Thursday, October 15, 2015

A Natural Gas Well To Watch; A Wildcat In North Dakota Produces One Million BOE In Three Years -- October 15, 2015


August 8, 2017: see reader's comment; apparently "well gave out" -- perhaps the casing collapsed; regardless, well will be plugged and abandoned. 

February 20, 2017: PA -- I guess that's it for this remarkable well. 

October 18, 2015: after posted the original post, a reader sent me four photos of Sharon #1 taken over the past weekend:

Original Post 

Disclaimer: in a long note like this, there will be typographical and factual errors. In addition, I may be "seeing" things that do not exist and/or missing things that do exist. If this information is important to you, go to the source.

A huge "thank you" to the reader for alerting me to this well. (I believe this is the second time the reader has alerted me to this well, but I had forgotten all about it. My bad.)

As noted, a reader notified me of this well. Application/permit by MBI; well transferred to BTA, December, 2011:
  • 21235, 0, BTA/MBI, Sharon 1, North Taylor oil field/wildcat, Winnipeg pool, 160 acres spacing unit, t2/12; oil cum 12K; natural gas cum 5,880,579 MCF 8/15;
This was a wildcat well which suggests that the North Taylor oil field was not a named field at the time it was drilled. Note the recent NDIC hearing dockets:
Docket: Wednesday, January 15, 2014
Case 21588, BTA, North Taylor-Winnipeg Gas Pool, redefine field limits, rules, Stark County -- that case was continued to September, 2015 and it was continued to October, 2015 (although I didn't see it there -- either missing or I missed it). Currently the North Taylor field is 320 acres, the south half of section 4-140N-93W.
Previous posts in which this well was discussed or noted:
Last twelve months production:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare


The well is four miles north of Taylor, North Dakota, in the southwest corner of the state, in the northeast corner of Stark County. The well is about 100 miles northwest of the "Sleeping Giant."

Nearest well: Sharon #1 is 1855 feet from the Conoco Stoxen #1 located 592' FNL x 709' FWL of section 9-140N-93W. The Stoxen well was completed as a dry hole in 1964, drilled to the Red River, it TD'ed at 11,718'.

In the graphic below, note how little activity is in this area (as in "none"):

Selected formation depth (in feet) (stratigraphic formations):
  • Base Fox Hills: approx. 2000 feet
  • Niobrara: not mentioned
  • Greenhorn: 4,110
  • Lodgepole: 8,667
  • Middle Bakken: 9,435
  • Three Forks: 9,446
  • Red River: 11,430
  • Winnipeg Shale: 12,106
NDIC File No: 21235
Well Type: OG     Well Status: A     Status Date: 2/25/2012     Wellbore type: Vertical
Location: SWSW 4-140-93     Footages: 660 FSL 680 FWL
Latitude: 46.965195     Longitude: -102.429673
Current Operator: BTA OIL PRODUCERS, LLC
Current Well Name: SHARON #1
Elevation(s): 2309 KB   2285 GR   2285 GL     Total Depth: 12381     Field: NORTH TAYLOR
Spud Date(s):  12/20/2011
Completion Data
   Pool: WINNIPEG     Perfs: 12228-12278     Comp: 2/25/2012     Status: F     Date: 2/28/2012
Cumulative Production Data
   Pool: WINNIPEG     Cum Oil: 11622     Cum MCF Gas: 5880579     Cum Water: 6119
Production Test Data
   IP Test Date: 2/28/2012     Pool: WINNIPEG     IP Oil: 0     IP MCF: 5011     IP Water: 0

Data Points / Comments / Things To Ponder

First of all, I'm not going to do the MCF-to-BOE conversion because I often make simple arithmetic errors. However, this is a lot of natural gas. I would appreciate it if someone smarter than I do the calculation (in the comments section, is fine; and anonymous is fine).

Note how remote this well is. Also note that all this natural gas is being captured and sold. There is an obvious question to be asked. In an earlier post, there were indications that this well was hooked up to an MDU natural gas pipeline.

Remember recent news item: CLR and Badlands NGLs; petrochemical plant.

Recent news item: wildcatting for natural gas in Ohio.  

Those incredible natural gas wells in Ohio and Pennsylvania are horizontal wells and fracked. This well was vertical and not fracked.

The NDIC hearing docket to define a new North Taylor-Winnepeg gas field. 

This natural gas well is 1855 feet from a dry Red River well that was drilled in 1964.  

