EIA: US Fossil Fuels Production to Reach Record Highs in 2023… The Permian is already there!

The Permian is our least unprofitable shale play.. It is dong quite well now as PDP’s and DUC’s are harvested. The $ are going mostly for buybacks, dividends, like for like acquisitions, which, given the history and trends, makes good business sense. After that, down, down, down. Oilprice.com is a relentless cheerleader, but what is missing from all of their pom pom missives are:

1. Mentions of committed, sustainable, 2022 CAPEX for even Permian developments.
2. Mentions of medium/long term favorable price agreements with the oilfield servicers.

Permian shale, as with the others, is also cursed geologically. First, us petroleum engineers have been utterly worthless in coming up with economic solutions to ever increasing frac hits. The only real “solution”, preloading, is not economic. Then, they will have increasing problems with frac water disposal.

https://jpt.spe.org/what-is-really-happening-when-parent-and-child-wells-interact.
https://www.hartenergy.com/exclusives/top-texas-shale-producers-hit-quake-driven-well-disposal-closures-report-198173#:~:text=Midstream-,Top%20Texas%20Shale%20Producers%20Hit%20by%20Quake%2Ddriven%20Well%20Disposal,likely%20to%20reduce%20disposal%20volumes.

Shale oil in general, is also internationally uncompetitive. Permian shale oil is closer, but still no cigar.

http://graphics.wsj.com/oil-barrel-breakdown/

The 2016 graph is older, but the separation is just as great now, and will become greater as geology and skyrocketing service costs take their toll on shale plays, 2022 forward.

An example. ConocoPhillips has committed $700MM of 2022 CAPEX to develop their (new and old) Permian shale assets, which include those bought from Shell for $9.5B. Seems like lots, until you see that they need to maintain the PDP base of ~175,000 boe/d, with a current composite decline of at least 30%/year, just for their newly acquired shale assets (I don’t know what they had before, but it must have been >0). They will also get lots of less bang/buck, from their CAPEX.

https://www.yahoo.com/now/oil-gas-investor-2022-outlook-040000852.html

“And while the oil and gas industry is preparing to increase spending in 2022, more than half of those outlays will be just to keep pace with escalating oilfield service prices, Rystad said in a Dec. 1 report.”

Bottom line, CoP got out evaluated by Shell, who put these assets in the rear view mirror. Shell got cash in fist, relief from an unsustainable development scenario, and a Trumpian YUGE lightening of their booked FASB143 obligations (the actual costs will certainly be much higher). Long story short, ConocoPhillips will be chasing those $9.5B – well – forever.  

“Energy Information Administration reported in the latest edition of its Drilling Productivity Report.”

Dead to me link…

I suspect oil back about $80 and US nat gas nearing $4 has something to do with the EIA projected increase in Permian output. And, IMO those numbers will be fairly stable going forward a few years for two reasons:

1. Deepwater (Brazil subsalt) needs about that to produce.
2. The annual decline in the world’s 700 largest oil fields reported by IEA in 2008 (5.7% pa) means deepwater and fracked shale increasingly have to take up the slack.

The Putin tank exercise will take oil to $100.

Gotta love those British thermal units. The sort of thing to build an empire.

Even though US fossil fuel production is increasing, the extreme-leftist White House cabal, nevertheless wants to install 30,000 MW of expensive offshore wind turbines to further debilitate the US trade deficit.

Are those folks in cahoots with Europe, which stands to gain enormously from the cabal’s foolishness?

EXCERPT from:

BIDEN 30,000 MW OFFSHORE WIND SYSTEMS BY 2030; AN EXPENSIVE FANTASY  
https://www.windtaskforce.org/profiles/blogs/biden-30-000-mw-of-offshore-wind-systems-by-2030-a-total-fantasy
 
The Biden administration announced on October 13, 2021, it will subsidize the development of up to seven offshore wind systems (never call them farms) on the US East and West coasts, and in the Gulf of Mexico; a total of about 30,000 MW of offshore wind by 2030.
 
Biden’s offshore wind systems would have an adverse, long-term impact on US electricity wholesale prices, and the prices of all other goods and services, because their expensive electricity would permeate into all economic activities.
 
The wind turbines would be at least 800-ft-tall, which would need to be located at least 30 miles from shores, to ensure minimal disturbance from night-time strobe lights.
 
Any commercial fishing areas would be significantly impacted by below-water infrastructures and cables. The low-frequency noise (less than 20 cycles per second, aka infrasound) of the wind turbines would adversely affect marine life, and productivity of fishing areas.
 
Production: Annual production would be about 30,000 x 8766 h/y x 0.45, capacity factor = 118,341,000 MWh, or 118.3 TWh of variable, intermittent, wind/weather/season-dependent electricity.
 
The additional wind production would be about 100 x 118.3/4000 = 2.96% of the annual electricity loaded onto US grids.
That US load would increase, due to tens of millions of future electric vehicles and heat pumps.
 
This would require a large capacity of combined-cycle, gas-turbine plants, CCGTs, to cost-effectively:
 
1) Counteract the wind output variations, MW, aka grid balancing
2) Fill-in wind production shortfalls, MWh, during any wind lulls
 
Such lulls occur at random throughout the year, and may last 5 to 7 days in the New England area.
 
