Peak Oil is You
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Page added on June 3, 2015
The shale outlook
A glut of product that has depressed prices has led the U.S. shale oil industry to cut jobs and idle more than half its rigs. But it’s only a temporary retreat for a sector that now has the upper hand globally, two experts write in The Wall Street Journal.
“Now the question is whether U.S. frackers can adapt to the lower prices they created,” say Donald L. Luskin, the chief investment officer of Trend Macrolytics, and Michael Warren, a managing partner of TrendMacro.Energy.
One reason they’re optimistic is that domestic frackers have been engaged in a “relentless” productivity drive. The industry is producing “more profitably today at … $65 a barrel than (it) could at $95 a barrel three years ago” with more gains ahead, the pair say.
Drilling multiple wells from one pad carries advantages in optimizing processes, holding down costs and responding to market conditions. Such wells can be activated when prices justify it. Which means OPEC no longer is the “swing producer” — the U.S. shale oil industry is.
Messrs. Luskin and Warren liken what’s happening with the industry to Japanese manufacturing’s “just-in-time” and “continuous improvement” methods. The industry thus is discrediting “peak oil” doomsaying, they contend, and enabling virtually limitless global economic growth as “American ingenuity and entrepreneurship (are) unleashed upon shale formations worldwide.”
And that sounds like a success story to us.
17 Comments on "The shale outlook"
Sugar Seam on Wed, 3rd Jun 2015 7:50 am
“limitless growth”…. fail
rockman on Wed, 3rd Jun 2015 8:49 am
With regards to the constant spin of “increased productivity here the numbers from the Texas rail road commission on how that increased productivity was panning out BEFORE THE RIG COUNT DROP. Its really a bitch when someone posts numbers that piss all over one’s spin. LOL.
“There were 2,521 producing oil leases on schedule in 2013; 1,262 producing oil leases on schedule in 2012; 368 producing oil leases on schedule in 2011; 72 producing oil leases in 2010; and 40 producing oil leases in 2009”
{A very impressive increase in the number of producing leases in just 5 years, eh? But notice the chart they present” in 2014 EFS production averaged 1.016 million bopd. But from Jan to March 2015 it has averaged 0.963 million bopd. That’s a 5% decline BEFORE the effect of the fallen rig count kicks in. And remember we have to be careful about how Texas classifies oil vs condensate: it isn’t a function of the API. Two wells might be producing the exact same oil but one could be counted as oil and the other as condensate. Too complicated to explain. But here is the stat for EFS condensate production:
2014 avg: 273k bbls
1Q 2015 avg: 245k bbls
So even combining C+C the daily rate is still current more than 5% lower than the average for 2014. And a reminder again: the 1Q production is from wells that were drilled long before the collapse of the rig count. So a lot more wells drilled and still production declined. And now a lot fewer wells are being drilled. I wonder which way production will be going the rest of this year?
Oh heck…I’m sure it will once again increase. After all we have “American ingenuity and entrepreneurship” on our side. LOL
Nony on Wed, 3rd Jun 2015 12:29 pm
I agree that productivity gain was levelion off. If we are as profitable at 65 now as we were at 95 three years ago, then why are we investing less?
GregT on Wed, 3rd Jun 2015 1:16 pm
“Then why are we investing less?”
Because the economy is in recession due to high energy costs Nony. Q1 2015 us GDP growth, -0.7%.
Nony on Wed, 3rd Jun 2015 4:05 pm
Greg: People will invest in positive NPV ventures (and not in negative ones) regardless of the general economy.
GregT on Wed, 3rd Jun 2015 4:36 pm
Nony,
People are generally not very intelligent, very easily manipulated, and as appears to be the case with you, inherently greedy. They would invest in Tulips, if somebody told them they could get rich from doing so.
Davy on Wed, 3rd Jun 2015 5:02 pm
NOo, you are probably too young to remember when there was the issue of confidence in the financial system. Today the system is rigged but when the people doing the rigging panic all hell will break lose and no amount of positive NPV is going to work when there is no liquidity.
nubs on Wed, 3rd Jun 2015 5:23 pm
“If we are as profitable at 65 now as we were at 95 three years ago, then why are we investing less?”
Because we were unprofitable three years ago at 95.
Speculawyer on Wed, 3rd Jun 2015 5:57 pm
” The industry thus is discrediting “peak oil” doomsaying, they contend, and enabling virtually limitless global economic growth as “American ingenuity and entrepreneurship (are) unleashed upon shale formations worldwide.””
Who take take such nonsense seriously? Yeah, productivity has increased . . . good. But ‘virtually limitless global economic growth’? C’mon. There is a finite amount oil.
And speaking of ‘increased productivity’, it seems to be a catchphrase for ‘we fired a lot of people so we’ll profit more as we coast for a little while’.
GregT on Wed, 3rd Jun 2015 6:04 pm
Two thumbs up Spec.
Nony on Wed, 3rd Jun 2015 7:10 pm
nubs: Than shouldn’t the rate of investment be the same? isn’t it more simple to assume that these wells make more money at high oil prices than low? I know, radical concept for both the doomers and the cornies, but I bet the mudlogger backs me up.
GregT on Wed, 3rd Jun 2015 8:45 pm
Many investments in oil and gas from education and retirement funds are being pulled right now Nony due to climate change. It is considered by many to be unethical.
GregT on Wed, 3rd Jun 2015 8:48 pm
http://business.financialpost.com/news/energy/companies-respond-to-shareholder-activism-on-carbon-risks#__federated=1
GregT on Wed, 3rd Jun 2015 8:52 pm
http://www.theguardian.com/environment/2014/sep/22/rockefeller-heirs-divest-fossil-fuels-climate-change
GregT on Wed, 3rd Jun 2015 8:53 pm
http://www.carbontracker.org/news/finance-people-warn-against-investment-in-coal-and-oil/
GregT on Wed, 3rd Jun 2015 9:17 pm
Unlike you Nony, people are choosing the future of all life on Earth, ahead of personal greed. Not all people are fools Nony.
You have had it explained to you many times, and you have even said that CC is a concern. Yet you continue to support the very activities that will destroy your ( and everybody else’s) future.
Why Nony?
Dredd on Thu, 4th Jun 2015 7:10 am
Shale poison.
Whoopee.