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Thread: The United States has overtaken Saudi Arabia to become the world's biggest oil producer

  1. #1

    The United States has overtaken Saudi Arabia to become the world's biggest oil producer

    Oct 15 (Reuters) - The United States has overtaken Saudi Arabia to become the world's biggest oil producer as the jump in output from shale plays has led to the second biggest oil boom in history, according to leading U.S. energy consultancy PIRA

    "(The U.S.) growth rate is greater than the sum of the growth of the next nine fastest growing countries combined and has covered most of the world's net demand growth over the past two years," PIRA Energy Group wrote.

    "The U.S. position as the largest oil supplier in the world looks to be secure for many years," it added.



    http://www.reuters.com/article/2013/...0I51IX20131015



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  3. #2
    Technically not correct. If (as the article notes) you include natural gas (which is an oil related product but not itself oil) and biofuels, we are. Just in oil production, Saudia Arabia and Russia are still ahead. From the article:

    Total liquids produced by the United States, which PIRA defined broadly to include supplies such as crude oil, condensate, natural gas liquids and biofuels, should average 12.1 million bpd in 2013, pushing it ahead of last year's No. 1 supplier, Saudi Arabia.

    Output from the OPEC state also rose last year, but the gains lagged those from the United States, the consultancy said.

    PIRA said the increase in oil from shale, which has been centered in areas such as Eagle Ford in Texas and the Bakken in North Dakota, has seen U.S. supply grow by 1 million bpd in 2012 and again 2013.

    The United States still lagged both Saudi Arabia and Russia in production of just crude oil by abut 3 million bpd, PIRA noted. Rounding out the top 10 oil suppliers were China, Canada, UAE, Iran, Iraq, Kuwait, and Mexico.

  4. #3
    Well, there's the supply, but we still have a cumbersome process. However, there is great profit to be made in a breakthrough that would allow us to get at the crude oil, natural gas, etc.

    The Market will take care of it and prices should go down...

    As long as there aren't any troublesome taxes or regulations in the way.

  5. #4
    If prices fall significantly, oil shale will be too expensive to produce and production will fall sharply. Just to maintain current levels of output, they need 6,000 new wells every year- their output declines by about two thirds after only one year in use.

  6. #5

  7. #6
    It's not even technically incorrect. It's just flat out incorrect. What's hilarious is that they don't even bother to disguise it in the "article."

    Ah well, silly propagandizing ain't what it used to be.

  8. #7
    Quote Originally Posted by Zippyjuan View Post
    If prices fall significantly, oil shale will be too expensive to produce and production will fall sharply. Just to maintain current levels of output, they need 6,000 new wells every year- their output declines by about two thirds after only one year in use.
    Shale oil would still be profitable even if the price of oil was as low as $40/barrel. Also, it makes perfect sense to include natural gas, condensate and plant products since there is really no difference in the process of drilling an oil well as opposed to a gas well. We really should be proud of the oil and gas industry in this country. It's the best in the world because the US is the only country whose energy industry isn't dominated by the government or the multinationals. That is the reason why it is so successful. The shale boom was made possible by the independent domestic companies for the most part. The mega-corps are too risk adverse. It also helps that the US is pretty much the only country in the world where ordinary citizens can own mineral rights.

  9. #8
    Interesting insight. Thanks.

    Quote Originally Posted by Pisces View Post
    Shale oil would still be profitable even if the price of oil was as low as $40/barrel. Also, it makes perfect sense to include natural gas, condensate and plant products since there is really no difference in the process of drilling an oil well as opposed to a gas well. We really should be proud of the oil and gas industry in this country. It's the best in the world because the US is the only country whose energy industry isn't dominated by the government or the multinationals. That is the reason why it is so successful. The shale boom was made possible by the independent domestic companies for the most part. The mega-corps are too risk adverse. It also helps that the US is pretty much the only country in the world where ordinary citizens can own mineral rights.
    I am more and more convinced that man is a dangerous creature and that power, whether vested in many or a few, is ever grasping, and like the grave, cries, 'Give, give.'

