T. Boone Pickens Talks Peak Oil

18 Comments on "T. Boone Pickens Talks Peak Oil"

Arthur on Fri, 4th Apr 2014 12:35 pm 



“Markets are going to provide the solution… but I was not sure how the solution would look like”

Market fundamentalism in action, geologic constraints be damned. Absolute refusal to look any further in the future than 5-10 years.

Makati1 on Fri, 4th Apr 2014 12:38 pm 



It’s a shame when you only know one thing and it is becoming obsolete.

rockman on Fri, 4th Apr 2014 1:09 pm 



And here’s what T Boy doesn’t explain about the “opportunities” with those ultra-deep wells in the shallow water of the Gulf:

The status of the ultra-deep wells drilled in the shallow waters of the Gulf of Mexico: McMoRan said in its new quarterly report that it has sunk a total of $1.2 billion to drill six behemoth wells, including Davy Jones, Blackbeard and Lafitte.

McMoRan is going after deeper reservoirs of natural gas more than 30,000 feet below sea level. McMoRan’s exploration wells have indeed found bountiful quantities of hydrocarbons. McMoRan has run into trouble completing the first Davy Jones well. In short, the bottom of the wellbore, which at 30,000 feet deep is no bigger than your fist, got all gummed up with heavy drilling mud that McMoRan had to pump down to control the well’s massive pressures. The gunk solidified and has stymied McMoRan’s efforts to complete the well and test its flow.

Impatient investors in McMoRan were so discouraged last year that the started bailing out on McMoRan. Facing the real risk that they would run out of cash before completing the ultra-deep wells, McMoRan in December forged a deal whereby sister company Freeport McMoRan Copper & Gold agreed to buy McMoRan for $3.4 billion. McMoRan now faces a bevy of lawsuits from shareholders alleging that it breached their fiduciary duty to Freeport by saddling that company with McMoRan’s high-risk ultra-deep wells. The merger is expected to close in June.

Investors will have to wait a little longer than that to see if Moffett can figure out how to unclog Davy Jones and get it flowing. In order to break through the solidified drilling mud, McMoRan is engineering a large-scale hydraulic fracking treatment. The big offshore service companies like Halliburton and Schlumberger don’t just have gear sitting around ready for this kind of job. No one has ever before tried to frack into a 30,000-foot deep reservoir through such a tiny wellbore while knowing full well that the natural pressures contained in the reservoir are on the order of 20,000 psi. Building the heavy duty blowout preventers and fracking gear for Davy Jones and the other wells takes months. McMoRan says it expects to resume work on Davy Jones before August.

The first Davy Jones well has to be most expensive well ever drilled. McMoRan says its “investment in drilling, completion and other costs specifically attributable to Davy Jones No. 1 approximated $339.4 million as of March 31, 2013″ and that its total investment in the Davy Jones complex, “which includes $474.8 million in allocated property acquisition costs, totaled approximately $1.0 billion at March 31, 2013.”

McMoRan holds a 63.4% working interest and a 50.2% net revenue interest in the Davy Jones complex. Other investors include Energy XXI and Fort Worth billionaire Tex Moncrief.

{And now you know “the rest of the story” as Paul Harvey used to say.}

Dave Thompson on Fri, 4th Apr 2014 1:26 pm 



T Boone telling me we have all the oil we need right here in the US?

Boat on Fri, 4th Apr 2014 1:48 pm 



Great story Rock

rockman on Fri, 4th Apr 2014 2:53 pm 



Boat – A couple of weeks ago I looked at one such deal. First, they have to shoot $15 million in 3d seismic to firm up the geology. If the seismic doesn’t key the prospect (that happens a lot more often than outsiders realize) it will be 2 to 3 years before drilling begins. The dry hole cost is $100 million (cheaper because it’s in the swamp and not open Gulf). If successful another $80 million to complete. So almost a $200 million investment…and that’s if there are no mechanical problems. And as the article above explains that’s far from a safe assumption. And guess what you make if it finds all the reserves they are hoping are there? About 3 to 4 times the investment. Which may sound good to outsiders but it falls below my owner’s requirement of 5 or 6 fold.

And that’s doing “unrisked” economics on the project . Put a 50% probability of success and assume $zero cost over runs and at best you’re looking at maybe 2 to 1 on your money. The only companies that can afford to take such chances are the large pubcos that have to swing for the fences if they have any hope of adding reserves that can at least match their reserve depletion.

And like Babe Ruth who had the home run record he often held the record for the most strike outs. That’s what often happens when you’re always swinging for the fences.

