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Page added on July 8, 2014
Tech Talk – of longer wells and drawdown pressure
There are, simply, three major parts to the coming global economic mess that will be created as we enter into the period of Peak Oil. The first of these comes from the current rising demand for oil, particularly emphasized by those countries, such as China and India, where demand is rising fastest. The second part is the declining production from existing fields as their reserves are drawn down. (Though it should be remembered that even when “exhausted” the fields will still contain vast quantities of oil, but oil which is at present not economically recoverable). And finally there is the oil in the undeveloped, and undiscovered wells and fields that can be added to the existing reserve to help ameliorate the imbalance between demand and supply from existing wells.
The high decline rates from long horizontal wells drilled into, and along the shale deposits in the United States, most particularly the Bakken and the Eagle Ford, mean that there is a constant need to drill new wells to sustain existing production. The EIA has taken note of this and calculated based on some assumptions, the number of rigs that must be operating in these fields, so that they will drill enough new wells to sustain current production.
Figure 1. The number of rigs required in the Bakken and Eagle Ford formations to sustain production at the level of the previous month (EIA).
Should the need be to increase production (which is the current assumption by most prognosticators of future equilibrium between demand and supply) then these numbers need to be significantly higher, perhaps by as many as 50 additional rigs. At present the Bakken rig count is running at around 176 rigs while there are around 270 rigs drilling in the Eagle Ford.
One of the ways in which production is anticipated to expand above earlier estimates for the wells drilled in both fields comes from the ability to drill longer horizontal wells and to increase the fracture density along these wells.
However, as the Kingdom of Saudi Arabia discovered some years ago, longer wells can only be viably effective out to a certain distance, beyond which there is no gain in productivity. As a result they have changed their drilling patterns so that the wells are shorter, with multiple laterals spreading from the original wells to more thoroughly cover the rock within the formation. Initially wells were drilled out to distances of up to 12 km, but over time the KSA found that this was too long.
Since there is a somewhat similar argument to be made for the wells in the United States, as they move to longer distances, I thought I would go over the explanation as to why this is not a very productive idea a second time.
To begin consider that regardless of whether I put a tiny glass of water or a huge glass of soda in front of you, if I glue it to the table then the amount that you can drink at one time becomes limited by the size of the straw that I give you to drink the liquid, rather than the amount in the container. And to get that liquid into the straw and up into your mouth requires that you suck on the straw.
What you are doing is reducing the pressure at the bottom of the straw, while the pressure from the atmosphere on the top of the liquid remains the same. By creating this differential pressure there is now a force to move the liquid into the straw and thence up into your mouth.
But, as Fishbuch et al showed, as the horizontal well bore gets longer the pressure at the back of the hole declines as then does the difference in pressure between the oil in the rock and the well (the drawdown pressure), and while the longer hole gives an overall increase in production to a certain point this seems to maximize at a length of around 6,000 ft. Beyond that distance the differential pressure between the formation and the well falls to a point where there is less benefit to the additional cost of drilling to that distance.
Figure 2. Drop in well pressure with increased well length, while increasing overall oil flow (Simulation by Fishbuch et al )
The answer which Aramco came up with to get around this problem was to use a main lateral from which a number of shorter laterals could then be drilled out into the formation, providing higher drawdown pressures within the wells and making it also easier to isolate any well section where the underlying water broke through into the well.
Figure 3. Schematic of a Maximum Reservoir Contact well as used in Saudi Arabia (Aramco).
The optimum length at which a well can produce is a function of the rock type and structure as well as the nature of the oil/natural gas that it contains and the water content (to name by a few of the parameters). Thus there are limits to the analogy, nevertheless it does show, even in the much more productive rocks of the fields in KSA that there are limits to how far a well can be productively driven, and these limits will also exist in the shales of the United States, although the oil locations and the optimal ways of extracting it are somewhat different.
The extraction of oil and natural gas in these shales is more sensitive to the levels of drawdown pressure, since much of the oil and gas is found in natural fractures that are not that wide (although they may be spread further apart by the fracking process itself). With exposure to the lower well pressure thus being restricted to a relatively small volume, significant reduction in the pressure because of the location relative to the heel of the well can have significant effects on lowering the overall well production.
Further as a general rule the complex valve systems used in KSA are not installed in the shale wells of the United States, making it less practical to focus the relative pressure differentials at different points along the well bore as a means of increasing production sequentially along the well.