    Abigail Adams



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  11. #9
    Quote Originally Posted by Legend1104 View Post
    Interesting insight. Thanks.
    Thanks. I work in Houston and the city is doing quite well economically. I think the energy industry is keeping the national economy from completely imploding. Fuelfix.com is a good source for news about the oil and gas.

  12. #10
    Quote Originally Posted by Pisces View Post
    Shale oil would still be profitable even if the price of oil was as low as $40/barrel. Also, it makes perfect sense to include natural gas, condensate and plant products since there is really no difference in the process of drilling an oil well as opposed to a gas well. We really should be proud of the oil and gas industry in this country. It's the best in the world because the US is the only country whose energy industry isn't dominated by the government or the multinationals. That is the reason why it is so successful. The shale boom was made possible by the independent domestic companies for the most part. The mega-corps are too risk adverse. It also helps that the US is pretty much the only country in the world where ordinary citizens can own mineral rights.
    Actually it isn't profitable at $40 a barrel. http://www.ft.com/intl/cms/s/0/ec1a6...#axzz2hwoqsUKB It can't go much below $100 and be a viable industry.

    http://www.dailyfinance.com/2013/06/...-is-shale-oil/

    While new technologies such as fracking and horizontal drilling are largely responsible for the boom in U.S. oil and gas production, the costs associated with these so-called "technological barrels" are on the rise.

    So exactly how costly is shale oil production? Staggeringly expensive, according to a new report from a leading energy research firm. Let's take a closer look.

    Costs still rising
    According to recent estimates by Sanford C. Bernstein, a research and consulting firm, non-OPEC marginal cost of production rose last year to a whopping $104.50 a barrel, representing more than a 13% increase from $92.30 a barrel in the previous year.


    What's more is that marginal production costs for U.S. drillers rose by even more, in both relative and absolute terms, from around $89 per barrel in 2011 to a remarkable $114 a barrel last year. While many have argued that rising marginal costs of production for unconventional oil projects will help buoy oil prices by driving a floor underneath prices, they're also limiting the industry's profitability.

    Bernstein's findings are worrying, because they imply that new technological improvements aren't enough to bring down the industry's overall marginal costs. "What we call technological barrels are day after day more expensive," Christophe de Margerie, chief executive of French oil giant Total , recently told the Financial Times.

    Implications for big oil
    That's bad news for the world's largest integrated oil companies, which are seeing reduced profitability due to the double whammy of rising costs and a cap on oil prices as a result of increased supply due to the shale boom. Not surprisingly, profit margins among the world's 50-largest listed oil companies are currently the lowest they've been in a decade, according to Bernstein.

    For instance, net income margins for ExxonMobil , BP , and Total have all fallen from their highs near the middle of the previous decade. Last year, BP and Total reported margins of 3.1% and 5.9%, respectively, down significantly from 2005 respective margins of 9.2% and 10.5%.

    Exxon's net income margin, however, fell only modestly, coming in at 10.9% last year, as compared with 10.5% in 2005. And ConocoPhillips was one of the few majors that managed to buck the weak margin trend, posting an impressive 14% net income margin last year, up from 8.2% in 2005.

    Bernstein further finds that, over the past decade, marginal production costs have risen by about 250%, from just under $30 a barrel in 2002 to a record of $104.5 a barrel last year, while cash costs have increased from $9.70 a barrel to $44.20 a barrel over the same time period.

    The bottom line
    The big takeaway is that the marginal barrel of oil is becoming more expensive to produce, which is helping buoy oil prices. But rising costs and lower profitability are a major challenge for the world's largest integrated oil companies, which are struggling to boost production and reserves.

    Most reported year-over-year declines in total oil and gas production for the first quarter, despite high levels of capital spending, which suggests diminishing returns from their upstream spending. According to energy research and consulting firm Douglas-Westwood, the upstream industry spent $2.4 trillion to produce 12.3 million barrels per day of additional oil output in the period 1995-2005.

