Hurricane Harvey took offline over 50% of Texas' refining capacity and shut down large percentage of the wells in the major Eagle Ford shale play.
This week, Hurricane Irma threatens to deliver a similar massive punch to the oil patch in the Gulf.
To discuss the ramifications from these storms on the oil markets, geoscientist and oil explorer Jeffrey Brown returns to the podcast. He calculates that Harvey alone will have long-lasting effects such as lingering supply shortages, but his greater focus is attuned to the growing validation of his Export Land Model, which calculates the rate at which oil-producing nations cease to become net exporters as their domestic consumption increases. Since it's formulation in 2005, more and more countries have switched from being net-exporters to net-importers, and the data in aggregates is strongly suggestive of a flat-lining in world oil production -- the consequences of which are immense:
But if you look at the available data -- basically we have to rely on some US data and some OPEC data -- it strongly suggests is that actual global crude oil production virtually stopped increasing in 2005.
I think it was 69 million barrels a day is what I estimated in 2005, we might have had 70, 71 million barrels a day in 2016 -- which is a very slight increase over 2005. So, in other words, if you look at the trillions of dollars spent on global upstream capex post-2005, all we’ve been able to do is basically keep crude oi production from collapsing. What has increased is global natural gas production and associated liquids, condensate and natural gas.
So my thesis is the increase in condensate natural gas liquids is obscuring flat-lining actual global crude oil production. Add to this tremendous shortfalls in discoveries and the fall-off in capex, and to me that’s just a very strong probability of actual ongoing material decline in real global crude oil production.
Click the play button below to listen to Chris' interview with Jeffrey J. Brown (49m:09s).
But we’re dependent on net crude oil imports for 42 percent of what we process daily in US refineries. So we’d have to boost – if we wanted to be just self-sufficient in crude oil over the next eight years, pretty much round numbers, we would have to put online the productive equivalent of basically two Saudi Arabia’s. One Saudi Arabia to offset declines from existing wells and another Saudi Arabia to get us close to being self-sufficient.
Not completely sure I unsterdood this statement cause It sounds like the response should be "oh shit"!!!! Rather than a problem with an easy solution we have a national predicament that's not being talked about?
AK GrannyWGrit
Eight refineries have begun the process of restarting after being shut down; this is an increase of one refinery since the last report. These refineries have a combined capacity of 1,775,720 b/d, equal to 18.3% of total Gulf Coast (PADD 3) refining capacity, 9.6% of total U.S. refining capacity.
At least four refineries in the Gulf Coast region were operating at reduced rates, according to public reports. No refineries had returned to normal rates since last report.
As of 02:00 PM EDT, September 4, eight refineries in the Gulf Coast region were shut down, according to public reports. These refineries have a combined refining capacity of 2,110,229 b/d, equal to 21.8% of total Gulf Coast (PADD 3) refining capacity and 11.4% of total U.S. refining capacity.
Eight refineries had begun the process of restarting after being shut down. This process may take several days or weeks to start producing product, depending whether any damage is found during restart. One refinery was identified as having begun restart operations since the last report. These refineries have a combined capacity of 1,775,720 b/d, equal to 18.3% of total Gulf Coast (PADD 3) refining capacity and 9.6% of total U.S. refining capacity.
At least four refineries in the Gulf Coast region were operating at reduced rates, according to public reports. No refineries had returned to normal rates since last report. The refineries operating at reduced rates have a combined total capacity of 1,338,776 b/d, equal to 13.8% of total Gulf Coast (PADD 3) refining capacity and 7.2% of total U.S. refining capacity. (NOTE: Actual crude throughput (production) reductions are lower than the total combined capacity).
Colonial Pipeline assessments are ongoing, and as such, the current estimated restart between Houston and Hebert remains for Monday, September 4 for Line 2 (distillates), and Tuesday, September 5 for Line 1 (gasoline). Colonial continues to ship as much gasoline and other refined products as available from Louisiana-based refineries and other refineries on the Colonial system east of Lake Charles, and will continue to do so as markets return to normal.
Colonial restoration crews are assessing facilities and the pipeline right of way to ensure conditions are safe for a restart of operations from Houston and Pasadena. Work also continues to resume operations from other Texas injection points, which are expected to occur after Houston/Pasadena.