31 Comments on "Tech Talk – of longer wells and drawdown pressure"
toolpush on Tue, 8th Jul 2014 4:58 am
As I understand multi lateral wells in Saudi, they are all barefoot completions, ie they do not run liners. Is this correct? and is it possible to have multi laterals that are cased and lined.
There are not too many formation where you can get away without a liner of some sort. Now fraccing and no liner, is another thing all together. I do not believe that can be done at all. I stand to be corrected as things are changing fast in the oilfield these days.
paulo1 on Tue, 8th Jul 2014 7:49 am
Would you need liners in shale? Isn’t the tightness of shale the main reason for the multi lateral approach? Just curious.
Paulo
rockman on Tue, 8th Jul 2014 8:03 am
Alright pusher, prepare to be corrected. LOL. The tech does exist. But it really is very small niche. It’s more likely for an operator to be forced to use it then wanting to use it. Either done in a deep well, which as you know makes it more expensive/risky, or off of a platform lacking slots to drill from. I evaluated it for an offshore project back in the 90’s but the combination of cost and risked killed the idea almost immediately. And AFAIK the situation hasn’t changed much so I doubt we’ll see much widespread applications. From
http://www.drillingcontractor.org/multilateral-completions-on-rise-but-still-a-niche-9938
Have multilateral completions finally come of age? Proven to maximize reservoir production, horizontal multilateral completions have witnessed growth in numbers and in complexity. However, while these completions have become more prevalent over the past decade, hurdles remain to widespread adoption, such as it being viewed as high-risk and involving multidisciplinary teams with varying decision perspectives. Also, as the market has matured, less complex junctions are being favored for economic reasons.
In terms of the number of completions, Cole Benson, senior multilateral technical professional for Halliburton’s Sperry Drilling business line, shares his company’s growth experience with multilaterals.
“We started with multilateral completions around 1993. Between 1993 and 2000 we completed more than 250 junctions split pretty evenly between the lower-technology completions, TAML levels 2 and 3, and higher levels, TAML levels 4 and 5. We saw a higher preference for onshore work, with 75% of jobs being conducted onshore,” he said.
“During the era 2001 to 2011, we’ve definitely stretched our limits. We placed the world’s deepest level 5 junction in December 2010 in Norway at more than 6,900 meters deep just at the junction. We’ve performed more than 720 junctions in the last 10 years; the bulk of these have been levels 4 and 5. We increased offshore use of multilateral technology to 35% of all installations,” Mr. Benson said.
In the Technology for Advancement of Multilaterals (TAML) ranking, level 2 is described as the main bore being cased and cemented and lateral is left open either barefoot or with slotted liner hung off in open hole. Level 3 is described as the main bore being cased and cemented and the lateral cased but not cemented, with the liner being mechanically anchored to the main bore casing. Level 4 refers to the main bore and lateral being cased and cemented at the junction. Level 5 includes pressure integrity installed at the junction.
Systems have evolved; continuous improvement has led to design changes to overcome problems experienced years ago. “More installs have led to a learning curve resulting in better designs to improve operational issues and higher success rate with lower risk levels,” Mr. Benson said. “In heavy-oil applications, disconnected or thin pays were earlier applications. We are now moving into applications to support shale plays with selective fracturing, gravel packs and frac packs.”
Joe Sheehan, multilateral systems product line manager for Baker Hughes, sees significant hurdles facing widespread adoption of multilateral technology. “It typically takes a multidisciplinary team to effectively plan a multilateral system,” Mr. Sheehan said. “The different disciplines may have different key performance indicators that drive their decisions. Many times these technologies are only considered when economic margins are tight. Ideally, multilateral technology would be used as a tool when planning field developments to optimize production and return on investment. These completions are still viewed by many as risky, but the reality is that reliability of these systems over the years has increased significantly.”
According to Barton Sponchia, multilaterals product line manager for Schlumberger, the industry pushed hard for even more advanced multilaterals, but as the market has matured, customers sought less complex junctions due to cost concerns.
“It was oil and gas companies that drove a reduction in complexity to bring multilateral technology closer to mainstream,” Mr. Sponchia said.
