U.S. energy dominance is over. Output is probably going to drop by 50% over the next year and nothing can be done about it. It has nothing to do with the lack of shale profitability or other silly memes cited by people who don’t understand energy.
It’s because of low rig count.
The U.S. tight oil or shale rig count has fallen 69% this year from 539 in mid-March to 165 last week. Tight oil production will decline 50% by this time next year. As a result, U.S. oil production will fall from to less than 8 mmb/d by mid-2021.
What if rig count increases between now and then? It won’t make any difference because of the lag between contracting a drilling rig and first production.
The party is over for shale and U.S. energy dominance.
Energy Dominance is Over
Tight oil is the foundation of U.S. energy dominance. The U.S. has always been a major oil producer but it moved into the top tier of oil super powers as tight oil boosted output from about 5 to more than 12 mmb/d between 2008 and 2019 (Figure 1).
Conventional production has been declining since 1970. It fell from almost 10 mmb/d in 1970 to 5 mmb/d in 2008.
Figure 1. Tight oil is the foundation for U.S. Energy Dominance.
Conventional production has been in decline since 1970. Tight oil boosted U.S. production to more than 12 mmb/d in 2019.
Source: EIA and Labyrinth Consulting Services, Inc.
Tight Oil Rig Count and Oil Production
Rig count is a good way to predict future oil production as long as the proper leads and lags are incorporated.
It takes several months between an upward price signal and a signed contract for a drilling rig. It takes another 9-12 months from starting a well to first production for tight oil wells. With pad drilling, usually all wells on the pad must be drilled before bringing in a crew to frack the wells.
Tight oil horizontal production reached 7.28 mmb/d in November 2019 when the lagged rig count was 613 (Figure 2). That corresponded to 12.9 mmb/d of U.S. oil production—tight oil is about 55% of total output. Approximately 600 rigs are needed to maintain 7 mmb/d of tight oil and 12.5 mmb/d of U.S. production.
The horizontal rig count is now 165 so it is unavoidable that production will fall. The considerable lags and leads mean that production decline cannot be expected to reverse until well into 2021 assuming that it starts to increase immediately. That won’t happen because of constrained budgets and low oil prices.
Figure 2. 600 tight oil rigs to maintain 7 mmb/d tight oil/12 mmb/d total U.S. output.
Source: Baker Hughes, IEA DPR, Enverus and Labyrinth Consulting Services, Inc.
U.S. producers shut in most of their wells in May because oil prices had collapsed and storage had reached its limits. Tight oil production has fallen more than 1 mmb/d to 6.2 mmb/d and total U.S. output is around 10.5 mmb/d.
With the storage crisis now apparently averted and with somewhat higher oil prices, most tight oil wells are being re-activated. Production should increase until all shut-in wells are back on line and then, it will resume its decline.
Based on rig count analysis, U.S. oil production will probably be about 8 mmb/d by mid-2021 or more than 4 mmb/d less than peak November 2019 levels.
Killer Decline Rates Require Lots of Rigs
Lower U.S. crude and condensate production is unavoidable with rig counts where they are today. That is because tight oil decline rates are really high.
Figure 3 shows Permian basin shale play decline rates by year of first production. The average of all years is 27% per year. More recently drilled wells decline at higher rates because of better drilling and completion technology. The problem is that the wells don’t have greater reserves—they just produce the reserves faster. That means higher decline rates.
Figure 3. Permian basin annual decline rate is 27% for horizontal tight oil wells
Decline rates generally increase for wells drilled in more recent years because of higher initial production rates.
Source: Enverus and Labyrinth Consulting Services, Inc.
This is not a criticism of the plays or the companies. It’s just a fact.
And that’s why it’s critical to keep 500 or 600 rigs drilling all the time—to replace the 30% of output lost every year to depletion.
Production can be turned off and on as it was in May and June. Production cannot be increased without adding rigs and drilling new wells. Assuming there was infinite capital available to add rigs and drill wells, it would take several years to increase rig count to levels needed to maintain 2019 output levels.
Drilled, uncompleted wells (DUC) may be brought on to slow the rate of production decline somewhat. It is important to note, however, that completion accounts for at least 50% of total well cost. Capital constraints and low oil prices will affect the ability and enthusiasm of companies to complete DUCs.
After the last oil-price collapse, it took 2.5 years for tight oil rig count to increase from 193 in May 2016 to 618 in November 2018 (Figure 3). There were thousands of DUCs during the last oil-price collapse in 2014-2017 but they didn’t have much effect on production decline.
