Thursday, September 19, 2019

The Incredible, Surprising Bakken -- September 19, 2019

Another example of the incredible, surprising, Bakken. You know, the one with the dreaded decline rate.

The well:
  • 22486, 2,421, EOG, Hawkeye 100-2501H, Clarks Creek, t9/12; cum 781K 7/19:
Selected portion of the production profile (note that cumulative total is closing in on one million bbls of oil and is less than eight  years old):
BAKKEN8-201431311553205219754980862246675469
BAKKEN7-201487229592798431256511212420
BAKKEN6-201429275542746911865495512114628272
BAKKEN5-201431352673530715480615432320338185
BAKKEN4-2014303978240933184723269632227319
BAKKEN3-2014232969928444193102382222827883
BAKKEN2-20140000000
BAKKEN1-20140000000
BAKKEN12-20130000000
BAKKEN11-201312641864781182921409161
BAKKEN10-2013312132522275458331678031524
BAKKEN9-2013241548614831359022352022242
BAKKEN8-2013311964719626449228746028591
BAKKEN7-2013311587215998407923600023445
BAKKEN6-2013301754417699417125794025644

Enerplus With Six New Permits; Six DUCs Reported As Completed -- September 19, 2019

Brent: at $64 won't be enough for Saudi Arabia. What does twitter have to say?
  • "Saudi Arabia has not asked for crude oil from Iraq after attacks." - Iraqi oil minister, via Platts
    • one doesn't have to ask; one can enquire --  Crudehead
  • Saudi Arabia bullying wealthy families to pump cash into IPO -- FT
  • Natural gas storage nears five-yeave average -- EIA
  • Saudi Aramco's oil stockpiles can cover lower output -- for now -- Bloomberg
  • Texas rain shuts down one Cushing-Gulf pipeline and oil terminals -- unsourced
  • the oil market has seen much bigger disruptions before, in percentage terms. History's biggest recorded one was the Suez War .. no price impact and forgotten because spare capacity was 35% (!) of supply." -- Chicago Times
  • third instance of Justin Trudeua in face-darkening makeup surfaces -- The Daily Beast
    • face-darkening makeup is different than blackface. For starters, black face is when a Republican does it -- CNM 

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Back to the Bakken

Active rigs:

$58.669/19/201909/19/201809/19/201709/19/201609/19/2015
Active Rigs6066553267

Six new permits, #36987 - #36992, inclusive:
  • Operator: Enerplus (6)
  • Field: Squaw Creek
  • Comments: 
    • Enerplus has permits for a 6-well fish pad in Squaw Creek, lot 4, section 3-148-94;
Four permits renewed:
  • BR (3): two Renegade permits and one Chuckwagon permit, all in McKenzie COunty
  • QEP: one MHA permit in Mountrail County
One permit canceled:
  • EOG: one Austin permit in Mountrail County
Six producing wells (DUCs) reported as completed:
  • 35839, 400, Sinclair Oil & Gas, Robinson Lake, t7/19; cum 19K over 13 days;
  • 32929, 306, Sinclair Oil & Gas, Robinson Lake, t7/19; cum --;
  • 31808, 1,981, EOG, Riverview 22-3031H, Clarks Creek, t8/19; cum --; 22486 -- see this post;
  • 31807, 2,222, EOG, Riverview 25-3031H, Clarks Creek, t8/19; cum --; 22200, 22199;
  • 31805, 2,073, EOG, Riverview 25-3031H, Clarks Creek, t8/19; cum --;
  • 31804, 2,596, EOG, Riverview 26-3031H, Clarks Creek, t8/19; cum --;

All Politics -- Nothing About The Bakken -- Unless One Is Worried About A Fracking Ban -- September 19, 2019

Wow, wow, wow -- even in Britain, they are reading the blog. I've been saying this for quite some time.

The link is: https://www.foxnews.com/politics/gambling-site-has-more-bets-for-hillary-clinton-winning-dem-nomination-than-anyone-actually-running.


There's no question it will be a brokered convention. Unless the super-delegates have enough clout to keep that from happening. And believe me: the rank-and-file and the media would love a brokered convention, but the DNC will do anything to keep that from happening.

But if no candidate gets 50% plus one on the first vote, pledged delegates can then switch. If there is no winner on the first vote, it is unlikely we would have a winner in the next two or three votes.

Someone with gravitas will come on stage, perhaps a Hollywood celebrity, perhaps a former president, and will manage to quiet the crowd. And then, planned (and pre-planned) while making that speech, the orator will be interrupted by diva ex machina. [One will have to scroll through a lot of chatter at that search result to find the phrase but it's been used often.

