Author Topic: Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.  (Read 85968 times)

petec

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Just making sure: are we talking peak oil/gas again? Fracking taught us nothing?

Yes it has lulled many people into the false sense that easy to access hydrocarbons are limitless.


Spindletop did that, too.

Fracking cost reductions + slow economies + global warming regulations + the rapid development of renewables and EVs does not spell a bright future for oil long term.   NB I'm not saying that renewables and EVs will change supply/demand overnight, but what they DO do is change the mindset of the Saudis, who can see that demand may well be much weaker in 2040 than one might have assumed 20 years ago, and therefore understand that the economics of leaving barrels in the ground doesn't look great anymore.   Their incentive to pump has grown.

Could the price spike?   Yep.   Is the price below the all-in cost of marginal capacity, and therefore likely to rise long term?   Not in my view.   The rate that costs are coming out of fracking is astonishing.


petec

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They also stated that Venezuela & the Canadian Tar Sands have BILLIONS & BILLIONS of barrels of oil.  At $45/barrel, that oil is not profitable to extract/process.  At $120/barrel, it is entirely a different story.


This was true several years ago.   Not so true today.   Suncor is largely oilsands and comfortably cash flow profitable despite depreciating high cost mines.   I suspect building mines at today's Ft. McMurray prices is much lower and $45 isn't far from the breakeven point.   And anyway, oilsands are no longer the source of incremental barrels: look to fracking for that.

DTEJD1997

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They also stated that Venezuela & the Canadian Tar Sands have BILLIONS & BILLIONS of barrels of oil.  At $45/barrel, that oil is not profitable to extract/process.  At $120/barrel, it is entirely a different story.


This was true several years ago.   Not so true today.   Suncor is largely oilsands and comfortably cash flow profitable despite depreciating high cost mines.   I suspect building mines at today's Ft. McMurray prices is much lower and $45 isn't far from the breakeven point.   And anyway, oilsands are no longer the source of incremental barrels: look to fracking for that.

The point they & I were trying to make is that there is a LOT of oil that does not have to be looked for.  We know exactly where it is, about how much there is, and how to get it...Tar sands and Venezuela would be used before we went back to horses & walking again...

Uccmal

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Looking at the Oklahoma quake this week suggests to me that fracking is about to get more expensive.  The earthquakes are occurring in a geologic region that was previously pretty stable - previous to 2009.  The companies involved in fracking are going to have to address their wastewater issue in more expensive ways than just putting it deep underground.  The outcome of lawsuits against the fracking companies and the EPA will be telling. 

No insurer in their right mind will touch a liability of this magnitude.  Makes the oil samds look pretty good - and cheap. 
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Uccmal

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Just making sure: are we talking peak oil/gas again? Fracking taught us nothing?

Yes it has lulled many people into the false sense that easy to access hydrocarbons are limitless.


Spindletop did that, too.

Fracking cost reductions + slow economies + global warming regulations + the rapid development of renewables and EVs does not spell a bright future for oil long term.   NB I'm not saying that renewables and EVs will change supply/demand overnight, but what they DO do is change the mindset of the Saudis, who can see that demand may well be much weaker in 2040 than one might have assumed 20 years ago, and therefore understand that the economics of leaving barrels in the ground doesn't look great anymore.   Their incentive to pump has grown.

Could the price spike?   Yep.   Is the price below the all-in cost of marginal capacity, and therefore likely to rise long term?   Not in my view.   The rate that costs are coming out of fracking is astonishing.

I think the potential development of alternative transportation and power supply is having a perverse effect on future long tail projects.  Companies, and countries, in oil production are hesitant to invest in the big projects with this backdrop.  If I were an Exxon, Shell, or Chevron CEO, I would be looking at slow diversification of my business away from fossil fuels.  Energy is energy and money is money.  You dont have to be just an oil company.  And I would be very uncomfortable investing billions in projects that may never bear fruit. 

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petec

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They also stated that Venezuela & the Canadian Tar Sands have BILLIONS & BILLIONS of barrels of oil.  At $45/barrel, that oil is not profitable to extract/process.  At $120/barrel, it is entirely a different story.


This was true several years ago.   Not so true today.   Suncor is largely oilsands and comfortably cash flow profitable despite depreciating high cost mines.   I suspect building mines at today's Ft. McMurray prices is much lower and $45 isn't far from the breakeven point.   And anyway, oilsands are no longer the source of incremental barrels: look to fracking for that.

