Clearing Out The E-Mail, August 25, 2014

Two items readers have sent me.

First, oil activity along the North Dakota - Saskatchewan state/province line, as reported by the Prairie Post:

With $48.4 million in revenue raised at Saskatchewan’s August sale of petroleum and natural gas rights, the 2014 calendar year total for land sales is now $158 million, already surpassing land sale revenue totals for both the 2012 and 2013 calendar years with two sales remaining.

The average price per hectare received for the sale was $1,916/hectare, the third highest on record. The April 2008 sale holds the title for highest average price per hectare for a single sale at $2,725/hectare, followed closely by the February 2008 sale at $2,495/hectare.

“The Bakken and Shauanvon light-oil plays in southern Saskatchewan are both prone to spectacular single-parcel results that we experienced once again in this sale,” Economy Minister Bill Boyd said.

“However, we’re equally pleased about land acquisitions in the heavy oil-prone areas of the province that are consistent in sale-after-sale, year-after-year. “By any measure, the volume of heavy oil in the province, estimated at 20 billion barrels of heavy oil in place, is impressive, but recovering this oil is a complex and capital-intensive process.

The August sale saw the Weyburn-Estevan area receive the most bids with sales of $43 million. The Lloydminster area was next at $2.1 million, followed by the Swift Current area at $1.8 million and the Kindersley-Kerrobert area at $1.5 million. The highest price paid for a single parcel was $17.1 million. Standard Land Company Inc. acquired the 2,201-hectare exploration licence east of Estevan. The highest price on a per-hectare basis was $10,136. Plunkett Resources Ltd. bid $634,520 for a 62.6-hectare lease southeast of Estevan.

One hectare = about 2.5 acres. I guess that $10,000/hectare works out to about $4,000/acre.

The second item was a pdf: the changing face of world oil markets, Department of Economics, UC-San Diego, July 20, 2014. Five areas of discussion:

• world oil demand is now driven by emerging economies -- key point -- "China alone accounted for 57% of the global increase in consuption since 2005
• growth in production since 2005 has come from lower-quality hydrocarbons -- key point -- "oil" is gtting harder and harder to find; all that "boe" is often irrelevant if it's not "oil"
• stagnating world production of crude oil meant significantly higher prices -- key point -- "if one looks only at field production of crude oil, the picture becomes quite stark. Field production increased worldwide by only 2.3 million bopd between 2005 and 2013. That compares with a predicted increase of 8.7 million bopd from extrapolating the pre-2005 trends in consumption growth for developed and emerging economies, and that's without even taking account of the dramatic acceleration in demand from the emerging economies. ... The actual increase in field production of crude oil was only 3.1%, consistent with a shortfall of 12 million bopd."
• geoopolitical disturbances held back growth in oil production -- really? Libya, Syria, Iran, Nigeria
• geological limitations exacerbate world oil production -- key point -- "the overall picture is that the Middle East countries have been devoting ever increasing resources to upstream development and yet have very little additional oil production to show for it." I've talked about that often and fits my world-view.