    Yet in the period from 2005 to 2010, the same level of spending actually yielded a decline of 0.2 million barrels per day. With unconventional sources of oil expected to account for a much larger share of total production over the next several years, energy companies will have to find better ways to get more out of their money.
    It wasn't so much technology (though it did help) which led to the oil shale boom but really it was $100 a barrel of oil which finally made it financially worth going after the difficult to recover oil. The regions have been through boom and busts about every 20 years or so as the price of oil rose and producers moved in and then back out when prices fell. Costs are rising and the price of oil isn't. Many companies have switched from extracting oil to capturing the natural gas becasue the margins were better but natural gas prices are falling which is reducing those margins as well.
    Last edited by Zippyjuan; 10-16-2013 at 10:02 PM.

  13. #11
    Quote Originally Posted by Zippyjuan View Post
    Actually it isn't profitable at $40 a barrel. http://www.ft.com/intl/cms/s/0/ec1a6...#axzz2hwoqsUKB It can't go much below $100 and be a viable industry.

    http://www.dailyfinance.com/2013/06/...-is-shale-oil/


    It wasn't so much technology (though it did help) which led to the oil shale boom but really it was $100 a barrel of oil which finally made it financially worth going after the difficult to recover oil. The regions have been through boom and busts about every 20 years or so as the price of oil rose and producers moved in and then back out when prices fell. Costs are rising and the price of oil isn't. Many companies have switched from extracting oil to capturing the natural gas becasue the margins were better but natural gas prices are falling which is reducing those margins as well.
    That article is talking about a marginal cost of $104, not total cost. I got the $40 profitable price quote from an article in the Houston Business Journal. I'll try to find it. Your last sentence about gas being more profitable than oil tells me you don.t know zip about this business.

    And your FT article is from June and its already out of date.
    Last edited by Pisces; 10-16-2013 at 10:28 PM.

  14. #12
    Marginal costs is what it costs to produce the next barrel of oil. Has there been a dramatic change in the costs of producing oil from shale in the last four months? (June being "already out of date")?

    If the figures I have are inacurate and out of date perhaps you can share some up to date figures on what it costs to produce a barrel of oil from shale. Thanks!
    Last edited by Zippyjuan; 10-16-2013 at 10:51 PM.

  15. #13
    I did find a brief article from that publication which indicates Shell was abandoning leases in Colorado and Kansas and Exxon in Colorado as well because they didn't think they could make enough money on them (at $100 a barrel of oil).

    http://www.bizjournals.com/houston/m...orado-oil.html

    Shell Oil Co. announced this week it would pull out of its Colorado oil shale project after 31 years.

    The company announced Sept. 26 that it was letting go of its Mahogany Project in Colorado after millions of dollars were spent in the region, Fuel Fix reports.

    Similarly, Houston-based Chevron Corp. (NYSE: CVX) abandoned its oil shale lease in the Piceance Basin in February last year.
    Last edited by Zippyjuan; 10-16-2013 at 10:40 PM.

  16. #14
    Quote Originally Posted by Zippyjuan View Post
    Marginal costs is what it costs to produce the next barrel of oil.

    If the figures I have are inacurate and out of date perhaps you can share some up to date figures on what it costs to produce a barrel of oil from shale. Thanks!
    Most of the oil being sold is from wells already drilled so the marginal costs don't really determine profitability. The article states that oil production for some of the majors is down but we know US oil production increased in 2013 so I don't think this article is very accurate. Maybe it was back in June. I'll see what I can find on the current cost of producing shale oil.

  17. #15
    Quote Originally Posted by Zippyjuan View Post
    I did find a brief article from that publication which indicates Shell was abandoning leases in Colorado and Kansas and Exxon in Colorado as well because they didn't think they could make enough money on them (at $100 a barrel of oil).

    http://www.bizjournals.com/houston/m...orado-oil.html
    Different regions of the country have their own unique issues. Obviously some shale plays are more difficult to drill than others. That doesn't mean all shale oil is unprofitable.