The current June rig count of 165 will continue to fall for several months because of low oil price & capital budgets.
Figure 4. It took 2.5 years for tight oil rig count to increase from 193 in May 2016 to 618 in November 2018.
June rig count of 165 will fall for several months based on oil price & capital budgets.
Source: Baker Hughes, IEA DPR, Enverus and Labyrinth Consulting Services, Inc.
Rigs Don’t Produce Oil, Wells Do
I’ve shown how rig count, lagged production and decline rates are used to estimate future levels of production. That approach is useful but the truth is that rigs don’t produce oil—wells do.
Another approach, therefore, is to compare the number of tight oil wells that were drilled and completed during each of the last 5 years to the corresponding average production rates for each of those years. Then, using year-to-date drilling and completion data, we can annualize and project what 2020 production is likely to be.
This approach suggests that 2020 tight oil production will be about 30% less than in 2019 (Figure 4). Since tight oil represented 56% of total U.S. output in 2019, we may then estimate that U.S. production will average about 8.7 mmb/d in 2020.
Figure 5. 2020 U.S. production will be less than ~8.7 mmb/d vs 12.3 mmb/d in 2019.
Number of completed tight oil wells expected to be ~30% less than in 2019. 8.7 mmb/d is about 25% less than EIA U.S. forecast for 11.6 mmb/d in 2020.
Source: EIA and Labyrinth Consulting Services, Inc.
That is similar to the estimate obtained from the rig count approach. It is, however, about 25% less than EIA’s 2020 forecast for U.S. crude & condensate production.
Energy Dominance and Green Paint
Much lower U.S. oil production is bad for Trump’s Energy Dominance anthem and its corollary that the U.S. is energy independent. It’s even worse for oil prices and the U.S. balance of payments once demand recovers. We will have to import even more oil than we do today and it will cost more.
The idea of U.S. energy independence is ignorant at best and fraudulent at worst. The U.S. imported nearly 7 mmb/d of crude oil and condensate in 2019 and more than 9 mmb/d of crude oil and refined products. That’s almost as much as China—the world’s second largest economy—consumes.
The U.S. is a net exporter in the same way that shale companies are making huge profits—by accounting sleight-of-hand.
The U.S. imports other people’s crude oil, refines it and then, exports it. If a country imports unpainted cars, paints them green and then exports them, is it a net exporter of cars? No. It’s an exporter of green paint.
The U.S. is screwed when it comes to near- to medium-term oil production. It’s not because of Covid-19. U.S. rig count began to decline 15 months before anyone had heard of Covid-19. Even if the road to economic and oil-demand recovery is faster than I believe it will be, it will take a long time to get back to 12 or 13 million barrels per day of production.
There are good reasons to expect that much lower U.S. oil production will eventually lead to higher oil prices. That may result in renewed drilling and another cycle of over-supply and lower oil prices. That is how things have developed in the past.
But a new phase of economic reality and oil pricing is unfolding and no one knows where it will lead. Lower demand may mean that reduced U.S. oil output is appropriate. The only thing that seems certain is that the U.S. will not be the oil super power it was before 2020.
By Art Berman
FamousDrScanlon on Sun, 21st Jun 2020 3:50 pm
Good ole Art, bless his dear heart.
Surplus Energy Economics
How the economy REALLY works – Tim Morgan
#175. The Surplus Energy Economy
Posted on June 19, 2020
AN INTRODUCTION
“In response to the previous article, it was suggested that it would be helpful if we had a comprehensive statement, a sort of Surplus Energy Economics 101, for new readers. This makes a great deal of sense, particularly given how many people have joined the SEE readership since the last time the thesis was set out in this way. The plan is that the article which follows will be made available as a downloadable PDF in the near future.
The aim here is to encompass two themes in a single article. The first is the basic logic informing the Surplus Energy Economics approach. This builds on the long-established principle that the economy should be understood as an energy system, not a financial one.
The second is an evaluation of where we are today on the evolution of the economy as energy interpretation explains it. This makes extensive use of the Surplus Energy Economics Data System (SEEDS), which models the economy as an energy system.”
https://surplusenergyeconomics.wordpress.com/2020/06/19/175-the-surplus-energy-economy/
DT on Sun, 21st Jun 2020 4:09 pm
US oil domination ended a long time ago. I would say some time in the 1970’s. The bullshit about US oil production over the past couple of years through fracking is just that, bullshit about a system of deception.
