[Oily Stuff]

Bentek Energy, I believe, is a well respected oil market analysis company based in Houston; they have a conference of sorts annually to discuss such things as oil marketing, production volumes, oil price differentials, etc. It appears to be another lets feel good about the future get together among oily type folks.

The big news at this years hoe down was the fact that Eagle Ford production in S. Texas surpassed 800,000 BOPD in 2012, headed to 1.4 million a day by 2016. Actual EF oil and condensate production thru February of 2013, however, was less than 559,000 BPD according to the Texas Railroad Commission Eagle Ford News website.

The oil industry, to which I almost always proudly associate myself with, is definitely on a mission. When it comes to this kind of fudging of the numbers, 1 million BOE estimated ultimate recoveries per well, 50% ultimate recovery rates of oil in place in the EF and 25 years and 40,000 shale wells of blissful energy independence, I sometimes would like to take the America Needs America's Oil bumper sticker off my pickup. All the hoopla has gotten a little embarrassing, really.

So, what is the point in all this never ending propaganda?

[Pops]

I don't care what "sector" of the market they're in, publicly traded companies are in reality in the business of stock prices, that's how the people that run the company get paid, it isn't salary, it's stock options.

Drive up the stock price and become a billionaire.

.

[Oily Stuff]

That is the only explanation I can think of too, sir. The general public does not really care where its oil comes from, as long as it gets there and is cheap. Financiers seem content to keep tight oil companies funded regardless of factual economics. I can't imagine that tight oil companies are overly concerned about long term alternative transportation fuel research and falling demand, of making sure America stays on the oil wagon. All the hype must simply be for the benefit of Wall Street and very short term stock values. A perfect example of your explanation would be the fella steering the EOG ship.

In any case, Americans read it on the internet and it must be true. You can't make stuff up on the internet.

[Econ101]

You make the wrong assumption that what is being produced today by the EF is at the maximum. Production could be down for a number of reasons, none of them related to peak oil.

North Dakota experienced a similar leveling off and maybe even a slight drop this winter. Not only was production affected by the brutal winter shipping capacity was and had been at max.

Projects are being completed now and shipping capacity will be at 1 mill/day by 2016. Right now it is ahead of production which is about 750,000 B/d. I dont know what maximum shipping capacity out of the Williston Basin will finally be developed to but it will be the production max as well.

At that point they will have to increase demand in-state. Maybe a huge refinery taking in 1 mill b/d of fine crude and shipping out good gasoline? They could refine the tar sands too.

Oil shale production technologies developed here are now being deployed world wide. Had the canadians know this was going to happen I dont think they would have invested in the oil sands so heavily. Now that they have Im sure they will clean the sands of the toxic crude.

The point is oil company values are only in part supported by reserves. Reserve depletion is of course used to protect gross production income from tax. Reserve numbers as well as cost of goods sold numbers are always at the pleasure of the issuing company within the GAAP rules of course.

The controlling factor is of course income. Without matching income they cant make value for the company by exaggerating reserves.

[John_A]

So, what is the point in all this never ending propaganda?

As it approaches 1 million barrels a day in real production, it is called reality, not propaganda. The future claims might be propaganda, but that is a matter of opinion. Certainly the reality cannot be denied.

[Oily Stuff]

Production levels in the Eagle Ford are not anywhere close to one million barrels per day and about 225,000 BOPD less than what a significant oil analyst reported they were in a recent press release that got national attention. Next year the same wells that produce current production rates in the EF will have declined by 63%. Forty percent of the new EF wells drilled between now and then will simply replace the 63% that has declined in the same time period.

Six million BOPD and energy independence from tight oil resources is indeed propaganda. Clearly the message works and that, I guess, is the point, isn't it?

[John_A]

Production levels in the Eagle Ford are not anywhere close to one million barrels per day and about 225,000 BOPD less than what a significant oil analyst reported they were in a recent press release that got national attention.

