[ROCKMAN]

Sum - "1.6%? So you are claiming that the ERoEI of US oil production is 62.5:1?". Not sure if that 62.5:1 is close or not. But as I've pointed out many times the direct consumption of deisel used in drilling is much less than many assume. I actually sign the deisel invoices for all the wells my company drills. From a cost basis the fuel is less then 10% of the total well cost...some times a good bit less.

So let's talk Btu's. It varies a bit but a 25% yield of diesel from a bbl of oil is not uncommon. IOW it takes 100 bbls of oil to make 25 bbls of diesel. Of course a lot more Btu's come from those 100 bbls of oil...like gasoline, bunker fuel, etc. But we'll ignore that or now.

So lets say I burn 300,000 GALLONS of diesel to drill a well...typical of what I drill. That's about 7,200 BBLS of diesel which would be cracked from about 30,000 bbls of oil. So if the well produces 300,000 bbls of oil that's roughly an EROEI of 10...but using only the Btu's of the diesel. Again (very roughly) the Btu's from those bbls represents something closer to 4X that EROEI.

Of course there's the Btu's used to build the drill rig, etc. But that has to be amortized over the many wells that the rig will drill during its life time. But another issue: that rig wasn't built to specifically drill my wells. So in one sense those Btu's are like a "sunk cost" and don't really apply to my wells.

And back to the basics: drilling decisions have never and will nevertnevert be based upon EROEI. They are based upon economic analysis. Back when oil was $100/bbl most wells couldn't meet economic justification at an EROEI below 5 or 6. An now that oil is $50/bbl or less the minimum drillable EROEI is closer to 12.

Long before the EROEI gets below 3 or so nearly all drilling for oil will cease because the VALUE (not the Btu content) of the production would be less then the cost (and not the Btu's consumed) of a well.

[ennui2]

$this->bbcode_second_pass_quote('ROCKMAN', '
')Long before the EROEI gets below 3 or so nearly all drilling for oil will cease because the VALUE (not the Btu content) of the production would be less then the cost (and not the Btu's consumed) of a well.

[kublikhan]

$this->bbcode_second_pass_quote('SumYunGai', '1').6%? So you are claiming that the ERoEI of US oil production is 62.5:1? That cannot be possibly true.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'W')TF are you talking about? Natural gas is fast replacing coal for power plants. Keeping the lights on is critical to maintaining BAU. It's also often used for home-heating, keeping people from freezing in the winter. And you just casually discount its value to civilization?????????????????????

[ROCKMAN]

k - "...do you see that happening (EROEI less the 5 or 6), as ETP says, within 4 years?" It's a bit of a mind twister but think about it: oil @ $50/bbl and minimum required EROEI about 12 and oil @ $100/bbl and minimum required EROEI around 5 or 6. So at what price would oil have to be to get for down for EROEI to be half of 6...about 3? Assuming drilling costs and reserve additions are roughly the same as today: about $150 to $200 per bbl..more or less. Such very high oil prices are possible - we've already seen it happen back in '08. But they didn't last long.

So again it's just a very rough gauge but I doubt we'll ever see the EROEI below 5 for an extended period of time. But here's a better question: how long will the current EROEI required minimum of 12 or so last? Remember what that really means: an oil project today will have to be about 2X as much oil to justify drilling as it did when oil was around $100/bbl.

Sorta explains why the number of shale wells being drilled has fallen so far: the reserves in the ground are exactly the same volume as they were 2+ years ago. Which also explains why shale wells being drilled today appear to be preforming so much better: if they didn't have that potential they wouldn't be drilled. Just like the thousands of shale wells that were drilled 3 years ago that aren't being drilled today.

IOW there has been a rough relationship between EROEI: as long as drilling costs were about the same the higher the oil price the lower value of EROEI is required.

That should really stir up an hornet's nest, eh? LOL.

[ralfy]

According to this article, both energy and oil consumption have been rising, but the growth is slowing down due to limits to growth:

https://ourfiniteworld.com/2015/06/23/b ... gy-demand/

[SumYunGai]

$this->bbcode_second_pass_quote('ralfy', 'A')ccording to this article, both energy and oil consumption have been rising, but the growth is slowing down due to limits to growth:

https://ourfiniteworld.com/2015/06/23/b ... gy-demand/

[onlooker]

Also its good to remember that we are reaching limits to growth in other resources as well

[ennui2]

There's a difference between conceding that growth is slowing and accepting a specific prediction of empty store shelves and mass panic in just 4 years.

