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Posts from the ‘Energy’ Category

Fracked Shale Oil Wells Drying Up Faster than Predicted, Wall Street Journal Finds

DeSmog, 10 January 2019

In 2015, Pioneer Natural Resources filed a report with the federal Securities and Exchange Commission, in which the shale drilling and fracking company said that it was “drilling the most productive wells in the Eagle Ford Shale” in Texas. That made the company a major player in what local trade papers were calling “arguably the largest single economic event in Texas history,” as drillers pumped more than a billion barrels of fossil fuels from the Eagle Ford. Its Eagle Ford wells, Pioneer’s filing said, were massive finds, with each well able to deliver an average of roughly 1.3 million barrels of oil and other fossil fuels over their lifetimes.

Three years later, The Wall Street Journal checked the numbers, investigating how those massive wells are turning out for Pioneer.
Turns out, not so well. And Pioneer is not alone.Those 1.3 million-barrel wells, the Journal reported, “now appear to be on a pace to produce about 482,000 barrels” apiece — a little over a third of what Pioneer told investors they could deliver. In Texas’ famed Permian Basin, now the nation’s most productive shale oil field, where Pioneer predicted 960,000 barrels from each of its shale wells in 2015, the Journal concluded that those “wells are now on track to produce about 720,000 barrels” each.

Not only are the wells already drying up at a much faster rate than the company predicted, according to the Journal’s investigative report, but Pioneer’s projections require oil to flow for at least 50 years after the well was drilled and fracked — a projection experts told the Journal would be “extremely optimistic.”

Fracking every one of those wells required a vast amount of chemicals, sand, and water. In Karnes County, Texas, one of the two Eagle Ford counties where Pioneer concentrated its drilling in 2015, the average round of fracking that year drank up roughly 143,000 barrels of water per well.

A Billion Missing Barrels

And while Pioneer has become one of the most active drillers in the Permian, it’s hardly alone in booking projections that the Journal found were dubious. “Two-thirds of projections made by the fracking companies between 2014 and 2017 in America’s four hottest drilling regions appear to have been overly optimistic, according to the analysis of some 16,000 wells operated by 29 of the biggest producers in oil basins in Texas and North Dakota,” it reported. “Collectively, the companies that made projections are on track to pump nearly 10 percent less oil and gas than they forecast for those areas, according to the analysis of data from Rystad Energy AS, an energy consulting firm.” “That is the equivalent of almost one billion barrels of oil and gas over 30 years,” the Journal added, “worth more than $30 billion at current prices.”

The problems the Journal focused on will be familiar to those who’ve turned a critical eye to shale reserves in the past: The most productive areas, or “sweet spots,” are smaller than first expected and companies predicted that wells would dry up slower than they have. DeSmog launched its latest series covering shale’s financial woes in April 2018 and our coverage extends back over a half-decade.
For the Journal, the take-aways were financial. “So far, investors have largely lost money,” the newspaper pointed out, adding that a review of 29 drillers showed companies have spent $112 billion more than they earned from drilling in the past decade. “Since 2008, an index of U.S. oil and gas companies has fallen 43 percent, while the S&P 500 index has more than doubled in that time, including dividends.”
The industry’s defenders argue that spending money now to make money later is simply how business works — this year’s “losses” are actually investments in future profits. But because shale drilling is relatively new, even the experts are left guessing about how much oil will be flowing from the wells 10, 20, or 30 years after fracking — and investors have become frustrated as shale drillers have largely failed to turn the corner and start racking up profits instead of continuing to operate in the red.

“The industry’s only hope of paying off debt and rewarding equity investors is for oil prices to rise high enough for long enough that they can generate consistent cash flow without breaking the bank on capex [capital expenditures],” said Clark Williams-Derry, director of energy finance at the Sightline Institute. “But they’ll have real problems — sweet spots are getting depleted, wells are declining faster than they’d hoped, pipelines are still constrained causing deep discounts in some markets, co-produced gas is close to worthless, and any sustained rebound will boost the cost for drilling services (i.e., higher prices mean higher costs).” “Plus,” he added, “investors need to worry about long-term cleanup costs.”