Classical Gas, Mason Williams

100% (2/2) Of New Bakken Wells Going To DUC Status; Two (2) New Permits -- North Dakota -- October 15, 2015

Active rigs:

Active Rigs66190184189195

Four (4) new permits:
  • Operator: EOG (4)
  • Field: Parshall (Mountrail)
  • Comments: 
CLR renews three (3) permits (the Cuskelly wells in Dunn County); and, MRO renews two (2) wells (Litvin and Cross, both in Dunn County, also).

Wells coming off confidential list Friday:
  • 23790, SI/NC, CLR, Pasadena 2-2H, Banks, no production data,
  • 28534, SI/NC, Hess, HA-Sanford-152-96-1819H-4, Westberg, no production data,

Jack Kemp's Weekly Fossil Fuel Tweets -- October 15, 2015

Residual fuel oil stocks continue trending gently higher; nearing 10-year max.

Propane stocks rise another 1.8 million bbls to a record 102 million bbls, almost off the charts.

US distillate stocks continued usual seasonal drawdown, a -1.5 million bbls, but still well above the ten-year average; and still +23 million bbls over 2014 level.

US gasoline stocks near their 10-year high; fell to 24.4 days of current consumption, from 24.8 the prior week; close to 2014 level of 24.1.

US gasoline stocks fell -2.7 million bbls, as refiners began to correct post-summer oversupply.

Ready for next recession? Current "US expansion" already 76 months old, longer than all but four previous expansions (only ones longer: 1991 - 2001; 1961 - 1970; 1938 - 1945; 1982 - 1991). The longest last about 120 months; thus we have long way to go to beat that record. It looks the average expansion lasts about 24 months.

Platts: OPEC crude oil exports to rise 60,000 bopd to average 24 million bopd in four weeks over October 31.  

Notes For The Granddaughters

Perhaps others remember "Mazda lamps." I did not. I first came across "Mazda lamps" in a letter written by Martha Gellhorn. From wiki:
Mazda was a trademarked name registered by General Electric in 1909 for incandescent light bulbs. The name was used from 1909 through 1945 in the United States by GE and Westinghouse. Mazda brand light bulbs were made for decades after 1945 outside the USA. The company chose the name due to its association with Ahura Mazda, the transcendental and universal God of Zoroastrianism whose name means light of wisdom (Ahura = light, Mazda = wisdom) in the Avestan language.

In 1909 the Mazda name was created for the tungsten filament light bulb. GE sold bulbs under this trademark starting in 1909. GE promoted the mark as identifying tungsten filament bulbs with predictable performance and life expectancy. GE also licensed the Mazda name, socket sizes, and tungsten filament technology to other manufacturers to establish a standard for lighting. Bulbs were soon sold by many manufacturers with the Mazda name licensed from GE, including British Thomson-Houston in the United Kingdom, Toshiba in Japan, and GE's chief competitor Westinghouse.

Tungsten-filament bulbs of the Mazda type were initially more costly than carbon filament bulbs, but used less electricity. Often electrical utilities would trade new lamps for consumers' burned-out bulbs. In at least one case the authority regulating energy rates required the utility to use only tungsten bulbs so as not to inflate customer's energy use.

The company dropped the campaign in 1945. GE's patents on the tungsten filament lamp expired in the late 1930s and other forms of lighting were becoming more important than incandescent bulbs. GE stopped licensing the trademark to other manufacturers, although it continued to renew the trademark registration up to 1990. The registration on trademark no. 77,779 expired in 2000.
Today, the Mazda name is mostly associated with the Mazda automobile manufacturer of Japan (which coexisted with Toshiba's Mazda bulbs in its early years). The Mazda trademark is now split between the Japanese manufacturer where it applies to automobiles (including automobile lights and batteries) and GE for non-automotive uses.

GE's Mazda bulbs were manufactured in northeast Minneapolis. The building is now headquarters for Minneapolis Public Schools.

