These sorts of articles are almost always written by people who know very little about oil and natural gas and the effect of resource depletion on production predictions. They have never experienced depletion in real life, have never known the negative affects of it from a financial standpoint (paying the bills) and refuse to look at depletion even from a worldwide historical perspective. All oil fields since the very beginning, deplete; read The Prize.
This year alone I have read a hundred articles just like this one and none of them even mention the word depletion. They hardly mention decline anymore.
The general public has been lied to so many times, by so many diffferent "experts" about oil and natural gas abundance in the U.S., it is essentially brainwashed.
The primary source of oil production growth in the entire world the past seven years has been from HZ unconventional wells in the Permian Basin, above. This phenomenal production growth has come from just six shalely carbonate resource beds (straigraphic sections) in the Permian. There are over 55,000 producing wells in these resource beds; over half of these wells drilled since 2014 now make less than 25 BOPD and 120 BWPD on artificial lift and are declining exponentially at the rate of 12% annually. They will reach economic limits and have to be plugged in the next 8 years. Sooner, unless operators can find more sub-surface formations to inject 22 MM BPD of produced water into,
New HZ wells being drilled today in over drilled, pressure depleted core areas suffer 85% decline rates in the first 24 months of production life.
No Permian HZ shale oil well will have a 30 year life span to generate these kind of BOE, EUR's in the map above. 766,000 barrels of oil, each?! Gimme a break.
Niney one percent (91%) of all Permian HZ tight oil production comes from just 8 partial counties in the Basin and there are wells drilled in these core areas that are producing in the same bench (stratigraphic section) that are only 500 feet apart. They communicate with each other. As these formations suffer pressure depletion from over drilling they produce more gas and less liquids.
An LSU graduate geologist commented on LindedIn a few days ago that oil resources in the Permian Basin are inexhaustible. Good grief. A geologist!
Almost everyone working in the United States domestic oil industry these days works in the unconventional shale sector. They need for the American public to believe the shale phenomena will last another 20 years or more, it just needs fewer regulations and more low interest capital to borrow. People in the sector, or cheerleading for it, don't want you fussin' about oil and LNG exports to foreign countries, or flaring, or earthquakes, or methane, or 3% dividends and they will never utter the word, depletion. EVER.
The United States only has 4% of the world's proven, producing oil reserves, yet it is the biggest oil producer in the world and the 3rd biggest oil exporter in the world. 48% of America's oil production comes from the Permian Basin HZ play. America can't seem to drain this area fast enough.
There is nothing "pragmatic" about energy independence, whatever that means, when you look at how crowded the Permian Hotel already is.
I think Trump maybe a unlucky holder of a big bag:
Low SPR
Permian decline
Economic crash
Needing to start crude imports from a chaotic ME
Ukraine War escalation
ME escalation if Iran retaliates close to inaguration, Iran promised a retaliation...
Economic showdown with China
Canadian decline rates are no picnic according to a small oil company president that’s a friend. He shared some pretty scary numbers with me.
Are not Canadian reserves more robust than US shale and they come with lower decline rates?
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This is probably not the place to post this but if anyone has Mr. Trump's ear, would he or she please point out that placing a 25% tarriff on Canadian heavy oil is not a great idea either for current prices or future energy independence. The term "energy independence" can mean homegrown or brought across the border from a friend's backyard. There is a whole lot more heavy Canadian oil than American LTO, and in about ten years it's going to be sought after.
Its about to get so crowded that noone will go there anymore (Yogi B)
Mike great post. Jim
hey mike , I am 24 from china, your big fan. here some my thoughts.
“For a long time, we Chinese have complained that the dictatorship and incompetence of the Chinese government have led China to compete on prices as the world’s factory, sacrificing our own interests to provide cheap goods and services to the world, which has also caused severe environmental pollution. At the same time, China has been exporting a large amount of rare metals at low prices. We always thought that foreign countries were different because they didn’t have a foolish dictatorial government. However, after buying shares in China National Offshore Oil Corporation and starting to research oil, I realized that the whole world is the same, so foolish, only caring about immediate interests. Most people don’t know the truth. I believe that in the next three to four years, as shale oil, which supports the world’s crude oil supply, gradually declines, people will not experience an oil crisis, but they will have to endure higher energy prices. Oil will once again be monopolized by OPEC, which needs higher oil prices, and American shale oil companies also need higher oil prices. Buffett’s purchase of Occidental Petroleum might be because he sees this future; he wants to buy the strategic oil reserves naturally existing underground, rather than quickly extracting them in these few years.”
You'll note that COP didn't tell us how much drilling inventory THEY have left, just what a consultant said about the industry as a whole. Enverus won't be held accountable to a shareholder for putting out a bad forecast. So Vicky, Harold Hamm, and Darren Woods are pretty much saying the same thing now that the election's over. Anybody listening in DC?
Had a company meeting with our 50 employees last week--well tenders, roustabouts, rig operators, etc. Asked them what % of the world's proven oil reserves were in the USA. The lowest guess...30%. They thought I was joking when I said 4.
There's a big poker game going on and pretty soon we're going to see who's holding the good cards. I don't see the big companies putting up posts that make the sort of claims these publications are putting out there about how shale will continue its "energy dominance" of the world markets. Commodity economics 101 says that the price of a commodity will end up being the price that allows the lowest cost producer to make an acceptable return because your stuff isn't any different than anyone else's and people don't want to pay for things they have to have. Everyone who's not in that group has to rely on political influence or some other sort of support (selling stock, anyone?) to stay afloat.
Would Oxy be spending so much money and time putting up fans in the desert if their regular business was booming? Would companies that absolutely hate government interference be spending so much money on CCUS, CO2 pipelines, etc. and put up with all the paperwork and regulations on who they can hire, where they can build, and what reports they have to file to get those credits if their core businesses were printing money like we heard they are?
This is common sense, you don't need "data". Watch what companies do, and where they spend their money, not what they say. Or don't say, and allow the subscription folks to say but don't actively endorse.
Long oil, long nat gas.