[GoghGoner]

In the latest STEO, the EIA is predicting a production increase in 2016. Still doesn't make sense to me... The yellow bar on 2016 should be going down over 0.5 mbd unless they expect Canada+Mexico to be increasing.



$this->bbcode_second_pass_quote('', '
')The Short-Term Energy Outlook (STEO) released on December 8 forecasts non-OPEC crude oil and other liquids production to grow by 1.2 million barrels per day (b/d) in 2015, and then decline by 0.4 million b/d in 2016, which would be the first annual decline in non-OPEC production since 2008.

...

EIA expects U.S. crude oil production declines to continue through September 2016, when total production is forecast to average 8.5 million b/d. This level of production would be 1.1 million b/d less than the 2015 peak reached in April. Forecast production begins increasing in late 2016, returning to an average of 8.7 million b/d in the fourth quarter.

[Revi]

They have no idea what will happen after next year, so they forecast production to rise.

[Pops]

Your quote says
"... grow by 1.2 million barrels per day (b/d) in 2015, and then decline by 0.4 million b/d in 2016..."

Looks like they think the surplus will clear by Q4 16 and production start to ramp up some.

The option of course is it just plummets forever because everyone decides oil isn't all that...
But prolly not.

--
I love the new EIA charts, they illustrate exactly how peak oil works by charting the depletion that happens from day one. And they really show how large that legacy decline is in the frack-zone. And it is the frack-oil that is supposed to save our suburban souls, lol.
Drill or Die Baby!
Look at the top bar chart (h/t crudeoilpeak.info)




Production from new wells only adds 71kbd — but depleting legacy wells reduce production 149kbd, so the region declines by 78kbd because it can't drill fast enough at the current price.


That is just one area. The Permian region hasn't yet declined.
There, new production is still offsetting decline from old wells... barely. I think more production there is from conventional and old or maybe really old?

[ROCKMAN]

Pops - In case you haven't yet ready my other posts on Texas oil production but here's the problem when the focus on specific trends like the EFS or the Permian: that just the EFS and PB...it ain't Texas. lol.

For instance the EFS: As of the latest month the TRRC reported there were 4,699 LEASES producing the EFS. These 4,643 leases represent a lot more the 4,699 wells.

The lease numbers: 31.822 million bbls for the month...1.026 million bbls per day...221 bopd per lease. The # of wells per lease: it's very common to see 2 to 6 or more wells per lease. Assume there are only 2 wells per the 4,623 Eagle Ford Shale leases currently producing. This would indicate that the average EFS well is currently doing a tad more than 100 bopd (at most...probably closer to 60 bopd). This is significant because while EFS wells tend to have a high initial decline rate (30%- 50%) eventually a few years down the road that decline rate decreases significantly (around 10% to 15%). But remember beside being a low decline rate the daily rate is also low. So a well making 100 bopd that declines 15% only loses 15 bopd over the next 12 months.

So while the EFS production seems to be starting a nose dive while the PB isn't they are just a part of the TOTAL oil production in the state. That 78k per MONTH decline (2,600 bopd) sounds like a lot but only represents a 0.8% decline in total Texas oil production. IOW despite the drop in EFS production Texas production from all of our 142,000 oil wells will not be falling off a "cliff". After all half of the current daily Texas oil production is coming from wells making 20 bopd or less. You gotta be on the edge of a cliff to fall off a cliff. A 20 bopd low "hill" ain't a high cliff. lol. Likewise not much of a fall from the 60,000 Texas oil wells (a lot of them in the Permian basin) making less than 2 bopd.

[Pops]

While interesting I'm not sure how all that related to my post ROCK.

I didn't say Texas, or cliff or nose dive, in fact those words don't appear anywhere on the page except in your post.

I put up 2 charts to illustrate how low prices are affecting 2 areas via declines vs new production. One still increasing a little one falling faster than it rose. The overall effect being a slowing of growth and likely an eventual decline next year until the market clears and new drilling resumes.

I don't get your point I guess. Do you mean production isn't/won't decline?
ever?

[ROCKMAN]

Pops - No...nothing you said. But I was being a tad proactive for folks who would see you EFS production decline as meaning much more then it really does. I've actually had to correct some of my coworkers who have been so focused on the decline in EFS drilling thinking it could lead to a quick turn around in prices. I still have one engineer struggling to accept that Texas has so many small producers that collectively make up so much of our daily production.