But remember, Joe Biden has a plan to put 720 million more women in to the US work force.

On another note, and I will come back to this again. Hillary and the Democrats promised in 2016 they would put a lot of coal miners out of work and look what happened. Now, the same party says they will put the entire US oil industry out to pasture. Just think about that.

Re-posting:


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Is There A Difference Between Pre-Senile Demential And Alzheimer's? 
What The Heck Is "Senile" By The Way? And What Is Pre-Senile?

Nancy Pelosi is 79 years old.

Joe Biden on January 20, 2021, will be in his 79th year, also? He turns 77 on November 20, 2019; 78 on November 20, 2020.

I assume we are all pre-senile.

But I digress.

If this video clip has not already gone viral, it certainly will by the end of the week.

https://www.youtube.com/watch?v=Uj0ccJgJsPA&feature=youtu.be

It is very interesting how folks are dancing around the word "Alzheimer's" and/or the phrase, "pre-senile dementia."

But clearly ... sorry, I lost my train of thought ... covfefe .... what's the frequency kenneth ...



Dueling Stories -- Saudi Peak Oil -- September 19, 2019

In an earlier post, I had this data point:
I did not want to clutter that post, get off track, muddy the waters, or confuse the point I was trying to make, but wattsupwiththat? posted a guest editorial two days ago saying the Bloomberg article was wrong. Here is the link to that article.

I'm a huge fan of wattsupwiththat? but in this case the Bloomberg article was more accurate than the wattsupwiththat? article, though technically both were correct, and interestingly enough, both saying the same thing.

The point that Bloomberg was trying to make -- and used a bit too much hyperbole --was that until the prospectus for the SaudiAramco was released, most folks thought that Saudi Arabia was producing 5 million bopd from their Ghawar, their largest field. In fact, it appears more like 3.8 million bopd. That was the headline.

wattsupwiththat? said, fine. So what if it's 3.8 million bopd? It's called "managing their assets."

But in this case, on the continuum from wattsupwiththat? to the Bloomberg story, I lean a bit more closely to the Bloomberg story. In light of recent events, the Bloomberg story becomes much more interesting, especially in light that it was published just a few months before the recent Iranian attack on Saudi Arabia.

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Sophia's Unicorn


Dimensions: about 2 inches by 2 inches
September 18, 2019
Age: 5 years 2 months

Peak Oil? For Saudi? -- April 7, 2013 -- Re-Posting -- September 19, 2019

Things are not adding up. Or maybe they are.

Too much to write. Y'all will have to connect these three data points:
  • for the past two years Saudi has been draining their crude oil storage tanks like there was no tomorrow; 
  • Saudi's largest oil field is fading faster than anyone realizes, Bloomberg, April 2, 2019; and 
  • back in 2013, Saudi spent a ton of money trying to raise production, and to the best of my knowledge, not much came of it.
With regard to the first data point (draining their crude oil in storage), see this post.

With regard to the third data point, trying to increase production, continue reading.

**********************************
Peak Oil? Saudi?

Re-posting from April 7, 2013, more than six years ago:


March 21, 2015: Reuters/Rigzone is reporting:

As the global energy industry stares transfixed at a spectacular drop in U.S. rigs, Saudi Arabia is ramping up the number of machines drilling for oil and gas despite a sharp fall in the price of crude.
Industry sources and analysts say the OPEC kingpin is looking beyond the halving of global oil prices since June 2014 to a time when crude could again be in short supply.
Riyadh is therefore keen to preserve what is known as its spare capacity - the kingdom's unique ability to raise oil output quickly at any given moment.
But to achieve that, Saudi Arabia has to drill much more than in the past, after boosting output to record levels to compensate for global supply outages in the past four years.
"The Saudis are probably worried about everyone else reducing CAPEX as a result of low oil prices and about non-OPEC output falling off a cliff at some point. We all know that supply disruptions are unpredictable but they are certain," said [an analyst].
"The increase in Saudi rig numbers is like a signal to the industry - let's be rational. We will need supply growth in the future."
Comment: something doesn't ring true.

