The Jurassic -- It's Not Just A Movie Any More -- May 27, 2019

Earlier today I suggested that with poorer-than-expected "high-impact" exploration results this past year (2018), "peak oil" was back on the table.

A reader reminded me of an interesting development: the Jurassic.

I'm a bit irritated with myself. I vaguely remember reading an article on the possibility of some very deep, very old Jurassic oil reservoirs. I thought I had posted at least a short note but perhaps not.

Now, after suggesting that "high-impact" exploration has not been as good as hoped, a reader writes:

Past few years, there has been some 'buzz' surrounding so called 'pre-salt' formations ... geologically older rock at greater depths. 

Brazil has claimed some VERY high numbers regarding oil in place in offshore pre-salt formations.

Recently, there have been several references to actual - or potentially - large resources in old, deep Jurassic  reservoirs, which I believe are the same as pre-salt.

The Gulf of Mexico is the location for some of these with Chevron's Anchor project being especially  intriguing.

At a vertical depth of 28,000/30,000 feet plus, these are VERY deep wells. (Water depth between 4 and 5 thousand feet. Manageable). 

The ultra high pressure of 20,000 psi has been an insurmountable factor as hardware has not existed to routinely exploit hydrocarbons at this high a pressure.

Anyway, if Chevron decides in the coming weeks to proceed with this Anchor project - and it is successful - it has the potential to open up huge areas for development that heretofore have been deemed not doable.

So, we'll add "Jurassic" to the "other formations" at the sidebar at the right. 

Back in 2005: "Origin and potential of unconventional Jurassic oil reservoirs on the northern Arabian Plate," from onepetro.

This may have been the article I saw recently and forgot to post. From rigzone, "US Gulf of Mexico on track for historic 2019." Snippets from the article:

• The U.S. Gulf of Mexico is on track to have a stellar 2019 ...
• Shell’s Appomattox development is due on stream in 2019 – marking the first-ever production from a Jurassic reservoir in the Gulf of Mexico. As Appomattox is a cornerstone of Shell’s global deepwater strategy, it will be a significant milestone for the company ...
• Another milestone for the offshore industry will be Chevron’s Anchor project, which is expected to move forward next year. With an operating pressure of 20-k psi, it would be the first ultra-high-pressure project in the world to reach FID
• If successful, Anchor would lead to the next wave of mega investments in the Gulf of Mexico – more than $10 billion worth according to WoodMackenzie

Update On Conventional Exploration; The Case For A Mix Of Conventional/Unconventional Exploration; The Impact Of The "Halo" Effect -- May 27, 2019

Over the past couple of years there has been some discussion about the lack of CAPEX allocated for conventional exploration.  I have a fairly long post with updates regarding all the hand-wringing about "decreased conventional discoveries" and how that will lead to a scarcity of oil in the "near future." Some refer to this as "peak oil."

At that post, two graphics:

At the time, Don sent the link to this article from Bloomberg: Chevron posted the strongest year of crude discoveries since 2011.

Now, rigzone has an update regarding this issue, apparently now called "high-impact exploration."

From the article:

Large oil and gas companies are commanding a greater role in high-impact exploration, but a lack of depth in the quality of global drilling opportunities diminished their performance in 2018, Westwood Global Energy Group reported Friday.

According to Westwood, a “twin track strategy” driving the industry comprises:

• Increasing short-cycle exploration over the period in mature basins with existing infrastructure [unconventional in Permian, Bakken, Eagle Ford?]
• Continuing to hunt for new petroleum provinces, particularly in deep water.

Also, Westwood noted that companies are moving away from sub-Saharan Africa and other onshore frontier drilling opportunities that can take considerable time – in some cases upward of 16 years – to commercialize.

Challenges above-ground include lack of infrastructure and political/regulatory hurdles, the consultancy added.

Other report findings include:

• Compared to the previous year, exploration drilling in 2018 was up nearly 30 percent but yielded poorer performance with fewer big discoveries and a lower commercial success rate.
• From 2014 to 2018, high-impact drilling discovered volumes were down 50 percent overall against results from the preceding five-year period.
• High-impact drilling should increase 20 percent in 2019 to approximately 80 wells, with more wells planned in maturing and mature plays such as North West Europe and Mexico.
• More than 50 percent of high-impact wells for 2018 and more than 70 percent for 2019 involve supermajors; in contrast, the supermajor participation rate for 2015 was 34 percent.

Takeaways:

• this report gives some credence to those who suggest "peak oil" is still on the table
• at the corporate level, it appears a combination of unconventional and conventional exploration is the best strategy
• shale: short-cycle
• deepwater: high-impact 

I'm curious. I had not seen that term before, "high-impact exploration." Let's see what google has to say.

It appears that "high-impact exploration" refers to deep water exploration but I don't know when the phrase was first used.

However, this article by Hart Energy back in 2013 is quite interesting. The entire article is worth reading (slowly). From an article like this it is best not to post one data point, but, against my better judgement, here it is (remember this article was written in 2013):

For example, a Bakken project may have a breakeven in the $50 per barrel range, versus a large discovered Gulf of Mexico field with a breakeven around $15 per barrel. In this instance, a 20% change in the volume of the GOM field may result in a 30% change in NPV, but a 20% change in well EUR in the Bakken will swing the NPV plus or minus 110%.

This is why I find the "halo-effect" or the "parent-well-uplift" phenomenon so interesting: "...  a 20% change in well EUR in the Bakken will swing the NPV plus or minus 110%."

Slow News Day In Wichita -- May 27, 2019

From twitter today -- must be a very, very slow news day for The Wichita Eagle. I can't imagine anyone reading The Wichita Eagle really caring one way or the other. With everything going on in the world "today," it's amazing that The Wichita Eagle found space (or enough interest) to post it. Helps explain why newspapers are disappearing.

Nothing new in the article that wasn't already known.

Legacy Fund -- Annual Report -- May, 2019

Legacy Fund update from The Bismarck Tribune via the West Fargo Pioneer, data points:

• Fund: $5.4 billion, total assets (deposits plus earnings)
• annual report presented May 25, 2019
• no significant changes in asset allocation
• 50% equity
• 35% fixed income
• 15% real assets
• earnings net $1 billion
• "Steady Eddy" -- I wonder where they got that phrase (LOL)
• no mention of rate of return 

Link here.

The Legacy Fund is tracked here.  

Legacy Fund Deposits -- May, 2019, Data

Link here.

The Legacy Fund is tracked here. 

May, 2019, deposits (again, these are deposits, not total assets in the fund): $56,102,590.40.