I've been spreading these details around since I discovered how many folks really had no clue what the production profile was for wells in the state with the most oil production in the country. I know you research a lot but how surprised were you with these numbers?

[Pops]

I was very surprised ROCK, I had no idea.

Still, they are only a part. I think I linked this already but here it is again.

400k wells but only 11% of total production.

$this->bbcode_second_pass_quote('', 'A') stripper is a small operator of very old oil wells that frequently produce less than five barrels per day of oil. These wells may not seem consequential, but there are roughly 410,000 of them in the U.S. Since 2002, according to the industry association for strippers, these marginal wells have generated more than 2.9 billion barrels of oil and 18.8 Mcf of natural gas. These wells account for roughly 11.3 percent of the U.S. oil output, so they are a non-trivial source of U.S. production. Stripper-operated wells account for all of the oil production in the state of Illinois for instance.

[ROCKMAN]

Pops - "A stripper is a small operator of very old oil wells that frequently produce less than five barrels per day of oil." Actually no official definition of a stripper. I like the 15 bopd level myself. But when you think about it the real dynamic is the net revenue. Proportionally strippers almost always tend to have higher production costs per bbl of oil produced. And unlike new drilling prospects where costs have reduced significant much of the operating cost for a stripper, like electricity and water disposal, tends to be more fixed. So the economic value of a stripper is bopd X $'s/bbl - lifting costs. So last year a 15 bopd striper well grossed ($1,350 - lifting cost cost) per day. Now a 15 bopd stripper well grosses ($570 - lifting costs). IOW a 2014 stripper producing 15 bopd is equivalent to a 2016 stripper producing 7 bopd.

And let’s forget the tag stripper: as the link shows that year 50% of the production from the largest oil producing state in the country came from wells making 20 bops or less. Which gets back to the main point I was trying to make: a very significant portion of US onshore oil production comes from legacy wells which are in the very low decline rate phase of their lives. And the easy way to show the non-shark fin future US oil production is to simply look at the chart: http://blogs-images.forbes.com/jessecol ... 014-lg.gif

US oil production declined from 10 mm bopd in 1971 to about 5.2 mm bopd in 2008. Or about a 130,000 bopd decrease per year. But look closer at the 1998 to 2008 period: a decrease of about 80,000 bopd per year. This is because the heritage wells that make up such a large portion of US production typically show a DECREASING rate of decline as they get older. Of course we then come in 2009 with the high oil prices/shale boom and US production increases significantly. And now with the combination of fewer shale wells being drilled and the high initial decline rate of the MOST RECENT shale wells drilled we’ll see a higher national oil production decline rate. But two important factors. First, we still have the slowing declining (and still significant) heritage oil production rate underlying the future national production rate. Second, while the shale wells might have a very high INITIAL decline rates those shale wells older than 2 years have slipped into a phase where decline rates are much lower than those initial rates. Here’s a typical shale decline rate graph the EIS likes:

https://www.eia.gov/todayinenergy/image ... 9/main.png

It shows the first 24 month decline rate on the order of 60% to 80%. But from Month 24 to Month 36 it’s around 20%. And then even lower down the line. So while the shale don’t drop down into the single digit decline rates of all those legacy conventional reservoirs they still add an addition production base with relatively low decline rates.

So again the bottom line: while the decile of the more recent shale wells combined with the decrease in new shale drilling will have US production falling quicker than it has been for the last 40 years, we will soon again be producing the majority of US production from wells that have slipped into their low decline rate phase. IOW no US shark fin oil curve IMHO.

[Revi]

I wonder what the next few years will bring. We seem to have a lot of oil around now, but maybe in a year or so, not so much...

[Pops]

I think unlike the frack wells that might come back with higher price, this is the bigger concern:

$this->bbcode_second_pass_quote('', 'T')he supply of oil may already be more constrained than many market participants realize as a result of stripper shutdowns. Once a stripper well is closed, it is often a permanent decision as reopening wells makes little economic sense given their miniscule production. At the same time, because there are over 400,000 wells across the U.S. and they are often operated by very tiny firms, there is no good way to track production from this market segment.

Stripper well shutdowns could increase significantly as 2016 gears up. The last time there was an oil price crash this severe was in the mid-1980s. In 1986, half of the country’s stripper well production was shut down as a result.

