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Page added on May 8, 2014
Oil & Gas Boom 2014: No End In Sight
In February, oil production in Texas hit a 34-year high, with combined oil and condensate volumes exceeding 2.9 million barrels of oil per day. For the first time in memory, Texas now produces more than 36% of all the oil produced in the United States, and if it were a separate country, Texas would now rank as the 8th largest oil producing nation on earth. Wow.
We see endless speculation about how long we should expect the current boom in shale oil and natural gas that is happening in Texas and throughout much of the United States to last. Prophets of doom like proponents of “Peak Oil” theory and radical anti-economic growth activists like Bill McKibben say it’s all a “bubble” that will burst at any moment.
Others actually involved in the development of shale resources tend to believe the correct answer today will be some variation on the theme: “a very long time.” One presenter at the recent Eagle Ford Consortium Conference in San Antonio, Greg Leveille of ConocoPhillips COP +1.34%, told his audience that the 25 county region that makes up the Eagle Ford Shale play should expect to see “decades and decades” of production.
Credit: Dr. Mark Perry at The American Enterprise Institute
People who live in the Eagle Ford region, the Permian Basin of West Texas, and other significant shale plays around the country naturally worry about when the next “bust” will come, which is not an unreasonable concern to have. Previous conventional oil and gas booms have almost always eventually wound down into a bust at some level. But there are many reasons to believe that the shale boom will be different, and the Eagle Ford play provides a very good example why.
The differences between today’s situation and that of prior booms are many. Start with the fact that previous booms, like the oil boom of the early 1980s, came about due to high oil prices driven by restrictions in supply. The restrictions in the 1980s were artificially driven by OPEC, and prior booms came about simply due to a failure by the global industry to identify adequate new resources. In every case, you had rising demand and limited supplies to meet it.
Today’s boom in the United States is different in that we now have rapidly rising domestic supplies meeting rising demand. Where in the past the United States was forced to rely more and more heavily on imports from OPEC countries to meet its domestic needs, today’s shale boom is enabling our country to actually lower oil imports on a daily basis, having cut them almost in half since 2007. In the meantime, rapidly rising demand in China, Japan, India and the rest of the Pacific Rim is filling the void in U.S. imports, consuming all the oil the OPEC countries and Russia can produce. This all ensures the price of oil will remain healthy enough for the U.S. drilling boom to continue.
Some in the environmentalist movement, like McKibben, promote what they call the “stranded carbon” theory, which posits the world will ultimately leave much of the known oil and gas reserves in the ground due to concerns over climate change. But this scenario is unlikely to become reality, because to do that will mean an end to economic growth in the developed world, and relegating developing nations who need abundant and affordable energy supplies to improve their economies and help move their people out of abject poverty to simply accept their current lot in life.
For at least the next 50 years, fossil fuels are the only available source that is truly scalable to meet those needs. The thought that 4+ billion people who populate developing nations on this planet are going to quietly accept their current fate is unrealistic. Yet, those who promote the “stranded carbon” theory have no real, current alternative to offer to fossil fuels.
To sustain economic growth here in the U.S. and to have any hope of helping move the developing world out of squalor, we are going to need all we can get of every source of energy we can develop. Rather than leave the oil and gas in the ground, it is more likely the human race is innovative enough to develop technologies necessary to deal with the carbon dioxide.
Writing in the Houston Chronicle on April 27, columnist Bill King warned Texans not to put all our eggs in the oil and gas basket, one reason being the potential for development of a “disruptive technology” related to Solar power that would make it more competitive with fossil fuels. That is great advice – we do need to continue to develop renewable fuel sources, and no state or country has done more to aggressively develop wind power than Texas has over the last decade. But even with that continued renewable development, and even if the long-awaited “disruptive technology” related to solar power or hydrogen cars finally comes about, our reality is that the world is still going to need every bit of every source of fuel we can develop.
This isn’t 1984 all over again, and we do not have to live in a world of energy poverty, as some actively advocate. The OPEC nations can still influence the global price of oil to some extent, but the ongoing shale oil boom in the U.S. means they can no longer force Americans to wait in endless lines to fill their tanks with gasoline. We can have a world of energy abundance, and Texas is playing a leading role in making it all happen.
God Bless Texas.
25 Comments on "Oil & Gas Boom 2014: No End In Sight"
degar7 on Thu, 8th May 2014 7:34 am
Thank God. I was worried those depletion rates were legit. Now where’s my car keys, it’s time for a drive.
Mike2 on Thu, 8th May 2014 8:10 am
The real competitors to oil&gas NEVER are not the “renewables”. Never were, never will be.