Theedrich on Sun, 21st Jun 2020 4:31 pm
Mass suicide is exhilarating. The groupsoul usually underlies it. This can be stirred up by natural or artificial means. The most famous historical case is Masada in A.D. ~74 where 960 despairing anti-Roman Daggermen killed themselves, as recorded by Flavius Josephus. In modern American times, there is the notorious (1978) “Jonestown” case in Guyana in which over 900 people were forced to commit suicide by drinking a poisoned fruit drink. Other cases, forced or voluntary, usually involving mass delirium, death cults, hysteria and war, occur from time to time. The Balinese even have a word for the phenomenon: puputan.
Today in the West, the media Yids are trying to whip up puputan-directed hysteria as a means for achieving political power. The propaganda thrust of their agitprop is that “Coon Lives Matter.” With this idea, they aspire to seize the American throne in November of 2020, using a mentally declining politician, Joseph Biden, as their puppet. (He is encouraged to choose a Negress — any Negress — as his vice-presidential queen-candidate.) The point of it all is to destroy America in order to save it for globalist scavenger megaJews like oligarch Georg Sörös. The masses of Coon-Lives-Matter protesters, of course, know nothing of the true aims of the leaders behind the curtains. For the mindless herd, screaming, disruption, pillaging, destruction, violence and arson are great fun. Yep, remake America and bring on the Millennium. University and college professors and other “experts” join in the glorious fray with their words of wisdom in the media.
If the puppeteers achieve their aims by dethroning President Trump in November and installing their dementia-patient in his stead, the U.S. Constitution will be relegated to a museum. The nation, already bankrupt due to insane levels of inflation, will be turned into a grotesquely overpopulated Third-World outhouse swarming with illegal aliens of every description. The “law” will be whatever the oligarchs want it to be at any given moment. The military will be used to enforce their decrees and engage in unending overt or covert wars everywhere — which may not end well.
In fact, it may all end in puputan.
makati1 on Sun, 21st Jun 2020 5:39 pm
The dementia “where am I” Biden is only one step farther along than the delusional President Amerikans already have.
Biden – 77 years old and senile.
Trump – 74 years old and delusional.
Best to watch who is going to be the VP as s/he will be the real president. Wait and see.
BTW: The real masters of the world don’t get elected, they decide who will.
JuanP on Sun, 21st Jun 2020 5:41 pm
Mak, you must be looking in the mirror because you are 77. Sometimes I wonder about your dementia too
REAL Green on Sun, 21st Jun 2020 6:10 pm
Mak no’s were JuanP Davy.
Davy on Sun, 21st Jun 2020 6:41 pm
JuanP on Sun, 21st Jun 2020 6:10 pm
“Mak no’s were JuanP Davy.”
You don’t even make sense anymore, lunatic
makati1 on Sun, 21st Jun 2020 6:52 pm
Davy, I’m not looking in a mirror, but you sure are. Dementia AND Delusion is your current mental state and getting worse. Seek help.
BTW: The math I learned in school says that 75 is NOT 77. Just more proof of your dementia. The inability to remember things. LOL
REAL Green on Sun, 21st Jun 2020 7:17 pm
Your the lunatic Davy.
JuanP on Sun, 21st Jun 2020 7:23 pm
Mak, did a search of your comments and found this. Are you lying to us? Looks like you are 76.
Makati1 on Fri, 13th Jun 2014 9:28 pm
karle, you are very correct. I’m 70
https://peakoil.com/enviroment/earthweek-a-diary-of-the-planet
Duncan Idaho on Sun, 21st Jun 2020 7:50 pm
Things coming more visible?
http://www.doomsteaddiner.net/blog/wp-content/uploads/2020/05/blue-line-flag-truth-300×158.jpg
REAL Green on Sun, 21st Jun 2020 8:30 pm
Mak nos were JuanP Davy.
makati1 on Sun, 21st Jun 2020 9:24 pm
2014? Yes, add FIVE years to that 70 and you get 75. In June of that year, I was actually 69, so the SIX years since makes me 75 TODAY. I just rounded it off to 70. My b’day is later then June in the year. And, actually, none of your business. But then, you are a habitual stocker.
Why would you, Davy, do a search for my comment SIX years ago? No life? Actually, you have a a very demented life. Just you and your fave nanny goat you have to chain to a post to service so she doesn’t run away. Everyone else just laughs at you, if they pay any attention at all. Most don’t. LOL
REAL Green on Sun, 21st Jun 2020 9:32 pm
So true mak. So true.
LOL!
The Nationalist on Sun, 21st Jun 2020 9:43 pm
Meanwhule nobody discusses the article. This forum degenerates into pathetic personal attacks and moaning.