Bakken Economy: $150 Million Truck Reliever Route Around Williston Complete -- October 15, 2015

Posted earlier, this is quite a story: North Dakota celebrates $150 million solution to Williston traffic woes. The Bismarck Tribune is reporting. I find it quite amazing how quickly the county, state, and surface owners got this done. There were even some North American Native artifact issues that had to be resolved. I drove the "reliever" route numerous times -- before construction began, and then just a few weeks ago when it was all but complete.
Construction is now complete on a permanent truck reliever route around Williston, where traffic counts have grown 160 percent since 2008.
“The explosion of truck traffic during the Bakken boom, was as I would call it, ‘truckmageddon,’” said Sen. David Rust, R-Tioga, during an event Wednesday in Williston. “And it needed to be addressed.”
Traffic congestion was the No. 1 complaint of western North Dakota residents after the influx of oil activity, Gov. Jack Dalrymple said.
The state invested about $150 million on a permanent truck bypass around Williston, allowing trucks to travel up to 70 mph on a 13-mile, four-lane route that connects U.S. Highway 85 and U.S. Highway 2.
The state also invested more than $27 million on a temporary bypass around Williston while the permanent route was in the works. In addition, the state has constructed truck routes that serve Dickinson, Watford City, Alexander, Killdeer and New Town.
In the big scheme of things (Syria, the US debt ceiling, etc) this is not that big a deal, but for Williston, Williams County, the Bakken, this is a huge, huge deal. This area -- on the northwest side of Williston -- is where much of the industrial activity will take place as the Bakken continues to build out.

But then look at this: note where the "trucker reliever route" (NDDOT Bypass) is in relation to the new Williston airport. Really, really huge.

Airport relocation information here.

The Poll Is Still Open


October 19, 2015: The Los Angeles Times is reporting that SecTreasury is concerned that an "accident" could befall the US if the debt limit is not raised by November 3, 2015. I wonder what he means by "accident."

I  think his biggest concern is his own hide. If the debt limit is not raised, investigative reporters will learn more about Lew's extraordinary means to keep the debt frozen for the past six eight months. He may have caused the accident. It may turn out that he knew the cliff was coming six eight months ago, but instead of slowing down back then, he kept the pedal to the metal hoping that the bridge would be completed by the time he arrived. I assume he was taking from Peter to pay Paul these last six months, and now Paul has run out of money. Huge, huge game of chicken, if he's being honest. My hunch is that this is all political theater, the date is "fake" and the sun will rise November 4, 2015.

From the article:
The nation technically hit the debt limit in March, but Treasury officials have been using so-called extraordinary measures since then to juggle government finances and continue borrowing. [March, April, May, June, July, August, September, October = 8 months.]
What is most interesting is this paragraph:
At that point, he said, the Treasury will have about $30 billion in cash and will have to use that and the daily inflow of revenue to pay a host of major bills, including Social Security payments, federal salaries and interest on the debt.
Many years ago I connected Social Security and the national debt in the same paragraph and readers took me to task for that, reminding me that Social Security was not part of the national budget/debt; was solvent through 2032; and, in the Algore lockbox. 

It was noteworthy that Lew did not mention military pensions in that paragraph. Federal salaries clearly take precedence over pensions. 
Original Post

Rollcall is now reporting that SecTreasury Lew has told House Speaker John A. Boehner, that “based on our best and most recent information, we now estimate that extraordinary measures will be exhausted no later than Tuesday, November 3.”

For those paying attention that is two days earlier than originally reported.

Also note this last statement at the link:
The third day of the month is when Social Security checks are issued, as was noted in a report Wednesday from the Congressional Budget Office.
It is my understanding that Social Security checks are not affected by the debt ceiling limit because Social Security cash is held in the Algore lock box. However, military retiree checks are not in that same lockbox. Fortunately, military retiree checks go out the first of the month, so the government has almost a full month to figure this out.

However, the fact that "someone" is connecting "Social Security payments" with the national debt speaks volumes.

By the way, that phrase "extraordinary measures" is the reason the national debt has been held frozen for months. I've explained how SecTreasury managed to do that but looks like the party is over.

I wonder if John gave the letter to an intern instructing her to take it over to Paul Ryan's office? Rumor has it that when the press asks John about the letter, he will respond, "I haven't seen it yet."

This is probably the US version of "hot potato."

Most Important Retail Story This Week?


Flashback to August 18, 2015, from Reuters:
Wal-Mart Stores Inc reported weaker quarterly earnings and lowered its annual forecast on Tuesday, as it copes with higher labor costs, a squeeze on pharmacy margins and sliding sales at its British supermarket chain.

Shares of the world's largest retailer fell 3 percent to $69.75 after trading at its lowest in 2-1/2 years.

