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Mikhail Liebenstein

Us Shale Oil Now Under Cutting Opec

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Looks like it may be time for anyone with sense to get out of Saudi.

According to this article, the Saudi plan to kill off US shale oil has failed. Prices have been reduced for a couple of years now, but the US producers have responded by cutting costs and are now more efficient that Saudi with low cost of oil extraction.

Looks like a crisis is coming in the middle east. http://www.telegraph.co.uk/business/2016/07/31/texas-shale-oil-has-fought-saudi-arabia-to-a-standstill/

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Not really the same product though is it. Shale oil is foul heavy garbage that costs more to refine Vs the light sweet crude of the ME et al.

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Given the fast turnover of drilling sites (shale doesn't produce for very long and new wells are drilled and equipment relocated on a constant basis) then attempting to suppress it is pointless unless you are willing and able to provide 'cheap' oil over the longer term - many years - to prevent new wells being opened due to them being uneconomic to develop and operate.

But the whole point of 'killing' shale is so that you can monopolise the market to raise prices, which only encourages shale production to restart once you force the price up to cash in on your gambit. It doesn't require the massive investment and lead times of a typical modern oil or gas well (especially not now that the easy stuff is long gone).

You are only suppressing shale, not killing it.

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This is why the Saudi's are attempting to create a Sunni Islam empire, with ISIS playing the role of the solders of God.

An Islamic copy of the Christian Crusades.

Saudi Arabia is sand flouting on oil, but no one wants to buy their sand.

Mecca seeks the power of Rome from 1000 years ago.

The West don't give a damn who dies in the process.

Money trumps freedom 99% of the time.

Edited by Lord D'arcy Pew

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Not really the same product though is it. Shale oil is foul heavy garbage that costs more to refine Vs the light sweet crude of the ME et al.

Sounds suspiciously like some of the bad press claims against shale that were prevelant on this site around 2010-2014.

Shale oils properties can vary (like any oil) but its not garbage or of zero value otherwise it would not be extracted. Similar claims were made about shale on this and other sites back in the early '10s (its a busted flush, the wells don't produce for long, it costs more to drill for and has a poor rate of return).

Now in 2016 we can see that most of these "technical" claimsm, mostly made by environmentalists who had no clue about the business of oil extraction aren't really holding up. From the article oil companies have become more efficient at drilling operations. In addition they've become better at extracting as they learn more about the process. This will continue for the next 10 years or so at least as new recovery methods come on line.

Sour Mash has it broadly right IMO. Shale oil is there, and as soon as prices rise increased shale extraction will occur which will naturally keep a lid on global prices. In addition, as production continues, the oil business will become better at extracting shale at lower cost. Plus, the up front risks that are associated with multi billion offshore platforms that tie up huge sums of money for years in an unpredictable market simply aren't there.

Bottom line is shale is here, and its here to stay.

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This is why the Saudi's are attempting to create a Sunni Islam empire, with ISIS playing the role of the solders of God.

An Islamic copy of the Christian Crusades.

Saudi Arabia is sand flouting on oil, but no one wants to buy their sand.

Mecca seeks the power of Rome from 1000 years ago.

The West don't give a damn who dies in the process.

Money trumps freedom 99% of the time.

that would be turkey trying that.

turkey wants saudi and iran out of the equation for hegemony of the caliphate.

russia and USA both happy to comply with a proxy war as both will gain significant market share from ME oil supply disruption.

poor old europe...only UK and norway got much in the way of reserves, and southern europe is overrun with refugees.

southern europe gets it even worse next time when turkey gets control of the caliph, the refugees will be a very angry army indeed(as mentioned by a US general quite recently)...and trump seems not to be in the mood to send much in the way of help to europe next time.

Edited by oracle

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Looks like it may be time for anyone with sense to get out of Saudi.

According to this article, the Saudi plan to kill off US shale oil has failed. Prices have been reduced for a couple of years now, but the US producers have responded by cutting costs and are now more efficient that Saudi with low cost of oil extraction.