July 5, 2013: Reuters is reporting -- 
Saudi Aramco plans to develop two less productive areas of major oilfields, industry sources said, as Riyadh takes care to maintain excess capacity for the long term, even while non-OPEC oil supplies are on the rise.
The plan to increase capacity from Khurais and Shaybah by a total of 550,000 barrels per day (bpd) by 2017 will take the strain off Ghawar, the world's largest conventional oilfield.
Such projects are not intended to raise Saudi production capacity beyond the current stated 12.5 million bpd, Saudi oil officials have previously said.
After pumping its biggest fields at near record rates to make up for lost supplies from Libya and Iran over the last two years, the kingdom wants to focus on less productive fields to ease pressure on aging reservoirs to help keep their output robust.
July 2, 2013: Bloomberg is reporting -- 
Saudi Arabia started a program to assess its potential for generating renewable energy, part of an effort to lure $109 billion for building a solar industry that will free up more of its crude oil for export. [Comment: if Saudi's reserves were as robust as they say they are, one wonders whether there would be this need for renewables?]
June 6, 2013: Oil & Gas Journal is reporting --
Saudi Aramco has begun construction of a gas plant in an industrial region of northern Saudi Arabia to handle production from Midyan gas-condensate field under development in the Red Sea.
April 7, 2013: This Bloomberg article may explain a bit more for the reason behind Saudi's increase in number of active rigs. Note the date of the article (January 23, 2013):
Saudi Arabian Oil Co. is set to boost its use of drilling rigs to a record this year as it pushes exploration for oil and shale gas into the Red Sea, a local energy analyst said.
Saudi Aramco, as the world’s largest crude exporter is known, will probably use about 163 rigs this year, up from 133 at the end of 2012, said Sadad al-Husseini, who founded Husseini Energy, an independent energy consultant in Dhahran, Saudi Arabia, after retiring from the state producer in 2004.
Aramco was using 98 rigs to produce oil and gas from onshore fields and perform maintenance on existing wells at the end of last year, with a further 35 employed in exploration activity and offshore operations, al-Husseini said. This year, the company may use as many as 170 rigs in total should the country step up production of oil or gas, thus activating more rigs, he said.
Schlumberger Ltd., the world’s largest oilfield-services provider, also expects a gain in Saudi drilling activity. Saudi Aramco ended 2012 with 134 rigs and that number will grow to 160 rigs by the end of this year, Schlumberger Chief Executive Officer Paal Kibsgaard told analysts and investors on Jan. 18 in a conference call. 
Unfortunately there's no "SAUDI EIA" to track monthly metrics.

One reader suggests that Saudi could be deploying an increased number of rigs in anticipation of disruptions or "live fire" hostilities: Iran, Syria, Egypt, Libya, Korea. To name just the ones I can count on my left hand. This was noted a year ago, March 1, 2012:
Saudi Arabia is deploying the most oil rigs in four years as it prepares for possible shortages caused by tension with Iran, giving President Barack Obama one less reason to answer calls to curb prices by releasing supplies from America’s emergency reserves.
My hunch: it may be both -- tactically Saudi is increasing the number of rigs in anticipation of disruptions and/or a shooting war somewhere; strategically, Saudi is aware its legacy fields are on the right side (the down side) of the production curve.

By the way, another Oil Drum article on January 30, 2013, noted the same thing about Saudi production. Coincidentally, it also referred to "a Figure 7" and said:
Finally it is worth taking a look at Saudi Arabia (Figure 7). The number of rigs operating in The Kingdom reached a record high of 88 in October 2012 and there has to be a message in that statistic in itself.
The split was 58 oil and 30 gas. But Saudi Arabia continues to produce around 11.7 million bpd on a slowly rising bumpy plateau with a relatively tiny number of operational rigs.
The production world changed in Saudi Arabia in 2005 when the drilling rig count more than doubled, drilling new wells to combat declines from legacy assets like Ghawar. Like the USA, there has been a recent prioritization of oil drilling over gas. With Brent crude trading at over $113 / barrel it is quite clear that the world's major producers are working flat out to meet demand.
Others have said the same thing; from wiki:
After US President Bush asked the Saudis to raise production on a visit to Saudi Arabia in January 2008, and they declined, Bush questioned whether they had the ability to raise production any more.
In the summer of 2008, Saudi Arabia announced an increase in planned production of 500,000 barrels per day. However, there are experts who believe Saudi oil production has already peaked or will do so in the near future. 
Original Post
For what it's worth, there's another "peak oil" article and discussion over at The Oil Drum.

