Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on September 7, 2012
Credit Suisse: US can maintain oil growth
The US can maintain oil production growth at around 600,000 b/d because of shale development, the Gulf of Mexico and, potentially, the Arctic, but requires a near-term oil price of $95/bl for Brent, according to Switzerland-based bank Credit Suisse.
The required price could drop to $80/bl over time. US growth is seen accounting for 80pc of the global net gain in production capacity but, under the bank’s model, that still leaves global spare capacity at just 2-3pc in 2015.
But a key uncertainty in Credit Suisse’s models is decline rates for shale oil fields, the bank said. The recovery rate for shale oil is lower than for shale gas, indicating that many more wells will have to be drilled for oil relative to gas. Early rates of decline on Bakken and Eagle Ford wells can reach 50-70pc.
Accommodating a forecast 600,000 b/d a year of US oil growth, plus 300,000 b/d a year of Canadian growth by 2017 will require new trunk lines. The bank sees the WTI-LLS spread staying wide through the first half of 2013. It sees a discount for Bakken and Canadian heavy crude remaining through the second half of 2014.
In theory, the oil price requirement for shale wells in the US is $50-75/bl, according to Credit Suisse. But funding upfront capital costs pushes this higher.
The bank’s model would require $80bn/yr for shale oil. Adding in the spend on conventional oil, the industry would need to spend $160bn/yr to meet growth forecasts. That is equivalent to 30pc of the global upstream capital expenditure forecast for under 15pc of global production.
6 Comments on "Credit Suisse: US can maintain oil growth"
James A. Hellams on Fri, 7th Sep 2012 10:26 pm
This report lacks one critical factor that is not accounted for. This critical factor is energy return on energy investment.
When a well requires more energy to extract the oil, than the energy the well will produce; then NO amount of money you throw into the oil production will work. At this point, it is completely useless to produce any more oil from the well.
No amount of money will ever change the EROEI factor!
BillT on Fri, 7th Sep 2012 10:59 pm
EROEI seems to be the missing link in ALL denial pieces. It’s as if natural laws don’t count, only money. Boy are they going to have a rude awakening when that 2×4 smacks them in the face in a few years.
MarkR on Fri, 7th Sep 2012 11:48 pm
EROEI is reflected in the price to extract the oil. In this case they did mention the price needed to extract this oil, so EROEI is factored in for what it is worth.
In any case, I think EROEI is a flawed concept. It isn’t as straightforward as many on here believe. If cheap energy is used to invest in expensive energy, that factor isn’t accounted for in EROEI calculations.
For a theoretical example, lets say that the oil drilling equipment runs on electricity from a hydroelectric dam. The EROEI on that electricity is 100:1, but the the oil that is being extracted only had an EROEI of 5:1.
In a second example the equipment is using oil to extract more oil, in this case the EROEI on the oil is 20:1- both for the oil used to run the equipment doing the extraction and the oil that is being extracted.
Which oil really has a higher EROEI? In the first example you are getting a 500:1 EROEI- 100 times 5. In the second example you are getting a 400:1 EROEI- 20 times 20.
indigoboy on Sat, 8th Sep 2012 12:13 pm
MarkR : I’m not sure you understand EROEI.
Quick analogy to make the point : Suppose you are in the middle of nowhere, and I put a loaf of bread (2000 calories) in a steel canister and bury it. Is it worth you digging? (by hand):
2 feet – yes
4 feet – possibly
6 feet – Hmmm… maybe not
8 feet – definitely Not
If the calories you expend to dig, is greater than 2000 calories, then it is utterly pointless to dig for the bread, even though you know that there are 2000 calories available below ground.
Note also that Money or Price doesn’t even figure in EROEI, which is a thermodynamic dilemma NOT a monetary problem. In short, no amount of money, efficiency, technology, price manipulation, can solve the EROEI dilemma.
KingM on Sat, 8th Sep 2012 12:45 pm
Indigoboy, but what if you have a backhoe to reach the loaf of bread? Clearly, you’ll expend more than 2,000 calories of energy to get the loaf, but the loaf provides energy in a form that the diesel for the backhoe does not.
Whoknows on Sun, 9th Sep 2012 12:32 am
KingM, that backhoe is going to make it easier, but the thermodynamic requirements are still there. These human applications are more energy intensive than digging by hand. These applications are energetically unfavorable and can only follow if combined with energetically favorable input. This is why fossils fuels don’t just spontaneously develop into fabrics. It takes a lot of energy to develop.
In other words, human work, or fossil fuels – in relatively – are highly concentrated energy sources. To activate either requires huge energy expenditure. Like human evolution, energy cultivation took the path of least resistance. This is why human cultures and development vary so much. It’s interesting to note that the reality of entropy ( > free – cannot be utilized energy over time) is why most cultures collapsed.
A high EROEI requires an energy-dense resource or input. The ratio decreases because a larger input is required. The problem here is not scaling up input, but the cannibalization of utilize-able energy required by other important reactions. Energy, like money, is scarce and overtime dissipates. If channeled into a low return operation, potential growth elsewhere will have to be curtail. Hospitals are a great example, sanitation is another. I think it’ll become more obvious when love ones require these inputs to just live another day.
Acquiring a high density energy source is an extremely cost process. Never mind refining (or activating) the source so that it can be used. Economic viability is dependent on EROEI, because energetically unfavorable operations will have unfavorable consequences. Not just environmental, but societal ones. Human evolution, as I stated earlier, takes the path of least resistance. We’re increasing resistance, by going for less dense energy sources, but leaving the function unmodified.
Starvation is the result of functional operations no longer being energetically viable. Humans evolve under these circumstances and thus have thermodynamic pathways which reduces intake. In other words, the fact that the input is of lower energy density is compensated by reduced intake. Human transition to agricultural society increased our carrying capacity, but led to retardation of growth. Fossil fuel sort of reversed this development, but now we have obesity. That bubble, thanks to the auto-centric, anti-recreational lifestyle, is going to take us to hell. Point is, something has to give.