(11-01-2015, 09:03 PM)BlackCat Wrote: [ -> ] (10-01-2015, 06:31 AM)HitandRun Wrote: [ -> ]The process should be this way: well permitting drops => rig counts fall => well fracturing & completions falls => then shale oil production falls. Given the lead time in each of those steps, I think we might see production fall only at late 3Q or 4Q this year, maybe possibly next year.
Thanks for the clarification HitandRun, I agree with this time frame. Best guess is that oil prices start rising 6-12 in months, assuming no bad surprises on the demand side.
Still searching for a ways to invest in oil - its one of the hardest industries to understand. Cant just go and buy some barrels to store in my flat....
How does the idea of rig count falling 50% next 3 month not hit production that we know have short peak production life, unless you guys talking about test rigs rather than production rigs?
I would think shale oil production will peak in 1Q, coupled with possible financial distress, to start declining in 2Q. Not too long a time to wait and see
PS there is oil futures rather than spot
When oil price was around US$150.00 few years ago , many experts predicted oil price would hit US$200.00 , due to limited oil fields and thus supplies , but now it turns out to be otherwise.
It appears to me that some (or most) folks have no idea what the oil drilling, fracking and completion processes entails, here's a 101 for you:
Starting a well
Companies start the drilling process on about a 3-acre pad of land, which allows for the many trucks that become part of an oil and gas drilling process.
The process begins with vertical drilling. A drilling rig is brought on site to drill the well, which will go to depths of up to 10,000 feet below the surface. This process can take from a week to 10 days, depending on the site.
Drilling stops initially below the water table so the well can be encased in cement to prevent anything from the well leaking into the water table. Once the casing is completed, a 7-inch drill bit will drill more than a mile to get to the formation in which to frac, usually the Niobrara or Codell formations, both stacked beneath several impermeable rock formations. Once the drill bit hits bottom, or the “pay zone,” the company will drill what is called the “bend,” which is the curve the well takes to get into the horizontal portion of the zone. The bend alone could take up to two days to drill.
Throughout the drilling process, drilling mud is pumped in to cool the drill bit and act as a means for the resulting debris to leave the well.
The horizontal portion of the well then is drilled for an additional 4,000 feet to 10,000 feet, then encased in cement, with a 4-inch metal pipe in the center to allow for the oil and gas to flow to the surface. At this point, the well is just a hole drilled into the ground, with a cement barrier between the pipe, the formations and water table.
The rig is packed up and activity stops until fracking is scheduled. Sometimes it can wait for weeks before a fracking crew is able to get there. Sometimes it takes a couple of days.
Fracking
The actual fracking process uses a lot of machinery capable of driving the fluid down more than a mile, and a lot of science to calculate the exact mixtures of everything from chemicals and water and sand to the pressure it takes to crack tiny little fissures into rocks, more than a mile beneath the surface.
Sand, water and chemical additives are pumped into the well at high pressures, so as to crack the rock in different stages in the horizontal (parallel to the surface) portion of the well.
“To open fractures at bottom-hole pressures in the Niobrara, you probably need downhole pressures of 10,000 psi or so to open the rocks,” Weijers said.
The chemicals do not erode the rock to create the cracks or fracs — it’s the high pressure of the water that opens them up. The chemicals, such as guar gum, which also are in many foods we eat, are added to help the water to gel, allowing the sand an easier vehicle in which to move.
“When it’s thicker, it does a better job of carrying sand downhole,” Weijers said. “If you think about a handful of sand at a lake, and you put it in water, the sand will settle quickly to the bottom of the lake. We don’t want that to happen in factures.”
Those cracks, now held open by the tiny kernels of sand, release the trapped oil and gas inside, which flow back to the surface after the downward pressure from fluids is released from the well.
Soap ingredients also can be added to the gel to prevent bacterial growth in the well. If bacteria forms, it could release deadly gases.
“You put a lot worse stuff in your food, your yard, or your garden,” Richardson said. “A lot of the chemicals are used to clean your counters, and put in your make-up.”
