[misterno]

I watched this documentary where a well is shown with %99 water and %1 oil. The well was still producing so I assume it was profitable.

How is this possible?

http://www.eco-tube.com/v/KNOW/Peak_Oil ... ggett.aspx

[shortonsense]

$this->bbcode_second_pass_quote('misterno', 'I') watched this documentary where a well is shown with %99 water and %1 oil. The well was still producing so I assume it was profitable.

How is this possible?

http://www.eco-tube.com/v/KNOW/Peak_Oil ... ggett.aspx

[misterno]

$this->bbcode_second_pass_quote('pstarr', 'I')t's simple misterno. It is about energy return on energy invested. EROEI.

If the oil is near the surface or there is still pressure left in the reservoir (though I doubt it at 99% water cut) then the energy (calories) to needed to process the oil (extract it from the ground, remove the water, refine it into gasoline, etc.) may in fact be less than the energy left in the remaining oil. That is a positive EROEI. It is therefore profitable.

Now some cornucopians, republicans, etc. may have a different answer. They will talk about the God of Money and Mr. Demand etc. making it all okay. But do not listen to them. They are wrong

[shortonsense]

$this->bbcode_second_pass_quote('misterno', ' ')So the question is how come only the %1 of the stuff coming out of that well makes the operation profitable?

[Blacksmith]

I don't know the particulars but there are several options:

The well or field is in the last stages of production, has paid for itself and the only costs you have remaining are production or pumping costs, getting rid of the produced water (generally through reinjection), transportation to refinery and a royalty or rent of some sort.

It is a produce or loose situation where you have to either produce or loose the rights to the oil and they are prepared to suffer a loss rather than surrender their rights.

For instance many of the wells currently being drill in spite of the low prices are commitment wells, which must for a number of reasons be drilled.

I can't see there being a great deal of production nor can I see just dumping the water into the nearest stream.

[TheDude]

What's the field? I'm guessing East Texas.

$this->bbcode_second_pass_quote('', 'T')here is an entire thread why Simmons and his "water cut in Ghawar" theories are bogus.

[Rod_Cloutier]

In terms of Saudi Arabia or other national oil producers, they would have to keep producing oil even at a loss or they would lose their credit rating. These oversea oil countries produce little but oil and live largely off giagantic sums of borrowed credit for the balance.

I would think that these countries, to keep the illusiion of their well being complete for foreign banks, would continue to produce even at an exceptional loss. ie. that the entire rest of their economy acts as a slave to subsidise the oil production losses, just so the ruling class can keep the favor of the big foreign lenders.

These types of subsidies will all end when one of several possiblilities occurs: oil volumes can't be maintained even with enormous subsidies and the fraud is revealed. That foreign banks become wise to the fact that they are being imbezzled (unlikely but possible), or there is a class revolt, where the over taxed and impovershed lower classes rise up to throw out the ruling elites. The first thing the new revolutionary government would do would be to eliminate the oil subsidies to lower taxes on the poor and middle classes, which would immediately lower or end oil production.

Think of Maddoff's ponzi scheme. It doesn't matter what investors believe just so long as their are more investors to cover the losses. In an oil nation, it doesn't matter what the rate of oil resevoir decline is so long as you can hide the truth and subsidise the losses through taxing the population more.

[Maddog78]

Taxes in the Middle East? Virtually non-existent.

Not to say the lower classes may not someday rise up against the elites but it won't be because of taxes.
It will be due to the lack of "trickle down" from the top.


$this->bbcode_second_pass_quote('Repent', '
')These types of subsidies will all end when one of several possiblilities occurs: oil volumes can't be maintained even with enormous subsidies and the fraud is revealed. That foreign banks become wise to the fact that they are being imbezzled (unlikely but possible), or there is a class revolt, where the over taxed and impovershed lower classes rise up to throw out the ruling elites. The first thing the new revolutionary government would do would be to eliminate the oil subsidies to lower taxes on the poor and middle classes, which would immediately lower or end oil production.

[Voice_du_More]

Your thread title is misleading. You say it is profitable and then in the OP you ask whether this is so.

Here are the facts EROEI is already mentioned above that is base level. Now can it appear profitable? Well, yes if you purchsed the operation on foreclosure with bailout money then nobody will know for at least a few years that it is a net loser.

A 99% watercut means you pump 100 barrels to get one barrel of oil. So you have fixed costs up front, probably $10-$20 per barrel, then you sell it for $50 per barrel, that is profitable. The small wells are probably doing pretty well even now since the costs are so small.

That does not change the overall supply problem that is getting worse slowly. Having 1000 50 barrel per day rigs does not undo the fact that all of the major world oil fields are in decline and the world needs more supply to the tune of 2-5% per year to continue growing under the old paradigm. It's only a matter of waiting long enough to see the every more severe gyrations as modern society comes to a halt complete with escalating resource wars, famine, plague, civil unrest,...

The argument is not dented at all by small wells being profitable. In fact in the area of refineries that can find a a way to keep operating after the serious impacts local oil markets will probably exist. Wyoming will probably has gasoline, and NGL after the US is gone and Wyoming is fighting for it's national sovereignty against rogue tribes coming in from the hinterlands.

[shortonsense]

$this->bbcode_second_pass_quote('Voice_du_More', ' ') Wyoming will probably has gasoline, and NGL after the US is gone and Wyoming is fighting for it's national sovereignty against rogue tribes coming in from the hinterlands.

[rockdoc123]

I need to point out this has zip to do with EROEI but rather to do with economics, the two not necessarily always linked. As an example on a full project cycle you could have a particular oil field deliver negative EROEI but still have very positive full cycle economics. When you look at EROEI the energy expended to create all the steel, fuel, plastic etc. that are used in the operation have to be taken into account. The decision to keep producing a well has nothing to do with that assessment but is made solely based on at what point operating costs exceed netbacks. If you've already capitalized the water knockout facilities, ESP's, pipelines etc. then it is quite possible to produce down to very high water cuts. The actual level of water cut that can be produced is also controlled by fluid properties and reservoir permeability. Some oils can produce to very high water cuts (over 90% like Kern River) others effectively stop producing oil at some point due to adverse mobility ratios, changing wettability or other issues.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'I')f the EROEI of an entire project is something absurdly poor or (god forbid! NEGATIVE) it will never be started in the first place. Rocdoc could give you many examples of such jobs. You just don't drill at all. period.

[shortonsense]

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'I')f the EROEI of an entire project is something absurdly poor or (god forbid! NEGATIVE) it will never be started in the first place. Rocdoc could give you many examples of such jobs. You just don't drill at all. period.

[Maddog78]

rockdoc123 is correct.

[shortonsense]

$this->bbcode_second_pass_quote('Maddog78', 'r')ockdoc123 is correct.

[kiwichick]

rocdoc

why have so many rigs and projects stopped or been delayed?