2013 February 15

The Master Resource Report  2013-02-15

CNBC interview

This is the interview with Ed Morse, Citigroup Head of Commodities Research on the study they just released.


EIA posted a supplement on U.S. oil production outlook

The EIA posted a supplement to its recently released Short-Term Energy Outlook to explain the key drivers behind the increase in its outlook for increasing U.S. oil production.

“U.S. crude oil output is forecast to rise 815,000 bbl/d this year to 7.25 million barrels per day, according to the February 2013 STEO. U.S. daily oil production is expected to rise by another 570,000 bbl/d in 2014 to 7.82 million barrels per day, the highest annual average level since 1988. Most of the U.S. production growth over the next two years will come from drilling in tight rock formations located in North Dakota and Texas. This paper explains the underpinnings of EIA’s short‐term forecast for crude oil production.”

This excerpt for example gives some interesting insight in how soon the well productivity will begin to decline in the Eagle Ford and Williston Basin. By 2014 producers will already be moving off the high productivity sweet spots. Is this really what the U.S. is going to build energy independence on?

“The IP rate of a Western Gulf Basin well is forecast to be 290 bbl/d in 2013. The IP rate declines to 269 bbl/d in 2014, as some of the Eagle Ford sweet spots are completely drilled and producers move into areas with lower well productivity.”

“Williston Basin wells have very high IP rates, averaging 435 bbl/d in 2013 and declining to 414 bbl/d in2014 as the basin’s sweet spots are fully drilled.”

The Supplement also goes into a good discussion of the infrastructure capacity constraints of the current and anticipated pipeline developments.

As far as Alaska goes they are sticking with the trend, downward. The forecast is a further 10% decline over the next two years.

“EIA estimated that Alaska oil production was 526,000 bbl/d in 2012. With the exception of the initiation of production at the Point Thomson condensate field in 2014 at 10,000 bbl/d, no new oil projects are expected to begin operations in 2013 and 2014. Overall, Alaska oil production is projected to decline in both 2013 and 2014, with continuing declines in production from existing wells. EIA projects that production will average 504,000 bbl/d in 2013 and 474,000 bbl/d in 2014.”

It might be worth remembering that it was Alaska’s production that briefly provided a turn up in U.S. crude oil production back in the 1980’s. Given the fundamental finite nature of crude oil is there any reason to believe this latest turn up will play any differently in the future?

Happy 125th Birthday to my favorite newspaper

The Financial Times   February 13, 1888