The results showed how a move to lift wages and other costs have kept Wal-Mart from taking full advantage of a strengthening U.S. economy, although there was a bright spot in its report: a fourth straight quarter of same-store sales growth.
And before that, May 19, 2015, in Forbes:
As expected, Walmart’s first-quarter earnings were below analysts’ projections. A kitchen sink’s worth of reasons were cited for the miss: the strong dollar, employee wage increases, consumer wallet tightening, lower gas prices, and weakness in its e-commerce business.

The truth is a lot simpler – Walmart has a sales problem. The company brought in essentially flat sales numbers at stores open at least a year (called comparable sales in the retail industry), reporting an anemic 1 percent increase. This is not a new story. Back in November 2014, the company announced its first quarter of positive comparable sales (a still weak .5 percent in the US) after seven straight quarters of declines. It should be noted that back then, the exchange rate was also cited as an earnings dampener, even though the company’s earnings were actually above analyst estimates.

What’s the cause of Walmart’s sales problem? It’s not all that complicated, really. Walmart continues to operate in a saturated market. Some competitors like Target have more cachet. Others, like dollar stores, continue to nip at the edges of its market basket. Its customer doesn’t seem to have an appetite to move online, and until now, the company hasn’t created any compelling reason for on-line shoppers to pick over or any other retailer, really. That’s what happens when your market is saturated. You have nowhere to go.
Today, at USA Today:
Walmart shares plunged to their lowest one-day drop in nearly three decades Wednesday after the U.S. retailing giant jolted financial markets by forecasting a 6% to 12% earnings drop in fiscal year 2017.

Shares of the Bentonville, Ark. company dropped 10.04% or $6.70 to close at $60.03 on the startling news Walmart executives delivered at the company's annual investors conference with Wall Street analysts, held in New York City.
My comments:
  • will be a losing proposition for Walmart
  • one wonders if Walmart needs to get back to its niche: small-town America; avoid major urban areas; nothing but controversy, problems, and retail saturation in major urban areas
I always thought the small, neighborhood Walmart stores would thrive, but I was completely wrong. I've only seen one and it's about four miles from where we live. We visit it only when having sushi at "Cow Town" next door. It's a clean, modern store. And there are never more than three customers in the store when we visit.

Trempealeau Formation, Ohio

Now it's the Trempealeau ("the Tramp" for those in the play), 150 miles from Ohio's Utica shale drilling activity. Bizjournals is reporting:
Houston-based EOR Technology LLC plans to drill the well about 45 miles north of Columbus.

EOR typically stands for enhanced oil recovery, which includes techniques to extract oil after much of it has already been drained.

Central Ohio has always been home to drilling, but with traditional vertically drilled wells. Part of the reason the Utica shale in eastern Ohio is coveted by drilling companies is because it's now economically accessible to get the oil and gas in it via horizontal drilling and hydraulically fracturing, or fracking.

Now that practice is coming to Morrow County, Central Ohio, about 150 miles from most Utica shale drilling activity in the state.

The drilling permit is for 3,200 feet, a depth too shallow to tap the Utica shale, as Marcellus Drilling News points out. Instead, it's the Trempealeau formation, state records show, whose oil was coveted in the 1960s.
Haven't heard of "the Tramp?" Neither had I. Here's an abstract of a 1965 paper on same:
Concentrated in central Ohio's Morrow County, the Trempealeau oil play has proven to be the most prolific in the state's recent history.
Unrestricted producing rates and the relatively shallow depth of 3,000 ft have created an added incentive to finding the scattered Cambrian erosional remnants that comprise the productive areas.
Approximately 413 wells were completed in 1964 and Trempealeau production from the Morrow pool during the year was almost 11 million bbl. [Equivalent to 10 days in the Bakken.]
The producing reservoirs are vugular dolomite with evidence of vertical fracturing.
Average core properties include 7.8 per cent porosity and 49 md permeability. Average per well recovery from an analysis of 75 wells is 68,000 bbl, while individual well recoveries have ranged up to 500,000 bbl.
Primary recoveries from the better areas are predicted at around 30 per cent of the oil in place, a particularly high figure considering these are predominantly solution gas drive reservoirs.
Secondary recovery will be a challenge to operators since conventional methods do not appear favorable in view of current data. This paper presents a summary of Trempealeau reservoir performance, particularly the Ashland development in the Morrow field.
So, while California does all it can to kill its in-state oil and gas industry, the rest of the world drills on. Good for you, Ohio. Wishing you "continued good luck." Rumor has it that President Obama will be in Ohio to check out the new Trempealeau well. 