[Revi]

Here's the latest post from Ron Patterson. He says basically that all roads lead to peak oil. Now.

http://peakoilbarrel.com

[Pops]

Russia was basically the reason that the decline of the N. Sea didn't put us in the toilet back in the aughts. They look to be maxed...I think there is a thread about that here somewhere.

And yeah, I've about decided that KSA spare capacity is a bunch of malarkey, wishful thinking at least


And the ROCK goes into syndication!

[Plantagenet]

$this->bbcode_second_pass_quote('Revi', 'H')ere's the latest post from Ron Patterson. He says basically that all roads lead to peak oil. Now.

http://peakoilbarrel.com

[GoghGoner]

This should be the start of a multi-year decline. With all of the global capex cuts, there is little chance of oil production going up in 2017-2019.

Oil prices gain as IEA says it sees production cuts

$this->bbcode_second_pass_quote('', 'T')he group, which coordinates energy policies of industrialized nations, said it believed non-OPEC output would fall by 750,000 barrels per day (bpd) in 2016, from its previous estimate of a 600,000 bpd decline.

It also said Iran's post-sanctions return to exporting was happening more gradually than expected, keeping its barrels from putting significant pressure on the market.

[Tanada]

I just read the whole article and its a cross between pulling my hair out and just doing a face palm.

$this->bbcode_second_pass_quote('', ' ')Goldman Sachs remained bearish, saying in a note to clients that prices could fall sharply in coming weeks with record U.S. inventory builds offsetting production declines in the country.

The bank said oil prices need to be low enough to ensure supply is reduced over time, projecting $39 a barrel on the average for global benchmark Brent crude in 2016, down from its previous forecast of $45.

[AdamB]

$this->bbcode_second_pass_quote('GoghGoner', 'T')his should be the start of a multi-year decline. With all of the global capex cuts, there is little chance of oil production going up in 2017-2019.

Oil prices gain as IEA says it sees production cuts

$this->bbcode_second_pass_quote('', 'T')he group, which coordinates energy policies of industrialized nations, said it believed non-OPEC output would fall by 750,000 barrels per day (bpd) in 2016, from its previous estimate of a 600,000 bpd decline.

It also said Iran's post-sanctions return to exporting was happening more gradually than expected, keeping its barrels from putting significant pressure on the market.

[Subjectivist]

$this->bbcode_second_pass_quote('AdamB', 'I')f someone wants to begin drilling onshore US, they can go from a standing start to producing oil in North Dakota in...perhaps....4 months, on an existing lease. So a capital cut back today means long frequency projects, like those in the GOM, can't give you a quick turn around in oil production, but the Eagle Ford and Bakken certainly can. So let production fall..and when the price part of POD kicks in, the same thing that caused US production to create a global glut, will activate to supply enough to keep the price near that of the marginal barrel. If cheap money becomes involved...again...you can have the same oversupply situation develop, depending on how long the cheap money occurs in conjunction with higher prices.

The industry is wonderful at boom bust cycles, and the Bakken has a ways to go before the oil there runs out.

[ROCKMAN]

Sub - Actually the skilled manpower of the POD may for the first time become a serious negative. There have some kids brought into the game but the vast majority of the experienced hands will vanish from the oil patch in the next 5 to 10 years. And that was going to happen even without the bust. Low oil prices will only accelerate the dynamic.

[GoghGoner]

Yes, the US will be interesting to watch as prices increase, however, the US still accounts for less than 15% of global oil production. The capex cuts are global and have taken quite a few millions of barrels a day off of future production since those cuts affect projects with multi-year startups.

[AdamB]

$this->bbcode_second_pass_quote('Subjectivist', '')$this->bbcode_second_pass_quote('AdamB', 'I')f someone wants to begin drilling onshore US, they can go from a standing start to producing oil in North Dakota in...perhaps....4 months, on an existing lease. So a capital cut back today means long frequency projects, like those in the GOM, can't give you a quick turn around in oil production, but the Eagle Ford and Bakken certainly can. So let production fall..and when the price part of POD kicks in, the same thing that caused US production to create a global glut, will activate to supply enough to keep the price near that of the marginal barrel. If cheap money becomes involved...again...you can have the same oversupply situation develop, depending on how long the cheap money occurs in conjunction with higher prices.

The industry is wonderful at boom bust cycles, and the Bakken has a ways to go before the oil there runs out.