As a quick 30-second sound bite / reminder, from wiki:
Based on his theory, [Marion King Hubbert (1903 - 1989)] presented a paper to the 1956 meeting of the American Petroleum Institute in San Antonio, Texas, which predicted that overall petroleum production would peak in the United States between the late 1960s and the early 1970s. 
At first his prediction received much criticism, for the most part because many other predictions of oil capacity had been made over the preceding half century, but these had been based purely on reserve and production data rather than past discovery trends, and had proven false.
Hubbert became famous when this prediction proved correct in 1970.
There is only one interesting data point at the first linked article that I had not seen before. I've always maintained that things are not as rosy as Saudi Arabia would suggest regarding their oil reserves. This past week Saudi announced they were decreasing production in light of decreasing refinery demand (which, of course, are about the only folks who "use" crude oil, the refineries, but I digress).

Saudi does this periodically, capriciously, sometimes it makes sense, sometimes it seems not, but this most recent production decrease by Saudi, in my mind, is a non-event.

However, having said that, it is interesting what the author of the linked article has to say about Saudi's production capabilities and reserves.
Stuart Staniford speculates that the recent Saudi cutback may have been a deliberate response to U.S. production gains in an effort to prevent oil prices from declining. On the other hand, his graph shows that Saudi effort (as measured by active drilling rigs) has ramped up significantly in the last two years.
Perhaps it's the case that Saudi Arabia isn't willing to maintain its previous production levels, or perhaps it's the case that Saudi Arabia isn't able to maintain its previous production levels. But whatever the explanation, this much I'm sure about: those who assured us that Saudi production was going to continue to increase from its levels in 2005 are the ones who so far have proved to be dead wrong.
The graph he refers to is Figure 7: comparison between Saudi oil production and Saudi oil rig count. Wow, if that doesn't get your attention. For newbies: it's just the opposite in the Bakken: increasing production in light of decreasing rig count. I doubt the Saudis are using old, inefficient and ineffective rigs.

Check out that graph, figure 7, at the linked article. Like I said, it's an interesting, very interesting graph. And why I love blogging. Here is a screen shot of figure 7 and the caption:

However, the number of rigs above -- shown in the graph -- does not come close to agreeing to this 2015 article in Rigzone:
State oil giant Saudi Aramco used a record-high 210 oil and gas rigs in 2014, up from around 150 in 2013, 140 in 2012 and some 100 in 2011, according to previous industry estimates.

Another Great Jobless - Frist Time Claims Report -- September 19, 2019

Jobless claims, link here:
  • prior: 204K
  • prior revised: 206K
  • consensus: 215K
  • actual: 208K
Dow: up 44 points at the open

WTI: $58.73

Only One Well Coming Off Confidential List Today -- September 19, 2019

Shell / Saudi Arabia deal: announced last April, 2019, well before the recent Mideast tension:
Saudi Aramco has acquired Shell Saudi Arabia (Refining) Limited’s 50-percent interest in the SASREF refining joint venture for $631 million, Shell and Saudi Aramco reported Wednesday, September 18, 2019.
The companies noted the acquisition follows receipt of all necessary regulatory consents. Located in Jubail Industrial City, Saudi Arabia, SASREF can process up to 305,000 barrels per day of crude oil and is one of the world’s largest export refineries, according to Shell’s website
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Back to the Bakken

Only one well coming off the confidential list today --
Thursday, September 19, 2019: 46 for the month; 178 for the quarter:
32421, conf, BR, CCU Boxcar 6-8-22 TFH, Corral Creek, producing,
Active rigs:

$59.189/19/201909/19/201809/19/201709/19/201609/19/2015
Active Rigs5966553267

RBN Energy: is the Uinta Basin poised for major crude production gains? Archived.
The Uinta Basin in northeastern Utah boasts enormous reserves of unusual, waxy crude oil with many characteristics that refiners desire: medium-to-high API gravity and very low sulfur, acid and metal content among them. Moreover, the combination of long horizontal wells and hydraulic fracturing now give producers access to the basin’s waxy crude at a remarkably low cost per barrel. The catch is that the crude’s most notable feature — its shoe-polish-like consistency at room temperature — poses a major economic and logistical challenge: how to cost-effectively transport the stuff to distant markets.
Refineries in nearby Salt Lake City have been making good use of the waxy oil for decades, but there are limits to how much they can process, so Uinta Basin producers, midstreamers and investors have been working on ways to move large volumes to faraway places like the Gulf and West coasts. They may finally be making real progress. Today, we begin a series on the prospects for taking waxy-oil production from the often-overlooked Uinta Basin to the next level.

