Tuesday, November 25, 2014

The Real Cost Of Electricity -- November 25, 2014


Monday, December 8, 2014: from a reader:
Below are the statistics on the cost of power generation in 2011 from the Australian Government’s own Productivity Commission:
  • coal fired power station $79 per Mw/h (megawatt/hour) 
  • natural gas fired power station $97 per Mw/h – or 1.2 times the cost of coal power 
  • wind power $150-214 per Mw/h – or nearly 3 times the cost of coal power 
  • solar power $400-473 per Mw/h – or nearly 6 times the cost of coal power 
Original Post
This is really getting into the weeds but it certainly raises the question about some recent articles in the mainstream media suggesting solar electricity is approaching 4 cents/kwh.

The data is taken from a presentation by the province of Ontario which gets most its electricity via hydro (Niagara Falls, I believe, but I could be wrong).

A reader suggested this source in response to a recent post (the one about MDU buying a wind farm near Hettinger, North Dakota).

The data is sourced:
Going through the presentation, the reader summarizes, assumes all power is provided by  only one of each option to levelize cost, and the various CF (capacity factor):
  • Solar: $0.89 kwh, 15% CF
  • Wind: $0.35 kwh 29.5% CF
  • Nuclear: $0.17 kwh 85% CF
  • Gas: $.012 kwh 54% CF  ($4/MCF - CF not 85% or more because much of the Gas power is under-utilized used for peak loading)
  • Coal: n/a -- politically incorrect to even think about 
Compare also the cost of electricity in the US as provided by the EIA

Another Look At Three Whiting Flatland Wells (Tarpon Pad) -- Twin Valley, Sand Creek -- November 25, 2014; 92/104-Stage Fracks; New BOE IP Records

A reader pointed out some wells that might claim the new "high IP" record. Two of the three wells had been noted before; this offers an opportunity to take another look at the wells. The Whiting Flatland wells, noted a little bit farther below, are the two wells that broke the fracking record with 94- and 102-stage NCS coiled tube fracking.
From a July 30, 2014, post:
More to follow; will clean this up later; from the FAQ page: What is the record IP to date in the Williston Basin? 
More to follow: in 2Q14 earnings report, WLL: Tarpon Well Completed in 2nd Bench of Three Forks Flowing 6,071 BOE/d. Not a record in the Bakken -- see Statoil's #23992. But still, this is huge for the second bench.
Statoil reported an IP of 5,417 on September 26, 2013: #23992, Beaux 18-19 7H, Banks oil field. Based on its IP for natural gas (9,663), this well had an IP of 7,083 boepd
In a comment, the reader noted this from Whiting's 3Q14 presentation, in which Whiting said its Tarpon pad demonstrated that "Whiting controls the sweet spot of the Williston Basin" and presented this as evidence (back on confidential status); two of these three wells broke the fracking record):
  • 27520, 7,824 boe, Whiting, Flatland Federal 11-4TFH, upper Three Forks Cycle 1, Twin Valley, gas ranged from 150 unit so 9,274 units.
  • 27521, 7,120 boe, Whiting, Flatland Federal 11-4HR, middle Bakken, target zone about 42 feet thick;
  • 28522, 5,930 boe, Whiting, Flatland Federal 11-4TFHU, a lower Three Forks well; the Middle Bakken was about 42 feet thick; it looks like the TF Cycle 1 might have been about 74 feet thick; background gas for target zone, the TF Cycle 2, ranged from17 to 8,500 units, in excess of 9,500 units during trips; in application referred to as Three Forks B1;
These three wells are on a single pad about 1,000 feet to the west of a Tarpon Federal pad in the northwest corner of section 4-152-97, Twin Valley oil field. 

Whiting also has Tarpon Federal wells in Sand Creek to the north, as seen at the linked post.

Thirteen (13) New Permits -- North Dakota; November 25, 2014; Whiting, XTO Each With Two "High IP" Wells; Oasis With A Nice Well

Active rigs:

Active Rigs184187183201162

Wells coming off the confidential list Wednesday:
  • 26250, 822, Whiting, Schlothauer 24-8-2H, Harding, t5/14; cum 32K 9/14;
  • 26948, drl, CLR, Oakdale 5-13H, Jim Creek, no production data,
  • 27333, drl, Hess, CA-Halverson-154-95-0409H-9, Hofflund, no production data,
  • 27653, drl, Petro-Hunt, Jonsrud 152-96-33D-28-1HS, Clear Creek, no production data,
  • 27945, 386, CLR, Wayne 1-14H, Ellisville, t8/14; cum 11K 9/14;
  • 28237, conf, Hess, EN-Freda-154-94-2635H-6, Chimney Butte, producing,
  • 28350, drl, Anschutz, Jacobson 1-29-134-104, wildcat, punch the coordinates into Google maps; at the south end of Little Missouri National Grassland, about 30 miles by road northwest of Bowman; this is not Bakken country; a Red River well? Also, note no "H" designation; the scout ticket says the Deadwood; according to the well file, the targets are the Red River, the Tyler, The Lodgepole on 160-acre spacing. Estimated total depth: 11,408 (deep). Slope County. Vertical.

