Great post by Goehring and Rozencwajg again - reinforcing the idea that all US oil basins have basically rolled over = production > 50% of estimated available reserves. This article goes into their version of the EIA "adjustment" math and predicts we could be down 1 million b/d by on crude production by year end 2024.
I'm not on board with this whole "under reporting" of production issue they're writing about here. Producers in Texas at least divide what comes out of the ground into 3 buckets - crude oil, condensate, and gas. I have no idea what they tell the EIA every month and since the EIA apparently doesn't audit it and royalty, working interest owners and the Texas University Fund don't collect their checks based on it I don't really care. It's fairly well known that condensate will find its way into a crude tank somewhere if it can meet the vapor pressure specs. Due to how the gas gathering systems are set up and the need for producers to quit allowing light ends to "weather off" in trucks and tanks, a bit more liquid is collected at compressor stations and gas plants. This "bit" is mostly butanes and pentanes. These will also get blended into crude, again if they meet the vapor pressure ceiling limit. Keep in mind that condensate blending is nothing new at all and should be in the numbers marked "crude and condensate" in the EIA reports. The NGLs left in the gas after all this wringing out in the field go into a separate system designed to handle high pressure liquids and mostly heads to Central Kansas, East Houston, or Corpus Christi. Contrary to some reports, the pieces that come out of them generally do NOT find their way back into the so-called crude oil stream.
I've pulled the numbers for liquids production reported by compressor stations and gas plants in Texas, and although quite a few of them don't bother to report, the volumes from the ones who do don't add up to anywhere near the 700k barrels of "adjustment" we hear about in the EIA numbers as what they need to close their bookkeeping gap.
Bottom line of all this - it appears to me that at least some of the barrels that we think are crude are really condensate and NGLs, which aren't worth nearly as much as actual oil. So that "BOE" people keep talking about is increasingly made up of lower value hydrocarbons.
Gas in the Permian today has risen in value to almost breaken - ($.015)/Mmbtu before gathering, treating, and processing fees. Yee-haw! You're much better off selling it as ethane if you can get it in the line. So it can go over the dock to India and China.
Yep, the growth in US "liquids" production isn't oil. A lot of it is ethane, which is actually gas, not oil.
Whoa Nellie !!!!!!
I think the decline can be higher, I think it can get to a worse case scenario 4mb/d of production gone by April 2025 if the decline picks up speed next week. another 4mb/d in the next year! I base my mental model on these 3 abstraction that were made about the physical realities of well declines:
Seneca effect
2. Red queen effect (it doesn't say much if the Red Queen stumbles and falls)
3. Steep declines of individual fracking wells some even to 70% a year. Makes for a bleak outcome if things get nasty.
One big unknown is fracking natural gas, if this suddenly crashes it might take down the grid and this could have catastrophic results on energy production thus getting into a vicious circle or death spiral.
Mike, I know you use Novi's data quite a bit. Wondered if you agreed with their latest comment about Permian Gas:
"Thanks to slower declines for the gas stream, the Permian product mix is gradually shifting to more gas. And while part of me wants to just extend the arrow in this chart to see where the Permian would break 35 bcf/d, that is also dependent on the buildout of gas offtake in the basin (last time we modeled this, we saw 40% growth of gas in the Permian through the mid-2030s, with no constraints).
I'm having a tough time supporting this forecast. If oil production rolls over why would companies drill for $0 gas and pay to export it? And why would a producer spend $1+/Mmbtu on new gas pipeline capacity?
I have long doubted EIA "data", but I am a layman, not an oil expert like you, Mike. Thank you!
I have now read this G&R article at length; it is incredibly important that everyone does.
At the risk of sounding conspiratorial, I believe the EIA is a big government entity that recieves orders from headquarters regularly, from whomever its boss is at the moment. For several years those orders have been to create as much confusion as possible as to how oil the US is producing, what it will produce in the future, what is on hand in storage and inventories... all to make the appearance of abundance seem more real, create oil that really does not exist, drive, and keep, the price of oil down as much as possible. It is a big lie.
How could any American dispute that the government will not lie at the drop of a hat to mislead the citizenery for the sake of votes, money, and political gain? Prove me wrong. If you intend to, please do not refer to this article. This is pretty good stuff right here.
The great lie has failed and gasoline prices are increasing and hurting the average American consumer badly. The lie was based on abundance that never existed. Clearly. Let there be no better example of that than the horseshit this president, with a small P, has done to our SPR. Less than a month ago it promised to refill the SPR and today it has crawfished on that for fear of rising gasoline prices and losing votes.
Most Americans don't care where their oil comes from, as long as it gets here, and its cheap. They are energy illiterate. Apparently college basketball is more important; I don't know.
YOU will pay the price, I am sorry to say. You will do so with this president, AND the next, whomever the son of a bitch is. They all lie.
Thank you for a very informative post Anne!