[ExI] The Peak Oil Crisis: The Shale Oil Bubble

[Kelly Anderson]

On Wed, Oct 30, 2013 at 6:03 AM, Eugen Leitl <eugen at leitl.org> wrote:

>
> http://fcnp.com/2013/10/29/the-peak-oil-crisis-the-shale-oil-bubble/
>
> The Peak Oil Crisis: The Shale Oil Bubble
>
> There are two key questions which will determine how much longer these
> shale
> oil plays will continue growing. One is how many economically viable sites
> are left to drill; and how long it will it be before production from the
> 10,000 or wells already pumping in the Bakken will fall to the place where
> the 150 or so new wells coming into production each month will not be
> enough
> to keep total production growing.
>

Absolutely true this.


> While not making a forecast as to when production will peak in the shale
> fields, the EIA, however, does make a projection as to what will happen in
> November 2013, not a particularly bold prediction but at least it is
> something. According to the EIA report, what it terms the decline in
> “legacy
> oil production” (i.e. those wells that have been producing for more than a
> month) for the Bakken field is now at 60,000. The Texas’s Eagle Ford
> field’s
> production is now declining at 80,000 b/d and the no longer growing Permian
> Field is declining at 34,000 b/d.


> Winter in North Dakota can be rather harsh and we have already had some
> snow
> up there, so bringing new wells into production in the next few months can
> be
> difficult. Last winter the number of new wells coming on stream was closer
> to
> 100 per month rather than the 200 or so during better weather.


Calling the winter in North Dakota "rather harsh" is like calling New
Orleans a "little breezy" during a hurricane. I'm surprised they could
bring 100 up in that kind of weather.

The whole article from there forward would have been a little easier to
follow if they had done year to year comparisons, rather than October to
November comparisons.


> Remember the number of producing wells in North Dakota is increasing at
> about
> 1,800 a year and even more down in Texas.
>

That sounds good. Though if they dry up quickly, that is clearly a bad
thing for oil production long term.


> In looking at the steep decline in production from legacy wells in the
> Bakken
> and Eagle Ford shales, decline between November 2012 and November 2013
> increased from 44,000 b/d to 60,000 b/d and from 54,000 b/d to 78,000 b/d
> respectively. Given that there will be another 4,000 or so legacy wells in
> production by this time next year the decline going on by this time next
> year
> is certain to be considerably greater.
>

It is hard to follow the logic from these numbers. The number goes up, but
it is seen as a problem?


> While the EIA does not seem willing to make a forecast, it sure looks as if
> the increase in production for these two fields will be unlikely to keep up
> with the rate of decline within the next 12 to 18 months and that US shale
> oil production will no longer be growing.
>

That would be unfortunate for us all.


> While it is possible that a surge of investment will increase the drilling
> to
> keep up with declines in production from the older wells, this is
> expensive,
> and for now it looks as if oil prices are heading for a level where fracked
> oil production is not profitable.


And thus, the fields will last longer until it is again profitable. Again,
oil prices declining is seen as a "bad thing" and this doesn't make a lot
of sense to me.


> Outside geologists with access to
> proprietary data on decline rates have been forecasting for some time now
> that as the number wells increases and their quality declines, the shale
> boom
> will be coming to an end in the next two years. The release of EIA data
> seems
> to confirm these predictions.
>

That would indeed be unfortunate. I hope he is incorrect, but I fear he is
not. Oil is a boom and bust kind of business, and booms don't last forever.
I hope they find another place to go boom when we need it. Maybe
Antarctica? Winters are a bit brisk there too... LOL

-Kelly
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