On Glide Path To Set New All-Time Daily Record For Gasoline Demand -- April 22, 2016

Tweeting now: With historically low gas prices, US gasoline demand in March was highest ever recorded for month.

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Flashback: the Red Queen

Link here: http://www.reuters.com/article/shale-output-northdakota-kemp-idUSL6N0UR2XA20150112.

Excerpts from the January 12, 2015, column:

 More than 22,000 wells have been drilled in North Dakota since oil was discovered in 1951, but over half of state production comes from around 4,000 wells drilled since the start of 2013.

By the end of Oct 2014, there were nearly 11,900 wells producing oil and gas in the state.

Of these producing wells, around 70 percent (8,400) are unconventional wells drilled into the Bakken and Three Forks formations, mostly since 2005, and they account for 95 percent of the state's current oil output.

The remaining 30 percent (3,500) are legacy wells, mostly from before 2005, but they account for just 5 percent of output.

In fact, an even smaller number of wells contribute the majority of output. The number of wells drilled into the Bakken has grown rapidly so the average well is just three years old.

While output is initially high it declines rapidly. The typical Bakken well produces around 1,000 barrels per day in its first 60 days, but output halves within the first six to nine months and continues to fall thereafter.

Just to keep output steady, the oil companies need to continue drilling a large number of new wells to replace fading output from existing ones.

The problem of decline rates and replacement drilling has been likened by many in the peak oil community to the "Red Queen's Race" in Lewis Carroll's "Through the Looking-Glass".

The Red Queen warns Alice: "It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that."

Peak oil experts have expressed fears that shale producers would have to employ ever more drilling rigs and bore ever more holes just to keep up with decline rates, and this would ultimately become unsustainable.

In practice, however, North Dakota's shale producers have been winning the race because they have been able increase productivity faster than output from old wells has declined.

Drilling crews have drilled faster and spent less time moving from one site to site and rigging up. The horizontal section of wells has grown longer and more fracturing stages have been performed on each well increasing output per well substantially.

Oil production depends on a broad constellation of factors including drilling efficiency, well productivity, decline rates and breakeven prices.

If the Red Queen's race can be won by productivity, it can be lost by low prices. If prices remain below breakeven rates, drilling will slow or stop, and decline rates on old wells become the primary drivers of future production. 

North Dakota needs between 140 and 155 active rigs to keep output steady throughout the next three years, according to a presentation on January 8, 2015, by the Department of Mineral Resources to legislators working on the state budget.There are signs this is already happening.  

The number of rigs operating in the state has fallen to 167, down from 183 at the same point last month and 193 in October. The number of operating rigs is likely to fall further in the coming months as crews come to the end of existing work programmes.

North Dakota oil production may yet fall over a cliff, but that article was written in January, 2015, and stated that 140 - 155 active rigs would be necessary to maintain output. There are 29 active rigs in North Dakota today; the big rigs (coming in after the initial spud) can reach total depth in about five days in experienced hands. When the boom began, we were talking upwards of 60 days to reach total depth. And time measured in weeks to get a rig from one site to the next.

It will be interesting to watch the progress of CLR's Tarentaise wells.

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Statoil's Skarston Wells
Banks Oil Field

Eight wells on an 8-well pad, "batch-drilled," spud date and TD dates:

• 25854, SI/NC, Skarston 1-12 2TFH: 9/21/14; 11/12/14;
• 25856, 3,645, Skarston 1-12 7H: 9/19/14; 12/01/14; t3/16; cum --
• 25857, SI/NC, Skarston 1 -12 4H: 9/17/14; 12/08/14;
• 25858, 5,010, Skarston 1-12 5H: 9/14/14; 2/14/15; t3/16; cum --
• 25859, 3,802, Skarston 1-12 6TFH: 9/14/14; 2/25/15; t3/16; cum --
• 25855, SI/NC, Skarston 1-12 3TFH: 9/10/14; 3/11/15;
• 29563, SI/NC, Skarston 1-12 8TFH: 1/07/15; 2/5/15;
• 29564, 3,583, Skarston XE 1H: 11/11/14; 4/14/15; t3/16; cum --

So, between 11/12/14 and 4/14/15: 8 wells on an 8-well pad drilled to depth. I assume they can be fracked within a couple of weeks, and oil in the national pipeline system within 30 days.

As of April, 2016: all on SI/NC status.