Thirteen (13) new permits --
  • Operators: Hess (5), BR (4), CLR (4)
    Fields: Blue Buttes (McKenzie), Brooklyn (Williams), Corral Creek (Dunn)
  • Comments:
Six (6) producing wells completed:
  • 26180, 217, Oasis, Postel 5693 44-35B, Alger, t9/14; cum 12K first 30 days;
  • 27287, 2,068, Whiting, Knife River State Federal 13-32H, Sanish, t10/14; cum --
  • 27744, 2,026, XTO, Brandvik Federal 44X-13H, Corral Creek, t11/14; cum --
  • 27746, 1,268, XTO, Willey31X-3D, West Capa, t9/14; cum --
  • 28481, 260, Whiting, Kannianen 21-4, Sanish, t11/14; cum --
  • 28491, 115, Oasis, Shaw 6092 11-23 7T, Cottonwood, t9/14; cum --

Satellite View Of New Williston By-Pass West Of Williston Under Construction -- November 25, 2014; CNBC Video With Energy Production / Consumption Trends Through 2035

A reader says Google satellite view now shows the Williston by-pass under construction.


If for some reason, the link does not take you there go to Williston, ND, and zoom in on the intersection at the four-mile corner east of Williston. It's going to be an impressive bypass, to say the least.

Global Energy Production / Consumption Out To 2035

I hope this video does not disappear over the years.

Two data-points/screenshots that may be most important:

The biggest "takeaway" from this video is the projection coming out of Europe. The second screen shot shows that energy production growth -- remember, this includes everything, including nuclear, wind, solar, coal -- will actually be decreasing in Europe, 2012 - 2035. This goes along with what I posted some time ago over at Europe at a tipping point, over at "Big Stories."  At that link:
European Energy became a big story on May 18, 2013, when the EU Council President predicted that  Europe might become the only continent in the world to depend on imported energy.
Within that story:
Now, the second takeaway: note the incredibly huge increase in consumption in India and China (again, this is all forms of energy).

Finally, at the video but no screenshot, the amount of oil / natural gas in the Arctic: 412 billion bbls of oil equivalent, and 67% of that is natural gas. This also is in-line with Harold Hamm's statement that the Bakken contains more OOIP in than the Arctic.

Along the same line, two additional stories:
Reuters via Rigzone is reporting: Canada's Northwest Territories hold big natural gas reserves --
Canada's Northwest Territories, including its Arctic islands and the adjacent Beaufort Sea, hold more than 1.2 billion barrels of crude oil and 16.4 trillion cubic feet of marketable natural gas.
The NEB, the industry regulator, also estimated the region holds 53.3 million barrels of natural gas liquids.
The crude oil total is minor compared with the U.S. Energy Information Administration's estimate of Canada's total proved reserves of 173.11 billion barrels, but it is nearly 25 percent of the EIA's estimate of the country's natural gas reserves of 68.17 trillion cubic feet. The report by the NEB was the first in which it analysed discovered oil and gas resources in the Arctic islands as well as the Northwest Territories mainland.
Reuters via Rigzone is also reporting:
Russia's Gazprom Neft, the oil arm of the world's top gas producer Gazprom, agreed on Tuesday to develop Russia's Dolginskoye offshore Arctic oil field jointly with Vietnamese state energy company Petrovietnam.
A Reuters correspondent at the signing ceremony also said the companies signed a deal under which Gazprom Neft will supply ESPO-blend crude oil to Vietnam.
Russian oil companies, including Gazprom Neft, have been hit by Western sanctions, which limit cooperation in offshore, deep water and tight oil production. The Dolginskoye field, with more than 200 million tonnes (1.5 billion barrels) in estimated reserves, is located near Prirazlomnoye field, Russia's first offshore Arctic field launched last year.
For newbie, some estimate the Bakken to hold 500 billion bbls original oil in place. 

