Archive for November 2015
After years of following developments in extraction of light tight oil (LTO) in the Bakken, the oil price, studying actual well production data from the North Dakota Industrial Commission (NDIC) and the SEC 10-Q/Ks filings for several companies heavily exposed to the Bakken, a quote from Shakespeare’s Macbeth comes to the fore of my mind:
All causes shall give way: I am in blood
Stepp’d in so far that, should I wade no more,
Returning were as tedious as go o’er:
(Macbeth: Act III, Scene IV)
For me the Macbeth quote very much sums up the predicament many Bakken LTO operators now find themselves in.What this study/update present:
- With the decline in the oil price the average well as from the 2012 vintage will struggle to reach payout and become profitable.
(The oil price decline reduces the portion of the more recent wells that are on trajectories to reach payout and become profitable.)
- The 2015 vintage follows the 2014 vintage closely, suggesting that around 20% of the wells of 2015 vintage are on a trajectory to reach payout and become profitable.
- The underlying decline from the legacy wells is strong. The extraction from all the wells started between Jan 2008 and Dec 2014 declined by close to 440 kb (or about 41%) from Dec 2014 to Sep 2015.
- Some of the early wells (2008 vintage) have been restimulated (refracked) and the effects are short lived and the economics of this looks questionable, at best.
- A near steep decline in LTO extraction from the Bakken is baked into the cake due to the financial dynamics created by a lasting low oil price.
- An average of around 136 wells/month were added so far in 2015 while extraction declined close to 60 kb/d, suggesting 140 – 150 wells needs to be added each month to sustain present extraction levels.
Studying the SEC 10-K/Qs for several of the companies that are heavily weighted in the Bakken shows that natural gas and NGLs (Natural Gas Liquids) are weighing down the financial results for many companies.
In this post I present actual Norwegian natural gas production, status on reserves, the development in discoveries and what this results for Norwegian Petroleum Directorate (NPD) and my expectations for the future delivery potential for Norwegian natural gas.
Norway, after Russia, has been and is the EU’s second biggest supplier of natural gas.
Included is also a brief look at developments in actual consumption and production of natural gas in the EU 28 (the 28 members of the European Union).
- NPD revised down their band for future delivery potential by about 10 Gcm/a (Bcm/a) and moved the start of decline one year forward relative to their forecast last year.
- I now expect the Norwegian delivery potential for natural gas relative to 2014/2015 to decline by more than 40% by 2025.
- Europe will increasingly have to rely on natural gas imports from more distant sources and should by now have implemented policies for the role natural gas will have in its future energy mix.
This post is an update to my post in 2014 looking at the status as of end 2013.
My forecast and NPD’s forecast at end 2014 are basically identical towards the end of this decade, but differs about the timing for the start of the decline and how steep this will become as from early next decade. My forecast is also tested versus the Reserves over Production (R/P) ratio as of end 2014, refer also figure 2.
NPD’s central projection is in about the middle of the green and orange lines. Note the span of uncertainties in the NPD’s forecast.