Thursday, August 10, 2017

Problems In The Permian? -- August 10, 2017


Later, 11:17 a.m. Central Time: Don helped me out with new airfields in the Bakken (see note below regarding the "talking head" that misspoke), with this link to the FAA. Don noted:
Minot got a runway,  Dickinson got runway expansion, and a terminal expansion ... at peak had Delta, United and a regional carrier. Bowman has a new 5700 ft CEMENT runway with lights ... and an all-new facility 4 miles east of town. And, of course, Williston is currently building a new international airport. 
 Original Post 

WTI: $50.13.

Jobs: 244,000 today, up 3,000 from last week's 241,000 (revised upward by 1,000). Narrative: jobless claims are now meaningless. Numerator/denominator (jobless claims/total employed) is at an all-time record low: employers no longer watching jobless claims -- their problem is this: employees unable to find qualified candidates for the jobs they need filled. 

Fed watch: likelihood of Fed raising rates in September, almost zilch. Maybe 0.25% in December, but that comes from a talking head at CNBC whose biggest concern seems to be NYC potholes (see below). 

Comment to start the day: the number of comments a WSJ story generates speaks volumes. There were 80 comments to the WSJ article on the Permian (see below) which suggests readers interested in the Permian were very surprised (concerned?) by this development. On the other hand, the WSJ story reporting that OPEC's production rose in July must have surprised no one: not one comment.

Talking head misspeaks: talking about infrastructure, talking head on CNBC says there has been no new airport built in the US in 23 years -- he needs to get out to the Bakken -- see the new Williston airport being built. Didn't Bowman, ND, get a new airport? At least a new runway. Minot with a new terminal a couple of years ago, I believe. I'm surprised he didn't say there has been no new refiney built in 50 years; in fact, at least one, again, in the US. Same talking head complains about lack of activity on roads: he needs to come to north Texas. He needs to get out of NYC. He didn't talk about the LNG export facilities -- his main concern: potholes in downtown NYC. Wow.

The Permian: for quite some time I've questioned the exuberant enthusiasm of operators who were willing to pay $40,000 / mineral acre to jump into the Permian. Lately there have been some "concerning" stories in the mainstream business media that suggest my thoughts may not be far off the mark. Today, in The Wall Street Journal: investors question oil output in Permian Basin. Worries mount after Pioneer reported its Permian wells are producing more gas than expected:
Investors helped turn West Texas’ Permian Basin into America’s fastest-growing oil field, but their confidence is cracking over whether drillers can keep production rising.

Questions mounted last week after Pioneer Natural Resources Co. PXD 1.60% reported that its Permian wells are producing more gas and natural gas liquids such as propane than expected. That worried investors, who care a lot more about oil.

Shares of Pioneer and other Permian producers tumbled as a result. Pioneer ended the week down 16%, while Parsley Energy Inc. PE -0.78% and Concho Resources Inc. CXO 0.76% both declined more than 9% over that stretch.
Most wells produce natural gas as a byproduct alongside oil, and that gas output tends to rise over time. That is because as a reservoir is depleted, its pressure drops and gas vapors separate from liquid—reaching the “bubble point” at which natural-gas production accelerates.
Pioneer last week indicated that some of its Permian wells are reaching this point sooner than it anticipated.
The Permian gas problem: RBN Energy seems to be all over this issue. Today, RBN Energy has a third installment on Permian natural gas (see below). 

OPEC cuts (wink, wink): OPEC says crude output rose in July. I'm shocked, shocked! In The Wall Street Journal today, "a blow to cartel's efforts to reduce output and drain a global supply glut." 
OPEC crude-oil production rose further in July, in the latest sign the cartel’s efforts to reduce output and drain a global supply glut are falling short.
The Organization of the Petroleum Exporting Countries’ output rose by roughly 0.5%, to 32.87 million barrels a day last month, up by 172,600 barrels from June. The uptick, which was smaller than the prior month’s increase, was driven by higher production in Libya, Nigeria and Saudi Arabia, according to OPEC’s closely-watched monthly market report.
The report comes as Saudi Arabia—OPEC’s largest member and the world’s biggest crude exporter—has been pressuring other members of the cartel for better compliance with an agreement to curb production output.
Back To The Bakken

Active rigs:

