Official (Alberta) Oil Discussion Thread

[Frequitude]

I doubt any SAGD operation shuts in. That would irreperably damage the reservoir to some extent. It is much more likely that someone with a stronger balance sheet would snap that asset up first and just weather the losses.

[Flacker]

Originally Posted by GGG

It means to stop producing oil.

So Sagd it means turning off the steam gens and closing the producers and letting the resivoirs slowly cool and de pressurize. This makes it more difficult to regain production and may permenantly lower the total production from the well long term.

My understanding is that the costs to restart Sagd is astronomically high, so I'm sure that is factored into the overall timing of pulling the pin. I'm sure there are lots of engineers here that can chime in.

The fuel cost, and carbon footprint of having to reheat the entire system can't be insignificant. And if there is risk of long term production degradation, risky to say the least.

[edmontonice]

Originally Posted by Locke

Well, on the surface that could be correct, but realistically what is the benefit in flooding the market that has surplus supply already at a ridiculously low price?

Sure, its dollars coming in the door, but are those dollars profit? If the price is low it makes more sense to hold back and wait until it comes up so you can maximize the benefit of your resource.

Its the same mistake the Saudis are making. "Flood the market and gain marketshare!!!"

Great. Lots of people are buying what you're selling, just at rock-bottom prices. So you're selling lots of stuff, just not making much while you're at it.

Congratulations?

I don't think Iran is making a mistake.

http://www.bloomberg.com/news/articl...ojects-in-play

As for choosing to keep barrels in the ground: if you know what the price of oil is going to be in the future so you can compare to today and decide what's worth more to you, then you might as well skip producing and just play in the futures markets.

[calumniate]

I hate to ask this, but are there any environmental effects or extra costs with cutting a tap?

[GGG]

Originally Posted by Flacker

My understanding is that the costs to restart Sagd is astronomically high, so I'm sure that is factored into the overall timing of pulling the pin. I'm sure there are lots of engineers here that can chime in.

The fuel cost, and carbon footprint of having to reheat the entire system can't be insignificant. And if there is risk of long term production degradation, risky to say the least.

Yep this is true. Which is why I think that most Sagd producers would have hedged enough of 2016 production to survive the $20 oil scenario. The downside risk is just too high if you were forced to shut in.

[GGG]

Originally Posted by calumniate

I hate to ask this, but are there any environmental effects or extra costs with cutting a tap?

At some point you have to abandon the wells and pipelines which costs money or you have to continue to monitor well integrity. I would assume most would just suspend operations so the only costs would me monitoring integrity.

One risk to the province would be companies going bankrupt without doing any reclamation on old non productive assets. This could lead to environmental liability falling to the province.

[taco.vidal]

Originally Posted by Brewmaster

From the reports I've read, oil sands production is unlikely to see shut-ins unless WTI gets to the low $20's and stays there. Based on the average variable costs, mining projects will continue down below $10/bbl and SAGD projects could see shut-ins in the $20-30/bbl range. This is all for existing production where the fixed capital has largely been spent.

With heavy oil and bitumen there is talk that some producers are getting less than $10 us per barrel in Alberta. That is nowhere close to break even price levels.

Here is an article about the US patch. This may not be far off in Alberta.

http://www.bloomberg.com/news/articl...s-than-nothing

January 18, 2016 — 1:28 AM MST Updated on January 18, 2016 — 3:01 PM MST

Oil is so plentiful and cheap in the U.S. that at least one buyer says it would pay almost nothing to take a certain type of low-quality crude.

Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it offered to pay $1.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a corrected list of prices posted on its website Monday. It had previously posted a price of -$0.50. The crude is down from $13.50 a barrel a year ago and $47.60 in January 2014.

While the near-zero price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch. U.S. benchmark oil prices have collapsed more than 70 percent in the past 18 months and fell below $30 a barrel for the first time in 12 years last week. West Texas Intermediate traded as low as $28.36 in New York. Brent, the international benchmark, settled at $28.55 in London.

“Telling producers that they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said of the price that was posted as negative until Flint Hills revised it on Monday.

[Jag_Gator]

Originally Posted by Ozy_Flame

I love how you quoted me for this, I'm a senior tech consultant and I know all to well the market for tech jobs in Alberta - of which there are many opportunities right now and will have many more on the way with the amount of startups resulting from this oil crash.

Highly recommend Code Academy too, as well as Treehouse. Basically any website that lets you learn code incrementally, as well as track your progress is a huge benefit.

Yep this what I've been doing since the end of October. I've done a lot of WYSIWYG (what-you-see-is-what-you-get) and content management system development over the years and am trying to make the transition to full stack web as well as software development. I love this stuff.

[DownhillGoat]

Originally Posted by Locke

Its the same mistake the Saudis are making.

And Canada. And the US. And everywhere else.

Prices high? Get it out of the ground! Prices low? Get it out of the ground!