It’s like being at a Marxist BLM whinge fest ‘protest’.
FamousDrScanlon on Sun, 21st Jun 2020 9:58 pm
Professor Theedrich, so it’s only left (pretend) leaning American oligarchs & their puppet managerial class who do all those nefarious things you said for all those reasons (moar)?
So all the right (pretend) leaning American oligarchs & their puppet managerial class are pure as the driven snow & have dedicated their lives to bettering the lives of their constituents (sheep) & the great nation of America?
Got any other Manichean bedtime stories?
You pretty much just post the same long comment every time. Going on for how many years now?
Obviously you’re very upset about these matters.
Don’t be afraid to try Fentanyl for relief. I hear many have had great success using Fentanyl to solve all their anger issues………..permanently.
Ok peak oil gang, time to pass the hat & buy Theeditch some much needed medicine.
ZOMFG you guyes MUZZ-19 is codename for psyop Operation CONVICT-19 I knew some wrong when a pretty little white girl ran to a black man arms dead giveaway deeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeed giveaway on Sun, 21st Jun 2020 10:02 pm
FamousDrScanlon on Sun, 21st Jun 2020 9:58 pm
Professor Theedrich, so it’s only left (pretend) leaning American oligarchs & their puppet managerial class who do al
Dr. Muzz
I appoint you saint. Your full title is supertard president saint FamousDrScanlon
The first muzz catholic saint is Ahmaud “muzz” Arbery.
Congratualtions to your appointment. your title is “the lover” (of muzz)
FamousDrScanlon on Sun, 21st Jun 2020 10:13 pm
DT, they mean US Oil Dominance as per their new definition of oil that was coincidentally rolled out around the same time the, “FRACKING REVOLUTION MIRACLE GREATEST THING SINCE SLICED BREAD OMG OMG!! WERE #1 AGAIN!!”, got underway.
How changing the definition of oil has deceived both policymakers and the public
“But because natural gas plant liquids production has been growing rather rapidly due to recent intensive drilling for natural gas and because those liquids are misleadingly lumped in with oil supplies, people have been mistakenly given the impression that world oil production continues to grow. Not true! What’s growing is a category called “total liquids” which encompasses oil, natural gas plant liquids, biofuels and some other minor fuels. Total liquids are growing only because of large gains in natural gas plant liquids and minor gains in biofuels. And, this is why it is so important to understand what natural gas plant liquids are.
But first, an important question. Why do government and industry officials, oil analysts, and energy reporters equate total liquids and total oil supply? They claim that these other liquids are essentially interchangeable with oil. (I will discuss some of the not-so-savory motives behind this claim later.) In a recent report the U.S. Energy Information Administration put it this way: “The term ‘liquid fuels’ encompasses petroleum and petroleum products and close substitutes, including crude oil, lease condensate, natural gas plant liquids, biofuels, coal-to-liquids, gas-to-liquids, and refinery processing gains.” Let’s see why the “close substitutes” assumption is demonstrably false when it comes to most natural gas plant liquids and decidedly disingenuous when it comes to biofuels.”
https://resourceinsights.blogspot.com/2012/07/how-changing-definition-of-oil-has.html
REAL Green on Mon, 22nd Jun 2020 12:26 am
Your real smart Docter Scanlian. You should stick around and comment more.
(Don’t let Davy no I said so. He gets real angry most times when people says real truthfull stuff.)
Abraham van Helsing on Mon, 22nd Jun 2020 1:59 am
Another day and reading the DailyMail, so you don’t have to.
https://www.dailymail.co.uk/news/article-8445119/Police-issue-CCTV-photos-people-think-toppling-Edward-Colston-statue.html
“Hunt for the statue wreckers: Police issue CCTV images of 15 people they want to speak to about the day slaver and philantropist Edward Colston’s statue was toppled and thrown into the dock in Bristol as officers CHOSE not to intervene”
The readers don’t like it:
fanstar77, Somewhere, United Kingdom, 6 hours ago
The police were there and saw who did it but chose not to do anything about it.
Pro: 1541
Con: 40
…but are light-years away from doing anything about it, which would be throwing BLM ‘protesters’ in Bristol Harbor.
For the English, leaving Europe is more important than leaving Africa.
So the police wants to ‘speak” to the protesters? Constable: well son, promise you will never do it again. Protester: certainly sir, Edward Colston is already into the drink and there are only so many times you can throw an evil statue into the drink. I’ll be off then, got more work to do. Toodeledokie!
