Idle Chatter About Mark Papa's Concerns About Shale Oil -- March 11, 2018

This is an old story but it's getting a lot of press because Mark Papa spoke about it again at the recent oil conference. One can find the story everywhere; here's one link. I think he first spoke about this about a year ago. I may have even blogged about it then.

Simply stated: Mark Papa warns that US shale oil forecasts are too optimistic. He may be right. Look at this graph from this link:

Note how "narrow" the band is for "tight oil" (the Permian, Eagle Ford, and the Bakken) compared to that large, large band labeled "other." I assume that's what Papa (former EOG/CEO) is looking at.

In the military when we had "information" or "intelligence" a big issue was whether the "information" or "intelligence" was "actionable." We have a lot of information but so what?

I'm not sure that Mark Papa's "concern" is actionable. After you read the articles about what he is saying, how will that affect what you do, with regard to anything? I honestly don't know.

One source said that Mark Papa said that the Bakken and the Eagle Ford were "long in the tooth." A reader sent me that link. I replied, not ready for prime time (and my reply does indeed miss what Mark Papa seems to be saying, but I will post it anyway):

He may be correct. It all has to do with perspective.

Oil companies are in the "E & P" business -- "exploration and production."

From an "exploration" point of view, I think he's right on track. There's not much more "exploration" needed in North Dakota. Exploration would suggest some dry wells while operators are looking for new plays; there are "no" dry wells in the Bakken. In other words, the Bakken was probably long in the tooth by 2014.

For me, the emphasis is now on the "production" half of the equation.

And production is going to depend on many factors:

• price of oil
• advances in technology
• skill of geologists
• completion strategies (fracking: number of stages; amount of proppant)
• infrastructure (takeaway capacity)
• state and federal regulations
• extraction and production taxes

To put all this in perspective, the Permian was a legacy play that was considered "dead" some years ago.

The Bakken is now in the "manufacturing" stage which was predicted some years ago.

I'm not sure what "actionable" information Mark Papa provides by saying the Bakken is long in the tooth without more specifics. I would be more interested in what his thoughts are about the Bakken with regard to max production in a "perfect oil" world.  Bentek provided that "analysis years ago: 2.2 million bopd. Right now, the Bakken is stuck at 1.1 million bopd but analysts expect the Bakken to set more production records as soon as this summer.