They are coal and nuke(with a resource-base for nuke of several 1000years).
How much got this man payed from oilmans for concealing ALL serious competitors?!
rockman on Thu, 8th May 2014 8:13 am
“…the Eagle Ford Shale play should expect to see “decades and decades” of production.” Not let explain the BS aspect of this statement. I’m currently drilling horizontal wells to recover residual oil in a Texas trend that has produced 4.5 billion bo since the ’30’s. And even after 7 decades probably half of those leases are still producing oil. Yes: “decades and decades of production”. OTOH these wells fell to stripper status (less than 10 bopd) many decades ago. The field I’mm drilling in has produced 26 million bo. Currently there are 6 wells doing a total of 12 bopd and 1,200 bbls of water per day. So yes: still producing oil more than 6 decades after these wells were drilled. We are saved. LOL.
So predicting “decades and decades of production” from the Eagle Ford trend will likely be true. But as far as the amount of oil being produced for “decades and decades” it don’t mean sh*t. LOL. And new wells for “decades and decades”? Consider the Austin Chalk fractured carbonate shale play of the 90’s. It was hz drilled and frac’d across an area several timed larger than the Eagle Ford Shale play. It was THE hottest oil play on the planet… for about a decade. And there still some AC wells being drilled today but the boom ended years ago. Just like the AC the EFS will eventually be drilled up for the most part. And IMHO it will not takes “decades and decades” to do it.
eugene on Thu, 8th May 2014 8:19 am
Couple of decades ago, I developed a theory that bullsh_t is the grease upon which the world turns. Looks like another confirmation of my theory.
Pops on Thu, 8th May 2014 8:38 am
I had an old Ford pickup as a kid. The worst thing about that truck is when you are boondocking around in the mountains and driving uphill you can’t see over the hood. It’s virtually impossible to see whether approaching a meadow or a cliff.
Forbs is like a drunk uncle riding in the passenger seat hollering
“Floor it!”
LOL
Ashby Lynch on Thu, 8th May 2014 8:51 am
Rockman,
You have mentioned the comparison to the Austin Chalk several times in the past.
It would be interesting to see posting comparing the Austin Chalk to a current shale field. What are the similarities and differences in geology, drilling technology, the boom and bust production curve, etc. Perhaps you could point to an article at another site. Always enjoy your two cents worth, been enjoying your comments since you were over at tod.
CAM on Thu, 8th May 2014 9:15 am
Here’s the thing though. Hubbert’s decline curve was based on the slow decline for conventional oil fields, 4-6 percent per year. As conventional oil continues to decline we become more dependent on fracked oil. When this bubble bursts, and it will, the ride down the curve will be something to behold!!
Beery on Thu, 8th May 2014 9:26 am
“No end in sight”
If that’s the case, why is oil production in places like the Bakken leveling off?
“…we now have rapidly rising domestic supplies meeting rising demand.”
If that’s the case. why are the cornucopians claiming that we’re facing peak demand?
“For at least the next 50 years, fossil fuels are the only available source that is truly scalable to meet those needs.”
So because people need something, they are automatically bound to get it? If that’s so, I should get an extra $500 in my next pay packet. After all, supply has to meet demand, right?
“To sustain economic growth here in the U.S. and to have any hope of helping move the developing world out of squalor, we are going to need all we can get of every source of energy we can develop.”
Sure, but that doesn’t mean it’s inevitably going to happen. If it did, then economic growth would never falter and the developing world would have innovated its way out of squalor thousands of years ago.
“…no state or country has done more to aggressively develop wind power than Texas has over the last decade.”
So now Germany lags behind Texas in wind power implementation? That’s news to me, but heck, what do I know.
“…the ongoing shale oil boom in the U.S. means they can no longer force Americans to wait in endless lines to fill their tanks with gasoline.”
Yes, because as anyone who is willing to ignore bad news knows, U.S. oil well production always keeps rising and never falters.
The problem here seems to be that Forbes seems to have no inkling that markets can collapse, or of pretty much any other negative fact about economics. As a result, they keep churning out articles like this that are classics of unintentional comedy.
One little bit of truth among the nuttiness:
“…our reality is that the world is still going to need every bit of every source of fuel we can develop.”
Could that be a veiled admission that everything is not quite as hunky-dory as the article promises? And while it’s true that we’re going to need all the energy we can get, the fact is that whatever we can extract, it’s never going to bring us the utopia that this article seems to suggest is just around the corner.