US - Mexica Natural Gas

New Stories

December 28, 2016: first time ever, Mexico is now a net importer of crude oil from the US

Original Post
Two stories on US natural gas to Mexico (huge thanks to reader for sending me the links), October 15, 2015:

Jobs Report -- Quite Remarkable -- That Seasonal Adjustment Really Helps -- October 15, 2015

From Department of Labor:
In the week ending October 10, the advance figure for seasonally adjusted initial claims was 255,000, a decrease of 7,000 from the previous week's revised level.
The previous week's level was revised down by 1,000 from 263,000 to 262,000.
The 4-week moving average was 265,000, a decrease of 2,250 from the previous week's revised average. This is the lowest level for this average since December 15, 1973 when it was 256,750. The previous week's average was revised down by 250 from 267,500 to 267,250.
Illinois Halts Lottery Winning Payments Over $600

Fox News is reporting.

Seriously.  In a statement, the Illinois Lottery said that its account for writing out checks to winners would be exhausted as of Thursday, and the agency does not have the legal authority to replenish its own funds. According to the Chicago Tribune, officials say the legislature must authorize the state comptroller to release the funds.

Despite the payment delay, lottery officials have continued selling tickets.

Last month, the Illinois comptroller's office announced that without a budget for the July 1 fiscal year, the agency didn't have the authority to write checks of more than $25,000 and payments would be delayed.

New Album 

I've been looking forward to Lana Del Rey's new album. I saw the vinyl at Barnes and Noble about a week ago but did not see the CD. I found it at Target.

I think this is one of a handful of CDs I have ever purchased without listening to any soundtrack first, or reading reviews or knowing anything about it. I'm going to check the reviews in a few minutes. I've been playing it pretty much non-stop -- while driving -- and absolutely love it. I put it on shuffle so I don't fall into that typical trap of getting hooked on a particular order, though I suppose the artist had a reason for putting them in the order she did.

Fourteen tracks, all of them written by Lana Del Rey and her co-writer, except for three of the tracks, I believe. I think the CD is very, very different from her past two (or three albums). It's hard to believe she did not produce this album as a demo to compete for new James Bond movie theme song. (The new James Bond movie is due out this October -- Great Britain; November -- United States; and the theme song is not by Lana Del Rey.)

24, Lana Del Rey

This is a nice review. Having spent my coming-of-age years near Chinatown, the Dodger Stadium, and west LA, I can connect with this:
She has been transfixed by, and riffing on, America since the beginning, but Honeymoon pushes past easy Kennedy kitsch and undulating flags to mine something more specific. In the opening track, she sings "We could cruise/ To the blues/ Wilshire Boulevard," and the name check is shrewd. One of L.A.'s earliest thoroughfares, a locus of establishing the city's car culture, Wilshire runs sixteen miles, and as architecture critic Christopher Hawthorne writes, "can take you from a world-famous piece of architecture to a weed-choked lot, from a realized ambition to an abandoned one, in the space of a few blocks."

In the following verse, she replaces blues with "news" and substitutes "Pico Blvd.", which is working class for its duration, bi-secting Koreatown and running through Ecuadorian, Salvadoran, Russian, and Mexican communities. The juxtaposition is startling and canny. In the space of one lyric, she posits the invisible, real city running parallel to the gleaming, manufactured one, sketching an arterial map of a city coursing with ambition. It reminds us of something that was the very issue with Del Rey that irritated some early on—she knows exactly what she is doing.
Honeymoon just synthesizes ideas she's been vamping on from the beginning into a unified work. She figured where she was going long before she got there; with Honeymoon she has finally arrived. 
I have driven both those "roads" many, many times.  By the way, it appears no reviewer particularly cares for the song featured above.

Another review here, and any review mentioning Anaïs Nin will get my attention.

