Monday, April 23, 2012

Look Out Bakken, Here Comes Eagle Ford, Where Oil Production Has Almost Tripled in the Last Year

Just in from the EIA:

New well starts in the Eagle Ford region in Texas increased 110% from January through March 2012 compared to the same period in 2011, according to BENTEK Energy.

Other key findings include:
  • Operators started drilling 856 new wells in January-March 2012 compared to 407 in January-March 2011.
  • In early April 2012, the Eagle Ford active rig count set a new high of 217 units.
  • Increased drilling translated into higher crude oil production, which is projected to average over 500,000 barrels per day (bbl/d) in April, up from 182,000 bbl/d in April 2011, an increase of 175% in just one year.
  • Current Eagle Ford area natural gas production is about two billion cubic feet per day.
  • Horizontal wells accounted for nearly all of the new well starts so far in 2012.
  • Bentek estimates that in March 2012, Eagle Ford crude oil production was approaching crude oil production in the North Dakota part of the Bakken formation.

23 Comments:

At 4/23/2012 3:06 PM, Blogger Benjamin said...

Obviously, this business of ramping up oil production sharply cannot be sustained. The people investing in this are not thinking long-term. How are they going to make money?

They cannot make money at Eagle Ford, but we are also going to have incredible global shortages of fossil fuels resulting in price spikes.

And the oil shale picture in California is enormous--two-thirds of the nation's shale oil is in CA. We have just scratched the surface. That's more proof it can never happen.

After all, we have been fracking and doing horizontal drilling for along time, so these plays can never work. We know all we will ever know about extracting fossil fuels.

Oxy says they will get $12 million in Year One from a $3 million well in CA's oil shale patch. They are really confused, no?

 
At 4/23/2012 3:44 PM, Blogger Unknown said...

I know the one in California is big - really big - but I have doubts about it because ... well, because it's in California. :-\

The Mississippian Lime in OK and KS is looking to be the next Big One.

 
At 4/23/2012 3:57 PM, Blogger Benjamin said...

Unknown: Gov. Brown is cracking heads to get oil shale going in CA. It will be huge--luckily, the drilling is inland, and not near rich people on the coast.

Speaking of rich people with coastal manses, Brown's actions contrast to the Bush Bros. who outlawed oil drilling off the coast of CA.

See:

"Bush prevents oil, gas drilling off Florida coast
Government to buy back leasing rights

From wire reports

Associated Press
President Bush and Florida Gov. Jeb Bush meet in the Oval Office on Wednesday.

WASHINGTON -- With his brother, Gov. Jeb Bush, looking on, President Bush sealed a deal Wednesday to prevent further oil and gas drilling off the white sand beaches of the Florida Gulf Coast and in the cypress swamps near the Everglades.

The unexpected announcement would require the federal government to repurchase $235 million worth of oil and gas leasing rights in the Destin Dome area, about 25 miles south of Pensacola, and in three wildlife areas including Big Cypress National Preserve.

Jeb Bush acknowledged that the Oval Office announcement would boost his re-election campaign in Florida, the swing state in the 2000 presidential election and a tourism mecca where polls show 75 percent oppose offshore drilling.

--30--

 
At 4/23/2012 3:58 PM, Blogger Unknown said...

Oh yeah one other thing ... I'm beginning to wonder if the various shales in west Texas' Permian Basin are going to be bigger than the Eagle Ford. There are multiple oil-bearing shales there, and at least one of them sounds like a monster.

Pioneer Bets On West Texas Shale Oil To Rival Bakken
"Sheffield and other oil experts say the Wolfcamp is probably the thickest of any onshore U.S. oil shale play, with up to 1,000 feet of potential payout across hundreds of thousands of acres."

 
At 4/23/2012 4:14 PM, Blogger Benjamin said...

Meanwhile, the boom in Chinese demand? Maybe not.

Audi presents A6 L e-tron PHEV concept at Auto China in Beijing
23 April 2012

The A6 L e-tron PHEV concept. Click to enlarge.
Audi is presenting the Audi A6 L e-tron concept at Auto China 2012 in Beijing. The plug-in hybrid has an all-electric driving range of 80 km (50 miles), and was specifically designed for the China market. Audi says that with its first e-tron technology study in the luxury class, it is showing what a locally produced New Energy Vehicle from Audi might look like.