Focus and drivers within the multilateral segment have also shifted as a result of technology advancements in horizontal drilling components (bits, motors, formation evaluation) and workstring tubulars, including topside mechanization. “Drilling farther, faster in real time has effectively tightened the multilateral market boundaries during the last decade,” Ron Barker, global general manager of re-entry services for Weatherford, said. “The days of ‘every well’ being touted as a multilateral candidate have been replaced with selection processes that typically force rank by risk first, cost second. Simpler multilateral designs continue to gain traction as the client can better measure and control ‘at-risk dollars.’ ”
rockman on Tue, 8th Jul 2014 8:11 am
Paulo – Depends on the shale. I believe most, if not all, EFS wells are cased through the shale. Done for hole stability, shallow aquifer protection and to isolate the different frac stages:
“As the wellbore is being drilled, concentric layers of casing are cemented in place to keep the wellbore from collapsing and to prevent fluids in the rock from moving up the wellbore. It also prevents fluids that are pumped down the well from seeping into the surrounding layers of rock. Good well integrity is crucial for protecting aquifers and to control methane emissions.
Shaped charges are detonated to perforate the horizontal part of the casing that’s inside the shale. Frac’ng fluids are pumped into the well and flow out of these holes into the shale.
shortonoil on Tue, 8th Jul 2014 8:19 am
“As I understand multi lateral wells in Saudi, they are all barefoot completions, ie they do not run liners.”
The Saudi aren’t frac’ing their wells. They have some of the highest permeability rock in the world. There is no need to fracture them further. Oil pours through it almost like water through sand. The Saudi can get away with it because these are water drive wells. Casing a multi lateral is another question, how do you connect the branch lateral casing to the main horizontal? Don’t think anyone has figured that one out yet. In a frac’d completion of a multi lateral some fissures are going to lead back to the main, which would drop the pressure in the branch lateral. Negating the reason for drilling the branch lateral to begin with.
Halliburton may figure out some way to cement the connection between the branch lateral, and the main, but it sure isn’t going to be cheap. Long lateral frac jobs have now become so expensive that they are now barely cost effective. Adding another complex step is not going to help that situation.
Anyway, we don’t watch the shales that closely. They are a dead end street to begin with. The only reason they exist now is because there is still enough conventional production to subsidize them. Shale oil is at best a very feeble energy source. Without energy there is nothing left but black goo in a barrel.
http://www.thehillsgroup.org/
bobinget on Tue, 8th Jul 2014 9:01 am
Shortonoil, is all shale (tight oil) created equal?
Of course not. The same is true with conventional oil and “tar sands”.
Don’t get carried away making blanket statements with no greater currency then to say “all men are inconsiderate, violent prone, sexist, pigs” .
(not all men are inconsiderate)
Northwest Resident on Tue, 8th Jul 2014 9:50 am
bobinget — I’m no expert, but I am going to agree with you that not all shale (tight oil) is equal in content and quality to other shale sources.
But, all shale oil does tend to share one fundamental similarity, and that is, it is all pure crap when compared to conventional oil. Some shale oil may be a little less or a little more crappy than other shale oil, but the difference is marginal.
Shortonoil’s point that the only thing enabling production of shale oil is the “conventional production to subsidize them” couldn’t have been stated any better.
Shale oil is crap — when conventional oil is gone, so will be shale oil. You can’t power the production of shale oil WITH shale oil — there isn’t enough energy in it.
That’s a POV from a non-expert.
Really, what good has the “shale boom” been except to pretend-and-extend BAU for a few more years. We’re living in a pretend-and-extend world right now, a world on the verge of collapse due to lack of energy to keep the complex machinery spinning. QE, shale oil — just short term measures to buy a few more years of BAU. Then, it all collapses in a pile of dust. And not even the best quality shale oil can prevent that.
rockman on Tue, 8th Jul 2014 12:02 pm
NR – “— there isn’t enough energy in it.
That’s a POV from a non-expert.”.
Not sure where you got that idea from. The 20+ million bbls per year of Eagle Ford production being exported to Canadian refineries is yielding a lot of gasoline and diesel.
Here’s an analysis of typical EFS production.
https://www.platts.com/IM.Platts.Content/…/eaglefordmarker.pdf
About 45% of the yield is gasoline and diesel. That compares to the 53% gasoline/diesel yield from what is considered prime US production: La Light Sweet.
But forget about yields for the moment. Just consider prices. The latest numbers I could find were just from last fall:”Plains Marketing LP’s posted price for Eagle Ford light oil was $101.25 a barrel. The price relative to Light Louisiana Sweet strengthened by 81 cents to a discount of $3.81 a barrel, according to data compiled by Bloomberg. It’s the smallest level since Plains began posting prices in 2010.”
