Technology Enabling $20 a Barrel Oil Costs

Breakeven Oil Prices
Peter Zeihan Absent Superpower map from Zeihan.com

“Really, it’s quite easy” to be profitable at $20, “when you sit down and add up all the ways there are to save money in our industry, and how much waste there is,” added Blake Burnette, CEO of IoT-eq (pronounced I-O-Tech), at the same conference. “Through automation, I think $20 a barrel is quite feasible.”

Burnette says the oilfield is 20 years behind industry-in-general in adopting the efficiencies of technology, and he believes he knows why. It’s the bucking bronco ride that is the oilfield economy. “One of my theories about our business is that the shortness of the business cycle makes us stay 20 years behind other industries” in technological advances. In down times companies feel they can’t afford to invest in new technology, whereas in boom times they don’t have time to adapt to changes—and the economic need is not perceived. __ Permian Basin O&G Magazine

There are indeed some companies that are bucking the business cycle and investing in advanced technologies which cut wastes and boost profitability. Technology-based streamlining not only makes production more profitable, it also stretches recoverable reserves farther out the time horizon.

With current oil prices above $60 a barrel, companies that use advanced technology to cut waste and streamline production are doing very well indeed. Those who do not learn such lessons will probably be swept up in the aftermath of subsequent price cycles.

Oil Supply Extended from Decades to Centuries

… with the right incentives, research and smart people putting their minds to it, we’ve been able to drastically increase what we can extract. Even now, I’ve seen estimates that only about 60 percent of oil in most reservoirs can be extracted with today’s technology regardless of oil prices, economics and how much is spent. I feel confident that we will see further advances which improve efficiency, effectiveness and economics of production (not to mention our ability to locate new deposits).

Another recent development is that the U.S. is now estimated to hold more oil reserves than any other nation. Estimates in 2016 by Rystad Energy indicate the U.S. tops Saudi Arabia and Russia. More than half of U.S. oil is in unconventional shales, which rely on fracking to produce. Although the cost to produce such oil can be higher than conventional wells, when the economics are right it will be tapped. __ Ray Perryman

IEA predicts explosive US oil growth this year

OPEC countries likely to be squeezed from now on
Countries such as Iran, Saudi Arabia, Venezuela, etc. depend too much on their oil & gas exports — and so are extremely vulnerable to price swings. The same is true for Russia, which is also dangerously dependent on energy exports to power its economy.

In the future, a combination of decreasing global demand for oil (peak oil demand) with more competitive petroleum production from outside of OPEC and Russia, will put a perpetual squeeze on such nations that are unable to adapt to the changes.

The Texas/New Mexico oil fields known collectively as The Permian Basin, will play a significant role in the global oil marketplace of the future. It is seen as the second largest oil field in the world with over 200 billion barrels of oily enticement driving the play.

As better technologies of discovery, production, and enhanced recovery come online, the Permian is likely to come into its own — along with a large number of other North American oil fields, many not yet discovered.

Evolving Perceptions

Ten years ago, the global perception of the oil future was shaped by maps such as the one just below:

http://www.egpet.net/vb/threads/93033-Map-World-Oil-Reserves#axzz552RxsmoG

According to this “peak oil” influenced global view, the middle east was where the action was going to be for the duration, as peak oil took over the world stage and played itself out over the dreary future landscape.

According to that viewpoint, the US in its entirety only held 21 billion barrels of oil reserves, and was incidentally also rapidly running out of natural gas.

But that was then and this is now. With Permian Basin reserves alone amounting to over 200 billion barrels of oil, we get a small glimpse at the revolution taking place before our eyes. Estimates for Bakken oil reserves have varied wildly over the years (up to 500 billion barrels), but have been consistently underestimated by the USGS.

US natural gas reserves have likewise exploded, driving the export revolution of LNG at US ports, with no end in sight.

Learn to See and Understand These Seismic Shifts

People who buy too deeply into cult-beliefs such as “Peak Oil Armageddon” or the “Climate Apocalypse Cult” get mentally stuck, and cannot quickly adjust to potent underlying shifts of reality — whether in technology, economics, or political power swings. Their entire beings resist the new realities, and so in their rigid brittleness they miss out on many opportunities to prosper that reality offers to everyone.

Wiser people do not usually limit their options by over-investing in ideologies — which always fail in the end, like all models.

Hope for the best. Prepare for the worst. It is never too late for a Dangerous Childhood.