  18. #16
    Quote Originally Posted by Zippyjuan View Post
    I did find a brief article from that publication which indicates Shell was abandoning leases in Colorado and Kansas and Exxon in Colorado as well because they didn't think they could make enough money on them (at $100 a barrel of oil).

    http://www.bizjournals.com/houston/m...orado-oil.html
    You left out the part of the article where Shell says it will look for shale oil in other parts of North America.



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  20. #17
    Quote Originally Posted by Pisces View Post
    Most of the oil being sold is from wells already drilled so the marginal costs don't really determine profitability. The article states that oil production for some of the majors is down but we know US oil production increased in 2013 so I don't think this article is very accurate. Maybe it was back in June. I'll see what I can find on the current cost of producing shale oil.
    The oil shale wells face steep drop-offs in productivity- losing about 70% of output in terms of barrels a day after only a year. They have to be constantly drilling new wells just to keep up. Thanks for looking for the figures. I am having troubles finding newer ones myself.

    Different regions of the country have their own unique issues. Obviously some shale plays are more difficult to drill than others. That doesn't mean all shale oil is unprofitable.
    You are right- it certainly isn't unprofitable at all or nobody would be doing it. The question is at what lower price than $100 a barrel for oil does it lose its profitablity.

    This doesn't specifically give a number for oil shale but is interesting anyways (from August of this year):
    http://fuelfix.com/blog/2013/08/02/d...il-into-slump/

    Exxon Mobil, Shell and BP all posted disappointing earnings this week. Chevron is expected to post a profit decline Friday. All of them face the same problem: The cost to get newfound oil from remote locations and tightly packed rock is high and rising. And it takes years and billions of dollars to get big new production projects up and running.

    The higher extraction costs could translate to higher oil and gasoline prices for consumers.

    Strong production growth at an oil company can offset higher operating costs, “but when production is flat or declining it’s a big hit,” says Brian Youngberg, an analyst at Edward Jones. “Even though oil prices are $100 or higher, the returns on investment aren’t what they used to be.”

    The new oil being found and produced is in ultra-deep ocean waters, in sands that must be heated to release the hydrocarbons, or trapped in shale or other tight rock that requires constant drilling to keep production steady.

    That makes this new oil far more expensive to get out of the ground than what’s known as conventional oil — large pools of oil and gas in relatively easy-to-drill locations. Those reserves have always been hard to find, but now they are all but gone outside of the Middle East.

    David Vaucher, who tracks oil production operating costs at IHS CERA, says oilfield operation costs are now at a record high. “The fields are more remote and the resource conditions are more extreme,” he says.

    New oil projects in the U.S. and Canada, where production is growing faster than anywhere in the world, require high oil prices to be profitable, Vaucher says.

    In order to make an industry average return, a new production project in the Canadian oil sands requires a price of $81 per barrel. For an onshore U.S. field, it’s $70 per barrel, but it ranges from $45 to $95 per barrel, depending on the rate of oil flow. In the Gulf of Mexico, it’s $63. In the Middle East, just $23 per barrel.

    Many oil analysts predict that relatively weak growth in world oil demand coupled with rising production from newfound fields will make for flat or lower oil prices in the years to come. But if big oil companies can’t earn strong profits at today’s oil prices, it may mean prices will have to rise higher to convince them it’s worth the risk to continue to aggressively explore new fields. If they worry they can’t make enough money, they’ll cut back.

  21. #18
    [QUOTE=Zippyjuan;5272219]The oil shale wells face steep drop-offs in productivity- losing about 70% of output in terms of barrels a day after only a year. They have to be constantly drilling new wells just to keep up. Thanks for looking for the figures. I am having troubles finding newer ones myself.

    This article is talking about the majors like Exxon, BP, etc, not the industry as a whole. I can't copy and paste with the device I'm using. If I could I would paste the paragraph where it explains that part of the reason the majors have not profited as much from shale is they were late to the game and have had to pay a lot more than the smaller companies for leases.