So EFS production was selling for a $4/bbl discount to one of the premier US oil…LLS. And the Canadian refineries were playing that plus the transport cost to ship it half way around the continent. So if “Shale oil is crap” and the EFS production is shale oil why are the Canadians willing to pay so much for “crap”? LOL.
Northwest Resident on Tue, 8th Jul 2014 12:16 pm
rockman — Thanks for correcting my misunderstanding. So, the shale oil at least from some plays contains enough energy to pay for itself without being subsidized by artificially low interest rates and massive investments? I was under the impression that shale oil development was losing money across the board, and the only way that “profits” could be made from shale oil was by accounting gimmickry combined with low interest rates and other “non-standard” financial methodologies. Now I’m really confused. Isn’t “shale oil” mostly composed of liquids that cannot be used for transportation fuel — plastics, asphalt, tar, paint thinner, etc…? If so, wouldn’t that justify my statement that shale oil is crap compared to conventional oil?
rockman on Tue, 8th Jul 2014 2:06 pm
NR – I know for a fact some EFS players are profitable. Maybe not big but profitable none then less. And I know a few who have lost big time. But I can also point to a number of conventional oil players that have lost their asses.
But as I’ve pointed before the primary goal of a public oil is to boost share price. And if that means going into Deep debt drilling (and continue to drill) a lot of marginal wells so be it. With the exception of small dividends shareholders don’t get any of the profit a company makes. Their big earning potential is from buying low/selling high. The only reason a shareholder would be concerned about a profit statement of his company would be its effect on stock price.
But it’s impossible to determine exactly how profitable a company’s shale drilling efforts really are. The annual profit statement can have little correlation to profit at the well head. But a very readily available factor is the reserve numbers that are certified by the SEC. Which is why Wall Street weighs a company’s stock value so heavily on those numbers. Which is why companies use every legal trick in the book to max those numbers. And that IMHO is the source of much of the distrust many elude to. Obvious smoke and mirrors do not instill much trust. Even when operations are really profitable.
Northwest Resident on Tue, 8th Jul 2014 2:26 pm
OK, rockman, as usual the situation in the oil business is far more complex than anybody except the experts can ever truly wrap their brains around.
I’m still at a loss of words though for three reasons:
1) I have read several articles and comments from people I view as very knowledgeable in the oil business that on average, shale oil companies are losing money on every barrel of oil produced, and that is WITH low interest rates and other accounting gimmickry
2) I have been lead to believe after reading quite a few articles and expert comments on the subject that the actual energy contained in a barrel of shale oil is very low compared with a barrel of conventional oil. I believe it was shortonoil who in one of his posts recently stated that the shale oil developments are only made possible by using conventional oil. My statement that shale oil doesn’t produce enough energy to extract, refine and deliver (produce) shale oil seems to be correct. In other words, without conventional oil, there would be no shale oil — in general.
3) I have also read several articles and statements/comments from experts who contend that shale oil is a very poor choice for making transportation fuel, and that the composition of shale oil is a variety of liquids OTHER THAN actual oil. Isn’t it Westtexas who has made the point a couple of times that why do they keep calling it oil when it isn’t, same as a butcher advertising 10 pounds of steak and then when you get there to buy the steak, you find out that you’re actually getting hamburger and other “stuff” that is anything but the steak that was advertised?
I’m sticking with my original “shale oil is crap compared to conventional oil” statement. If that isn’t true, then my world is going to do an about face. I’m going to discontinue my prepping activities, invest all my money in shale oil development, buy a gas mask and prepare for BAU to last forever!
shortonoil on Tue, 8th Jul 2014 2:50 pm
“So, the shale oil at least from some plays contains enough energy to pay for itself without being subsidized by artificially low interest rates and massive investments?”
No, non of it probably does. The astronomical high depletion rate of these wells insures that the re-invested energy to keep the game running will exceed energy extracted. Yes, some of it is better than others. It is almost all high API, and even the Bakken, the best of the best is at least 30% condensate. That compares with 3% for conventional wells. Condensate wells from the shales are even worse. Even a rich gas condensate only produces about 6.5 to 7% C7 (heptane) and above (C7+) production (the stuff that makes fuels). The rest is primarily methane and ethane.