Many involved in the process describe frac fluid as “slime,” like the stuff kids play with from the local toy store.
The Layout
To handle the sand, water, chemicals and production that comes out of the well during the fracking of the well (commonly called flowback), the site needs have the basics: Trucks, trucks and more trucks to carry the water, the sand, and the chemicals to mix them all together, and more truck horsepower to combine it all to shoot down through a pipe into an 8-inch hole in the ground.
To prep the area, several 500-barrel tanks for water storage or a massive, 40,000-barrel pool to store water is erected on the periphery of the site. Sand storage tanks arrive, then are filled. A typical frac job will utilize from 1.5 million to 6 million pounds of sand.
Iron trucks carry massive amounts of pipe that will be used to keep the well opened and separate from the well.
“When the rest of the crew arrives on location, they’ll typically rig up to the well head with a missile,” Weijers said.
The missile is a manifold around which most of the activity centers, to ultimately pump fracking fluid downhole. Crews will line on each side of the missile five to six semi trucks, which contain the horsepower to create enough pressure to pump the fluid downhole at the proper rate.
In addition to the horsepower trucks, there are sand trucks and trucks containing the chemical additives to thicken the water to keep the sand moving in the well.
A hydration truck, through which the chemicals are added to the water to “gel,” and a blender, which mixes that fluid with the sand, are nearby. All surround the missile in a horseshoe shape.
“The blender sends the mixture of sand water to the low-pressure side of the missile,” Weijers said. “From that missile, we have 10-12 connections to the individual horsepower units, which really pressurize the mixture of sand and fluids so the (missile) can send it (through its high-pressure side) downhole at pressures that can crack the rock open.”
That one process is good for one frac, or stage, at which the horizontal well is cracked from being hit at such high pressures.
A typical well can have 20 fracs, each necessitating this procedure of blending, pressurizing and cracking. A typical frac job can last up to 20 hours — one frac stage per hour — from start to finish.
At the open end, or the top of the horseshoe, is a data center, or a trailer containing about five to six people controlling the science of the job. There’s usually a representative or two from the oil and gas company, a frac job supervisor and an engineer to do the calculations.
“Typically, there’s an engineer who makes the readings of the pressure,” Weijers said. “There’s hundreds of parameters being tracked, all the chemicals, the proppant (sand) being pumped, pressures during the job. The engineer makes it possible to track that and do scientific calculations of the data.”
Here, employees track every aspect of the job, from pressures of the frac fluid to the diesel engine’s fuel gauges.
At various other open areas, there will be containers in which the used sand and production waters are placed into once they fulfill their purpose in the wells to be hauled off later for recycling, injection or disposal.
On jobs where crews utilize a large pool of water, the water is usually being heated to temperatures of about 70 degrees to provide the perfect chemical combination with the additives and sand.
At some point in the drilling and completion process, crews will build oil and gas storage tanks, vapor recovery units to control air emissions, and oil and gas separators for the eventual well production. All will be strategically located around the wellhead.
Completion
Once all the fracs are created, the downward pressure is removed from the well. Within a couple of days, the release of that pressure will reverse, allowing the oil and gas to flow from the rocks and up the well.
“At end of the frac job, the flow stream is reversed,” Wiejers said. “Instead of pumping things downhole, due to the pressure we created, we have almost no pressure at the surface, then the flow reverts and oil and gas and some of the water find their way back from downhole to the surface.”
All the equipment is removed from the site, leaving only the wellhead, the storage tanks, separators and emissions control. Production can last for years.
P.S. (Following comment is lifted from Encana's website, typical of a fracking ops): On average, it takes two days to frac each well and Encana USA typically drills 4-8 wells per pad. A 15-man crew generally works from dawn to dusk, 5 to 6 days per week. From the time the drilling rig leaves the site to the point when the wells are completed and placed “on production,” approximately 55 days
SGX is conducting the Oil & gas course again by NSAI. Can get more than 101 from there.