  22. #19
    Quote Originally Posted by Zippyjuan View Post
    The oil shale wells face steep drop-offs in productivity- losing about 70% of output in terms of barrels a day after only a year. They have to be constantly drilling new wells just to keep up. Thanks for looking for the figures. I am having troubles finding newer ones myself.



    You are right- it certainly isn't unprofitable at all or nobody would be doing it. The question is at what lower price than $100 a barrel for oil does it lose its profitablity.

    This doesn't specifically give a number for oil shale but is interesting anyways (from August of this year):
    http://fuelfix.com/blog/2013/08/02/d...il-into-slump/
    The last paragraph you bolded is talking about the price needed to make an industry average return. That's not exactly the same as the price to break even.

  23. #20
    Zippy, I found an article I think you should read to clear up some of the misconceptions you have.

    Sceptics also drew the wrong conclusions about high decline rates. All oil and gas wells exhibit a sharp drop in output after the initial high rate of production in the first few months, as the natural pressure in the oil or gas field drops. In general, the higher the initial output, the faster it will subsequently decline. Rapid decline rates are associated with unusually productive wells. Rapid declines also tend to be associated with high ultimate production over the lifetime of the well, as Beal demonstrated nearly a century ago. ("Decline and ultimate production of oil wells" 1919) Sceptics often imply rapid decline rates are an unattractive feature of shale wells, ignoring the fact that production is declining from an unusually high initial rate. The big upfront yield is what makes shale wells so economically attractive, resulting in a fast payback on investment and high rates of return. While sceptics worry about how much wells will be producing after 10 or 15 years, producers are more interested in how much they will produce within the first year or two. The rates of return on shale wells are phenomenal. Continental Resources, the leading Bakken oil producer, claims it can achieve a 20 to 25 percent rate of return on shale wells even at oil prices as low as $60 per barrel, rising to 50 to 65 percent returns when oil prices are $100
    . - See more at: http://www.rigzone.com/news/oil_gas/....d1ko28bB.dpuf

  24. #21
    Thanks for the link. On page one it does say that there is a level of new wells which need to be drilled to maintain production though it is currently exceeding that amount.

    LONDON, Oct 16 (Reuters) - North Dakota's rapidly rising oil output continues to defy the sceptics, who have predicted that production would stop growing as declining output from existing wells offsets extra production from new drilling.

    Oil production soared to 911,000 barrels per day in August, up more than 200,000 bpd compared with the same month last year, the state's Department of Mineral Resources (DMR) said this week.

    Production is on course to hit 1 million bpd by the end of the year or early 2014, according to the DMR. By the end of August, 9,452 wells were in production. But another 450 had been drilled and were awaiting fracturing and completion.

    Completions are running at about 1.5 times the threshold needed to maintain production, the DMR wrote in its monthly statement, which implies output will continue rising in the next few months as crews work through the backlog.

    - See more at: http://www.rigzone.com/news/oil_gas/....WTZtRJi0.dpuf
    If 450 is 1.5 times the "maintainance of output" number of wells required, that means that they need 300 new ones. Over how much time? Report is monthly but it does not say.
    Last edited by Zippyjuan; 10-17-2013 at 08:17 PM.

  25. #22
    Quote Originally Posted by Zippyjuan View Post
    Thanks for the link. On page one it does say that there is a level of new wells which need to be drilled to maintain production though it is currently exceeding that amount.
    Yes, but its saying that this isn't a problem because companies have improved their drilling procedures so that they are able to drill more for less cost. You have to read the whole article.

  26. #23
    Quote Originally Posted by Pisces View Post
    Zippy, I found an article I think you should read to clear up some of the misconceptions you have.

    . - See more at: http://www.rigzone.com/news/oil_gas/....d1ko28bB.dpuf
    Looking at the profit figures you shared their costs run about $45 to $50 a barrel so your earlier reported claim that $40 a barrel would be no problem doesn't seem supported.

