Reason #10 Why I Love To Blog -- February 9, 2015 -- Here We Go Again; OPEC Signaling A Price Increase?

Here is simply another incredible story.

This is why I started blogging -- to better understand the oil industry in North Dakota. Had it not been for the blog the story being reported at Rigzone would have made no sense. This will probably be the top story of the week.

Rigzone is reporting a Nevada play that just might be the richest shale oil play in North America, maybe the world:

Nevada’s Chainman play offers great untapped potential in terms of conventional and unconventional resources, say industry veterans who’ve studied the play in the past few decades.

In March, SAM Oil will test the potential of a conventional prospect in the Pluto 27-1 re-entry prospect, an anticlinal trap with migrated hydrocarbons into sand and fractured shale reservoirs.

Originally drilled in 2007 by Plains Exploration & Production near the copper mining town of Ely in northeast Nevada, SAM redrilled the well last fall. In its test, SAM is targeting an anticline structure with an estimated 50 to 89 million barrels of oil recoverable, SAM manager Allen Matzke told Rigzone.

The Chainman shale is considered to be possibly not only richest oil shale in North America, but worldwide, said Charles Laser, an oil and gas consultant and wildcatter with nearly 40 years of experience.

“The Chainman is superior to the Bakken or Eagle Ford due to the fact is a secondary, tectonically, naturally fractured shale with excellent total organic carbon (TOC), allowing for much large reserves and higher flow rates.”

Nevada has not seen the level of oil and gas activity as that of Texas or North Dakota.

Oil and gas drilling has taken place in the Eastern Great Basin, which encompasses eastern Nevada and western Utah, since the late 1800s in Utah, according to a 2007 study by the U.S. Geological Survey (USGS).

The first commercial oil production in Nevada started in 1954 with Shell Oil’s completion of the #1-35 Eagle Springs, the discovery well for the Eagle Springs field in Nye County, Nevada. From the early 1900s to Shell’s Eagle Springs well in 1954, roughly 90 exploration wells were drilled in the Eastern Great Basin.

“As the exploration industry became more established, popular exploration targets were large, surface exposed anticline structures,” according to the USGS report.

“Some of these structures had oil shows in prospective reservoirs, but no accumulations were found.” The Shell discovery resulted in a sharp increase in drilling for approximately three years, but drilling activity fell due to low oil prices. Four more drilling activity spikes inspired by new field discoveries occurred in 1961, 1965 to 1970, 1977 to 1981, and 1984 to 1988. “The correlation between the number of new oilfield discoveries and the number of wells or total footage drilled, however, is poor,” said USGS. 

Much more at the link. This article will likely be archived by the source.

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Update On Collateral Damage Being Caused In Latin America

Rigzone's John Kemp also has an update on the collateral damage being caused in Latin America.  This article will also likely be archived.

Three data points from the article:

• U.S. shale will continue to be the marginal supplier of crude to the global market and set benchmark prices. The only real question is what level of prices and production are needed to balance the market.
• The number of active land rigs has fallen sharply in OPEC members Ecuador (down by 46 percent) and Venezuela (21 percent) as well as non-OPEC Bolivia (60 percent), Colombia (18 percent) and Mexico (45 percent). The only country where there is no evidence of a slowdown in activity, so far, is Argentina, where the number of rigs operating has climbed steeply over the last three years and has remained stable in recent months. The Vaca Muerta shale in Argentina's Neuquen Basin is seen as one of the most promising shale plays outside the United States and has attracted strong interest from international oil companies.

• Deepwater and ultra-deepwater fields off the coasts of Latin America and Africa require major capital commitments which international oil companies are reluctant to make when their revenues have been slashed and they are under pressure to increase capital discipline to maintain dividend payouts to investors. Shale is proving such a disruptive force in the oil market because it has emerged in the middle of the cost curve rather than at the top. North American shale plays may be more expensive than conventional fields in the United States, Canada and around the Middle East Gulf. When the shakeout is completed, North American shale drillers will not be the only, and perhaps not even the main, losers. 

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Getting Ready For A Price Increase?

Reuters at Rigzone is reporting:

OPEC forecast on Monday that demand for its oil this year would be much higher than previously thought, as its strategy of letting prices fall to hurt other producers begins to take effect.

In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast demand for its oil would average 29.21 million barrels per day (bpd) in 2015, up 430,000 bpd from its previous prediction.

That would raise demand for the group's crude to above the level seen last year, with OPEC's forecast for production growth outside the group slashed by a third due to a slowdown in the U.S. shale boom and lower oil investments globally.

"(Lower non-OPEC supply is) mainly due to announced capital expenditures cuts for 2015 on the part of international oil companies, as well as a decline in the number of active drilling rigs in the U.S. and Canada," it said.

It said non-OPEC supply would rise by only 850,000 bpd this year, down 420,000 bpd from last month's forecast.