Calling in the Experts

And the pressure on the experts charged with preparing oil and gas production estimates for drillers is enormous. As the first shale wells get older and more production history rolls in, engineers have developed models they say can make better predictions — but the Journal suggested those tools haven’t been widely adopted. “Why aren’t we doing this?” one engineer demanded repeatedly after John Lee, one of the most prominent reserves experts in the U.S., gave a talk in Houston in July about making more accurate shale projections. “‘Because we own stock,’ replied another engineer, sparking laughter,” the Journal reported.

The Journal’s reporting frequently cited Rystad Energy, an independent oil and gas consulting firm, as the source of more conservative projections — but, as DeSmog has previously reported, Rystad isn’t the only large independent firm to find troubling indications that shale wells are on track to produce only a fraction of their “proved” reserves. Wood Mackenzie, another major oil consulting firm, studied the Permian’s Wolfcamp shale, where early projections predicted that production from a five-year-old well should be declining at a rate of 5 to 10 percent. Those wells, the firm found, are actually declining by roughly 15 percent a year — a significantly larger drop than expected and an ominous sign for any companies projecting wells can last 50 years.

And fracking giant Schlumberger — which like Halliburton specializes in performing hydraulic fracturing jobs on wells other companies drill — has begun calling attention to a problem with much more immediate impacts: The sweet spots are getting too crowded. For years, the industry has said that it can minimize impacts by drilling multiple wells from the same well pad — but in parts of the Permian, wells drilled later on or near existing well pads have proved roughly 30 percent less productive compared to the first well drilled.

“[T]he well-established market consensus that the Permian can continue to provide 1.5 million barrels per day of annual production growth for the foreseeable future is starting to be called into question,” Schlumberger’s CEO Paal Kibsgaard said in an October 2018 earnings call. “At present, our industry has yet to understand how reservoir conditions and well productivity change as we continue to pump billions of gallons of water and billions of pounds of sand into the ground each year.” Kibsgaard warned that similar problems are beginning to show up in the Eagle Ford as well.

The Long-Term Costs of a Boom and a Bust

Karnes County is still the most active part of the Eagle Ford, with 562 drilling permits issued last year. After a heady oilfield boom, oil prices plunged in 2015 and 2016, leading to the layoffs of thousands of workers and royalty checks drying up. This past year, drilling has re-emerged, albeit at a slower pace. “It’s not a boom, but there’s a resurgence here in the Eagle Ford,” Rick Saldana, an energy company superintendent told the Houston Chronicle in October.
Investors have faced a rocky ride. Sanchez Energy, the Eagle Ford’s third largest driller, has now been warned twice by the New York Stock Exchange that it will be de-listed if its stock price, now at roughly $0.26 a share, doesn’t soon rise above $1.

But other impacts of the boom and bust cycle run deeper. In nearby Dilley, Texas, a former oilfield man-camp, built to house Eagle Ford workers, was turned into the “the South Texas Family Residential Center” in December 2014 by a private prison company. It’s now the nation’s largest immigration detention center for families, housing up to 2,400 people, half of them children.

And while over the past decade, Wall Street and other investors poured billions into fracking — the Journal tallied $112 billion more spent than earned from production at 29 major drillers — the U.S. more broadly has failed to seriously invest in a rapid transition away from climate-changing fossil fuels. That leaves the U.S. at risk of being left behind as the rest of the world focuses its efforts to innovate on renewable energy prospects that don’t dry up like oil wells. Bethany McLean, a financial journalist famous for first breaking the Enron story, recently told Fortune about conversations she’d had with major private equity investors as she researched her new book Saudi America. “They are all trying to figure out when we’ll be able to see the end of the oil age, because as soon as that happens, the price of oil will go into secular decline (as it did with coal),” she said. “Other countries, namely China, are frantically investing in renewables. For us to crow about our oil wealth, and not focus on renewables, is for us to miss the opportunity to be leaders in the world as it’s going to be.”