Venezuela In A World Of Pain


August 8, 2015: Venezuela out of control -- PanamPost.

Original Post

CNBC is reporting:
Venezuela, for example, was already struggling to maintain domestic order before its government revenue began drying up in the face of plunging global oil prices.
Other OPEC members like Nigeria , having lost the U.S. import market, are looking to Asia to buy its light sweet crude. Many of the world's consumer-producer relationships have been influenced in some way by America's new role as a top energy producer.
"This unconventional revolution is pretty recent. In terms of oil, it's only been about four years, but it's moved very fast. One question is whether the price downturn will affect the speed of growth, but I think the defining new factor for the world oil market is this growth of unconventional supply," said Daniel Yergin, vice chairman at energy and economic intelligence firm IHS.
"Since 2008, U.S. oil production is up nearly 4 million barrels a day." The energy boom that started with hydraulic fracturing and natural gas  in America and grew to include a surge in drilling of so-called tight oil is still very new, and some of its biggest effects have yet to be felt.
Shale may push US past Saudi Arabia as top oil producer.
For example, the United States will begin exporting liquefied natural gas next year, and that will feed into those Asian markets. New pipelines will also take natural gas to Mexico.
"It's going to revolutionize the way natural gas is going to price around the world. There's almost nothing that can stop it," said Edward Morse, head of global commodities research at Citigroup. And U.S. natural gas reserves are huge.
"First is U.S., then Russia, then the state of Pennsylvania, which a decade ago produced no gas," said Morse. The arrival of more gas on the world market will also make it harder for countries like Russia to extract high prices.
Look at that: one analyst listed US, #1; followed by Russia, and then PENNSYLVANIA, at #3. I find that incredible.

I think something folks forget during this era of slumping oil prices: the rate of growth of consumption in India and China through 2035 is going to be huge, and this is a dynamic phenomenon. These countries currently have a huge daily appetite for oil, and any disruption would be catastrophic, and that appetite just keeps growing.

By the way, Daniel Yergin seems to be popping up everywhere these days in the news. I've mentioned before: the best book ever on the history of oil is probably his book, The Prize. I read it many, many years ago, and re-read portions of it every so often. The Frackers would easily be one chapter in that book, The Prize. That's how incredibly "complete" and in-depth The Prize is.


I was up all night last night listening to radio reports on Ferguson. I went to bed at 7:00 a.m.

The history of Ferguson is very, very interesting. It was a booming, growing suburb on the north side of St Louis during the 70's. But then the US Justice Department stepped in in the late 70's or early 80's, and things changed. Those who saw it coming, moved out.

Something that was very rarely mentioned on talk radio overnight: if the Ferguson economy was booming, a lot of these businesses would bounce back, but the rest of the US is not like North Dakota. The rest of the nation, with some exceptions, is still in a deep recession. I think the majority of Ferguson businesses were probably surviving on the margin; this will put them over the edge. Most will not be able to re-build. New businesses thinking of building in Ferguson: no way. The business owners I see on CNBC video (internet) suggest the are putting up a good front, but I think this will be the death knell for the city of Ferguson "as we know it," the end of a "process" that began in the late 1970s / early 1980s.

The Big Lebowski

After listening to talk radio all night to follow the Ferguson story (and not conservative talk radio -- I bet I was one of the very few to actually listen to the entire "speech" by the prosecuting attorney), it's nice to settle down and watch The Big Lebowski again. It puts things into perspective. Also, the current issue of The Rolling Stone has a nice feature on Bob Dylan's "basement tapes." I don't think I will buy the deluxe edition for $100 (six discs) when the 2-disc set if probably "adequate" (for about $25). On another note, I was surprised how "thin" the Rolling Stone is getting. When one juxtaposes Al Sharpton, Bob Dylan, and the community-organizer-in-chief, one almost wonders if we aren't seeing a bunch of folks trying to re-live their youth. Something tells me the Coen brothers have moved on. By the way, the agitators in Ferguson can certainly be told "they did not build that" but they certainly burned it down (regardless of who built it). By the way, "everyone" criticized for the decision to release the "verdict" after dark, but whether it was planned or a complete screw-up, it was a brilliant "decision." Counter-intuitive. Those with a military background understand.

