International [Oil & Gas News] America Achieved Energy Independence As The World's Top Oil Producer (2018-2019)

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Arkain2K

Arkain2K

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Thanks to technological innovations in the last five years that drastically reduced the average break-even prices for shale production down to around $50/barrel, we are now pumping so much oil that all the pipelines and refineries are at max capacity.

Not a bad problem to have, I'd say.

With the U.S flushing with oil, $100/barrel of Middle East crude is a thing of the past. Once all the kinks are worked out, my guess is global prices will stabilize at the $60-$70 range, no matter what OPEC and Russia does, because the United States will soon be the world's top oil exporter.

If they ever think about cutting production, American oil would simply swoop in and take their market share right under them.

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America's Permian Basin Is Growing Into the Largest Oil Patch in the World
By Jessica Summers and Sheela Tobben | April 24, 2018

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The Permian shale play is all about setting records. Now, the region may even become the world’s largest oil patch over the next decade.

Output in the basin is forecast to reach 3.18 million barrels a day in May, according to the Energy Information Administration. That’s the highest since the agency began compiling records in 2007.

By 2023, the basin may produce 4 million barrels a day, according to the International Energy Agency. The Ghawar field in Saudi Arabia is currently the world’s biggest oil field, with capacity of 5.8 million barrels a day, according to a 2017 EIA report.

This is all thanks to the size of the oil deposits, coupled with increased technology and efficiencies.

“The technology is the biggest driver,” said Rob Thummel, managing director at Tortoise, which handles $16 billion in energy-related assets. “The basin in and of itself could end up being the largest oil field in the world, even bigger than Ghawar in Saudi Arabia."

By contrast, top-producing members of OPEC such as Iran and Iraq pump less than 5 million barrels a day. Iran produced about 3.81 million barrels day in March, according to data compiled by Bloomberg.

“If the Permian was part of OPEC, it would be the fourth-largest OPEC member, right behind Saudi Arabia, Iran and Iraq,” Thummel said. “By the end of the year, the Permian probably overtakes Iran.”

The rampant production growth has already strained available pipeline capacity to transport the oil to market, pressuring prices. West Texas Intermediate oil in Midland, Texas, the heart of the Permian, sank Tuesday to $8 a barrel below U.S. benchmark prices in Cushing, Oklahoma, the biggest discount in more than three years, according to data compiled by Bloomberg.

Companies are planning more lines to ease the bottleneck. Phillips 66 Partners LP and Andeavor announced Tuesday a joint venture to build a pipeline from the Permian to Corpus Christi and the Sweeny-Freeport area that may carry as much as 700,000 barrels a day when it starts at the end of 2019.
https://www.bloomberg.com/news/arti...een-growing-to-largest-oil-patch-in-the-world
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America's biggest oilfield is running out of pipeline
By Matt Egan | May 8, 2018
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America's most prolific shale oilfield is pumping so much crude that the pipelines can't handle it all.

These congestion headaches have contributed to the spike in crude prices by trapping some supplies inside the Permian Basin, the oil-rich West Texas shale field where production has skyrocketed.

Sudden pipeline bottlenecks are the latest reminder that the shale oil revolution has reshaped energy, both at home and abroad.

"US producers have become a victim of their own success," said Michael Tran, global energy strategist at RBC Capital Markets.

"The Permian Basin has been so prolific that it's overwhelmed pipelines," he said. "There isn't enough capacity to move barrels to market."

Lifted by signs that the United States will re-impose sanctions on Iran, the price of benchmark US oil settled above $70 a barrel on Monday for the first time since late 2014.

But, because of the pipeline problems, crude oil from the Permian trades at a big discount. For instance, analysts said that a barrel of crude in West Texas's Midland priced about $13 to $16 below similar oil contracts.

With the pipelines near full capacity, shale producers in the Permian can turn to rail and truck to get their crude to the market. But those options are much more expensive, and more difficult to carry out at large scale.

These pipeline headaches have had a hand in the recent leap in oil prices because they have dashed the belief that higher oil prices would be limited by a steady flow of oil out of the Permian Basin.

Tran said that "bottlenecks" in the Permian Basin have played a "fairly large role" in lifting crude to $70 a barrel.

Other major factors include robust demand for oil, concerns that Iran's supply will be limited by new sanctions from the United States and an agreement by OPEC and Russia to cut production.