https://www.desmogblog.com/2019/01/10/fracking-shale-oil-wells-drying-faster-predicted-wall-street-journal

Chasing China: Chile drives Latin America’s electric vehicle revolution

Sydney Morning Herald, 10 December 2018
A massive cargo ship docked in the Chilean port of San Antonio at the end of November. It carried it its belly the first 100 electric buses from China that Chileans hope will revolutionise their public transport system.
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We finally have the rulebook for the Paris Agreement, but global climate action is still inadequate

The Conversation, 18 December 2018
Three years after the Paris Agreement was struck, we now finally know the rules – or most of them, at least – for its implementation. The Paris Rulebook, agreed at the UN climate summit in Katowice, Poland, gives countries a common framework for reporting and reviewing progress towards their climate targets. Yet the new rules fall short in one crucial area. While the world will now be able to see how much we are lagging behind on the necessary climate action, the rulebook offers little to compel countries to up their game to the level required.
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California is first state to mandate zero-emission bus fleet

AP News, 15 December 2018
California moved Friday to eliminate climate-changing fossil fuels from its fleet of 12,000 transit buses, enacting a first-in-the-nation mandate that will vastly increase the number of electric buses on the road. The California Air Resources Board voted unanimously to require that all new buses be carbon-free by 2029. Environmental advocates project that the last buses emitting greenhouse gases will be phased out by 2040.

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At last, divestment is hitting the fossil fuel industry where it hurts

The Guardian, 17 December 2018
I remember well the first institution to announce it was divesting from fossil fuel. It was 2012 and I was on the second week of a gruelling tour across the US trying to spark a movement. Our roadshow had been playing to packed houses down the west coast, and we’d crossed the continent to Portland, Maine. As a raucous crowd jammed the biggest theatre in town, a physicist named Stephen Mulkey took the mic. He was at the time president of the tiny Unity College in the state’s rural interior, and he announced that over the weekend its trustees had voted to sell their shares in coal, oil and gas companies. “The time is long overdue for all investors to take a hard look at the consequences of supporting an industry that persists in destructive practices,” he said.
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Australia’s LNG export surge fuels domestic supply concerns

Financial Times, 13 December 2018
Australia overtook Qatar to become the world’s biggest exporter of liquefied natural gas last month following a $200bn decade-long investment to ship the fuel to Asia. But the export boom has come at a cost. The country is now facing a looming domestic gas shortage in its most populous states, leading prices to skyrocket and concerns over security of supply to increase.

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VW Says the Next Generation of Combustion Cars Will Be Its Last

Bloomberg, 5 December 2018
Volkswagen AG expects the era of the combustion car to fade away after it rolls out its next-generation gasoline and diesel cars beginning in 2026. Traditional automakers are under increasing pressure from regulators to reduce carbon-dioxide emissions to combat climate change, prompting Volkswagen to pursue a radical shift to electric vehicles.

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Qatar Announces OPEC Exit Days Before Pivotal Oil Cuts Meeting

Bloomberg, 3 December 2018
Qatar said it will leave OPEC next month in a move that threatens to fracture the group’s unity just as it tries to maintain a global coalition to control the oil market. Qatar, a member since 1961, is leaving to focus on its natural gas production and has informed the Organization of Petroleum Exporting Countries of its decision, Energy Minister Saad Sherida Al-Kaabi told a news conference in Doha on Monday. A spokesman for the group declined to comment.

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Norway’s plan for for a fleet of electric planes

BBC News, 22 August 2018
By 2040, Norway has promised all of its short-haul flights will be on electric aircraft. It could revolutionise the airline industry.

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Carbon dioxide emissions from the U.S. power sector have declined 28% since 2005

EIA, 29 October 2018
U.S. electric power sector carbon dioxide emissions (CO2) have declined 28% since 2005 because of slower electricity demand growth and changes in the mix of fuels used to generate electricity. EIA has calculated that CO2 emissions from the electric power sector totaled 1,744 million metric tons (MMmt) in 2017, the lowest level since 1987.
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