The Shale Oil Party Is Ending, Phibro’s Andy Hall Warns
Tyler Durden, zerohedge.com
Phibro’s (currently Astenback Capital Management) Andy Hall knows a thing or two about the oil market – and even if he doesn’t (and it was all luck), his views are sufficiently respected to influence the industrial groupthink. Which is why for anyone interested in where one of the foremost oil market movers sees oil supply over the next decade, here are his full thoughts from his latest letter to Astenback investors. Of particular note: Hall’s warning to all the shale oil optimists: “According to the DOE data, for Bakken and Eagle Ford the legacy well decline rate has been running at either side of 6.5 per cent per month… Production from new wells has been running at about 90,000 bpd per month per field meaning net growth in production is 25,000 bpd per month. It will become smaller as output grows and that’s why ceteris paribus growth in output for both fields will continue to slow over the coming years. When all the easily drillable sites are exhausted – at the latest sometime shortly after 2020 – production from these two fields will decline.”
Wyoming May Act to Plug Abandoned Wells as Natural Gas Boom Ends
Dan Frosch, New York Times
Hundreds of abandoned drilling wells dot eastern Wyoming like sagebrush, vestiges of a natural gas boom that has been drying up in recent years as prices have plummeted.
The companies that once operated the wells have all but vanished into the prairie, many seeking bankruptcy protection and unable to pay the cost of reclaiming the land they leased. Recent estimates have put the number of abandoned drilling operations in Wyoming at more than 1,200, and state officials said several thousand more might soon be orphaned by their operators…
Whither the world of energy prices during the next 12 months?
Chris Nelder, Smart Planet
The supply picture
The question then becomes: Can supply keep up?
Here, we must look to U.S. tight oil production, for it has been responsible for the vast majority of oil supply increase for the past several years. But we have good reasons to believe that the trend of the last two years, where tight oil production added 1 mb/d each year, will not continue in 2014.
Data in the EIA’s Drilling Productivity Report indicates that 70 percent of new production in the Bakken shale, and 77 percent of new production in the Eagle Ford shale, will be needed just to make up for the decline of rapidly depleting legacy wells. Unless drilling rates increase substantially from current levels (and there is no indication that they will), growth is set to moderate considerably in 2014.
David Hughes, the Canadian geoscientist whose refreshingly transparent work on shale gas and tight oil I have regularly featured, presented persuasive new data at the 2013 Transatlantic Energy Security Dialogue event I attended on Dec. 10 in Washington, D.C.
In March, I highlighted his model for U.S. tight oil production, which forecast that it could peak in 2016 at a level not much higher than today. With almost a year of additional data to go on, Hughes now calculates that Bakken production could peak at just over 1 mb/d in 2015, and the Eagle Ford could peak at around 1.4 mb/d in 2016. (This assumes that drilling gradually declines from 5,500 wells per year currently to 3,000 wells per year when the fields are drilled out.) Hughes estimates that the two plays will likely see an end to drilling in 2025, and that their combined production will likely fall to nearly zero by 2035. This scenario, in which the combined total recovery from both fields is 11 billion barrels (1.5 billion barrels have been recovered so far), assumes there are no constraints on capital expenditures (“capex”) for drilling, and that 80 percent of more than 70,000 drilling locations are accessible and economic…
Colorado Communities Could Ban Fracking Under New Proposed Amendment
Andrea Rael, Huffington Post
A proposed amendment to Colorado’s constitution that would give municipalities the power to ban or restrict fracking and other industrial activities would be the first of its kind nationwide if it passes.
The Daily Camera first reported that the Colorado Community Rights Network is planning to submit the language for a ballot measure as soon as next week that would flip the tables on pro-fracking groups…
Bakken Crude Found More Dangerous to Ship Than Other Oil
Mark Drajem, Angela Greiling Keane and Lynn Doan, Bloomberg
Safety rules will probably be tightened on crude oil shipments from North Dakota following a string of railway explosions, threatening to damp an energy boom that has boosted the region’s economy.
U.S. regulators issued a safety alert after a train carrying oil crashed and caught fire earlier this week in North Dakota, where surging production has helped lead a renaissance in domestic energy and driven the state’s unemployment rate to the nation’s lowest.
The type of oil pumped from the shale formations of North Dakota may be more flammable and therefore more dangerous to ship by rail than crude from other areas, the Transportation Department said in the alert. Regulators are considering imposing tougher rules on railcar construction, among other things, potentially raising the costs of moving the crude to market.
Pipelines could be affected as well.
Shale Gas: Killing Coal without Cutting CO2
Shakeb Afsah and Kendyl Salcito, CO2 Scorecard
It is well known that natural gas generates only half the CO2 of coal for every MWh of electricity generation. However, there are two offsets that nibble away at these CO2 savings. The first is the component of natural gas generation that displaces nuclear and renewable sources of energy that have no emissions. The second is methane leaks. Using the US electricity sector data for 2012, we show that even at a low leakage rate of 1.22% (USEPA’s estimate for power plants comparison) the two offsets combined were sufficient to almost erode the entire annual savings in CO2 from coal-to-gas fuel switching.
We discuss policy and regulatory implications of our findings…