This is how I imagine Ferguson could have been:

Jesus, the Bowler, The Big Lebowski

Background To Record-Setting Frack Stages In The Bakken -- November 25, 2014


November 28, 2014: see the comment dated November 28, 2014. It is from one of the engineers involved in the 94-stage frack. There must be a real sense of accomplishment to be part of history, in this case setting a world record for number of successful frack stages. I have been a member of many different "teams" over the years involved in some task, and it is difficult to articulate how rewarding it is to be part of a team doing important work. The camaraderie is incredible; what appears to be "work" turns out to be not work, no matter how hard the job is, or how long it takes, or how little sleep one gets until the task is complete. Earlier this evening I posted a "bit" on an article in The New Yorker that talks about this;
Read the short article "When General Motors Was Google," in the current issue of The New Yorker, and look at the bits about Google and Microsoft:

Google doesn't stress out about work-life balance among its employees: work this meaningful and fulfilling isn't just work. When Laszlo Bock talks about what he's learned at Google, he isn't just giving you career advice; he's giving you life advice.
I would think that while completing that 94-stage frack, those involved must have had that same feeling -- that "work this meaningful and fulfilling isn't just work."

Thirty years from now, a lot of veteran Bakken roughnecks and geologists will be telling their grandchildren about the time they drilled a record well in a blizzard, with wind chills 60 degrees below zero, and they had to walk uphill both ways going to and returning from their rig to do it.

November 25, 2014: so it all comes together -- the 94-stage and 102-stage fracks that set world records for fracking, were done in the Bakken by NCS for Whiting which in turn set IP records. It will be interesting to see how much proppant was used:
  • 27520, 7,824 boe, Whiting, Flatland Federal 11-4TFH, upper Three Forks Cycle 1, Twin Valley, gas ranged from 150 unit so 9,274 units.
  • 27521, 7,120 boe, Whiting, Flatland Federal 11-4HR, middle Bakken, target zone about 42 feet thick;
November 25, 2014: see first comment, a reader notes:
EOG's recent 3Q14 conference call contained an interesting exchange regarding their experimental, confidential fracking process that is producing a 39% increase above their already high IPs.
While their suits were tight-lipped about the specifics, the CEO stressed that precise, uniform placement of proppant along the wellbore was both crucial and responsible for the high production.
Sounds like coiled-tube fracking.

Original Post

Remember that post on record-setting number of frack stages in the Bakken (and earlier, in the Eagle Ford). Here's the update of the technology over at Rigzone.
A technology originally used for coalbed methane operations can allow oil and gas operators to conduct more accurate hydraulic fracturing operations.
Officials with Houston-based NCS Multistage Unlimited – formerly known as NCS Energy Services and NCS Oilfield Services in Canada – say their award-winning, unlimited coiled-tubing fracturing system offers a more effective alternative to the plug-and-perf and ball sleeve frac systems that have been widely used in oil and gas operations.
As the number of stages of U.S. shale wells rises, completion methods such as plug and perf and ball sleeves become less effective, said NCS President Tim Willems in an interview with Rigzone at the Society of Petroleum Engineers’ Annual Technical Conference and Exhibition last month in Amsterdam.
In both methods, operators can’t tell how the formation in the frac zone is responding to fluids sent down a well, and have no way of managing how water and chemicals are being consumed. They are also left with no resources when a screen out occurs.
In the United States, a plug and perf operation might have four sets of perforations, then pump fluid at a rate of 100 barrels a minute hoping to get 25 barrels in one perforation and 25 in another, but analysis might show that one is taking more fluid than the others, Willems noted.
The article at the link has the full story.

The article ends:
“The reason we can set all the records we have is because we’re doing one stage at a time,” said Warren Williford, NCS marketing director, told Rigzone.
The company is preparing to do a 100-stage well in Texas.
I think that well was reported earlier.

Speaking of Records

MacRumors is reporting:
Apple's stock continues its strong recent performance, hitting another milestone today with a market capitalization of $700 billion and once again setting a new standard as the highest market cap in history before pulling back slightly. The mark comes less than two weeks after Apple's market cap passed $660 billion to set its first new high in two years. 
As usual, the comments are most interesting, and some are most inane.

Revised 3Q14 GDP Almost Hits 4%; Tuesday -- November 25, 2014; EOG Submitting Plans For 1500 Wells In Wyoming

A reader sent this link: aerial view of the Dakotas, Smithsonian Channel. Pretty cool. 

On November 23, 2014, I posted a long note on "the" New York Times opinion piece disguised as a news article; today, there is a link to Mike Kemp's response over at Rigzone. Worth reading. 

US economy rockin' and rolling: revised GDP figures for 3Q14 suggest the economy grew at 3.9% vs 3.5%, the original figure. I think there's on more schedule revision; maybe "we'll" hit 4%.