DC on Thu, 8th May 2014 9:45 am
“To sustain economic growth here in the U.S. and to have any hope of helping move the developing world out of squalor, we are going to need all we can get of every source of energy we can develop. Rather than leave the oil and gas in the ground, it is more likely the human race is innovative enough to develop technologies necessary to deal with the carbon dioxide.”
ROFL! Forbes ability to pile it ever deeper never ceases to amaze! The u$ has never given 2shyts about moving the ‘developing world out of squalor’.Hell, it doesnt even care about squalor in the ‘homeland’ itself. If anything, u$ economic imperialism and its odious ‘free-trade agreements'(among many other things) are precisely tailored to insure the poor remain that way-in squalor. And does does ‘un-economic ‘growth’ in the u$ of Inequality alleviate ‘squalor’ in the third world anyhow? Maybe Forbes is referring to Mississippi? Who knows. But the real kicker in that little blurb is what the 1% have in store for the u$. If its made of carbon-and can fit in the tank of a 2.5 ton grocery fetcher-it will be extracted and burned-costs or consequences be damned. I cant help wonder though, how will the ‘human race’ develop technologies to ‘deal’ with carbon anyhow? ‘We’ have made about zero progress on that front for as long as ive been alive. What does forbes have in mind? Carbon sequestration? LOL ‘Hybrids’, Hydrogen hoaxsters? Anti-matter? I remember when I was kid reading how in the magical land of the 21st century-we werent supposed to be driving gas-powered cars anymore. Now we produce record numbers of them and ‘fuel efficiency has barely improved on any of them. And so far, the only way the ahem ‘human race’, and by that, I assume Forbes means the distinctly IN-human US welfare capitalist overclasses way of dealing with ‘carbon’, has been sophisticated PR disinformation campaigns to tell the sheeple continued extraction and use of FF is really not a problem.(And if it is a problem-well thats too fooking bad). While in the real world, spills, leaks and pollution of air, land and water by corporate fossil-fool corporations keeping piling on.
It must be nice to live in Forbesland(aka Fantasy Island) though.
noobtube on Thu, 8th May 2014 10:46 am
Does anyone under 50 read Forbes?
The New York/DC media machine loves to produce myths, fables, and fiction for their aging, Boomer, stuck in the 60s/70s/80s, me/greed generation readers. New York/DC media is stuck in the fantasy of the late-20th century.
I wonder when they will realize this is the 21st century and the American century is over?
Davey on Thu, 8th May 2014 10:54 am
True noob, but I doubt you know what finance is and an alternative reality so I understand why you don’t read it. Maybe if you read it a little you may have better perspective. Us over 50’s who received a decent education are tolerant unlike the heathen youth consumed by the couch and their games
Plantagenet on Thu, 8th May 2014 11:32 am
At least Forbes was right when they said “god bless Texas.”
The US economy would be in a lot worse shape right now if tracking and Texas hadn’t stepped up to help fuel the economic recovery we’ve seen since 2009.
Northwest Resident on Thu, 8th May 2014 11:50 am
“…the American century is over.”
Or, more correctly and inclusively, maybe we can say that the fossil fuel age is (just about) over.
It is global finance and global powers, not American. The fact that the global powers leverage American society and government to produce a large military and international control is no reason to hate America. We’re being used. Our kids are going off to die and/or return home maimed and forgotten by TPTB. Americans are being victimized just like everybody else.
noobtube, you’re like Makati1, everything you post exposes your bitterness and anger toward America. It must be miserable to live with all that pent-up negativity.
Forbes — what a lying pos that rag of a magazine is. And the really sad thing? There are millions of people with stock market investments who totally buy in to the crap that Forbes spews.
Do not forget that Forbes is owned and controlled by very wealthy and powerful interests. Forbes has always been a propaganda tool used by TPTB to manipulate large segments of the investing public. That is truer today than ever before. This article is clearly intended to instill and/or fortify faith in investors who might be getting a little nervous. Don’t worry, investors, as long as Forbes is stroking you the way you like it, you’ve got nothing to worry about.. hahahahaha! Suckers!
Davey on Thu, 8th May 2014 12:06 pm
Great post n/r!
Davey on Thu, 8th May 2014 12:08 pm
N/R, Forbes is all you say and more but no reason not to read some of it to try to understand pathological greed and self interest
Northwest Resident on Thu, 8th May 2014 12:24 pm
Davey — I totally agree. I am glad that this site regularly posts articles from Forbes, along with sample selections of all the other B.S. propaganda that is being perpetuated by the MSM and other “news” outlets that are owned and controlled by TPTB.