[Frequitude]

Originally Posted by Locke

Well, on the surface that could be correct, but realistically what is the benefit in flooding the market that has surplus supply already at a ridiculously low price?

Sure, its dollars coming in the door, but are those dollars profit? If the price is low it makes more sense to hold back and wait until it comes up so you can maximize the benefit of your resource.

Its the same mistake the Saudis are making. "Flood the market and gain marketshare!!!"

Great. Lots of people are buying what you're selling, just at rock-bottom prices. So you're selling lots of stuff, just not making much while you're at it.

Congratulations?

For both Iran and the Saudis, yes it is operating profit (as in revenue minus opex). Extraction costs for both are ridiculously low.

However the difference between the two is that for Iran it literally is found money. They've been living for a while and building budgets on essentially zero oil revenue. So any extra dollars coming in the door increases their standard of living. Their old budgets effectively break even at opex (say, $5).

Saudi on the other hand has been living off of their insane oil profits to maintain a higher standard of living. It's not their operations that break even at $120 or whatever, it is their budget that breaks even at $120. Their operations probably break even at like $5. So at these low low prices their standard of living is taking a huge hit, or at least will take a huge hit when they get sick of burning a hole in their $700B sovereign wealth fund.

[GGG]

Originally Posted by taco.vidal

With heavy oil and bitumen there is talk that some producers are getting less than $10 us per barrel in Alberta. That is nowhere close to break even price levels.

Here is an article about the US patch. This may not be far off in Alberta.

http://www.bloomberg.com/news/articl...s-than-nothing

$10 Canadian for bitumen is break even for the lowest cost SAGD producers as it essentially excludes the silent addition. So if you are getting 8.50 U.S. For bitumen a company like MEG is still above break even as op cost is only $9.10 cad.

http://www.megenergy.com/sites/defau...5%20Report.pdf

Cenovous is like $8.

The interesting thing about the Alberta Industry as opposed to US shale is that while the initial capital intensity is very high the op costs are actually relatively low and the penalties for shut in high. Compared to shale which requires ongoing capital reinvestment of oil produced by the previous well to keep going. This means that shale should blink first in terms of production cuts.

[Fuzz]

So realistically, how much EXTRA oil is showing up from Iran, understanding that they have obviously been sending it elsewhere?

I understand the big future risk is they have sanctions lifted so they can develop more easy oil, but in the meantime, is their any net change? how much?

[cracher]

So who else has been following oil with HOD in the last while?

More importantly, with all the knowledge in this thread, when should one take a monster long position? (and, by long, I mean the leveraged HOU - so not long at all in a temporal sense)?

[calumniate]

Oh boy! I guess if it approached zero that would be a safe time to go in :-)
I'd have some Advil on hand for sure if I took a bite

[GGG]

Originally Posted by cracher

So who else has been following oil with HOD in the last while?

More importantly, with all the knowledge in this thread, when should one take a monster long position? (and, by long, I mean the leveraged HOU - so not long at all in a temporal sense)?

The forward strip pricing isn't all that unreasonable right now. You would be betting on an event that causes a disruption and a price increase which is very unpredictable.

[me_dennis]

Originally Posted by GGG

At some point you have to abandon the wells and pipelines which costs money or you have to continue to monitor well integrity. I would assume most would just suspend operations so the only costs would me monitoring integrity.



One risk to the province would be companies going bankrupt without doing any reclamation on old non productive assets. This could lead to environmental liability falling to the province.

This was more of a problem in the past but I believe regulators have started collecting funds from producers in a separate trust fund to pay for these abandonments in the futures. I'm not sure about wells, but for pipelines I know the NEB is going this route.


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[Iowa_Flames_Fan]

Originally Posted by GGG

It means to stop producing oil.

So Sagd it means turning off the steam gens and closing the producers and letting the resivoirs slowly cool and de pressurize. This makes it more difficult to regain production and may permenantly lower the total production from the well long term.

I'm the farthest thing from an expert, but doesn't the term derive from conventional oil, where a well is "shut in"?

[IliketoPuck]

Early trading appears to indicate that Iranian production was largely priced in.

In positive news:

http://boereport.com/2016/01/18/trud...d-hit-alberta/

[Looch City]

Originally Posted by IliketoPuck

Early trading appears to indicate that Iranian production was largely priced in.

In positive news:

http://boereport.com/2016/01/18/trud...d-hit-alberta/

The government is in talks to quickly allocate C$1 billion ($690 million) for infrastructure projects in the two provinces

Sweet, that basically covers CalgaryNext!

[IliketoPuck]

Originally Posted by Iggy City

The government is in talks to quickly allocate C$1 billion ($690 million) for infrastructure projects in the two provinces

Sweet, that basically covers CalgaryNext!

What encouraged me was not the $ figure, but that Trudeau's government recognizes how serious things are in Alberta and Saskatchewan right now.