Okay, so significant oil analysts aren't any better at predicting the future than those who said the US was past it's peak in oil production and it was all down here from there. Instead of growing oil production faster than at any point
in time in its entire history.

Predicting stuff is hard. The reality is, we are making more oil now, and the only question is "how much more". It is not propaganda for someone to estimate X, and someone else estimate Y. It's an estimate. Some are higher, some are lower. Those who believe low don't get to call propaganda any more than the guy who called high gets to proclaim the other is an ignorant denier. They are just different estimates.

Next year the same wells that produce current production rates in the EF will have declined by 63%. Forty percent of the new EF wells drilled between now and then will simply replace the 63% that has declined in the same time period.

And that has been going on for years, and may continue for a few more, or not. And sure, when all drilling stops, production will decline. Just like Prudhoe Bay. It is what oil fields do.

Six million BOPD and energy independence from tight oil resources is indeed propaganda. Clearly the message works and that, I guess, is the point, isn't it?

5 years ago growing oil production faster than ever before would have been propaganda. OOPS. And the EIA certainly isn't declaring American oil independence out to 2035, so maybe you just picked a bad source?

[Oily Stuff]

Thank you for your response. First let me say there is a factual component in reporting production that you are missing. It is NOT a matter of "estimating" and actual production is what it is. The actual production from the Eagle Ford shale in Texas was less than 560,000 BOPD, C+C, thru February of 2013. It was not 1 million per day nor was it 800,000 BOPD thru 2012 as Bentek reported. In Texas the Railroad Commission knows every bbl. produced, everywhere, and that data is published.

I think that intentionally overstating reserves by public companies is a pretty well established fact. One only has to review the shale gas situation to confirm that, for instance in the Barnett shale. As POP's suggested, overstating reserves was, and still is about enhancing the value of stock shares. CHK is the poster child for overstating reserves.

I absolutely do not agree that in the US we are growing oil production faster than "any time in history."

Lastly, "oil fields" don't typically decline 63% in their first year of life, not conventional oilfields anyway, not Prudhoe, not any oilfield I have ever worked in. Oil fields producing from conventional classified reservoirs currently seem to be declining at something like 5-7% per year. The decline rates of tight oil wells in the Eagle Ford and the Bakken shale oil plays are astronomical, over 75% in the first two years of life. That is very unconventional and a very new part of the equation in predicting future production rates. I am often astounded how difficult it is for people in general to get their arms around the significance of production decline.

Politicians, the media and CEO's of public tight oil companies are actually predicting energy independence a lot sooner than 2035. I hear that every single day from some source. I believe that is deceptive and a disservice to the American people.

I liken it to truth in advertising. My industry I do not believe is being very forthright about tight oil resources.

[Plantagenet]

"oil fields" don't typically decline 63% in their first year of life, not conventional oilfields anyway, not Prudhoe, not any oilfield I have ever worked in. Oil fields producing from conventional classified reservoirs currently seem to be declining at something like 5-7% per year. The decline rates of tight oil wells in the Eagle Ford and the Bakken shale oil plays are astronomical, over 75% in the first two years of life.

You are comparing conventional "oil fields" with individual oil wells drilled in unconventional reservoirs, but they aren't at all the same kind of thing.

A conventional oil field is typically a single small geologic structure that may be no more than a few square miles in areal extent and holds an accumulation of oil in a small region where permeable sediment lies beneath an impermeable "oil trap". In contrast, an unconventional shale oil deposit is a huge geologic deposit that can be thousands of times larger in areal extent. So yes---oil wells in conventional and unconventional oil deposits behave very differently----but that doesn't mean there aren't significant amounts of unconventional oil still to be produced by drilling thousands of wells into deposits like the Eagle Ford shale.

The point is that ROI is much much lower for unconventional oil than conventional oil, but companies can still make a nice profit drilling shales at the current market price of ca. $100 bbl.