In some parts of the country, pipeline projects have been blocked or slowed by opposition from environmental groups and Native American tribes. President Trump advanced both the Dakota Access and Keystone XL pipeline projects over protests.

Bottlenecks caused by surge of activity

Of course, the pipeline problems in the Permian Basin haven't been caused by political pressure in Texas, which is among the friendliest states to the oil industry. Instead, they reflect the enormous increase in production from the Permian Basin, where unique geology makes it easier for companies to drill more cheaply.

Located in West Texas and eastern New Mexico, the Permian Basin can survive at low prices better than other fields can. It's so cheap to drill in the Permian that it was the only major shale basin to continue growing even when oil prices crashed as low as $26 a barrel in early 2016.

"We've seen a lot of companies and investment flooding toward the Permian Basin," said Jenna Delaney, senior oil analyst at S&P Global Platts.

Several Permian Basin producers have acknowledged how crowded the pipelines there have become.

"A lot of folks are going to be waiting for new pipeline," D. Lance Terveen, senior vice president of marketing at EOG Resource, (EOG) recently told analysts. Terveen explained that this is what happens when "there's a lot of hype" in a "very active area" like the Permian Basin.

The "hype" has also driven up other expenses for Permian producers, including the cost of recruiting talent and paying for supplies like sand.

Reprieve is coming

Even regulators are flagging the Permian pipeline problems. "We need investment in energy transportation infrastructure like pipelines and ports to realize Texas' full potential," Ryan Sitton, a commissioner on the Texas Railroad Commission, tweeted on Monday.

Help is on the way. Companies are racing to build pipelines to carry the crude out of the Permian. But most of those won't start pumping crude until late next year.

For instance, Plains All American Pipeline (PAA) is building the $1.1 billion Cactus II pipeline system to carry crude from the Permian Basin to Corpus Christi, Texas. The project isn't expected to open until the third quarter of 2019.

The Gray Oak Pipeline, being built by Phillips 66 (PSX) and Enbridge (EBBNF), aims to carry more than 3 million barrels per day from West Texas to the Corpus and Houston region. Service is expected to begin during the second half of 2019.

"It could be pretty tight between now and then," Pioneer Natural Resources (PXD) CEO Timothy Dave told analysts during a conference call last week.
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http://money.cnn.com/2018/05/08/investing/oil-pipeline-permian-basin/index.html
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U.S. Shale’s Refining Crisis
By Nick Cunningham - May 08, 2018​
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U.S. shale is growing so quickly that it is presenting new challenges for refiners. The quality and type of the oil mix, particularly in the U.S., is changing because of the gusher of oil coming from West Texas.

For years prior to the shale revolution, refiners made large investments into downstream assets that were equipped to handle medium and heavier types of oil. A lot of expected supply growth was coming from Canada’s oil sands, a type of oil that is particularly heavy. Integrated oil companies and refiners poured money into refineries, such as those along the Gulf Coast, equipped to handle heavier varieties.

But oil coming from U.S. shale basins, especially the Permian, is light and sweet. That is creating somewhat of a mismatch between available supplies and downstream capacity.

As the IEA notes in a recent commentary, because upwards of 80 percent of the sulfur found in oil must be removed, sweeter varieties command a higher premium. The density (light, medium or heavy) has more to do with the type of refined product that a facility can make – lighter oils tend to produce relatively more gasoline, while medium and heavy crudes produce more diesel and kerosene.

Again, because the refining industry had been planning for medium and heavier types of oil prior to the shale revolution, the expected slate of future oil supply was expected to be pear-shaped, the IEA says. That is, the mix would be made up of a larger supply of heavier oils at the bottom of the barrel.

However, the explosion of shale supply has the oil mix more shaped like an hour-glass, which is to say, lots of light oil at the top of the barrel and lots of oil at the bottom of the barrel. The OPEC cuts are taking medium varieties off of the market, putting the “squeeze” on the middle. OPEC and Russia together account for about three-quarters of the world’s medium supply, according to the IEA, so the coordinated production cuts have accentuated the shakeup in the fuel mix.

Up until recently, U.S. refiners absorbed all of the light oil coming out of the shale patch. They processed and exported refined products like gasoline even though some of the equipment used to process heavier oil went underutilized. While not a perfect match between quality/type and refining capacity, the situation seemed to work out just fine.