Kenz300 on Thu, 8th May 2014 12:27 pm
Forbes — Shilling for the fossil fuel industry and the top 1%………
Forbes and Faux Noise — spin, spin, spin for the RepubliCON cause…………..
MSN fanboy on Thu, 8th May 2014 2:22 pm
OMG Kenz300 said something different…..jaw drops….. like seeing a Unicorn.
shortonoil on Thu, 8th May 2014 3:23 pm
“People who live in the Eagle Ford region, the Permian Basin of West Texas, and other significant shale plays around the country naturally worry about when the next “bust” will come, which is not an unreasonable concern to have.”
That should be in no more than three years. The Duvernay now has 120 producing wells, and according to Platts they will have a hundred rigs working there by the end of this year. The Duvernay has a $15 – $20 dollar shipping advantage over the Eagle Ford because it is only 200 miles from the primary market for condensate, the oil sands. IP in the Duvernay is running at 1000 – 1500 barrels per day, and of the 120 wells that have been drilled to date there has not been one dry hole. Because there is no other market for condensate in the US, and it can’t be exported the US shale oil industry can expect to soon lose 40% of its market. That would be the effective end of the shale oil industry in the US.
Forbes should do some due diligence before they publish articles on subjects. They don’t appear to have any idea what they are talking about when it comes to petroleum.
http://www.thehillsgroup.org
Davey on Thu, 8th May 2014 3:50 pm
Forbes due diligence??? That could hurt their bottom line short. There is reality and there is market making which is whatever sounds good. Great post as always short!
Northwest Resident on Thu, 8th May 2014 4:32 pm
Give Forbes a break. Of course they did due diligence. They went through that article with a fine-toothed comb and made sure they removed any reference to actual truth or reality — so, you know, as to not upset their readers with trivial bits of information that they don’t need to know. Good job, Forbes!
rockman on Thu, 8th May 2014 5:26 pm
Ashby – This will give you some flavor. And the AC didn’t just have one boom. The first article bragging on it is 34 years old. The first boom was done with vertical wells. in the late 70
s I watched over a joint venture that got heavy into the AC with companies like Mosbacher. Some frac’ng but the key was finding structural elements that created significant natural fractures. And then came the oil price bust of the mid 80’s. Then in the 90’s the hz drilling of the AC began. Some of my links will show the huge extent of the Giddings Field. Which isn’t really a field in the classical sense but just the extent of the AC trend…just as there really is no Eagle Ford Shale Field either.
But as the sweet spots were drilled up in the AC longer laterals and more fracs were required to keep individual well productivity up…the same that will happen in the EFS, Bakken and every other fractured reservoir play. Just the nature of the business to try to drill the best looking leases available.
From:
http://www.epmag.com/item/Giddings-full-circle_106275
“The Austin Chalk served as the stage for the birth of modern horizontal drilling. It may be time for Act II.
There are more steel-toed boots in line for the legendary barbeque ribs at the City Market in Giddings, Texas, nowadays.
And that correlates with talk that Giddings, the center of the original Austin Chalk play, is on the cusp of a third boom. Hope dies hard in the cantankerous chalk country 36 years after geologist Ray Holifield used 2-D seismic to exploit fracture joints and inaugurated the chalk play in an era of rising oil prices. The 1981 oil price collapse brought that first boom to a close.”
http://www.texasmonthly.com/story/new-oil-giddings-gamble
http://www.slb.com/resources/technical_papers/technical_challenges/unconventional_gas/145117.aspx
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=9&ved=0CE8QFjAI&url=http%3A%2F%2Fwww.beg.utexas.edu%2Fmainweb%2Fservices%2Fpdfs%2Fgiddings.pdf&ei=eP9rU6zuGeGCyAHg_ICYCw&usg=AFQjCNEzG5Epp1reyaMDJP6nFZjbq0ji6A
And this map shows how much further the AC trend ran compared to the EFS:http://images.pennwellnet.com/ogj/images/ogj2/9604jwi01.gif
hvacman on Thu, 8th May 2014 6:39 pm
The only error in Forbes’ article is a complete failure to seriously consider the following fine-print standard Wall Street boilerplate disclaimer that is on every nugget of investment advice:
“[recent]past performance is no guarantee of future results.”
hvacman on Thu, 8th May 2014 6:44 pm
Ah, found it. Forbes should apply its own investment advice to its oil future predictions:
http://www.forbes.com/2010/04/16/fund-performance-ads-personal-finance-sec.html
Patrick on Fri, 9th May 2014 9:09 pm
It’s not as if we had the choice to move away from fossils, it’s the fossils that will move away from us. And soon.