Crude Oil Reserves -- Commentary -- March 27, 2020

The purpose of this post: to consider whether it is likely that crude oil will come off the global market a lot faster than folks think possible, and the implications for countries and companies that cut production (or not).

Part One

I don't know if this is generally accepted but this is what wiki says which fits with how I understand this:

Oil reserves denote the amount of crude oil that can be technically recovered at a cost that is financially feasible at the present price of oil.

Hence reserves will change with the price, unlike oil resources, which include all oil that can be technically recovered at any price.

Reserves may be for a well, a reservoir, a field, a nation, or the world. Different classifications of reserves are related to their degree of certainty.

The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is only this producible fraction that is considered to be reserves. The ratio of reserves to the total amount of oil in a particular reservoir is called the recovery factor.

Determining a recovery factor for a given field depends on several features of the operation, including method of oil recovery used and technological developments.

US crude oil reserves, under the definition above, will fluctuate based on the price of oil. When oil trades in a narrow band, year-over-year, the reserves assessment/estimate should not change much. When the price of oil changes significantly year-over-year, one would assume that oil reserves in the US would change (and perhaps significantly) year-over-year.

It will be interesting to see if any "rating" agency announces new numbers for US reserves based on $15 WTI.

Definitions at wiki and SEC rules that changed effective January, 2010.

Proven reserves (90% confidence, 1P, P1):

• proven developed (PD) -- minimal additional investment (advantaged oil?)
• proven undeveloped (PUD) -- additional capital investment needed

Unproven reserves:

• probable (50% confidence, P50, 2P, P2); P2 includes proven (PD, PUD) and probable
• possible (10% confidence, P10, 3P, P3); P3 includes proven (PD, PUD) probable, and possible 

Part Two 

Saudis "reserves" have never changed over decades.

US "reserves" have changed significantly (up and down) over decades.

Russian "reserves": I don't know. I assume somewhere in between Saudi (no change) and the US (quite volatile).

Part Three

Oil coming off market. I think we will be surprised how fast crude oil comes off the market.

From twitter:

By country:

Petro-states (Mideast, Venezuela, Libya, Mexico): could be hard hit with no financial reserve. Won't be able to compete with Russia, Saudi Arabia which can lease VLCC to store crude oil. Iraq, apparently, is in particularly bad shape.

Iraq, link here:

“My main worry today is not on shale,” Fatih Birol, executive director of the International Agency (IEA), told CNBC’s Steve Sedgwick earlier this week. Birol suggested countries like Iraq, Algeria and Nigeria — all OPEC producers — were in a “very, very difficult situation” and would require support from the rest of the world. [Said no one ever.]

“They are facing major fiscal strains. Many of them will have difficulties to pay the salaries for the public sector, spending for health, for education, which in turn may provide social pressures in those countries.

Iraq, OPEC’s second-largest producer, is thought to be particularly exposed to an all-out price war because it has one of the least diversified economies of the producer group — despite relatively low production costs.

US oil imports from OPEC: Iraq is exporting to the US almost the same amount that Saudi Arabia is exporting to the US. Something has got to give -- Saudi vs Iraq.


Canada: costing more to ship it than to buy it. Accounts for 5 million bopd US imports.

This is how it plays out:

• marginal US companies fail
• marginal OPEC+ countries unable to produce; societies fail; funding unavailable;
• majors will "protect" only their most important global plays; the others end production;
• Russia agrees not to increase production;
• Saudi won't increase exports; 
• oil production will drop a lot faster than folks think;

Posted late morning / early afternoon Saturday, March 28, 2020.

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Part IV

6:19 p.m. CT, Saturday, March 28, 2020: just announced. Rosneft (the company that started the OPEC+ spat with Saudi Arabia) just sold all its Venezuelan assets to the Russian government. Huge bailout. Huge. Rosneft isn't holding stranded assets on its book, but will be in a position to buy them back when things are "back to normal." The question is whether Rosneft's former assets will still be producing crude oil for export or if this is Venezuela crude oil taken off the global market. As of January, 2020:

• Venezuela was exporting one million bopd
• In terms of customers, Russia’s Rosneft was the largest receiver and intermediary of Venezuelan oil with 33.5% of total exports, followed by state-run China National Petroleum Corp (CNPC) and its units with 11%, and Cuba’s state-run Cubametales with 7%. 

US Jobless Claims -- Jump; Three Wells Coming Off Confidential List Today -- June 13, 2019

Stanley Cup: Boston Bruins come up short. Shout to the St Louis Blues. 

US jobless claims: pending

• prior (revised): 218K (219K)
• consensus: 216K
• actual: 222K

Global oil reserves: US not leads the world in oil reserves. From Rigzone. At wiki, the US is still listed as #14. The list at wiki as of June 13, 2019:

• Venezuela
• Saudi Arabia
• Canada
• Iran
• Iraq.....
• ....US

From Rystad:

• US: 293 billion bbls of recoverable oil resources
• Saudi Arabia: 273 billion bbls
• Russia: 193 billion bbls
• Rystad's US estimate is 5x more than the reported proven reserves published in the BP Statistical Review of World Energy 2019  

Hormuz horror: tanker torpedo attack. One of the tankers is flagged indirectly to the United States. Iran says the tanker has sunk, though other sources deny it. The other tanker was Panama-flagged. The US-tied tanker was chartered by Taiwan and was sailing from UAE.

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Back to the Bakken

Updates

September 15, 2015: IPs and production data for the Hess wells below at this post.