[Oily Stuff]

My response was to the previous post inferring that all "oilfields" decline at rates equal to wells in the Eagle Ford shale. They don't. I think, but am not sure, you must be trying to say that just because most individual wells in the Eagle Ford decline at a combined rate of 75% in the first 2 years of life that does not mean the Eagle Ford shale play itself will decline at that rate? I suppose it won't as long as they keep drilling one 8 million dollar well after another for the next 25 years and until there is no grass for cows to eat, only crushed limestone. When the drilling treadmill stops however, hold on to your knickers.

I don't understand this passionate defense of tight oil. I have not said that unconventional shale resources will not contribute to domestic production, it has and it will. I did not say that the EF would not keep growing. It will for awhile. As long as oil prices stay above 75 dollars. Yes, you are correct, a few of the big companies that have zeroed in on sweet spots and can practice of economy of scale can make money doing that sort of thing...if 8% annual rates of return float a companies boat and it does not mind risking borrowed dollars for that kind of return, more power to it. We can sure use the oil.

What I have said, categorically, is that IMO tight oil will never be the energy "revolution" that people like you seem to think it will. It will not make the US energy independent. Eighty percent of current tight oil production in the US comes from 2 resource plays. Best educated guesses are that maybe, maybe we will get 1.5 years worth of our domestic oil needs from these two plays, total; that's all. That's no game changer.

And that sir, is the point.

[Pops]

In contrast, an unconventional shale oil deposit is a huge geologic deposit

Curb your enthusiasm, lol
There are 21 tight oil plays in the US, 80% of production comes from 2, that's 10 counties in TX and 4 in ND. According to Hughes at shalebubble.org, the EIA estimates drilling locations run out in 2015 in ND and '17 in TX.

It's isn't unlimited.

The 2013 EIA guess says

U.S. production of crude oil in the AEO2013 Reference case increases from 5.7 million bpd in 2011 to 7.5 million bpd in 2019... Despite a decline after 2019, U.S. crude oil production remains above 6.0 million bpd through 2040.

That's 1.8MB/d net with a peak in 6 years at best. They don't show C+C in their chart, they show "liquids" I assume because they want to be able to count NGPLs from the gas land rush - prices are climbing for gas tho and drilling isn't, that may be a snafu...


http://shalebubble.org/drill-baby-drill/
http://www.eia.gov/forecasts/aeo/er/ear ... uction.cfm
https://docs.google.com/viewer?url=http ... 120512.pdf

[Plantagenet]

...most individual wells in the Eagle Ford decline at a combined rate of 75% in the first 2 years of life that does not mean the Eagle Ford shale play itself will decline at that rate? I suppose it won't as long as they keep drilling one 8 million dollar well after another for the next 25 years

Yup. Now you've got it.

What I have said, categorically, is that IMO tight oil will never be the energy "revolution" that people like you seem to think it will.

Now you are making things up. I've never said tight oil will be an "energy revolution" as you claim. I simply pointed out that no matter how quickly individual wells in the Bakken or Eagle Ford decline, production from these tight oil formations will go on for years.

Tight oil is hardly a revolution----at best its a bridge to delay the effects of peak oil for a bit longer.

[Oily Stuff]

You did not say tight oil was revolutionary, no. Other posters previously in the thread implied that it is. If you don't feel that way, goodonya; I stand corrected. And thanks too for the lecture on oilfields.

We don't really know for sure, yet, how these tight oil wells will perform in the future; these are not straws into a big homogeneous reservoir container. Tight oil wells drain only the container it creates for itself via the frac radius around the horizontal leg. All those hyperbolic decline curves with 20 year fat tails, like conventional reservoirs, its a guess. And part of the hoopla. Could in the end be these wells have actual straight line linear down in the ditch declines, don't know. They'll all be stripper wells soon enough.

So, as long as banks don't panic and pull the plug, oil prices stay high, water does not run out, and nobody screws up and frac's into some farmers toilet, the party will go on. In the mean time 97.5% of the world's crude oil production from conventional sources is going down, down, down.