Saudi Arabia Importing Oil -- WSJ -- September 19, 2019


Link here. "To keep exports flowing, Saudi Arabia looks to import oil."
After attacks on the country’s largest oil facilities, Saudi Arabia is reaching out to foreign producers for crude and other petroleum products, upending its usual trade flows to plug gaps in its own supply.
Missiles knocked out roughly half of the country’s crude production, and the disruption to Saudi supplies is having knock-on effects all along the global oil-supply chain. To maintain its reputation as a reliable supplier, the world’s largest oil exporter is looking to buy crude oil from at least one of its neighbors and additional oil products from the global market, oil traders said.

Brent crude oil was up 2.8%, at $65.36 a barrel, with minimal early day gains accelerating in the minutes after The Wall Street Journal broke the news that Saudi Arabia is importing oil products and had requested two million barrels of oil from Iraq. West Texas Intermediate futures were up 1.6%, at $59.01 a barrel.
Where will the oil come from? Iraq.

On Sunday, September 15, 2019, the day after the attack, I wrote:
  • Biggest winner? Iraq.
  • Next? Maybe US shale.
"Alfalfa": things will be back to normal by Monday."


Democrats running for president: ban fracking. It's one thing to try to beat Trump at all costs, but to take down the US to do that is insane. Some might say treasonous?

Now with regard to the note from yesterday -- see below. There are two "things."

First: what in the world was Saudi Arabia thinking when drawing down supplies so incredibly fast since 2016? The buildup began in 2008, about the same time the US shale revolution was beginning, and accelerated in 2014 - 2016 when Saudi opened the spigots, flooded the world with oil, trying to break the US shale operators (their "trillion-dollar mistake"). Then, for some reason, started draining inventories at an unprecedented level. What was their goal? How low were they going to go?  Something to explore later on.

Second: back-of-the-envelope. The graph shows 179 million bbls as of April, 2019, One might assume the drawdown continued, but we don't know. We are being told that Saudi Arabia did take another 8 million bbls out of storage in July, 2019.  All agree that the Iranian attack took almost 6 million bopd out of the pipeline, but let's call it five (5 million bopd).

Saudi has said they will meet customers' requirements/contracts. It's now pretty much agreed that things won't be back to "normal" NET the end of September, 10 days.

Others suggest they won't be back to "normal" until the end of October, 40 days.

40 days: that's a nice Biblical number. But I digress.

40 x 5 = 200.bbls.

And now, only five days after the attack, we learn that Saudi is importing oil.

And we move on.

Yesterday a reader suggested that the price of oil should be moving higher not lower. I responded:
Just prior to reading your note, I posted a note about Saudi storage (http://themilliondollarway.blogspot.com/2019/09/saudi-storage-september-18-2019.html).
Then I read your note. There seems to be a real disconnect. If you are correct (and I agree with you) and if my thoughts on Saudi storage are correct (and I've yet to post my conclusion) then the price of WTI is way, way too low right now.
We should see much higher numbers right now. In fact, if you are correct (and you are) and if my thoughts on Saudi storage are correct, we could see some incredibly high oil prices before then end of November, 2019, if not sooner.
WTI: the inexplicable decline in prices over the past day or so has now reversed direction; WTI is up almost 2% overnight, up over a dollar a bbl, and now trading at $59.11.

*************************************************
Background


Re-posting. Yesterday I wrote:
This may be the most interesting "thing" being talked about over at twitter right now. These are the tea leaves:

  • the attack was worse than first thought
  • it will take longer than first forecast for Saudi to be back to "normal"
  • it appears the end of September is the earliest Saudi would be back to "normal"
  • most suggest back to "normal" will occur NET the end of October
  • most agree that 5 million bopd were knocked out of the "pipeline" by the attack
  • Saudi says they will make up the difference from their oil in storage
  • the most interesting thing over on twitter regarding Saudi storage: no one really has the same number
    • I've seen figures as low as 60 million bbls in storage
    • I've seen figures as high as 400 million bbls in stoage
    • the most "consistent" figure coming from the more "credible" sources has been 160 million bbls in storage
  • prior to the attack, Saudi Arabia was dropping the amount of oil in storage for a number of reasons
  • prior to the attack, in the month of July, 2019, Saudi Arabia's crude oil storage dropped by 8 million bbls
With all that data, it's easy to come up with some back-of-the-envelope numbers. We'll come back to this later but see if you see what I'm seeing.

Later, 8:43 p.m. September 18, 2019: let us continue. I think this is a most incredible graphic. For some reason, Saudi Arabia has been deliberately filling customers' orders with oil from storage for the past several months, not from "new" oil:


This is an amazing graphic. Spend some time thinking about it.