    (the article doesn't say that production won't decline or when that might happen- only that it is not currently declining as more wells are being drilled).

  27. #24
    Quote Originally Posted by Zippyjuan View Post
    Looking at the profit figures you shared their costs run about $45 to $50 a barrel so your earlier reported claim that $40 a barrel would be no problem doesn't seem supported.

    (the article doesn't say that production won't decline or when that might happen- only that it is not currently declining as more wells are being drilled).
    Not really. The article states that a $60 price will get Continental a 20% return. That is a very high rate of return in any industry. That doesn't say anything about their profit at $40. I can't remember where exactly I read that little bit so feel free to disregard. I don't think it is unreasonable.



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  29. #25
    Quote Originally Posted by Zippyjuan View Post
    Looking at the profit figures you shared their costs run about $45 to $50 a barrel so your earlier reported claim that $40 a barrel would be no problem doesn't seem supported.

    (the article doesn't say that production won't decline or when that might happen- only that it is not currently declining as more wells are being drilled).
    Of course production will eventually decline, just not nearly as quickly as the skeptics think. These independent oil companies are interfering with the environmentalist narrative that we are rapidly running out of natural resources. The left will never forgive them for that.

  30. #26
    Quote Originally Posted by Pisces View Post
    Not really. The article states that a $60 price will get Continental a 20% return. That is a very high rate of return in any industry. That doesn't say anything about their profit at $40. I can't remember where exactly I read that little bit so feel free to disregard. I don't think it is unreasonable.
    The $100 a barrel example makes the math easy.
    Continental Resources, the leading Bakken oil producer, claims it can achieve a 20 to 25 percent rate of return on shale wells even at oil prices as low as $60 per barrel, rising to 50 to 65 percent returns when oil prices are $100
    If you are making 50- 65% returns on something which sells for $100, your costs must be $45 to $50.
    Last edited by Zippyjuan; 10-17-2013 at 08:51 PM.

  31. #27
    Quote Originally Posted by Zippyjuan View Post
    The $100 a barrel example makes the math easy.


    If you are making 50- 65% returns on something which sells for $100, your costs must be $45 to $50.
    True. But this example is just for this one company in one formation - the Bakken shale.

  32. #28
    I'm a little uneducated on this subject so this has been quite enlightening for me. I have a question though. From where does the US get all of its oil? What countries and what percentage?

  33. #29
    Quote Originally Posted by Prog Snob View Post
    I'm a little uneducated on this subject so this has been quite enlightening for me. I have a question though. From where does the US get all of its oil? What countries and what percentage?
    This is from an article published in June


    http://www.npr.org/2012/04/11/150444...y-be-surprised

  34. #30
    Canada is our biggest supplier.
    Mexico used to be number two- ahead of Saudi Arabia but declining production combined with growing domestic demand has lowered their exports to all countries including the US. Some estimate they may become a net importer in as few as ten years.

    http://www.fuelsnews.com/u-s-imports...igin-decrease/



    U.S. imports of crude oil from the top 10 countries of origin decreased during the first three quarters of the year. As seen on the graph below, the U.S. reduced imports from 9 out of its top 10 origin countries, while it increased imports from Canada. The biggest variance so far this year comes from Brazil, where crude oil imports have decreased nearly 51%, from 9,517 thousand barrels per day (bbl/d) between January and September of 2012, to 4,635 thousand bbl/d so far this year. Furthermore, Nigerian imports are down by 24%, Iraqi imports are down 21%, and Mexican and Venezuelan imports are down by 16%. Canadian imports are up by 6%, from 89,651 thousand bbl/d in 2012 to 95,033 thousand bbl/d so far in 2013.
    These are just the largest sources- but they account for over 70% of all our imports. In May of this year, we imported oil from 60 different countries. For a more detailed list: http://www.eia.gov/dnav/pet/pet_move...im0_mbbl_m.htm
    Last edited by Zippyjuan; 10-17-2013 at 09:52 PM.

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