tag:blogger.com,1999:blog-8861605.post583332010415521725..comments2024-03-24T11:01:27.668-04:00Comments on Resource Insights: Shale oil becomes shale fail (and a nice subsidy for consumers)Kurt Cobbhttp://www.blogger.com/profile/05330759091950742285noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8861605.post-78192039323415272522019-07-15T11:15:06.237-04:002019-07-15T11:15:06.237-04:00Anonymous asks us to believe in two things which a...Anonymous asks us to believe in two things which are not plausible or supported by the evidence: 1) the number of economically viable places to drill in shale deposits is unlimited and so growth can go on indefinitely and 2) shale wells will have decades long production. The first one is demonstrably false if one looks at the maps of where people actually drill which is in narrowly circumscribed sweet spots. If the entire deposit was economical, one would expect far greater dispersion of drilling in order to avoid high acquisition costs. But this is simply not the case. Sooner or later companies will run out of sweet spots and then either the price of crude must rise to justify the drilling (which free cash flows don't even justify at the current price) or the industry must find new techniques that vastly improve efficiency of drilling and extraction. Maybe this will happen, but no one has proposed what new technology will allow it.<br /><br />As for decades long production of shale wells, since we are only into the first decade of such production, we can't know. But the decline rates are so severe that it seems unlikely that current largely depleted wells will be pumping anything 20 years from now.Kurt Cobbhttps://www.blogger.com/profile/05330759091950742285noreply@blogger.comtag:blogger.com,1999:blog-8861605.post-21166588171991895202019-01-27T17:12:20.300-05:002019-01-27T17:12:20.300-05:00SV koho: Light sweet oil (40-45 API, low sulfur) ...SV koho: Light sweet oil (40-45 API, low sulfur) continues to get a premium price. That premium has SHRUNK. But it is still a premium over heavier, sourer grades. (By the way, it is amusing to look at the peak oil articles from 2005 where authors said there would not be more WTI found...now we have too much!)<br /><br />Kurt:<br /><br />As usual, you are a smart guy and there is a lot right here. But I still have to criticize:<br /><br />1. Part of the reason for negative cash flow is GROWTH IN SIZE. If a company has negative cash flow and is flat in size, that is a huge problem. If they are growing, it MAY be OK. (you have to look at the specifics to determine the MAY.)<br /><br />2. You are correct that after recent growth, base decline increases (Rystad explains this well). Of course the opposite is also true. In late 2016, the decline in base decline made it easier to grow. However, it is not just an issue of number of wells (as you say) but number of recent wells. A thought experiment (can verify with Excel): if you keep production absolutely flat, drilling just enough to do so, what happens to base decline? The answer is it decreases (meaning less drilling needed with time). This is because you have "more base". So, at same production, number of wells is actually a positive in that it implies having more wells at end of life in their slow decline phase.<br /><br />P.s. Let's see how long it takes you to delete this. (Can't have a debate...must have like thinkers only in comments.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8861605.post-55377081739340660522018-11-01T10:38:48.643-04:002018-11-01T10:38:48.643-04:00Another thought is the nature of most shale oils.S...Another thought is the nature of most shale oils.Shale oil is very light and yields low amounts of middle distillates like diesel and jet fuel which do the work of the industrial world. Its energy content is significantly less and it needs to be blended with heavy oils to generate a broad spectrum of refinery products and shale oil yields mostly light fuels like gasoline and Lpg.sv kohohttps://www.blogger.com/profile/11058401490041584973noreply@blogger.comtag:blogger.com,1999:blog-8861605.post-7194404502120385122018-10-28T22:20:05.006-04:002018-10-28T22:20:05.006-04:00Well explained. An additional danger from shale is...Well explained. An additional danger from shale is that after the final top of production, decline in overall shale production is likely to be rapid. This is when relying on shale as the source of all oil production growth will be dangerous to the global economy, especially if demand for oil has not already peaked. <br /><br />If the day shale production begins to decline is also the day world oil production begins its decline, it will also be the day the world economy begins to decline. The global market economy can avoid recession only by substituting other non-fossil energy sources faster than oil declines. The rapid decline rates of shale will make that process of substitution much more difficult. "Energy trap" effects are exacerbated by high decline rates in fossil fuel availability. Relying on shale will ensure high decline rates at some point.Joehttps://www.blogger.com/profile/01251330546889158364noreply@blogger.com