Active rigs:

Active Rigs189187183201162

RBN Energy: the propane story, an update.
Last winter a Midwest propane shortage of epic proportions caused prices at the Conway, KS trading hub to spike over $4/Gal in January 2014 (nearly twice the price of crude oil at the time).
The shortage was caused by a perfect storm of events starting with high propane demand from farmers for crop drying in the late fall and ending with record retail and commercial heating demand during the Polar Vortex cold weather in January.
The high demand was compounded by the partial closure of the Kinder Morgan Cochin pipeline supplying propane to the Midwest from Western Canada and a temporary shutdown of the Hess Tioga fractionation plant in North Dakota, not to mention booming Gulf Coast propane exports reducing domestic availability.
This year the Midwest propane market appears to be much better supplied in spite of the loss of the Cochin pipeline that has now been reversed to carry diluent to Canada. Prices should therefore be less volatile than last year – unless Mother Nature throws another icy winter curve ball. Today we look Midwest propane prices and supply this year.
We have previously described the seasonal nature of the U.S. market for propane – (the only natural gas liquid (NGL) with a hit animated TV series - see NGL Trading Part 2 Propane).
About 57 percent of propane demand comes from residential and commercial space heating during the winter. That has traditionally left a surplus of supplies in the summer months, which is injected into storage so that it can be retrieved when needed to meet heavier winter demand. And to some extent what happened last winter in the Midwest propane market was just a classic case of too much demand draining available storage and causing prices to run up.
But changes in the overall NGL market also impacted what happened to propane in the Midwest last year – changes to infrastructure and to overall propane supply and demand that had wider reaching consequences. As a result propane marketers and consumers now need to pay more attention than usual to fundamentals like price, storage levels and weather forecasts in order to secure supplies at reasonable market prices.
EOG Submits Plans To Drill 1,500 Wells in Wyoming

Don sent me the link at the Casper Star Tribune:
EOG Resources, a Houston oil company, has submitted plans to the U.S. Bureau of Land Management to drill up to 1,500 oil wells along the Campbell-Converse county line. 
The plan calls on developing 150 wells annually for 10 years and seeks an exemption from seasonal drilling restrictions aimed at protecting a rare raptor, the ferruginous hawk.
The BLM, which owns much of the mineral rights in the area, must first complete an environmental study before signing off on the proposal, known officially as the Greater Crossbow Oil and Gas Exploration and Development Project. The nearly 120,000-acre area is between Wright and Bill.
That analysis will be carried out separately from the environmental impact study the bureau is conducting in Converse County, where up to 5,000 wells are projected to be drilled in the next decade.
For a bit of background regarding "the 5,000 wells," see this post of August 18, 2014

This is reminiscent of the early days in the Bakken in which EOG submitted plans for about 570 wells in the Parshall and/or Van Hook oil field (Bakken) in one case.  [That takes us back to 2009 when I knew very little about the Bakken; I had been following the Bakken for only two years by 2009.]

Saudi Arabia and The Slump In the Price of Oil

A reader sent me this link at Business Insider
OPEC's biggest crude producer Saudi Arabia will have its sights set on the upstart US shale oil business at a crucial cartel meeting to debate possible output cuts on Thursday.
Analysts say the kingdom is strong enough to withstand lower prices.
"Saudi Arabia wants to try and knock out shale oil competitors from the market," said Saudi economist Abdulwahab Abu-Dahesh.
"They have the fiscal strength to remain steadfast for two to three years," he told AFP.
Oil prices have collapsed to four-year lows on factors including dampening demand in a sluggish world economy, a sharp rise in output from shale oil and other unconventional sources, and a strong dollar.
It will be interesting to follow. In the meantime, the US consumer is going to be doing very, very well with gasoline falling in price. 

Venezuela will feel the pain the most but won't have much voice at the OPEC meeting. Russia will also feel the pain but is not a member of OPEC. Bloomberg is reporting that Venezuela is looking to meet with Saudi Arabia, Russia, and Mexico ahead of the OPEC meeting.

CNBC  also has a story on Saudi Arabia, shale oil (yes, I know that's not quite correct), and the slump in the price of oil. My perspective: if Saudi Arabia wants to keep giving away their resource for $75/bbl (and probably lower), that's find with me. The Bakken may slow down, but it won't go away. And US consumers are going to love "cheap oil."


Halcon could have difficulty finding economical wells in 2015 -- Filloon.