Active Rigs573372193184

RBN Energy: Permian natural gas processing plants and NGL pipelines, part 3.
The year-ago completion of Energy Transfer Partners’ Lone Star Express NGL pipeline from West Texas to the Mont Belvieu storage and fractionation hub near Houston was a big deal. The new, 533-mile pipe increased effective NGL takeaway capacity out of the Permian by more than 25% and gave Energy Transfer a larger conduit for moving NGL produced at its Permian natural gas processing plants directly to the company’s still-growing complex of fractionators in Mont Belvieu. Energy Transfer also owns another big NGL pipeline out of the Permian: the Lone Star West Texas Gateway. Today we continue our blog series on the NGL side of the Permian with a look at what is currently the biggest fish in the play’s NGL pond.
All of the drilling going on in the Permian — 379 active rigs as of August 4, according to Baker Hughes — is focused on crude oil, but the 70,000-square-mile play in West Texas and southeastern New Mexico also produces large volumes of associated natural gas (about 6.5 Bcf/d as of this week and NGLs (nearly 800 Mb/d) that help to fatten producers’ wallets. The focus of this blog series is Permian NGLs: the natural gas processing plants that separate raw gas into dry gas and mixed NGLs and the pipelines that transport mixed NGLs (also known as y-grade or raw mix) to storage and fractionators, primarily in Mont Belvieu.


  1. Perhaps the most important bit of information conveyed in the entire OPEC report is this:

    It testifies to the fact that OPEC lost its price war on US shale.

    If OPEC had won the price war, the US would be in a world of hurt, as would the rest of the world's oil consumers.

    1. Agree completely; will bring links to the main post when I get a bit more time later. Thank you.

  2. RE: The Wall Street Journal on the Permian Basin

    It looks like the Wall Street Journal reporter has been reading too many of the analyses written by peak oilers, like this one from Art Berman:

    --- The Beginning of the End For The Bakken Shale Play ---

    In his analysis, Berman posits what has become known as the "bubble point death" theory. It is junk science writ large, regardless of whether we're talking the Bakken or the Permian.

    Berman is a Director of ASPO-USA (Association for the Study of Peak Oil & Gas USA). He was a Managing Director and frequent contributor at The Oil Drum.

    As a petroleum engineer I could go through and do a point by point rebuttal of Berman's specific claims, pointing out their fallacies. It doesn't take an engineer or anyone with any specialized training to see where Berman went off the tracks. But it would more space than what this forum allows.

    1. Because he wrote for Forbes (or Forbes re-published his articles) I respected Berman at one time, but somewhere along the line I realized I had been duped.

      I was unaware or had forgotten that he was a frequent contributor at The Oil Drum.

      The best thing about the article linked above is for the archives and to look at it every six months. So far, six months out, he's wrong on the Bakken.

  3. CLR is sounding positive on Bakken. Very pleased with enhanced recovery efforts 30 miles west 40 miles south from NE corner McKenzie County. Checkout frac job on 32094 Kukla.

    1. It's been a long time since I've heard (or thought) about a Kukla well. Thank you for reminding me. I might post a note regarding Kukla -- there might be a story there. Thank you.

  4. Like Richard Rainwater, I was once quite the believer in the peak oil philosophy too. I still find it intriguing.

    There are a number of motivations that explain why people are attracted to peak oil theorizing. But regardless of the motivation, I believe Newt Gingrich describes accurately what are the mental processes of peak oilers here at minute 42:35
    --- Part 1 ---

    "Trump is a pragmatist more than he is a philosophical anything. Pragmatism, remember, William James described as the only real American contribution to philosophy. You start with a very simple model which is you take the facts and then you figure out a philosophy. You don’t take a philosophy and then figure out the facts.

    In his brilliant work on the Soviet destruction of human beings, Robert Conquest writes at one point, no matter how good your intentions are, if you coerce reality to fit your philosophy you almost certainly can’t get a positive outcome....

    Are you prepared to look at reality and then try to figure out what it means philsophically, or do you have to have a philosophy book in your hand and only look at those parts of reality that fit your philosophy? I think that's a very serious question for us to ask."

    1. Ah, music to my ears ... William James. I never thought I would have a reader quote him (directly / indirectly). I was in a Henry James / William James phase many years ago.

      I would agree with that assessment of Trump.