The U.S. Coast Guard reports the Houston Shipping Channel is open to just past ExxonMobil’s Baytown refinery to vessels up to a 40’ draft. Ships exiting and entering the channel on 9/4.
(Source)
The rumor control website is a good place to check out the sorts of things that are being spread around.
The largest plant in the US, the Motive refinery at Port Arthur which has a capacity of just over 600,000 barrels per day, seems likely to be out of commission for a long time?
Here's the first post-storm image I've run across (courtesy of Robert Rapier via facebook):
I dunno...that looks like a lot of flooding to me. Seems likely to be off line for a number of weeks, or even months, depending on what got shorted out, shifted, bumped, or corroded.
But even if 2 Mbd stayed off line for months, and there's nothing to suggest that will be the case, that's just one super tanker a day arriving and off loading from Europe or somewhere with spare capacity.
A logistics problem, not a refining predicament in other words.
Very few people ever look at net exports, and what also no one pays any attention to is depletion. These net export declines tend to be characterized by a ferocious rate of depletion in the early years of the net export decline period. And in fact, a rough but fairly consistent rule of thumb is, if it takes twenty-one years to go to zero net exports, roughly one-third of the way, about seven years into that net export decline period, they’ve already depleted half of their remaining supply of net exports.
Is it any wonder that some companies have a longer view of the future than what we currently see swirling around in the US oil patch? Did CNRL's recent purchase of $975 million for Cenovus 's 19,600 BOE Pelican Lake play make sense? If we followed Richard Heinberg's suggestion of planned contraction for the coming slide, could we make our dwindling supply last? As one oil pundit points out, some are in it for the long term:
“They are doing an excellent job of building a quality asset base that can withstand near-term [price] volatility and yet provide big torque to stronger mid-term oil and natural gas prices,” Dan Tsubouchi, chief market strategist for Calgary-based Stream Asset Financial Management, told BNN via email.
“The long life [oil sands] assets are low decline, free cash flow assets. They provide a big uptick in value if the long-term oil prices [rise] as I believe they will,” he wrote.
The discussion of the “minimum operating level” was particularly helpful for me. I was certainly guilty of being “that guy” who looked at the EIA gasoline inventory report, divided by daily consumption, and then arrived at the number of 24 days. With the minimum operating level of 180m barrels, the # of days turns out to be 5, not 24. That’s substantially scarier. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WGTSTUS1&f=W
He does seem to get all the math that Chris laid out
It is amazing (and pathetic) to see an industry brain tell us
(1) real crude production (the hemoglobin of the modern world) peaked over ten years ago
(2) the “powers” that be have been hiding that with substitutes
(3) which are only “possible” by taking on insane debt
(4) because they are ridiculously difficult and unproductive compared with easy crude
(5) that export countries are rapidly becoming import countries
(6) and the whole thing can not possibly support itself
(7) and will fail very soon
(8) and the political leaders and media are either ignorant or dishonest when asked
$2.73 today in MD today. Up from $2.20 pre-Harvey, but it hasn’t gone up as far or fast as I might have anticipated. I must be missing something, but that’s the story of my life…
Firstly, I wrote a comment on a previous thread saying basically, because shale oil makes a loss that must means it is an energy sink. I never got a reply saying either I’m correct or wrong. Come on guys, put me out of my misery, what am I missing?
Secondly, who are these investors? They are either stupid or they know something we don’t, like they know that the government have their back ie. they keep collecting the interest and their capital will be bailed out by the US tax payers ultimately.
Climber99: Biggest cost considerations for major drilling and service companies is spare capacity and operating costs. When you have gazillions of dollars tied up in equipment that’s not working your fixed costs can kill you. With 3-D seismic and other technologies you can be somewhat certain whether the play is worth the drilling. If the leases are paid for and not drilled, inactivity can burn big holes even in deep pockets. My experience and that of others tell me that $35 - $40 a barrel is a reasonable cost expectation for fracking a hole. Compared with some older wells drilled in the 50’s and 60’s with operating costs at the $4- $7 a barrel, Fracking seems insane. Hedging materials and finagling operating cash flow financing is another part of this complicated equation which is not for the faint of heart. If interest rates start to climb, watch for a slow down until prices go up.