Going forward is trickier now that refiners are stretched in terms of the amount of light oil they can process. The IEA sees another 3.3 million barrels per day of light oil coming out of U.S. shale over the next few years. Much of that oil will need to be exported since refiners cannot absorb it all. And because demand is growing so much in Asia, particularly for chemicals, much of that U.S. oil will likely be shipped there.

But it won’t necessarily be smooth sailing; there could still be some hiccups for the refining complex. Despite the IEA’s hour-glass argument, heavier oils have plunged in Venezuela and eroded in Mexico as well. Canada can’t get its heavy oil out of the country because the pipeline system is maxed out.

"Our thesis is that the U.S. refining system is close to being maxed-out on the amount of shale oil it can process," wrote Morgan Stanley equity analysts in April. The investment bank argues that outside of the U.S., demand for light oil is not as high as everyone might think and could actually be capped at about 6 mb/d.

While the IEA says that Asia’s demand for petrochemicals might mean that U.S. exports to Asia rise, Morgan Stanley argues that much of the world’s demand growth will coming in the form of diesel and jet fuel, products that light shale oil isn’t equipped to make.

The upshot is that if shale drillers are going to find a home for all of the oil that they are producing, they will have to increasingly offer discounts in order to gain market share.

It is not clear as of yet the depth of the problem for drillers. But for refiners that do, in fact, process light oil, there could be a windfall from the discounts.
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https://oilprice.com/Energy/Energy-General/US-Shales-Refining-Crisis.html
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Don't we WANT oil around 80-90 bucks a barrel though?
 
how about some really clean oil?
 
Scary amounts. The world would be screwed without it. Hope there is plenty to go around...

Prices have risen too high by me. Close to 3 a gallon
 
The US will become the world's largest oil producer before the end of the year and a net energy exporter within the next few for the first time since 1953. As a percentage of daily demand, imports have gone from 65% in 2005 to below 15% currently. This comes at a time when there is a massive amount of reshoring taking place that will see the US regaining the top global position from China as the most competitive manufacturing country on the globe, thanks in part to tech innovation and reinvention.
 
Bloodworth said:
Scary amounts. The world would be screwed without it. Hope there is plenty to go around...

Prices have risen too high by me. Close to 3 a gallon
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Crude oil prices and gasoline price at the pump are related, but not the same thing.

If your gas price is $3 a gallon, it's because your State is taxing the hell out of it.

Here's how much we're getting fleeced in California for every gallon:

gastaxes.jpg


Also, where you live also affects how much you pay for gas, because the gas station owner pay different prices to rent the land their station is sitting on, and they pass that cost onto you. Kinda funny that you can drive a few blocks to the next city and see gas price differs to the tune of 25-50 cents each gallon compare to your city.
 
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Arkain2K said:
Not a bad problem to have.
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Knew this thread wouldn't generate much in response as it doesn't follow the woefully false narrative that America is in the midst of some kind of terminal decline. It's becoming entirely self-sufficient and it's only a matter of time before upholding the position as guarantor of global free trade and security (at great expense) are outright dumped altogether to a posture more closely resembling pre-1945. It's willfully going to break its own 'empire'.
 
V-2 said:
Knew this thread wouldn't generate much in response as it doesn't follow the woefully false narrative that America is in the midst of some kind of terminal decline. It's becoming entirely self-sufficient and it's only a matter of time before upholding the position as guarantor of global free trade and security (at great expense) are outright dumped altogether to a posture more closely resembling pre-1945. It's willfully going to break its own 'empire'.
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I don't follow.
 
V-2 said:
Knew this thread wouldn't generate much in response as it doesn't follow the woefully false narrative that America is in the midst of some kind of terminal decline.
Click to expand...

Yeah, but it's better that the Trump/Russia crowd stay out of this Business/Economic discussion :)

It's becoming entirely self-sufficient and it's only a matter of time before upholding the position as guarantor of global free trade and security (at great expense) are outright dumped altogether to a posture more closely resembling pre-1945. It's willfully going to break its own 'empire'.
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I don't know about that...If anything, having a vast oil production capability and greater control over the global oil market means a huge boost to our soft power, as we can guanrantee our allies an important economic factor that they badly needs, as welll as eliminating our energy dependence on the undemocratic shitholes that we collectively (used to) depends on for oil.

Energy independence is a very powerful tool/weapon for whichever administration that's in office, and could very well be used to expand our global influence if we chooses to.
 
