, 2006 Posts: 697

ROCKMAN · Posted: Tue Oct 07, 2008 1:28 pm Post subject: Re: Oh The Irony

yes,

I can just offer a wild guess but if you're talking a net increase (new production less decline) I would say a small increase for several years thanks to some new big fields coming on. But after 2012 or so I would expect a continual decline. This is based upon some great work by some folks at The Oil Drum. But that’s even a tricky answer. They take into account increased consumption in the exporting country. A valid factor for sure but one more set of assumptions.

And it's fair to also make a distinction between "production rate" and "production capability". Eventually, IMO, OPEC will be able to function as a true cartel and exert extreme control over the outflow of oil. Production capability might be x bbls/day but that doesn't mean OPEC will produce at that rate. But this assumption ignores potential political/military reactions to such a policy by OPEC.

And now with the looming financial mess it's easy to project significantly more demand destruction then we saw from the price increase alone. This will also distort the production curve in ways I have trouble estimating.

In general I take all estimates of future rates and prices with a huge grain of salt. Been doing this for 33 years and have seen monumental miss-estimates of both numbers...especially prices.

WildRose · Light Sweet Crude Joined: Jun 21, 2006 Posts: 1089

yesplease · Fission Joined: Oct 03, 2006 Posts: 2564

So the megaproject database? What I'm wondering is, does it taper off around 2012 due to lack of available resources, or are megaprojects only announced a few years in advance?
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lorenzo · Fission Joined: Jan 01, 2005 Posts: 2231

I think I estimated oil to go down to $70, but I would very much appreciate it if it went down further. It would add a digit to my profits.

If only I can find a serious and safe bank to stash away all that cash. That will be the real problem. Very Happy

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The Beginning is Near!

species8742 · Coal Joined: Oct 07, 2008 Posts: 18

Even a non-working clock is right twice a day.

You did not predict economic meltdown.

be honest.
Now saying you were right is disengenuous.

You will have to be assimilated, I will let the Borg through to you, and take care of them later.

VMarcHart · Posted: Tue Oct 07, 2008 5:29 pm Post subject: Re: Oh The Irony

yesplease · Fission Joined: Oct 03, 2006 Posts: 2564

the48thronin · Posted: Tue Oct 07, 2008 10:40 pm Post subject: Re: Oh The Irony

Gazzatrone · Posted: Wed Oct 08, 2008 3:01 am Post subject: Re: Oh The Irony

ROCKMAN · Posted: Wed Oct 08, 2008 5:26 am Post subject: Re: Oh The Irony

Rose -- from the bits and pieces I've seen about Iraq they may have some significant exploration potential. But it should take well beyond 2012 to discover, and more importantly, to fully develop. Once a large field is discovered, even onshore, it can take 3 or 4 years to reach max flow rate. By the time anything big in Iraq is fully developed I suspect the declines of the old mega fields will be so severe that there will still be a net decrease in prod capability even with any new Iraq prod. And all this ignores the political instability of the region...look at Nigeria these days.

Yes -- mega projects is the most thorough data base I've seen. And it tries to stick to conservative estimates. And yes, you can only legitimately throw in new reserves from new mega projects which have been well defined. Speculating on future exploration potential is a fool’s game IMO. Offshore Brazil does have a big potential but they're still trying to get their hands around it. In a couple of years we'll probably see some huge (and accurate) additions to global prod capabilities estimates from this region. But development of those reserves, owing to the great water depths, could take 6 or 7 years to develop once a commitment is made. But, as I mention above about Iraq, we’ll be in such steep decline by that time the new Bz prod may still result in a net decline globally. And, just like the Deep Water GOM, the declines rates for those new Bz fields will be significant (probably drop 70% in 6 to 8 years).

And don’t ask about new offshore US drilling. I’m all for it (good for the economy…even more so with the current mess) but it won’t amount to much more than a blip. But at that point in time I suspect we’ll be desperate for every little blip that can be had.

VMarcHart · Posted: Wed Oct 08, 2008 6:19 am Post subject: Re: Oh The Irony