There are some really smart cookies out there that have made this activity viable and the red ink is always just below the surface motivating innovation. The bigger question becomes, “How hard can you squeeze shale rock before you run out of energy”? This older article may be of some help in understanding how thin the edge is that this industry has to tread. http://www.reuters.com/article/us-usa-oil-cost-analysis/u-s-shale-oil-braces-for-the-unfamiliar-in-2017-inflation-idUSKBN15W1OB
Firstly, I wrote a comment on a previous thread saying basically, because shale oil makes a loss that must means it is an energy sink. I never got a reply saying either I'm correct or wrong. Come on guys, put me out of my misery, what am I missing?
Secondly, who are these investors? They are either stupid or they know something we don't, like they know that the government have their back ie. they keep collecting the interest and their capital will be bailed out by the US tax payers ultimately.
Not necessarily. Money is, at best, a proxy for energy, and a quite bastardized one at that. When the central banks have distorted the price-of-everything, it's hard to get much signal amongst the noise.
A review of the literature by Charles Hall led to these findings:
Alternatives to traditional fossil fuels such as tar sands and oil shale (Lambert et al., 2012) deliver a lower EROI, having a mean EROI of 4:1 (n of 4 from 4 publications) and 7:1 (n of 15 from 15 publication)
(Source)
The few studies I've read put shale oil at somewhere between 1:1 for the truly marginal parts of the play to as high as 10:1 for the sweet spots.
Hard to say where the average is because the studies are so few, the methodologies so inconsistent, and many of them using dollar proxies (vs. direct measurements and/or interpolations).
Again quoting Charles Hall, I like this summary:
If you've got an EROI of 1.1:1, you can pump the oil out of the ground and look at it.
If you've got 1.2:1, you can refine it and look at it.
At 1.3:1, you can move it to where you want it and look at it.
We looked at the minimum EROI you need to drive a truck, and you need at least 3:1 at the wellhead.
Now, if you want to put anything in the truck, like grain, you need to have an EROI of 5:1. And that includes the depreciation for the truck.
But if you want to include the depreciation for the truck driver and the oil worker and the farmer, then you've got to support the families. And then you need an EROI of 7:1.
And if you want education, you need 8:1 or 9:1.
And if you want health care, you need 10:1 or 11:1.
(Source)
My best guess is that sweet spot and "average spot" shale can support its own activities, but that we won't be able to support education and health care (let alone rebuilding from catastrophic storms) on it.
For that you need the stuff that Saudi Arabia and Russia are exporting.
Unfortunately for the US, our foreign policy towards Russia is rooted in a really, really ancient and broken neocon dream of being the uncontested world military superpower.
(And here's a source for that Wolfowitz quote)
The neocons are so blinded by their lust for power (a bloodthirsty one at that) that they are completely unaware of EROEI and the reason that we should be almost desperately courting Russian oil rather than driving it elsewhere.
Oh well. This is how history is made.
“Money is, at best, a proxy for energy, and a quite bastardized one” - Chris Martenson
" I tried to drown my sorrows but the bastards learned how to swim" - Frida Kahlo
Thanks Chris, Dr Hall is a legend. His latest book is on my reading list.
I guess it depends on how one defines and then calculate EROI. I would count the energy for refining and transporting the oil, energy used by the workers to get to work and to feed them, energy used to manufacture the rigs and trucks, energy used in educating their kids etc etc in with EROI calculation personally. Money is a good proxy for all this. If the shale operators are having to borrow money to cover all these things that I have just mentioned, they are in effect, borrowing excess energy from elsewhere within society.
Geopolitics is also fascinating. I’m very much on your wavelength in looking at it through, what you coined, the energy lens. Russia in energy terms is in a far superior position than the US. The US feels very threatened by this and their foreign policy is to gain control of Russian energy resources. The play book is very clear. Regime change in Iraq, Libya, Syria, Iran and finally Russia. Russia is well aware of this so had no choice but to try to holt the regime change sequence before it reached her soil. I say try because Russia may have won the battle in Syria but the war continues. Who will China, EU(Germany) and Britain eventually side with? Qatar is already wavering. Fascinating stuff.
I dunno...that looks like a lot of flooding to me. Seems likely to be off line for a number of weeks, or even months, depending on what got shorted out, shifted, bumped, or corroded.
But even if 2 Mbd stayed off line for months, and there's nothing to suggest that will be the case, that's just one super tanker a day arriving and off loading from Europe or somewhere with spare capacity.
A logistics problem, not a refining predicament in other words.