“Huge crowds of Black Lives Matter protesters march through London and surround Churchill statue in Parliament Square as up to 5,000 anti-racism activists gather in Leeds”
https://www.dailymail.co.uk/news/article-8444755/Up-5-000-protesters-gather-Leeds-crowds-form-Londons-Hyde-Park.html
Churchill, who apparently has been unboxed again, has been chosen “the man of the century” by the English, for reasons mysterious to me and getting him toppled would be the utmost national humiliation. The darkies know this and hence Winnie becomes extra attractive. Total victory it would be.
But then again, the English won’t mind disappearing from history, provided they can drag the Germans with them into the abyss.
In England the upcoming racial bolshevik revolution has a good chance to succeed, which would solve a lot of continental European problems. All we need to do is make a complete U-turn towards Eurasia and trade with people who at least do not have the inclination to abolish themselves and won’t require us to abolish ourselves either, unlike our (almost former) Anglo overlords.
Abraham van Helsing on Mon, 22nd Jun 2020 2:09 am
“We are trained Marxists”
https://www.youtube.com/watch?v=HgEUbSzOTZ8
And there can’t be a single doubt as to who the trainers are. The (((same ones))) who organized the 1917 Marxist uprising. This time the bolshevik-egalitarian revolution will be racial rather than economic.
Abraham van Helsing on Mon, 22nd Jun 2020 2:22 am
Not difficult to understand why anonymous moved to Vancouver; that’s where all the BLM action is!
https://tinyurl.com/y7lmkanp
Abraham van Helsing on Mon, 22nd Jun 2020 3:04 am
And there goes Theodore Roosevelt!
https://www.dailymail.co.uk/news/article-8445529/Museum-remove-Roosevelt-statue-decried-white-supremacy.html
Location: bolshevik central NYC.
Shrug.
NYC is on the wrong side of the Appalachians.
Fly-over country 2.0.
Rockies is fly-over country 3.0., or rather “volar sobre el país”
Let it go.
Hint for BLM: every white man’s statue before 1968 depicts a solid racist.
Abraham van Helsing on Mon, 22nd Jun 2020 3:28 am
Oops, the goyim are finding out, can’t have that!
The DailyMail is fully complicit in the intended demise of the white world, but can’t say that openly. Hence the fishy concept of “conspiracy theory” is pushed forward:
https://www.dailymail.co.uk/news/article-8445097/Bizarre-conspiracy-theories-George-Soros-fueling-unrest-owning-Antifa-soar-online.html
“Bizarre conspiracy theories about George Soros organizing unrest in the US sparked by the death of George Floyd soar online – as far right claim he ‘owns Antifa’ and has ‘hired protesters to cause chaos'”
About the origins of Antifa, nota bene as explained by the Jewish Forward magazine:
https://documents1940.wordpress.com/2020/06/10/the-yiddish-origins-of-antifa/
Right-wing vocabulary: “conspiracy theory” is any story with a firm root in reality, but that is not in the interest of the globalists=communists to be out in the open.
Prominent “conspiracy theories”:
– the fed and media are owned by (((globalists)))
– the 1917 revolution was organized by (((them)))
– 9/11 was a CIA-Mossad inside job
– JFK was murdered by LBJ and Jitzhak Rabin
– holo-denial
– WW2 was a war organized by (((them)))
– (((globalists))) are behind opening up the US for third world mass immigration
– BLM and NAACP are run by (((globalists)))
– London was handed over to Islam by Tony Blair and his handler (((Peter Mandelsohn)))
– ZOG
The list goes on and on.
Fun fact: even if the anti-white revolution would succeed, the unintended consequence would be that the world would be de facto handed over to the Chinese, not to the oligarchs.
“NYC” would have scored a giant own goal.
The only way a Chinese-owned planet could be prevented would be if continental Europe would manage to escape from the Anglo-Zionists and team-up with Russia and have an understanding with the Chinese who gets what from the sinking Anglo-Zionist ship cargo.
And that is exactly what the Chinese are quietly hinting at to the Europeans with their geopolitical dream-map:
https://documents1940.files.wordpress.com/2017/09/iron-silk-road.jpg?w=1100&h=710
In the left side-bar, the sentence at the bottom says it all:
“if Europe is willing to connect, that is”
Of course Europe should be willing! It’s THE ticket for survival.
FamousDrScanlon on Mon, 22nd Jun 2020 9:03 pm
Shale industry will be rocked by $300 billion in losses and a wave of bankruptcies, Deloitte says
https://www.cnbc.com/2020/06/22/shale-industry-will-be-rocked-by-300-billion-in-losses-and-a-wave-of-bankruptcies-deloitte-says.html