As Long As The Saudis Want To Give Their Only Resource Away -- December 1, 2014

I don't think there is any fracking in Arizona. Nonetheless, a really, really big earthquake has just been reported -- magnitude 4.7 in the Flagstaff region. Really, really big? The 4.7 is 10 - 1,000 times "bigger" (shaking amplitude) than the really, really small quakes being reported in fracking country. LOL.

The U.S. Geological Survey says the magnitude-4.7 temblor that hit Sunday night was centered 7 miles north of Sedona and 6 miles underground.

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Wells coming off the confidential list over the weekend, Monday have been posted, with their IPs.

As long as the Saudis want to give their oil away for $60 -- how long have I been saying that? Now Bloomberg is reporting:

China is emerging as the winner from OPEC's battle with rival oil producers as the world's biggest energy consumer stockpiles crude.

The nation's efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects Ltd. That's more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week. Brent crude has slumped 41 percent from its peak in June.

This link was posted earlier; a story that needs to be closely read. See below.

For me, I think there are two stories that need to be followed, with regard to the Saudis:

• were the Saudis surprised to see the price of oil fall this far, this fast, this soon?
• exactly what is meant by protecting "their" market share?

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I noted earlier (on more than one occasion) that it should be relatively easy for one (1) to two (2) million bopd to come off production (and I've listed the areas that would be hit first). Here's one example, in Yahoo!In-Play today:

Marathon Oil announced that the Jisik-1 exploration well has discovered multiple stacked oil and natural gas producing zones (MRO): Oil and natural gas shows were noted over an extensive gross interval of both Jurassic and Triassic reservoirs. A drill-stem testing program yielded a sustained flow rate of 6,100 barrels per day of oil, and multiple non-associated gas zones flowed at a combined rate of approximately 10-15 million cubic feet per day, without stimulation, together with associated condensate, all of which were equipment constrained.

The Jisik-1 well will be suspended for potential future use as a producing well.

Something tells me that this well's production would not be suspended if oil was (were?) selling for $200/bbl.

This well is in the semi-autonomous region of Kurdistan.

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Active rigs:

	12/1/2014	12/01/2013	12/01/2012	12/01/2011	12/01/2010
Active Rigs	185	191	182	196	161

RBN Energy: crying time at OPEC? Not as long as they don't mind giving their only resource away.

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I apologize. This will be the third time I've linked this article. The Telegraph is reporting -- the Saudis risk playing with fire. (Again, for newbies: the indentations are quotes from the linked article -- in other words, their words, not mine.)

First: the comments that follow the article at the link are incredibly inane. Whatever.

Second: how big is the the "Bakken"? (Remember my three-part definition of the "Bakken.")

There is no question that the US has entirely changed the global energy landscape and poses an existential threat to OPEC. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria.

Third: compare The Telegraph writer's list to the vulnerable spots around the world to my list, posted several times in the past few weeks:

• North Sea (off-shore)
• ultra-deepwater ventures in the Atlantic off Brazil and Angola (off-shore)
• Canadian oil sands
• the Arctic

Fourth: countries that could ignite/implode

• Nigeria, a full-blown economic and political crisis could turn the north into a Jihadi stronghold under Boko Haram
• The Maghreb: The growing Jihadi movements in the Maghreb (western and northwestern Africa) – combining with events in Syria and Iraq – clearly pose a first-order security threat to the Saudi regime itself; parts of Libya have pledged support to ISIS
• Algeria (part of the Maghreb): represents a new worry; the Bouteflika regime goes into its final agonies. “They have an entrenched terrorist problem as we saw in the seizure of the Amenas gas refinery last year. These people are aligning themselves with Islamic State as part of the franchise." Algeria exports 1.5 million bopd of petroleum products
• Iraq: open question what will happen
• Libya: open question what will happen 

And the article concludes:

The Sunni Salafist tornado sweeping across the Middle East – so strangely like the lightning expansion of Islam in the mid-7th century – is moving to its own inner rhythms. It is not a simple function of economic welfare, let alone oil prices. 

Fifth: the break-even costs. By the way, I consider the issue of "break-even" costs very similar to IPs and rig counts; the break-even costs are useful as a single data-point but not particularly useful in the big scheme of things, despite all the interest. In addition, IPs and rig counts are subject to error, misinterpretation, and manipulation, but "break-even" costs are much more so.

Just one item, as an example, from the linked article, that is incredibly important in the Bakken:

The “full cycle” cost for shale production is $70 to $80, but this includes the original land grab and infrastructure.

“The remaining CAPEX equired to bring on an additional well is far lower, and could be as low as the high-$30s range,” he said.  

The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.” 

By the way, ask an analyst: is the break-even cost the "break-even cost of one week ago" or the "break-even cost of one month from now"? That makes a huge, huge difference. 

By the way, that $28/bbl break-even price is the lowest I have heard; several months ago, it was said to be $37/bbl -- from a reliable source.

Interestingly enough, one country was barely mentioned in that linked article. One individual, by name, was not mentioned at all.

On another note, CNBC sees "barbarity and looting" in Venezuela's future.

Flashback, November 25, 2014: OPEC's most important meeting in years.

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A big "thank you" to RBN Energy for the idea. It's hard to find really good Emmylou Harris songs on YouTube.

It's Crying Time Again, Emmylou Harris and Buck Owens