The basis for this study is the new A6 L, Audi’s bestselling model in China. Audi produces this business sedan at the Changchun plant in a joint venture with FAW.

--30--

What if China mandates PHEVs? They already mandated electric scooters.

The Peak Oil story is looking very iffy.

 
At 4/23/2012 5:26 PM, Blogger Larry G said...

I thought the oil in ND was essentially "stranded" and there was no more pipeline capacity to ship it to refineries?

obviously.. if they are still drilling and bringing new rigs online.... they must have a way to transport it, eh?

 
At 4/23/2012 7:07 PM, Blogger rjs said...

that's good we have something going in the area of the country near our coast refineries, because the Bakken crude is going to china:

"The Bakken Pipeline will pump the oil and gas fracked from the Bakken and carry it southward to the meeting point of the Bakken Pipeline and the Overland Pass Pipeline. Some of that oil will continue moving southward toward Cushing, while some of it will divert westward to the city of Opal, Wyoming, another key pipeline fork in the road. Oil and gas piped further southward toward Cushing will now be part of Oneock’s Bakken Crude Express. Oil and gas being piped westward toward Opal will connect with the Ruby Pipeline, which carries gas fracked in the Niobrara Shale westward to Malin, Oregon. From Malin, the oil and gas will continue its westward voyage to the city of Coos Bay, Oregon, via the Pacific Connector Pipeline, where it will end up at the Jordan Cove LNG export terminal and placed on the Asian gas export market"

http://news.firedoglake.com/2012/04/20/new-bakken-shale-pipeline-to-cushing-ok-in-the-works/

 
At 4/23/2012 7:17 PM, Blogger Buddy R Pacifico said...

rjs states:

"that's good we have something going in the area of the country near our coast refineries, because the Bakken crude is going to china:"

The folks at the Tesaro refinery in Anacortes. WA have commitments for Bakken crude to replace Alaskan slope crude, by the end of 2012.

 
At 4/23/2012 8:06 PM, Blogger Unknown said...

"From Malin, the oil and gas will continue its westward voyage to the city of Coos Bay, Oregon, via the Pacific Connector Pipeline, where it will end up at the Jordan Cove LNG export terminal and placed on the Asian gas export market."

Uhhh ... did you even read that? An LNG export terminal exports Liquified Natural Gas, not oil. It even says "and placed on the Asian gas export market."

 
At 4/23/2012 8:09 PM, Blogger Unknown said...

@Larry G:

Williston Basin crude oil production and takeaway capacity are increasing

 
At 4/23/2012 8:21 PM, Blogger Larry G said...

very excellent, "unknown". Thanks for posting!

:-)

interesting that they take a substantial hit on the price but they still choose to produce it (as opposed to letting it sit until it can fetch higher prices from the benefit of increased pipeline capacity.

One other comment. We hear a LOT about the Keystone Pipeline.

What's the name of the pipeline for the ND oil (or is it ALSO the Keystone)?

If the pipeline for the ND oil is separate, is it proceeding or also held up?

 
At 4/23/2012 9:16 PM, Blogger Unknown said...

You might be referring to this. The Keystone pipeline is a different one.

ONEOK Partners to build 1,300-mile pipeline from North Dakota to Cushing hub

If it gets built, it's got a great route. Not only will it hit the Bakken, but also the WY/CO Niobrara shale, and an emerging one in KS and OK.

 
At 4/24/2012 6:37 AM, Blogger Larry G said...

very interesting. compare that route with the Keystone Route:

http://www.washingtonpost.com/rf/image_296w/2010-2019/WashingtonPost/2011/11/10/Web-Resampled/2011-11-10/w-PipelineMAP296--300x350.jpg

Has Obama nixed the ND pipeline also?

 
At 4/24/2012 10:31 AM, Blogger Unknown said...

I don't think there's much Obama could do to nix the ONEOK pipeline. Nor do I think he would want to even if he could.

 
At 4/24/2012 10:54 AM, Blogger Larry G said...

so if Obama is anti energy.. why does he nix the Keystone but leave ND and their pipeline alone?

just asking...