Original Post

Wells coming off the confidential list today -- Thursday, June 13, 2019: 41 for the month; 230 for the quarter;

• 34935, SI/NC, XTO, Darlean 41X-2H, Alkali Creek, no production data,
• 34864, 3,659, Hess, BB-Eide-151-95-3328H-10, Blue Buttes, t7/19; cum 45K over 28 days;
• 34863, 3,382, Hess, BB-Eide-151-95-3328H-9, Blue Buttes, t7/19; cum 57K over 31 days;

RBN Energy: US motor fuel exports to Mexico to hit a rough patch.

For some time, U.S. motor fuel exports to Mexico had been increasing at a healthy pace, reliably filling the void created by a series of production setbacks at Pemex’s refineries south of the border.

From 2014 to 2018, U.S. gasoline exports to Mexico soared by more than 160%, from an average of 197 Mb/d five years ago to 517 Mb/d last year. Diesel exports rose by nearly 130%, to 279 Mb/d, over the same period. But that export-growth momentum has since sagged — in fact, export volumes for both gasoline and diesel actually declined in the first few months of 2019, primarily due to logistical challenges within Mexico.

Also, Mexico’s new president has proposed ambitious plans to boost state-owned Pemex’s refining capacity, possibly posing a longer-term threat to U.S. exporters. So, is the boom in refined-product exports to Mexico over? Today, we examine what’s behind the downshift, and what the Mexican government’s effort to reinvigorate Pemex’s existing refineries — and build an entirely new one — may mean for U.S. gasoline and diesel exports in the 2020s.

The stories coming out of Mexico will be a lot of white noise, as they say. The big story is that Mexico is clearly headed down the same road as Venezuela. Whether they reverse course or not is the bigger story.

Price Of Gasoline To Remain Lower For Longer? -- CNBC --July 9, 2017

From an earlier post, this graphic:

Note the drawdown in global crude oil reserves forecast through the end of 2017 (this graphic was posted in 2Q17). The forecast:

• a global drawdown in crude oil reserves in the first three quarters of 2017; 
• some small increases in global reserves into early next year; and, 
• followed by a huge increase in 2Q18 which won't be offset by what follows

CNBC is suggesting the same. Link here.

I don't think any of this is new for regular readers of the blog.

Ms Lonely -- December 14, 2016

Posted earlier. No reason to post it again, except I wanted to play "Mr Lonely."

The media "turn" on Obama / Clinton: anyone paying attention cannot possibly miss the huge 180-degree "turn" on Obama / Clinton. MSNBC "Morning Joe" sounds like a responsible Fox News morning talk show. If one needs additional proof, read this article in Vanity Fair, another huge fan of Hillary. Had Hillary won, Huma would have been elevated to an even higher level than the one she held before the election.

Later, 7:47 p.m. Central Time: picture of loneliness -- Huma. From The Week:

Huma Abedin has found herself at the center of a blame game over who lost Hillary Clinton the election, Vanity Fair reports. "[Abedin] was enjoying the red carpet and enjoying the photo spreads much too much in my opinion," one campaign insider reflected.

"She enjoyed being a celebrity too much."

Abedin has spent most of her life as one of Clinton's closest aides and was largely blamed after new Clinton emails were discovered on her estranged husband Anthony Weiner's computer, prompting a fateful letter to Congress from FBI Director James Comey in late October.

But Abedin is also being blamed by Clinton insiders for "reinforc[ing] all the bad habits" throughout the campaign. "Where in most presidential campaigns the circle grows broader and broader, [Clinton's] grew smaller and smaller," one insider source explained to Vanity Fair.

My Lonely, Bobby Vinton

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US Oil And Natural Gas Proved Reserves -- 2015

When I first started blogging about the Bakken in 2007 this was a subject I did not understand at all. I now understand it much better and, in some ways, it's now how I would measure "proved reserves." But it it what it is. 

U.S. oil and natural gas proved reserves decrease in 2015 due to lower prices.

U.S. crude oil proved reserves declined 4.7 billion barrels (11.8%) from their year-end 2014 level to 35.2 billion barrels at year-end 2015, according to U.S. Crude Oil and Natural Gas Proved Reserves, Year-end 2015, released today by the U.S. Energy Information Administration (EIA).

U.S. natural gas proved reserves decreased 64.5 trillion cubic feet (Tcf), a 16.6% decline, reducing the U.S. total to 324.3 Tcf at year-end 2015.

The significant reduction in the average price of both oil and natural gas between 2014 and 2015 resulted in more challenging economic and operating conditions, an important factor in determining proved reserves.

These price developments, reflected in a nearly 50% decline in average West Texas Intermediate crude oil spot prices (from $95 per barrel in 2014 to $50 per barrel in 2015) and a more than 40% decline in the natural gas spot price at the Louisiana Henry Hub (from $4.55 per million Btu in 2014 to $2.62 per million Btu in 2015) led to reduced drilling activity and downward revisions in proved reserves across a broad range of U.S. producers in 2015.

Changes in proved reserves between year-end 2014 and year-end 2015 are summarized in the following table

New Mexico had the largest net increase in proved reserves of crude oil and lease condensate of all states in 2015, mostly from development of the Wolfcamp shale and Bone Spring plays in southeastern New Mexico's portion of the Delaware Basin.

Crude oil and lease condensate extensions to existing fields were highest in Texas and North Dakota in 2015. However, as a result of downward revisions, both states experienced a net reduction in proved reserves.

In 2015, Ohio added more than 5 Tcf of natural gas proved reserves (in the Utica/Point Pleasant Shale play), and surpassed Arkansas and the Gulf of Mexico to become the ninth-largest natural gas reserves state.

Proved reserves are those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. U.S. Crude Oil and Natural Gas Proved Reserves, Year-end 2015 is available at: http://www.eia.gov/naturalgas/crudeoilreserves/.