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Gregolian said:
Don't we WANT oil around 80-90 bucks a barrel though?
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It has to be $75 a barrel for Bakken oil to break even.
I can’t back up this up with a source but there’s over 800 wells in the Bakken that are drilled but still need to be fracked. I know Nabors has over 200 not fracked.
 
Arkain2K said:
Not a bad problem to have.

With the U.S flushing with oil, $100 oil is a thing of the past. Once all the kinks are worked out, my guess is it will stabilize at the $60-$70 range, no matter what OPEC and Russia does.

If they cut production, American oil would simply swoop in and take their market share.



America's biggest oilfield is running out of pipeline
By Matt Egan May 8, 2018​



http://money.cnn.com/2018/05/08/investing/oil-pipeline-permian-basin/index.html


U.S. Shale’s Refining Crisis
By Nick Cunningham - May 08, 2018

1e03576e2ff2c88c70751083a53c3c0d.jpg


https://oilprice.com/Energy/Energy-General/US-Shales-Refining-Crisis.html
Click to expand...

Kind of makes Scott Pruitt's recent granting of hardship waivers to billionaire oil tycoons a little hard to explain, doesn't it?
 
spin_ said:
how about some really clean oil?
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Well are figuring out ways to extract the oil we have more efficiently. It is this thing called SCIENCE powered by this thing called PROFIT.

I think Canada has more oil than Saudi Arabia and we have more oil than Canada.
 
Arkain2K said:
Crude oil prices and gasoline price at the pump are related, but not the same thing.

If your gas price is $3 a gallon, it's because your State is taxing the hell out of it.

Here's how much we're getting fleeced in California for every gallon:

gastaxes.jpg


Also, where you live also affects how much you pay for gas, because the gas station owner pay different prices to rent the land their station is sitting on, and they pass that cost onto you. Kinda funny that you can drive a few blocks to the next city and see gas price differs to the tune of 25-50 cents each gallon compare to your city.
Click to expand...
fleeced? Those taxes pay for road maintenance and it's still not enough because the federal tax is fixed and woefully insufficient.


California has some of the better roads in the nation thanks to the dry weather and higher gas taxes, but places in the Midwest and the Rust Belt look like Fallujah. Politicians are terrified of raising it yet everyone constantly bitches about the poor state of roads. It will get even worse with widespread EV adoption unless they institute some sort of mileage tax.
 
jefferz said:
It has to be $75 a barrel for Bakken oil to break even.
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That's outdated data broski. Here are the current break-even points (BEP) for various types of U.S shale:

BE.png


http://www.ogfj.com/articles/print/...es/north-american-shale-breakeven-prices.html



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https://oilprice.com/Energy/Crude-Oil/The-Lowest-Shale-Breakeven-Costs-Are-Here.html

The massive drop in break-even costs now compare to the advent of shale five years ago is the reason why our pipelines are overflowing again with Permian crude. As long as WTI remains above $55, it's pump baby pump! :cool:
 
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bad seed said:
fleeced? Those taxes pay for road maintenance and it's still not enough because the federal tax is fixed and woefully insufficient.


California has some of the better roads in the nation thanks to the dry weather and higher gas taxes, but places in the Midwest and the Rust Belt look like Fallujah. Politicians are terrified of raising it yet everyone constantly bitches about the poor state of roads. It will get even worse with widespread EV adoption unless they institute some sort of mileage tax.
Click to expand...


I dunno man, California consistently cracks the top 10 for worst roads in the US year after year. Just because they tax the shit out of gas for infrastructure doesn't mean they spend it on roads. That shit gets siphoned of to other state programs. When I lived in the Bay Area the roads were worse than where I grew up in PA.

https://www.statista.com/chart/8492/the-worst-roads-in-the-usa/
 
Curmudgeon said:
Paper beats rock.
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I still don't follow, lol.

I don't see how upping our ability to impact global energy prices via supply is going to undermine our position as protector of international free trade or lead to a nationally driven undermining of our empire.

As @Arkain2K noted, the economic and soft power that comes with being a net energy exporter should actually bolster our ability to protect free trade since we can counter other nations attempts to impact the market through oil supply. More importantly, it should strengthen our empire by reducing our reliance on foreign oil thus give us more autonomy to act in our best interests.

I assume you're joking but I really did want to see how he got from A to B.
 
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