The Eagle Ford production that Rock keeps referring to is in the northern section of the play. It has an API of about 50 or higher, and like the Bakken 30% condensate. Just because some of the shale production can be converted into transportation fuels is no indication that it is an overall energy provider. Swamp gas can be turned into transportation fuel if you want to invest enough energy into it.
That will probably be the next claim to US energy independence after the shale industry has gone broke.
http://www.thehillsgroup.org/
shortonoil on Tue, 8th Jul 2014 3:11 pm
Something else to consider, the economy needs an energy source with a high enough ERoEI to drive it. By our calculations that is 6.9 to 1. Neither the shales, or bitumen can do that by themselves. They both depend on energy inputs from other sources. Bitumen depends on NG, and shale primarily conventional crude. When you run out of energy, the economy stops. It seems like most of the world is having that problem. Exploding world debt confirms it. Extracting shale to boast the economy is like burning the house down in the winter to keep warm; it works for a little while!
http://www.thehillsgroup.org/
Northwest Resident on Tue, 8th Jul 2014 3:18 pm
“Extracting shale to boost the economy is like burning the house down in the winter to keep warm; it works for a little while!”
Yep. One good burn. Then game over. Time to embrace the horror.
That one good burn is happening right now. We all know — or should know — what comes next.
rockman on Tue, 8th Jul 2014 3:41 pm
NR – Do yourself a big favor: stop listening to me and everyone else. LOL. But seriously…stop it. We’ve chatted enough for me to know you’re not a dummy. Do our own web search. I told you what the yield was from the EFS. I also gave you the link. Do you think Pratts is lying? I don’t ask you or anyone else to believe anything I post…that’s why I always try to post links. As for as what shorty says about “shale oil” or “condensate” I was talking to you specifically about the yield and price of EFS production. Did any of that make think EFS production was crap? If so then I have to think you believe my info was incorrect. That’s OK…now post the link proving it.
BTW I had no idea what the yield was from the EFS production nor the price it was selling for. So in less than 2 minutes I found the info I sent you on the web as well as a good bit more I didn’t bother to post. At least half the FACTS I post are new to me. I might seem like I know a lot of sh*t…but I don’t. LOL. But I have an 11″ touch screen tablet continually hooked into the www sitting next to me 24 hours a day. Actually a little less due to driving or taking a crap. LOL. My MS keeps me trapped in my recliner. And I’m very good at multitasking: while typing this message I’m keeping up with events in the ME on Aljazeera and took care of 3 business matters on line for my company.
So are the Canadians paying $100/bbl for “crap” and then paying to ship it half war around the continent so they can refine it into low energy products? The answer is just a few clicks away…satisfy yourself.
The biggest problem I constantly see with many posts here is gross generalizations and “facts” presented with no independent links to support them. In my experience all generalizations are true and false at same time. Just depends on what part of the elephant you’re touching at the moment. LOL.
J-Gav on Tue, 8th Jul 2014 3:44 pm
Short – Yeah, 6.9:1. Sounds about right. I think Charlie Hall pegged it at 7:1 a while back as the EROEI necessary to maintaining a ‘modern’ lifestyle to some extent, i.e. still providing some of the key services we’ve grown used to.
J-Gav on Tue, 8th Jul 2014 3:58 pm
NR – We may have some inkling (or foreboding) of what comes next but I’m not sure anybody has a really clear picture of what it’s going to look/feel like. That’ll vary according to time and place.
That said, I know you were commenting in general terms and your “one good burn” metaphor could be close the mark given what we’ve seen of human psychology, both individual and collective.
And I’m not one to say that some sort of broader awakening is impossible among our species. However, I am one to say that it won’t occur until AFTER TSreallyHTF.
Northwest Resident on Tue, 8th Jul 2014 4:21 pm
rockman — I think I’ll stick with depending on you and other very knowledgeable people to inform me on oil related matters. I see and get exactly what you’re saying. There are some shale oil extraction projects which are at least slightly profitable and that do produce a fair amount of transportation fuel. But in general, on average, not so much. Hey, you’re my best teacher. I’m not questioning the facts you present, just trying to elaborate on my understanding. Honestly, I have too much respect for you to try and question the info you provide — you’re an awesome source of fact, keep it coming, please.