(11-08-2014, 01:44 AM)specuvestor Wrote: [ -> ]SGX actually had a very interesting oil and gas seminar last month which helped to clarify some technicalities of shale. One of the most interesting takeaway is that shale are the sources of oil and gas reservoirs if there exist a natural trap. In other words shales are actually the streams that feeds into the gushing waterfalls (through centuries). What effectively we are trying to do now is to get the resource from the "streams" rather than from the reservoirs. From a certain perspective, IMHO this might not be the proudest moment of mankind
China import make no different in the demand side. I reckon the only differentiator is the US shale oil production...
Oil prices extend fall despite record China imports
SINGAPORE - Global oil prices continued the week's rout with benchmark Brent crude falling for a fourth consecutive session on Tuesday to its lowest in almost six years, despite China reporting record crude imports
...
http://www.todayonline.com/business/oil-...na-imports
Oil prices are easily manipulated, not so much of demand and supply, how can we quantify the slow down of economic of china, and caused the oil prices to fall? furthermore, china has been aggressively buying for their reserve. I do not have the numbers of the import and export or consumption of oil in the world.
but the prices fall has been very steep, and usually for steep falls in prices usually followed by a steep increases. that is all in technical analysis. but I looks like a good short-median term investment in oil at this point of time, in my opinion.
Oil prices will not stay too low for long period, because it will affect alot of industries. automobile, oil companies etc etc.
OPEC vs USA...
rest of world, watch and profit!
(14-01-2015, 04:23 PM)danieldo Wrote: [ -> ]Oil prices are easily manipulated, not so much of demand and supply, how can we quantify the slow down of economic of china, and caused the oil prices to fall? furthermore, china has been aggressively buying for their reserve. I do not have the numbers of the import and export or consumption of oil in the world.
but the prices fall has been very steep, and usually for steep falls in prices usually followed by a steep increases. that is all in technical analysis. but I looks like a good short-median term investment in oil at this point of time, in my opinion.
Oil prices will not stay too low for long period, because it will affect alot of industries. automobile, oil companies etc etc.
China is adding to its strategic reserve, they are not buying oil for immediate consumption, big difference there. There is a daily surplus of roughly 2m barrels of oil now, unless consumption habits change this excess supply will not go away.
2m barrels is a LOT of oil, it must be stored somewhere if it isn't consumed, and it costs money to store them, this cost is enormous and is reflected in the deep contango in crude oil futures now.
The crash in oil prices is mostly a supply issue, demand hasn't actually changed much, but supply has surged and is projected to keep moving higher despite the recent plunge in oil prices. OPEC is right to blame the marginal producers for this glut, they were producing expensive oil that should not have been economically feasible if it wasn't for the fed's reckless monetary policy. Cheap money always fuels malinvestments, it was housing back in 2006-2007, now its oil.
(06-01-2015, 04:19 PM)jjlim84 Wrote: [ -> ]the problem is, how do you know when the storm finishes? How do you know the low that you buy is one of the lows?
Valuable stocks ride through the storm, if you abandon it and come back again when it's sunny, that defeats the principle of value investing I guess
I was going to say the same, but you beaten me to it.
Pardon me for the potentially off topic reply.
Equity investment means (to me) having an ownership in a business, like a provision shop owner. Equity investment has its up and down like a provision shop. Provision shop enjoys the upsides, like us equity investors who would grin at the share price appreciation.
But, when a shop suffers a drop in sales, do the owner say lets close and move to do something else? I think the same applies to us equity (and value) investors. When there is a down trend in price of equity, do we "close down" by ditching the stock and move to something else?
Equity investment is buying into ownership, not for a day or two only. As a business owner (in a private company), i keep my show running even when business is down for a month or so. Same for a stock, do we "close shop" over a few days/ months of price down swings? Its a personal call. I would hold out because of the beliefs I have in what the business (not just the price) can achieve over the longer term.