Thursday, October 15, 2015; We Start The Day With Post-Boom Record Low Active Rigs -- 66

Active rigs:

Active Rigs66190184189195

RBN Energy: looking for signs of a natural gas production slowdown, part 2.
On Tuesday of this week the Energy Information Administration released its latest Drilling Productivity Report, projecting declines in US natural gas production volumes. Meanwhile, daily pipeline flow data shows gas production hitting record highs and gas storage fill could also be heading toward maximum levels.  The CME/NYMEX Henry Hub natural gas price for the November 2015 is responding to these burgeoning supplies, settling yesterday at $2.518/MMBtu, near all-time lows for this time of year. Today we continue our look at the various sources of natural gas production data and what they tell us.
In the first part of this series we looked at the natural gas production data in EIA’s historical monthly report – the Natural Gas Monthly (NGM) – as well as two of its forward-looking monthly reports – the Short-Term Energy Outlook (STEO) and the Drilling Productivity Report (DPR). The September ending NGM published actual gas production volumes for July 2015 for the first time and showed that gas production rose to a record high in July, exceeding June production and also trumping prior expectations for July in the STEO and DPR data, both of which last month had predicted that July 2015 volumes would decline month-on-month. What’s more, the September 2015 STEO also raised its projections for August through December 2015 by about 100 MMcf/d.
The latest DPR released earlier this week (Oct. 13) revised its July 2015 gas production estimates up by a total of about 400 MMcf/d across all seven shale basins, and, further, it lifted its projections for August through October 2015 as well. Upward revisions were largest in the Utica and Permian basins. Unlike the STEO and NGM, however, the latest DPR continues to predict that the combined volumes from all basins declined between June and July and will continue to decline month-over-month through at least November.
 And look at this, something I've said from the beginning:
We explained last time that while the various EIA datasets are generally reliable for the historical periods, it isn’t unusual for the forecast periods to be revision-prone and underestimate growth in this environment where producers are rapidly adapting to lower market prices. In this case, standard model assumptions based on historical metrics, even recent history, become less accurate for predicting future production volumes. As we touched on last time, this is due to changes in producer productivity, including improved completion techniques and a focus on high-yield wells in “sweet spots” or increasing well completion rates, all of which can cause production to increase even as rig counts remain down. In effect this increases how much gas is produced per rig for new wells, an important metric if you’re trying to answer the question of whether production from new drilling is enough to offset existing wells’ natural decline rates. This measure is a key feature of the DPR, which provides historical “production per rig” for new wells and projects it forward for the three months after the last month of actuals published in the NGM. Because productivity is constantly changing, however, the forecast is subject to historical bias. But its “production per rig” metric does provide valuable market intelligence about the trajectory of efficiency rates by shale basin.

North Dakota celebrates $150 million solution to Williston traffic woes. The Bismarck Tribune is reporting.

A North Dakota coal testing plant near South Heart, ND, operated by GTL Energy, is moving overseas; can't win Obama's "war on coal." The Dickinson Press is getting out the champagne.

Two stories on US natural gas to Mexico (huge thanks to reader for sending me the links):
More Quickies

At least it's hard to catch. This is an interesting development.

No links; story everywhere: President Obama abandons plan to exit Afghanistan. Will maintain current level of troops; US troops will remain in Afghanistan even after President Obama leaves office (assuming he still plans to leave, January 20, 2017).

For those paying attention, and apparently the Obama administration was not, Russian military is using Syria as a proving ground; "west takes notice" -- New York Times.

Bible story: perhaps the most interesting story of the hour: earliest known draft of King James Bible found -- New York Times.

Last One

Bloomberg/Rigzone is reporting:
The world is awash in crude, but big oil companies are lining up to develop new fields in Iran even as they slash spending and abandon exploration elsewhere. One thing explains this paradox: cost.

The Middle Eastern country is one of the cheapest places in the world to tap new oil fields and pump from existing wells. The slump in crude prices makes Iran even more attractive to investors, assuming its nuclear deal with world powers leads to an easing of international sanctions, said the International Energy Agency.

“Costs are low because they have giant fields which produce economies of scale, the terrain is mostly straightforward and reservoirs are highly prolific,” Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by e-mail. If prices stay low, production costs could drop even further in Iran and its neighbor Iraq, he said.

Cheaper barrels are a significant lure to companies as they eliminate jobs and defer expensive projects following a 40 percent plunge in oil prices in the past year. Royal Dutch Shell Plc abandoned its exploration campaign in the Arctic last month citing high costs, while Total SA reduced production targets after a fresh round of investment cutbacks. Both companies have dispatched executives to Tehran in recent months for talks with the National Iranian Oil Co.

While the cost of developing an oil field in Canada or the U.S. can range between $59 and $114 a barrel, the expense in Iran doesn’t exceed $31, the IEA said in an Oct. 13 report. The Persian Gulf nation has also worked up a “vastly improved version” of its oil contracts to attract international oil companies, according to the Paris-based adviser to 29 nations.