Northwest Resident on Tue, 8th Jul 2014 4:27 pm
J-Gav — I should have written “one last good burn”, because we’ve been having one hell of a good burn since the beginning of the industrial age. From my point of view, and I think the evidence supports this, the shale oil “boom” amounts to what I’ll call the “one last good burn”, like the settlers who in the dead center of a frigid winter burn the last of their wood, knowing that once those embers die out, there won’t be anything left TO burn. From my point of view, figuratively speaking, that’s where we are. And I’ll agree with you that no broader awakening is imminent until after disaster strikes and smites humanity with a hard dose of reality. All growth is painful, and if we’re going to grow, then it will take a lot of pain to motivate us to change our ways. I’m pretty sure that “the pain” is headed our way, but it remains to be determined if that pain results in meaningful growth. We can only hope so.
shortonoil on Tue, 8th Jul 2014 5:28 pm
Like I said before, the Bakken is the best of the best in shale plays. According to our calculations it requires the energy from 46,000 barrels of oil to drill the average $8.5 million Bakken well. From Drill Baby Drill, the average Bakken well produces about 85,000 barrels its first year, and 35,000 its second year. The numbers used to make the above calculation came from the World Bank, and the EIA. If anyone wants the details on how we did it let me know, and I’ll put up a page at the site under “Bakken” in commentaries. Its not that complicated, but too much to put into a blog spot.
The Shale industry must be one of the most energy intensive industries in the world. It is the game of robbing Peter to pay Paul. Funny thing is all the proponents of shale are named Paul. What’s after Shale; swamp gas —– then, Buffalo farts!
rockman on Tue, 8th Jul 2014 8:58 pm
NR – First, don’t believe anyone…we all get it wrong to some degree. LOL.
“…and that do produce a fair amount of transportation fuel. But in general, on average, not so much.”
Hmm. This time I’ll go with facts you can provide. Of course, as I just pointed out, the EFS is documented to yield a fair bit of motor fuel. And the Bakken is being shipped across the country to be cracked into motor fuel by US refineries. So here’s the tough question: given that the Bakken and EFS are the source of 80%+ of US shale oil production how can the average be not so much?
Here’s tougher question for you but don’t take it personally: can you name the other shale formations besides the Bakken and EFS that brings the average down so low? Do you actual recall the names of the other shale formations which others have declared “crap”? This is the point I was making about generalities: easy to toss out but rather difficult to support with specific facts.
Which is why I’m taking a different tack and not focusing on the nature of all the various oils, condensates, NGL’s, etc. Again according to the EIA in the last 4 years US refineries have produced more gasoline then during any 4 year period in the entire history this country. Diesel production is also at an all time high according to the EIA. Then add that US crude oil imports have dropped dramatically and it’s been constantly shoved down our throats that this has happened as result of oil shale production. And the documented claim the US conventional crude production peaked almost 10 years go.
So again if the US oil shale production is crap that doesn’t yield much motor fuel and the US has replaced a lot of “good crude oil imports” with crap from the shales what exactly are we making these record amounts of motor fuel from? McDonald grease trap collections? LOL.
Folks can argue all the want about what we can’t make from the shale production. But if so they are going to have to explain what this huge supply of gasoline and diesel is coming from. A fair question, don’t you think?
toolpush on Tue, 8th Jul 2014 9:00 pm
Rockman,
Thanks for the research, I was not far off the mark. So lined and tested multi laterals are possible but sound rare and expensive.
From my experience in fraccing you need to be able to reverse circulate, therefore you need lined/cased and cemented hole. So I doubt we will see too many multi lateral shale wells, even though they are technically possible, especially when you can drill a complete new one in about 20 days. KISS seems to come to mind.
Shortie,
As you say the Saudi fields have great permeability and do not require fraccing. There always seems a exception to the rule, I seem to remember when they were redeveloping Khurais there was talk of fraccing it. Doing a Google search I came across some linked-in CVs who claimed to have had experience Fraccing Khurais, but could not find any articles stating such. Do have any knowledge of Saudi playing around with fraccing?
Northwest Resident on Tue, 8th Jul 2014 9:57 pm
rockman — First of all, I’m starting to feel like I’ve experienced a good old fashioned Texas-style ass kickin’. Not that I would know what that feels like having never experienced one before, but being a former Texan I did dish a few out in my high school days and what my opponents looked like after I was done with them makes me wonder if maybe I’m feeling a little bit like they looked.
