This post is an update on LTO extraction in Bakken based upon published data from the North Dakota Industrial Commission (NDIC) as per January 2015.
This post also presents a closer look at developments in LTO extracted from the three of the four counties that presently dominates LTO extraction; McKenzie, Mountrail and Williams.
With an oil price below $50/Bbl (WTI) the companies involved in extraction of LTO in Bakken faces two financial challenges;
The decline in the cash flow from operations reduces funding capacities for manufacturing new wells. A lower oil price also lowers the value of the companies’ assets and borrowing capacities.
The “average” well with around 90 kb [90,000 Bbls] of flow in its first year is estimated to have an undiscounted point forward break even (that is a nominal break even with 0% return for the well) at around $65/Bbl (WTI). The break even price increases with increases in the return requirement.
In short, LTO extraction at present prices ($45/Bbl, WTI) makes little commercial sense!
Figure 01: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of January 2015 in Bakken North Dakota [green area, right hand scale]. The top black line is the price of Western Texas Intermediate (WTI), red middle line the Bakken LTO price (sweet) as published by the Director for NDIC and bottom orange line the spread between WTI and Bakken LTO wellhead all left hand scale.From December 2014 to January 2015 LTO extraction from Bakken(ND) declined from 1.16 Mb/d to 1.13 Mb/d.
In this post I present actual Norwegian crude oil extraction and status on the development in discoveries and reserves and what this has now resulted in for expectations for future Norwegian crude oil extraction.
Norwegian crude oil extraction peaked in 2001 at 3.12 Million barrels per day (Mb/d) and in 2014 it was 1.52 Mb/d.
The Norwegian Petroleum Directorate’s (NPD) recent forecast expects crude oil extraction from the Norwegian Continental Shelf (NCS) will become around 1.49 Mb/d in 2015.
Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 – 2014. The chart also includes a forecast for crude oil extraction from discoveries/fields towards 2040 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio etc. as of end 2014. Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup (blue area) [at end 2014 estimated at 2.22 Gb; [Gb, Giga (Billion) barrels, refer also figure 05] which is now scheduled to start flowing in late 2019.“Sanctioned Developments” in Figure 01 represents the total contributions from 8 sanctioned developments of discoveries now scheduled to start to flow between 2015 and 2017.
My forecast for 2015 is 1.47 Mb/d with crude oil from the NCS.
My forecast shown in figure 01 includes all sanctioned developments and not discoveries (refer also figure 07) and contingent resources in the fields. The forecast is subject to revisions as the reserve base becomes revised (as discoveries pass the commercial hurdles) which likely will fatten the tail post 2020 of the presented forecast.
My forecast assumes some reserve growth, but does not include the effects from fields/discoveries being plugged and abandoned as these reach the end of their economic life.
Discoveries sanctioned for development and Johan Sverdrup (with an expected start up late 2019) is expected to slow down the decline in Norwegian crude oil extraction.
What follows are the continuance of my research, discussions, observations and thoughts around the nexus of debts, interest rates and the oil price.
I now believe these relations are poorly understood and with total global debt levels at all time highs (and growing), years of low interest rates, which are kept low (by concerted efforts by central banks) while the oil price in recent months has collapsed may hide a SIGNAL that struggles with attention from too much noise.
A collapsing oil price while interest rates remain low is likely the proverbial canary.
Global Crude Oil Supplies, The Oil Price And Interest Rates
Figure 1: The green area [left hand axis] in the chart above shows the world’s development of crude oil and condensates supplies between 1980 and 2013. The pink line shows the development in the interest rate (yield) for US 10 Year Treasuries [right hand axis]. The price of oil (Brent), black line nominal, yellow line inflation adjusted in $2013 [both right hand axis]. NOTE: The oil price has been divided by 10 to accommodate it on the same scale as the interest rate [right hand axis]. The US 10 Year Treasury (US10T) interest rate has been in decline and is presently around 2.0%.Cause and effects amongst the oil price and interest rates are of course subject to (some informed and gripping) discussions.
The price of oil appears to have been the leading indicator.
Any (small) increase to the interest rate now will likely affect demand for oil and thus its price, thus further slowing investments for new supplies.
![Figure 01: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of January 2015 in Bakken North Dakota [green area, right hand scale]. The top black line is the price of Western Texas Intermediate (WTI), red middle line the Bakken LTO price (sweet) as published by the Director for NDIC and bottom orange line the spread between WTI and Bakken LTO wellhead all left hand scale.](https://runelikvern.com/wp-content/uploads/2020/05/88849-fig-01-bakken-lto-per-jan-2015.png)
![Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 - 2014. The chart also includes a forecast for crude oil extraction from discoveries/fields towards 2040 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio etc. as of end 2014. Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup (blue area) [at end 2014 estimated at 2.22 Gb; [Gb, Giga (Billion) barrels, refer also figure 05] which is now scheduled to start flowing in late 2019.](https://runelikvern.com/wp-content/uploads/2020/05/c0089-figure-01-actual-and-forecast-crude-oil-production-for-norway.png)
![Figure 1: The green area [left hand axis] in the chart above shows the world’s development of crude oil and condensates supplies between 1980 and 2013. The pink line shows the development in the interest rate (yield) for US 10 Year Treasuries [right hand axis]. The price of oil (Brent), black line nominal, yellow line inflation adjusted in $2013 [both right hand axis]. NOTE: The oil price has been divided by 10 to accommodate it on the same scale as the interest rate [right hand axis]. The US 10 Year Treasury (US10T) interest rate has been in decline and is presently around 2.0%.](https://runelikvern.com/wp-content/uploads/2020/05/b1ecb-figure-1-oil-supplies-oil-price-and-us10t.png)
Fractional Flow 
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