[SumYunGai]

Babydoomer posted this link on the Etp thread:

https://www.woodmac.com/analysis/US-ups ... k-in-brief

$this->bbcode_second_pass_quote('', '[')size=120]Oilfield services recovery unlikely in 2016[/size]

Although some smaller oilfield service players are operating at (or below) true variable cash breakevens, Schlumberger has cautioned analysts against using their failure as a basis for a bottom, since their equipment is likely to end up in the hands of larger players.

Indeed, the profitability of small companies shouldn’t be expected to define the bottom of this oil service cycle. The US market is currently operating below 50% of peak activity and may never be called upon to grow production at the same pace as it did from 2012 to 2014.

The market is sending signals to the oilfield service industry: scrap equipment or run it into the ground. Halliburton estimates 25% of pumping capacity has been cannibalised beyond recovery.

[Tanada]

EVERYONE predicted this would happen. That is everyone who knows the first thing about oil industry economics, which includes most o the folks posting n this board.

The exact same pattern happens in every industry you can name when they are in a burst bubble economy. First they lay off as many workers as they can to economize. Then they scrap the oldest least efficient equipment in their inventory. If the doldrums last long enough they cut more workers and scrap more equipment.

Look at another industry, say the Airlines just as an example. Costs go up, passenger traffic plummets what do they do? First every airline has list of aircraft in their inventory with stats on age, capacity and fuel efficiency. The least valuable aircraft upon review get sent to the desert and parked, the flight crews for those aircraft get laid of. If the recovery happens quickly those aircraft are reactivated. If the recovery takes a while then those aircraft are offered for sale, some are bought by cargo companies and some end up being parted out and scrapped.

The oil industry works the same way, drilling rates are in the toilet so lots of drilling rigs and their crews were put in storage and laid off. Things have continued at a low level long enough that to keep the working rigs operational parts have been stripped from the rigs in storage. The only thing mysterious about this is why anyone finds it surprising or thinks it was hard to predict.

[SumYunGai]

$this->bbcode_second_pass_quote('Tanada', 'T')he only thing mysterious about this is why anyone finds it surprising or thinks it was hard to predict.

[ennui2]

You guys don't see the forest through the trees. Just because there are bankruptcies and layoffs in the oil patch does not back up ETP's predictions.

In fact, you could say they server to invalidate it should it set the stage for a future supply shortfall that leads to a price spike (which is most likely). These spikes are NOT part of ETP's narrative. The economy is supposed to keel over before oil has a chance to go up in price.

Every time oil inches upward in price it erodes the validity of ETP. The more it goes up and the longer it stays up the more ETP's simple "down and only down" logic looks idiotic.

Likewise, oil saying cheap and the economy chugging along also invalidates ETP. The low oil prices is supposed to be reflective of a lack of economic activity (aka demand destruction). That is not happening. We're experiencing marginal but steady growth instead.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'T')he oil industry works the same way, drilling rates are in the toilet so lots of drilling rigs and their crews were put in storage and laid off. Things have continued at a low level long enough that to keep the working rigs operational parts have been stripped from the rigs in storage. The only thing mysterious about this is why anyone finds it surprising or thinks it was hard to predict.

[AdamB]

$this->bbcode_second_pass_quote('ROCKMAN', '
')And back to the basics: drilling decisions have never and will nevertnevert be based upon EROEI.

[AdamB]

$this->bbcode_second_pass_quote('ralfy', 'A')ccording to this article, both energy and oil consumption have been rising, but the growth is slowing down due to limits to growth:

https://ourfiniteworld.com/2015/06/23/b ... gy-demand/

[StarvingLion]

The bankruptcy of the Concorde in the beginning of 2004 (perfectly coinciding with Peak Oil) signaled the death of the Oil Industry as well. You think they couldn't find enough customers printing oil (fake money) to keep that gas guzzling Jet operating?

Any supersonic jet startup now has to cut the cost of a ticket from $20,000 to $5000. Meaning they won't be giving the oil industry any higher prices per barrel.

Where is the successor to the Concorde, Adam?

[ennui2]

$this->bbcode_second_pass_quote('StarvingLion', 'T')he bankruptcy of the Concorde in the beginning of 2004 (perfectly coinciding with Peak Oil) signaled the death of the Oil Industry as well.