The point they & I were trying to make is that there is a LOT of oil that does not have to be looked for.  We know exactly where it is, about how much there is, and how to get it...Tar sands and Venezuela would be used before we went back to horses & walking again...

Yes, agreed!

As Saudi's old oil minister said, the stone age did not end for a lack of stones and the oil age will not end for a lack of oil!

petec

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Just making sure: are we talking peak oil/gas again? Fracking taught us nothing?

Yes it has lulled many people into the false sense that easy to access hydrocarbons are limitless.


Spindletop did that, too.

Fracking cost reductions + slow economies + global warming regulations + the rapid development of renewables and EVs does not spell a bright future for oil long term.   NB I'm not saying that renewables and EVs will change supply/demand overnight, but what they DO do is change the mindset of the Saudis, who can see that demand may well be much weaker in 2040 than one might have assumed 20 years ago, and therefore understand that the economics of leaving barrels in the ground doesn't look great anymore.   Their incentive to pump has grown.

Could the price spike?   Yep.   Is the price below the all-in cost of marginal capacity, and therefore likely to rise long term?   Not in my view.   The rate that costs are coming out of fracking is astonishing.

I think the potential development of alternative transportation and power supply is having a perverse effect on future long tail projects.  Companies, and countries, in oil production are hesitant to invest in the big projects with this backdrop.  If I were an Exxon, Shell, or Chevron CEO, I would be looking at slow diversification of my business away from fossil fuels.  Energy is energy and money is money.  You dont have to be just an oil company.  And I would be very uncomfortable investing billions in projects that may never bear fruit.

+1. 

wellmont

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i think it's safe to say that the worries expressed in the OP are only held by the original poster and perhaps a few other very contrary minded observers. as such options that would pay off big if this actually happened are extraordinarily cheap right now. that probably means it's not a bad time to express this contrary view financially. the reason it's such a contrary view is because there is a lot of oil out there that would be viable in the $80 and up price. i follow a lot of companies whose stocks would really really do well were that to happen. and as a counter point, I would keep a close eye on the permian. apparently a very respected oil research firm has come out with a new report that suggests the success people are having finding cheap oil in the permian may totally offset the production declines in other parts of the NA. and don't forget that if the high price of oil does bring the world economy to its knees, with civilization itself at stake, the voters of California may ultimately say "ok fine, i need to put food on my table, you can go ahead and drill the Monterey Shale". and pot smoking slackers who protest every proposed pipeline in Canada may in the future alter their refrain to "drill baby drill!". this is why options on far higher oil prices are cheeeeep.

The US Energy Information Administration (EIA) estimated in 2014 that the 1,750 square mile Monterey Formation could yield about 600 million barrels of oil, from tight oil contained in the formation, down sharply from their 2011 estimate of a potential 15.4 billion barrels.[3][4]
« Last Edit: September 06, 2016, 03:24:55 PM by wellmont »

rkbabang

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the stone age did not end for a lack of stones and the oil age will not end for a lack of oil

I think that just about says it all.  And I'm sure the solar power age will not end for lack of sun, the fusion age will not end for lack of fusible nucleuses, the antimatter age will not end for lack of matter and antimatter, etc...

The peak oil scaremongers are getting tedious.  Next up: How overpopulation is going to destroy us all!!!!!!!


sculpin

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the stone age did not end for a lack of stones and the oil age will not end for a lack of oil

I think that just about says it all.  And I'm sure the solar power age will not end for lack of sun, the fusion age will not end for lack of fusible nucleuses, the antimatter age will not end for lack of matter and antimatter, etc...

The peak oil scaremongers are getting tedious.  Next up: How overpopulation is going to destroy us all!!!!!!!

Always find it incredulous that there are those who make such generalizing flippant statements with most likely little or complete lack of understanding of an industry. Especially one of such great importance as energy to modern civilization.


People that use this analogy are taking an example of something that had nothing to do with supply scarcity and using it to describe something that does (oil depletion) in a way to pretend that supply scarcity doesn't matter, or is something that will inevitably be dealt with easily. We'll get past real issues of scarcity by acknowledging that the issues are real, that they are serious, and that we have to plan accordingly for the future with those issues squarely in mind. We won't get to the future we desire by shrugging our shoulders, saying that "The Stone Age didn't end for lack of stones..." and claiming that things always work out in the end because it makes us feel good to pretend that they always have and always will. If you think Peak Oil has anything to do with "running out" then I'd suggest that you don't properly understand Peak Oil. Likewise, if you're using the Stone Age analogy, I'd suggest that you don't properly understand energy."