Looks like a crisis is coming in the middle east. http://www.telegraph.co.uk/business/2016/07/31/texas-shale-oil-has-fought-saudi-arabia-to-a-standstill/

Shale oil is not cheaper. However unlike Middle East Oil Shale / Tight oil producers are not having to fund the bulk of their governments spending programs.

Saudi can easily produce oil below $10 a barrel. In fact when I worked for Aramco (2010-12)they were producing at less than $4 a barrel. However the Government needs $70 a barrel to balance its books.

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Shale oil is heavier and bottle necked by heavy oil refinery capacity.

EROEI is lower, about a third of the usual sources of oil.

These figures are also based on the new field sweet spot. i.e. it gets harder to extract once the easy stuff is gone, ME oil fields are long established and so are well into the long tail of extraction efficiency, yet still massively outperform shale. Shale sources have yet to hit the rapid tail off phase.

Although l agree that offshore plats are costly with long lead times, l am bemused you think shale production will just switch on and off in response to pricing?

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Not really the same product though is it. Shale oil is foul heavy garbage that costs more to refine Vs the light sweet crude of the ME et al.

Not a problem to the Yanks. They use very little ME crude and many of their refineries are already set up to deal with the heavy crude that comes from places like Venezuela. Anyway it is a myth that oil shale crude is low quality. The Bakken Shales produce low sulphur light crude. Ironically, one of the issues that the U.S. has had with shale oil is that it produced more light crude than US refineries were capable of processing leaving a surplus they were not allowed to export under U.S. law. As consequence the refiners ended up mixing it with heavier crude oil types so that they could convert it into refined products that they could sell overseas.

The point about oil Shale is that it does not have to be that cheap to bankrupt the Saudis whose national economy needs crude prices nearer $80 a barrel.

As others have stated the cost of setting up an onshore oil shale fracking operation is a lot less than conventional offshore oil production in places like the North Sea.

Edited by stormymonday_2011

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Shale oil is heavier and bottle necked by heavy oil refinery capacity.

EROEI is lower, about a third of the usual sources of oil.

These figures are also based on the new field sweet spot. i.e. it gets harder to extract once the easy stuff is gone, ME oil fields are long established and so are well into the long tail of extraction efficiency, yet still massively outperform shale. Shale sources have yet to hit the rapid tail off phase.

Although l agree that offshore plats are costly with long lead times, l am bemused you think shale production will just switch on and off in response to pricing?

Do we also need to distinguish between shale oil (which could vary) and say tar sands, which is probably a totally different game as getting the oil out of that wastes loads of water and needs huge excavations.

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Do we also need to distinguish between shale oil (which could vary) and say tar sands, which is probably a totally different game as getting the oil out of that wastes loads of water and needs huge excavations.

There is some possibility for confusion, which Kurt alludes to in his post.

https://en.wikipedia.org/wiki/Shale_oil

What we are really talking about here by the wiki definition is tight oil (oil produced from low perm shale) as opposed to what is defined by the wiki article as shale oil.

The reality is though whether you talk about tight oil or shale oil in a non expert environment and geo-political context most people are talking about tight oil, however they refer to it. It's the production of this oil that has resulted in the massive increase in US production and has affected the global supply balance so hugely in recent years. And yes, you are right it can often be sweet and light (although these are relative terms) and its actually the lack of light refining capacity in the US which is the problem, not heavy.

Rollover, as regards the figures, they are out there if you want to get them but like any analysis you can apply a great deal of subjective bias to them should you so choose.

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What is the break even cost for shale oil Gigantic Purple Slug? How much is the profit for shale oil wheel during it's short life?

Entirely depends on the quality of the oilfield. at Sweeter spots in the US I hear the production costs are down to the mid - high 30's. Less favourable fields and localities the costs maybe $60-$70.

Edited by Kurt Barlow

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Petrol gone down near me from 114.9 to 111.9. I understand this is mainly due to USD rates etc, but if they raise rates today with some QE thrown in and the pound rallies, how long will it take to go back to 114.9 I wonder :ph34r:

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May be its time to look at the Bowland field more seriously. Then the good folk of the North West can do what the Scots, Norwegians, Saudis and Russians do....live on benefits, go shopping in the mall, complain a lot and ask for Independence....the Resources curse. Why work to catch your food when it comes in tins.

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