[Subjectivist]

Life isnt like The Lord of the Rings, the only point is what you make of it. If there is a divine plan it is up to you to figure it out, trying to figure out the plan if there is no divinity is totally baseless. Either God has a plan or He doesnt exist, either way do the best you can with what you have.

[ROCKMAN]

P – “…production from these tight oil formations will go on for years.” Not just tite oil and the fractured shales. The old conventional fields, even if higher prices don’t bump up their production rates, will keep delivering as long as the net income stays positive. And that will happen as long as oil prices stay elevated.

Let’s just consider Texas that produces more oil than any other state. Oil production here peaked at 3.45 million bopd in 1972 from 167k wells. Or 21 bopd per well. By 2007 the numbers dropped to 921k bopd from 153k wells. Or 6 bopd per well. I don’t have a breakdown but the vast majority has come from conventional reservoirs. At 6 bopd a well can’t justify the production overhead of many wells without higher oil prices. If we had not seen oil prices rise in the last few years many of those wells would have been abandoned. And if we have a significant drop in prices many will suddenly be abandoned.

Now thanks to high oil prices and the shales (mostly the Eagle Ford) the rate in Texas is up to 1.46 million bopd from 168k wells. But that’s still less than 9 bopd per well. A nice bump up but some of the shine comes off when you remember the high decline rate of those fractured reservoirs. As long as new wells are drilled fast enough the total rate will stay up there. But if prices drop enough not only will we lose that short term bump from the unconventional reservoirs but also from conventional fields that suddenly go uneconomic to produce.

But even with the recent nice shale bump we’re still only producing about 40% of our peak rate. And even that is dependent on oil prices staying elevated. Bottom line: the US oil industry is very mature and worn out. It took record high prices (adjusted for inflation) not seen in more than 3 decades to breathe a little more life into us. A bit more life at the expense of the rest of the economy. For that I thank you. LOL.

[Econ101]

It took 3 decades to organize, research and develop those massive discoveries. Now we are enjoying the fruits of those labors. Price didn't hurt but that shale was getting drained no matter what.

[dolanbaker]

It took 3 decades to organize, research and develop those massive discoveries. Now we are enjoying the fruits of those labors. Price didn't hurt but that shale was getting drained no matter what.

Would those shale plays have been drilled if the price of oil had remained below 25 USD? I doubt it!

[Econ101]

It took 3 decades to organize, research and develop those massive discoveries. Now we are enjoying the fruits of those labors. Price didn't hurt but that shale was getting drained no matter what.

Would those shale plays have been drilled if the price of oil had remained below 25 USD? I doubt it!

Yes, they would have. They were drilling it at $20. A lower price would have certainly changed the business/finance structure but the shale was going to be drained.

It's no place for wildcatters, this deal is about volume drilling. A wildcatter or small deal maker is going to have a hard time. Many of these companies like Hess and Heilis have been out there since the beginning gathering, consolidating and developing.

By looking at how the deals are structured you can draw conclusions about the quantity of the resource and it looks as if things are very rich indeed.

[ROCKMAN]

donlanbaker – Not much doubt required. As pointed out these reservoir were well understood for many years. And the technology used to develop them today was well known in the late 90’s. And we had $25/bbl in the late 90’s. And no drilling boom. At least not in the Bakken and Eagle Ford Shale. But we had just finished a horizontal drilling and frac’ng boom in a fractured carbonate shale, the Austin Chalk, situated just a couple of hundred feet below the EFS. A play which was supported by oil prices at the time. And now we have $90+/bbl oil and a drilling boom in previously uneconomic trends. As much as I would like to portray us geologists as truly brilliant it really ain’t rocket science, is it? LOL.

[Econ101]

All RM has described is what happened. Of course they started drilling when the price rose. Wouldn't you?

It was going to happen anyway. It just would have been a little slower. It's every bit as rich as you can imagine.