 
At 4/24/2012 10:57 AM, Blogger Larry G said...

oh.. and look at the maps where both pipelines more or less start.

why is Keystone headed east then south and the ND pipeline straight south?

why is the Keystone running into opposition and the ND pipeline not?

why can't the Keystone use the same path the ND pipeline is using without trying to go where there is opposition?

how come the keystone is a political issue and the ND pipeline almost invisible?

 
At 4/24/2012 4:00 PM, Blogger VangelV said...

I take it that most of the people here are challenged mathematically. Let me point a few things out before everyone buys into the hype. All of this is simple back of the envelope stuff that should be easy to follow.

First, look at the graph. See the number of new wells going up?

Let us be conservative and ignore the upward trend. Assume that for all of 2011 the 407 well count for Q1 holds. That gives us 1200 new wells. Add to this the 856 wells for Q1 2012 and we get around 2000 new wells.

The increase in daily production came out to be around 320,000 bpd.

See the problem? You are looking at production of 160 bpd for each one of those $5 million dollar plus wells. This means that the operations are nowhere near self financing yet. There is a urgent need for the producers, many of which blew their brains out on shale gas production, to borrow massive amounts of additional cash or to sell off 'assets' in other areas.

I don't know about many of you folks but I don't see this as good news for the average producers. The few that have the best properties with high IPs and reasonable depletion rates will make most of the profits. But 80% of the wells will wind up breaking even or losing money. In the good old days of conventional oil production a horizontal well of such length would produce more than 10,000 barrels of oil. Most companies were content to drill cheap and shallow vertical wells that produced less than 1,000 barrels a day and had a very low depletion rate. They would still be producing strongly ten years after they were first drilled. In the case of today's shale wells you are looking at very expensive and very high depletion rates. While a good accountant can make the income statements look OK for a while once the historical data shows that the EURs are too high the game will be over and borrowing will turn out to be much harder for the producers in non-core areas.

I would keep an eye on this space. I suspect that a year or two from now Mark will be dropping this as he has dropped the profitability of the shale gas industry story and be looking for some other bit of hype to promote.

 
At 4/24/2012 4:01 PM, Blogger VangelV said...

Meanwhile, the boom in Chinese demand? Maybe not.

Audi presents A6 L e-tron PHEV concept at Auto China in Beijing
23 April 2012


Keep up Bunny. The Chinese electric auto experiment has failed.

 
At 4/24/2012 4:16 PM, Blogger juandos said...

"They cannot make money at Eagle Ford, but we are also going to have incredible global shortages of fossil fuels resulting in price spikes"...

Hmmm, pseudo benny are you in some sort of contest with Joe Biden?

We should have a 'gaffe off' between you and Biden on national television...

 
At 4/24/2012 4:23 PM, Blogger juandos said...

"so if Obama is anti energy.. why does he nix the Keystone but leave ND and their pipeline alone?

just asking...
"...

Well larry g can you say Warren Buffet?

 
At 4/24/2012 4:33 PM, Blogger Larry G said...

geeze Juandos... are you so politically messed up you can't even read?

I was asking about the Bakken Crude Express Pipeline which seems to be very similar to the Keystone but without opposition from the Prez.


so what gives? The pipeline is not owned by Buffet is it?

Why can't the Canadians use the Bakken Crude Express Pipeline instead of building a duplicative one ?

 
At 4/25/2012 6:07 AM, Blogger VangelV said...

I was asking about the Bakken Crude Express Pipeline which seems to be very similar to the Keystone but without opposition from the Prez.

There is not much that he can do when a pipeline does not cross the national border. If he could the EPA would be trying to stop those pipelines as well.

 
At 4/25/2012 6:16 AM, Blogger Larry G said...

reallY? there are a number of domestic pipelines moving forward..some of them through Federal lands...

The Prez is not interfering with the Bakken Oil drilling nor the thousands/more of "fracking" wells either.

I think the Keystone is a competitor to the Bakken Crude Express and that Obama got himself in the middle of it.

Will the Keystone XL pipeline lower gasoline prices?

Both pipelines are efforts to INCREASE the price of a commodity, right?

 

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