These URLs provide examples of similar wind/solar lull conditions in Germany and New England
 
https://www.windtaskforce.org/profiles/blogs/analysis-of-a-6-day-lull-of-wind-and-solar-during-summer-in-new
http://www.windtaskforce.org/profiles/blogs/wind-plus-solar-plus-storage-in-new-england
https://www.windtaskforce.org/profiles/blogs/wind-and-solar-energy-lulls-energy-storage-in-germany
https://www.windtaskforce.org/profiles/blogs/playing-russian-roulette-with-reliable-electricity-service-to-new
 
High Costs of Balancing the Grid with Increased Wind and Solar: The ANNUAL grid balancing costs are entirely due to the variations and intermittencies of wind and solar, because the OTHER power plants have to operate far from their efficient modes of operation, 24/7/365. They experience:

1) More up/down production at lower efficiencies, which have more Btu/kWh, more CO2/kWh
2) More equipment wear-and-tear cost/kWh, due to up/down production 
3) More-frequent plant starts/stops, which have high Btu/kWh, high CO2/kWh 

Increased wind and solar also requires:

– Increased hot, synchronous (3600 rpm), standby plant capacity, MW, to immediatelyprovide power, if wind/solar generation suddenly decreases, or any other power system outage occurs.
– Increased cold, standby plant capacity, MW, to provide power after a plant’s start-up period. 

When wind and solar were only a very small percent of the electricity loaded onto the NE grid, those balancing costs were minimal, sort of “lost in the data fog”
 
When wind and solar became a large percent, those balancing costs in the UK became 1.3 BILLION U.K. pounds in 2020, likely even more in 2021, 2022, etc.
https://www.windtaskforce.org/profiles/blogs/grid-balancing-costs-sky-rocket-in-the-uk-due-to-increased-wind
 
Those balancing costs should have been charged to the Owners of wind and solar systems, but, in reality, they were politically shifted to taxpayers, ratepayers, and government debts.
 
Those balancing costs are in addition to the various government subsidies, which are also politically shifted to taxpayers, ratepayers, and government debts.
 
Now you all are finally beginning to see just how wonderful wind and solar have been, and will be, for your pocketbook.
 
Energy systems analysts, with decades of experience, saw this mess coming about 20 years ago, but all-knowing legislators and bureaucrats ignored them, because they were pressured into aiding and abetting the harvesting of federal and state subsidies.
 
The Biden fools adding 30,000 MW of very expensive offshore wind, would be donating a financial bonanza to Europe, because it would make oodles of money, plus it would permanently saddle the US, a trade competitor, with much higher energy costs, in addition to the enormous ANNUAL costs of defending Europe. 

A master stroke, in deed, and the US is falling into their very expensive, debilitating trap.

BTW, Europe must have wind and solar, because it imports huge quantities of energy (mostly from unfriendly countries), whereas the US is nearly energy independent

Turnkey Capital Cost: The turnkey capital cost for wind systems, plus offshore/onshore grid extension/augmentation would be about 30,000 MW x $5,000,000/MW = $150 BILLION, excluding financing costs. Biden’s excessive inflation rates, about 7% at present, surely would increase that cost.
 
Area Requirements: The 8-MW wind turbines would be arranged on a grid, spaced at least one mile apart (8 rotor diameters), about 1 sq mile per wind turbine. The minimum sea area requirement for 30,000/8 = 3,750 wind turbines would be 3,750 sq miles, or 2,400,000 acres
 
Electricity Cost/kWh: Based on the real-world European, mostly UK and German, operating experience in the North Sea and Baltic, such highly subsidized wind turbine systems:
 
1) Last about 20 years
2) Have high maintenance and operating costs, due to the adverse marine environment
3) Produce electricity at an “al-in” cost of about 2 times the “calculated” values
 
The “all-in” wholesale prices of the offshore electricity of new systems are calculated at about 17 c/kWh, without cost shifting and subsidies, and about 9 c/kWh, with cost shifting and subsidies. The shifted costs and subsidies would result in:
 
1) Increased tax burdens on taxpayers
2) Increased household electric rates on ratepayers
3) Additions to federal and state government debts.
4) Additional burdens on the owners of traditional generators, because their power plants have to counteract the wind output variations, 24/7/365; the more wind (and solar), the greater the electricity quantities involved in the counteracting, plus their plants have to spend more time on standby, and are required to have more-frequent start/stops. See URLs and Appendix
 
https://www.windtaskforce.org/profiles/blogs/grid-balancing-costs-sky-rocket-in-the-uk-due-to-increased-wind
http://www.windtaskforce.org/profiles/blogs/cost-shifting-is-the-name-of-the-game-regarding-wind-and-solar

NOTE: These rates compare with the average New England wholesale price of 5 c/kWh, during the 2009 – 2022 period, 13 years, courtesy of:
 
1) Abundant, domestic, natural gas-fueled CCGT plants, that have: 1) low-cost/kWh, low-CO2/kWh, extremely-low particulate/kWh
2) Domestic, uranium-fueled nuclear plants, that have low-cost/kWh, near-zero CO2/kWh, zero particulate/kWh
3) Long-lasting hydro plants, that have low-cost/kWh, near-zero-CO2/kWh, zero particulate/kWh
 
NOTE: Cost shifting and subsidies have not yet affected NE wholesale prices, because the percent of new RE (mostly wind and solar) on the NE grid is very small, after 20 years of subsidies.
The image shows the negligeable “contribution” of wind + solar to the NE grid load, during 2021, after 20 years of subsidies!!
 
Wind and solar became significant in Germany and Denmark after more than 20 years of subsidies, resulting in:
 
– Politicians excessively allocating RE costs to households, thereby greatly increasing household electric rates.
– Politicians keeping industrial rates artificially low for international competitiveness reasons (a hidden trade subsidy). See URL
https://www.windtaskforce.org/profiles/blogs/german-household-electricity-prices-reach-new-record-high-in-2021