Northwest Resident on Fri, 4th Apr 2014 4:47 pm 



rockman — The Babe Ruth analogy invokes some pretty heavy duty thoughts.

In Babe Ruth’s last at bat, he quietly grounded out, and a great career ended as he walked off the field.

Somehow, I don’t think the oil industry’s “last at bat” will go down nearly as quietly, or that it will “walk off the field” to the cheering praise of adoring masses.

rockman on Fri, 4th Apr 2014 5:09 pm 



NW – We’ll see. Whe the oil patch was knocked down to its knees in the 80’s it was pretty quiet here. Except for the cheering of all those Joe6packs. But next time they might feel differently when we take them down with us. LOL.

Boat on Fri, 4th Apr 2014 5:21 pm 



Rockman
Is the oil patch like professional sports? Do the best at hitting the wells with the highest percentage make over 25 million a year and get 2-10 year contracts so they cant look for another job?

Northwest Resident on Fri, 4th Apr 2014 5:24 pm 



All the J6P’s will feel differently next time, we can pretty much bet the farm on that. Some of those J6P’s will probably be trading their kids for a full tank of gas before it is all over with. It ain’t gonna be a pretty sight.

rockman on Fri, 4th Apr 2014 8:59 pm 



Boat – Not in Texas: we’re a “right to work state”. They can try to hang you with non-compete clauses in your contract but they don’t tend to work in many cases. We essentially work like every self-respecting whore: first the money…then the clothes. And we don’t make promises we don’t have to keep. Loyalty can occasionally be earned but usually it’s bought.

And it ain’t personal…just business.

Nony on Fri, 4th Apr 2014 9:21 pm 



If the offshore oil is so low potential, why are the peakervironmentalists against allowing it opened for exploration? 85% is off limits. Obama said he would open it up (under political pressure because of gas prices). But then after Macondo, he used the political cover to go back on his promise.

If there’s no opportunity there, then after a few trials, they’ll just give up. I think peakervironmentalists are really more worried that there WILL be finds and increased production. But they try to wall off even trying by saying, “nah, nah, you won’t find any”.

rockman on Sat, 5th Apr 2014 1:14 am 



“But then after Macondo, he used the political cover to go back on his promise.” Since Macondo President Obama has offered over 100 million acres of offshore oil leases in the GOM. He also approved more Deep Water drill permits than any other POTUS. He has approved at least 15 major offshore oil producing facilities.

And leasing off the east coast: no federal leasing has taken place on the offshore US Atlantic coast since the early 1980s. The federal government had scheduled a lease sale offshore Virginia, to take place in 2011, and in March 2010, US President Barack Obama announced his intention to open the Mid-Atlantic and South Atlantic planning areas to oil and gas exploration. However, lease sale plans were cancelled in May 2010 following the Deepwater Horizon oil spill in the Gulf of Mexico. In December 2010, Interior Secretary Ken Salazar announced a ban on drilling in federal waters off the Atlantic coast through 2017.

And that ban on drilling through 2017 is absolute BS: if they said the were going to have a lease sale next week and companies picked up tracks it would be several years to acquire seismic data. And the it typically takes 2+ years to get a drill permit in the GOM. So a ban through 2017 is meaningless.

So I’m not exactly sure what President Obama has done to hold back the oil patch.

Nony on Sat, 5th Apr 2014 1:50 am 



The more drilling is related to the price, Rock. Remember, that’s your riff? But he’s not opened up the VACAPES. Open it all.

Jimmy on Sat, 5th Apr 2014 5:34 am 



Is Nony 14?

Jimmy on Sat, 5th Apr 2014 5:35 am 



I feel certain Nony has Aspergers

rockman on Sat, 5th Apr 2014 1:55 pm 



Nony – “VACAPES”. There are also areas in the GOM that are perpetually off limits for military reasons. Volumetrically they couldn’t even add an insignificant amount of reserves. Likewise just my guess but when the eventually start drilling off the east coast there will be a lot of disappointed folks. Despite what many think there has been a number of test wells poked out there and it ain’t no GOM. West coast…that’s a different matter.

But back to our current POTUS. I known little old conservative me has shocked folks in the past but it’s true: from just an energy stand point the oil patch has very little complaint about President Obama. Social issues…that’s a different matter.

And no one has yet caught my little deceptive spin when I highlight that he has offered over 150 million acres of offshore leases to the oil patch. The reality: seldom not much more than 7% of that acreage receives even a single bid. So “opening it all up” ain’t meant sh*t. LOL.

Nony on Sat, 5th Apr 2014 6:40 pm 



He said he would open up the East Coast and then he went back on it.

As far as people not deciding to lease stuff…just open it all up. If no one still leases, so be it.