Honestly, I’m having a hard time reconciling what you’re saying with what I have read on this and plenty of other websites in the past. I totally get the fact that yes, transportation fuels can be produced from much of the shale liquids being produced in the USA. And I do not doubt for one second that what you’re saying is true about American fuel production being due to those shale liquids converted to transportation fuel.
But, isn’t the processing required to produce transportation fuels from the shale oil a little more energy intensive and overall much more expensive than producing the same fuel from conventional crude?
And isn’t much of the shale oil simply not suitable for producing transportation fuels? That’s what I remember reading on more than several occasions. And what really puzzles me is that I’m pretty sure I recall you being on the other side of this issue on more than one occasion.
I read stuff like this:
Oil shale development is unsupportable because it will create far more problems than it will solve. Beneath the thin veneer of oil shale’s energy potential lies a host of pitfalls caused by the nature of the resource. Oil shale isn’t oil. In order to release its tighly held energy, a lot of other resources have to be consumed, pollution and toxic by-products produced, and a vast area of the West severely disturbed and degraded. Oil shale has never fulfilled its promise for providing a significant supply of transportation fuel and is not the key to American energy independence that its proponents suggest.
And this:
Both strip-mining and in-situ mining which requires heating the ground to more than 1,000° F to melt out the kerogen2) require massive amounts of energy. In fact, more energy may go into the development process than would be produced by the oil. Over the lifecycle of the fuel, oil shale generates from 1.75 to 3 times more greenhouse gas emissions than conventional petroleum fuels.
Add to that the information that I believe other knowledgeable oil industry experts have offered regarding the profitability of shale oil including on this forum several or more times in the last few months — that on average it takes more money to produce a barrel of shale oil and deliver it to market than the price supports.
I’ve never understood you to be a big proponent of shale oil, for all the obvious reasons, and I do seem to recall (not having the time to look through past articles and posts) that you have been in general agreement that shale oil is a losing proposition. Did I misunderstand your position? It seems, suddenly, as if you have kind of jumped on the shale oil bandwagon and are now singing its praises.
I’m a little stunned, generally confused and not sure what to make of it. Kind of the same feeling a guy would have who just experienced a good old fashioned Texas style ass-kickin’.
But hey, it’s all good. I’m hear to learn primarily, and you’re a great teacher. You just have me a little confused right now.
P.S. I still think shale oil is CRAP! Even if they are somehow, someway making a few bucks on it and even if contrary to what I thought I knew, it is “good” for making transportation fuels. Good news is, and on this I’m sure you will agree, shale oil production is a short term proposition. It’ll all be over soon enough, agree?
FloridaGirl on Wed, 9th Jul 2014 2:06 am
NWR: Re:”Both strip-mining and in-situ mining which requires heating the ground to more than 1,000° F to melt out the kerogen2) require massive amounts of energy. In fact, more energy may go into the development process than would be produced by the oil. Over the lifecycle of the fuel, oil shale generates from 1.75 to 3 times more greenhouse gas emissions than conventional petroleum fuels.”
The above paragraph refers to oil shale, which is essentially rock and is different than shale oil. I’m no expert but from what I’ve heard, it’s probably safe to say oil shale is “crap” :).
As far as shale oil goes, I looked at the SEC filing statements of several companies that have been in the business for a while and focused primarily in Bakken shale oil, namely KOG, CLR and WLL. I figured they would be motivated to make the situation look as good as they could and yet be legal. Also, it essentially is a realistic average of the good producing wells with the not so good producing wells. It’s been a few months since I looked, but what I saw was that while they may appear to be profitable, they do it by depreciating the drilling costs slower than what is reflected in the decline rate of the wells (I imagine they depreciate based on conventional wells). If I compared the cost of drilling plus production, it exceeded the income from sales of oil and gas. All 3 were increasing their debt substantially. Some even listed that a possible inability to borrow more was a “risk” item.
The well costs ranged between $9-$10 million.
The 2013 oil price was about 93% of “NYMEX average”, so that doesn’t sound like crap but it is hardly worthwhile if it cost more to get it than it sells for.
I thought about why they would continue in a money losing business, and realized that the people running the companies are making lots of money; it’s the lenders and investors who are going to eventually lose out big time.
Another interesting tidbit from the SEC filings is that the planned 2014 capital expenses were about the same as 2013. So I think their oil production will still increase, but at a much slower rate (it’s still a lot of drilling).
