With Shale Oil Production Like This, Who Needs Trump?

All right, you really going into territory on racism right now.

 

Not really, it's pretty high compared to the Saudi fields, which are shallow and run between $2-$4/bl costs to raise; Brent Sea crude runs a little higher, $11-$14/bl. average, and that's some rough seas there.. I'm not much concerned with throwing in the creative accounting gimmicks like royalties and taxes and other padding they use for tax avoidance purposes and the like. the majority of oil being produce these days is well below $10/bl average; yes, some places, like mountainous areas and certain types of rock strata are far more expensive cost wise, up around $18+, but they aren't common.

 

Have you got a graph?

What you aren't factoring in is the grades of oil also. Much of that oil in the Mid-East is Sour and costly to refine in comparison to the good stuff in the US and UK which is Light Sweet crude.

 

I'm talking about production cost to raise to the wellheads, not the price per barrel it sells for, that's a different price calculation. Production costs per barrel are variable, depending on a lot of factors, and have to be paid regardless of spot market or futures contract prices per bl. Doesn't matter if the market price is sold at $100 a barrel or $5, the cost to raise at either price is more or less fixed for a given field an wellhead; it will be the same cost to produce at either price. You're right that different grades will increase or decrease the costs to pump, depending on their chemistry, better more experienced drillers and managers will be able to do it cheaper than those who aren't, etc., etc.

 

The operating cost to produce a barrel of oil from Venezuela is around ~$10 (which is around middle of the pack), Saudi Arabia is ~$5. Furthermore the Arab Medium and Heavy oil is more sour than the Venezuelan oil, although the Venezuelan oil is heavier. It isn't all about price. An astute corporate executive needs to factor in sovereign risk, diplomatic relations between nations, dependency and reliance on a source, supply chain and logistics etc. Much safer from a geopolitical perspective to have a supply from South America than the Middle-East, dare I say. This is just my opinion.

 

Estimating oil reserves is complicated, US oil companies are carefully regulared on how they do this and they constantly revise figures, much more than simple geology is involved, the cost of production changes over time as would the estimated value of the reserves. Government-run oil companies don't worry about this (until they try to raise capital selling stock -like Aramco). Since an oil company's value depends on it's reserves they are always trying to increase these either exploring new sources or improving efficiencies in production. As I noted, this is of no concern to government run oil companies, some neither explore for oil or refine their output so they've no way to improve valuation.

 

Well, we're not talking about the same thing here; I don't know how to make it any plainer. lol

In any case, I'm one of those who think it's better to use up 'everybody else's and keep our reserves in the ground as long as possible, said so several times on the board and elsewhere, so yes, I would indeed rather use up Venezuela's before ours, if it can be done.

 

British and Dutch are the most pro - sanctions, so it's no chance for Putin here. And Muscovy needs cash new, a lot of cash. With other words, Muscovite empire is totally in Trump 's hands..

 

ARAMCO has always estimated their reserves and until recently it was secret. The way reserves are measured is an economic measurement.. like a guestimate. Its flow rate, quality, market demand, price per barrel and difficulty in refining.

 

I am talking about the operating cost to produce a barrel of oil: "Operating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis. The operating cost is a component of operating income and is usually reflected on a company’s income statement. While operating costs generally do not include capital outlays, they can include many components of operating a business including:
- Accounting and legal fees
- Bank charges
- Sales and marketing costs
- Travel expenses(*)
- Entertainment costs
- Non-capitalized research and development expenses
- Office supply costs
- Rent
- Repair and maintenance costs
- Utility expenses
- Salary and wage expenses"

(http://www.investopedia.com/terms/o/operating-cost.asp)

As I said, you need to provide me with your data so that we are on the same page, where is the graph or table?

 

Closest I can find that isn't behind a paywall is this simple graph from the WSJ; it doesn't break it down by fields, just regions. I'm talking about production costs, not all the overhead accountants pile on top of the price. And, the price of Venezuela production has fallen since I last checked, UK is higher. That could be because of the stronger dollar, I would guess.

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

This graph has Vene production costs at $7.94 and UK at $17.36. Check out Norway compared to UK, at just $4.24. Russia's at less than $3.00; that's how they got away with tacking a $25/bl export fee on theirs, at least they did a couple years back.

Seeking Alpha has much better data and charts, as always, if you have a subscription. It's one of the best sites for this stuff, especially for calculating real inflation rates versus the horse(*)(*)(*)(*) our Fed and CBO put out.