Their well production average was only in the range of 50-100 barrels/day/well.
Given that the Bakken shale oil appears to cost more than it returns, I wonder if the EROEI is really lower than people think. Especially if you consider total energy like the energy for employees to travel long distances to work in ND, plus that involved in building their housing and heating the housing. That all takes energy and is reflected in the overall costs.
Northwest Resident on Wed, 9th Jul 2014 9:01 am
FloridaGirl — Great info! All of which confirms my previously (and still) held belief that overall, shale oil is a money loser for everybody except for like you say the oil workers doing the drilling and servicing and running the crews, etc…
Way back on this thread I made two points to begin with. One is that shale oil is “crap” compared to conventional oil. Given the environmental costs of shale oil production, the excessive amount of energy required to get shale oil to market in whatever forms they bake it into, and the fact that in general taking all expenses and artificially low interest rates into account, it is a money loser. And I said that shale oil cannot power the production of shale oil which as rockman points out is not entirely correct — it CAN power its own production, but not long term, and not profitably.
I’m still hanging onto two well-founded beliefs. One, shale oil is crap. Two, the huge benefit of shale oil to me and to you and to everybody else is that the shale oil plays have bought us some time and given us all a chance to prepare for whatever comes after the shale plays have played out, which by all signs won’t be long from now. Like shortonoil says, what comes after shale oil? Swamp gas! Buffalo chips!
It is going to be one heck of a wild ride down the backside of peak oil once we get to the end of this undulating plateau. Fasten your seat belts and prepare for a very hard landing.
shortonoil on Wed, 9th Jul 2014 12:37 pm
ToolPusher:
Here is a pretty good article on Khurais, with Google Earth photos.
http://downstreamventures.yuku.com/topic/1176/Khurais-Me-A-River-in-Saudi-Arabia#.U72hG1KE6qY
It appears that in the southern part of the field, outside and below the Abab-D formation permeability is fairly low at 5 md. If they are frac’ing Khurais that would be were it is being done.
http://www.thehillsgroup.org/
Nony on Wed, 9th Jul 2014 1:12 pm
NR: Bakken oil is almost indistinguishable from WTI in API and sulfur content. From a commercial perspective, the Bakken stuff is the same or better in terms of output of high value products. We’ve had this discussion a bazillion times already, given the links, etc. etc.
In the EF, I would beware of Jeff Brown or Watcher or who-ever blathering about it all being condensate. DC and Ron have run the numbers and it isn’t much condensate and has actually become less percent condensate with time. But Jeff and Watcher just live in this super suspicious mode where no proof is needed for their hypotheses…and opposite data points are ignored or argued with.
The whole thing comes down to an interesting meme from the 2005ish peak oil era. All the buzz said that new oil would be crappy (heavy and sulfurous). That light sweet vanilla flavored maple syrup oil was a thing of the past. But then annoyingly…the shale oil came along and was kissing cousins with WTI (reference light sweet). If you want to kvetch about costs of extraction, fine. But complaining about the chemistry is just ignorant and conspiracy crankish.
Nony on Wed, 9th Jul 2014 1:41 pm
http://www.hydrocarbonprocessing.com/images/798/89779/Bryden-Tab-01.jpg
41.9 API (assayed!) versus WTI reference of 40. Kissing cousins.
Sulfur (assayed!) at 0.19 versus WTI reference of 0.33. Sweeter than sweet.
Nony on Wed, 9th Jul 2014 1:45 pm
http://g.foolcdn.com/editorial/images/6886/crude-quality_large.jpg
what comes out of the distillation tower. Yeah, it’s a light oil. So what. Not cracking is an advantage. Cracking costs money…
Nony on Wed, 9th Jul 2014 1:47 pm
Off topic from the Seahawk beatdown:
http://seekingalpha.com/article/1769682-whitings-q3-cemented-liners-plug-n-perf-completion-technique-should-lead-to-higher-valuation
Pretty accessible article on sliding sleeve versus cemented liners. Read down into the comments and there is some good discussion of how cemented liners are not new, cost differences, and just Whiting being slow to use the standard technique.
Nony on Wed, 9th Jul 2014 1:55 pm
Back to beating on the Seahawk:
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTQ4MjQ4fENoaWxkSUQ9MjQwOTMyfFR5cGU9MQ==&t=1
(read page 29)
Value at the refiner’s door within a couple dollars of LLS or WTI.