Oh, and this graph is interesting to look at for how much revenue per bl certain countries need to finance their budgets from this source.

http://graphics.wsj.com/oil-producers-break-even-prices/

 

This site provides a decent break down of total costs vs operating costs with their methodology: "This chart was compiled using data from more than 15,000 oil fields across 20 nations. The production costs were calculated by including a mix of capital expenditures and operational expenditures. Capital expenditures included the costs involved with building oil facilities, pipelines and new wells. Operational expenditures included the costs of lifting oil out of the ground, paying employee salaries and general administrative duties"

http://money.cnn.com/interactive/economy/the-cost-to-produce-a-barrel-of-oil/index.html

 

If you are interested you can also use this site to compile your own charts and graphs for various analysis of oil based metrics between countries: https://knoema.com/vhzbeig/oil-statistics-production-costs-breakeven-price

 

I don't do CNN, but yes, I'm sure their numbers may be close to the WSJ's; they're using Rystad as a source for their data, and again I go by actual production costs; all the other is highly variable and a matter of management, how much one company had to borrow versus another and other factors that have little to do with baseline costs, i.e. overhead; each individual company will have widely varying costs and competence within the same oil field; they can throw in the cost of the CEO's solid gold toilet seats for his personal company Lear Jet, bribes, coke and hookers, anything, for all one can tell. Actual production costs are a better measure as they are a fairly constant baseline picture for a filed or region, a little harder to fake and pad.

 

I understand what you're saying and it is a fair point that you make. In saying this the operating costs provide an average benchmark for prospective entities that are looking to enter into a particular region and do business.

 

I use the BP Statistical Review of World Energy for a great deal of my referencing. Many Senior Executives around the world also use it as a reliable and credible source: http://www.bp.com/content/dam/bp/pd...l-review-of-world-energy-2016-full-report.pdf

Also page 41 of this publication will give a quality evaluation of all the major world oils: http://www.vurup.sk/sites/vurup.sk/...52_2010/issue1/pdf/pc_1_2010_stratiev_051.pdf

 

The damage to the Russian economy, if it is:
- Decreased oil prices and lower production Russian cars for this reason.
-Decreased oil prices (plus the sanctions) and decreased production of Russian chicken.

..... Dropped the price of oil and Russia forced to buy cars and chicken in Lithuania (for example)

nothing happens now. Vice versa. Production of Russian cars and poultry increased. Due to the decline in oil prices ()

22222222222222222
The decline in living standards in Russia due to the decrease in oil prices, it's like ..

to take out a drug from a drug addict.

If you take off a drug, the addict can recover.
If you not take away a drug, the addict will die. ( the economy will die )

 

The cost of getting shale oil out of the ground and refined is becoming easier and cheaper. When it hits a certain point it will absolutely have an affect on global oil prices. For now it can only do so much as it has a "hard cap" as to how expensive it is to take out. Meanwhile places like ( I think Saudi Arabia does it with the least cost if I remember) do it at less than half what it currently costs to do shale.

So yeah, the Sauds' and OPEC can try all they want to keep shale out of the game and they will and have seen some success. But companies are throwing trillions into how to get it out of the ground in a cheaper way, when they do, 'ish' will hi the fan as to the price of oil.

Constant $25.00 PPB would be AWESOME for everyone NOT in the gas industry. Always cracks me up how defenders try and say how many jobs lower oil prices bring, meanwhile conveniently forgetting how many are created on the other end.

 

Partly right. It will indeed force development of other sectors of the economy. But if the same corruption is allowed to persist, it will stagnate right along. this is not just a Russian problem, it affects most of the world's economies.

 

I think that in less than six months shale will drive the ppb down to less than $50 a barrel and offset all the OPEC cuts.

- - - Updated - - -

$25 a barrel puts the US, Canada and Brent out of business.

 

So much for Earth, too. 60 degree weather this year in February, in Minnesota, was a sign that things are out of whack.

 

Yes, the Russian economy really should diversify. Without the Kleptocrats running things, it could do just that and enjoy the kind of investment and benefit that China has seen, I expect, with the added bonus of much more natural resource development due to all that vast, resource-rich territory. Russia should be among the wealthiest countries on the planet today.

 

Colder than usual events are just weather, warmer than usual events are global warming. Funny how that works.

 

Have you seen a new documentary about Medvedev ? 50 b. 'costs ' this Putin's friend... And some how all Putin's oligarchs made a lot of money in 2016...

 

I think shale means oil will never reach $100 a barrel and that the OPEC has ceased to serve any function. OPEC is after all a cartel to fix prices, US capacity to flood markets with shale oil means the cartel has become useless. Even in a hypothetical where OPEC effectively re-enacted their 1973 oil embargo, I think shale could overcome OPEC's shutoff.

The 1973 oil embargo was focused against the US, I think US shale oil production could equal it's current oil imports immunizing the US from any future OPEC embargoes. For how long could US shale oil production replace imported oil? What about others, could US shale oil cover the EU's needs as well?